A Note on Weak Double Dividends

Gilbert Metcalf, Babiker Mustafa H. () and John Reilly
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Babiker Mustafa H.: Arab Planning Institute

The B.E. Journal of Economic Analysis & Policy, 2004, vol. 4, issue 1, 1-12

Abstract: A weak double-dividend is the proposition that the welfare improvement from a green tax reform, where the revenue from an environmental tax is used to reduce other tax rates, must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion. We show in this note that a weak double-dividend need not hold in a world with multiple distortions. In an economy with multiple distortions one must choose carefully which tax rates to reduce, or one can do worse than a lump sum redistribution of the environmental tax revenues.

Date: 2004
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DOI: 10.2202/1538-0653.1275

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