A Reconsideration of gDouble Dividends h Hypothesis in Taxation on Externalities

Koh Koh and Masatoshi Yamada
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Koh Koh: Department of Economics, Otaru University of Commerce
Masatoshi Yamada: Graduate School of Economics, Osaka University

No 08-01, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Bovenberg and Mooij (1994) and others pointed out that the optimal taxation on goods with external diseconomy both collects revenue and also corrects the external diseconomy by the goods, and thus it is said that the tax has gdouble dividends h. The purpose of the present paper is to examine whether the double-dividend arguments by Bovenberg and Mooij and others are appropriate when they are viewed from the traditional arguments of optimal and corrective (Pigovian) taxation. Based on their framework, we show that it should be evaluated differently from Bovenberg and Mooij whether double-dividend hypothesis holds or not, and that the hypothesis usually holds if it is appropriately defined.

Keywords: Optimal tax rule; external diseconomies; double-dividend hypothesis (search for similar items in EconPapers)
JEL-codes: D62 H23 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2008-01
New Economics Papers: this item is included in nep-env and nep-pbe
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