Earmarking of pollution charges and the sub-optimality of the Pigouvian tax

Tingsong Jiang

Australian Journal of Agricultural and Resource Economics, 2001, vol. 45, issue 4, 18

Abstract: One approach to internalising a negative externality of economic activity is to impose a Pigouvian tax equal to the marginal cost of the externality. However, this approach overlooks the possibility that the tax revenue can be earmarked to correct the externality directly, i.e. financing the environmental protection projects. It is found that a pure Pigouvian tax is usually not an optimal policy. This issue is examined in both partial and general equilibrium, static and dynamic settings. Certain conditions for justifying a pure Pigouvian tax or a fully earmarked tax scheme are developed.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ageconsearch.umn.edu/record/117732/files/1467-8489.00160.pdf (application/pdf)

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:ags:aareaj:117732

DOI: 10.22004/ag.econ.117732

Access Statistics for this article

More articles in Australian Journal of Agricultural and Resource Economics from Australian Agricultural and Resource Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().