Climate Change Policies and Tax Recycling Schemes: Simulations with a Dynamic General Equilibrium Model of the Italian Economy

Roberto Roson

Review of Urban & Regional Development Studies, 2003, vol. 15, issue 1, 26-44

Abstract: A dynamic general equilibrium model of the Italian economy is used to assess the impact of carbon taxation (or auctioned carbon permits), where additional revenue is used to cut either existing taxes on labor or on capital income. Simulation results do not support the existence of the so†called “double dividend†when labor taxes are reduced, whereas lower tax rates on capital have mild positive effects on growth and welfare, with progressivity properties on income distribution. These findings hinge on the assumptions of open economy, given world interest rate, and capital mobility.

Date: 2003
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