Setting Environmental Taxes in a Second-best World

William K. Jaeger ()
Additional contact information
William K. Jaeger: Williams College

No 2001-13, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: This paper compares the optimal environmental tax with two alternative definitions of marginal environmental damages. One definition reflects the social marginal rate of substitution between income and the environment; the other reflects the sum of households' marginal willingness to pay. The analysis finds that the definition based on the social marginal rate of substitution provides a consistent benchmark for setting environmental taxes that is compatible with both the Pigouvian principle and the double dividend hypothesis. The definition based on the sum of households' marginal willingness to pay, however, is found to be incompatible with optimal taxation and an unreliable benchmark for making welfare inferences.

Keywords: environmental tax; second best; double dividend; optimal taxation (search for similar items in EconPapers)
JEL-codes: H2 Q2 (search for similar items in EconPapers)
Date: 2001-02
Note: full text not available
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wil:wileco:2001-13

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Department of Economics Working Papers from Department of Economics, Williams College Williamstown, MA 01267. Contact information at EDIRC.
Bibliographic data for series maintained by Greg Phelan ().