Uncertainty and the double dividend hypothesis

Eftichios Sartzetakis () and Panagiotis D. Tsigaris

Environment and Development Economics, 2009, vol. 14, issue 5, 565-585

Abstract: This paper examines the double dividend hypothesis in the presence of labour income uncertainty. Empirical evidence shows that uncertainty over labour income is particularly significant in developing, while not negligible in developed countries. Under uncertainty, and assuming incomplete capital markets, the tax system plays a role in providing social insurance, and a green tax reform influences its effectiveness. We show that the increase in environmental tax reduces consumption risk, while the balanced budget decrease in labour income tax increases income risk. We find that the total welfare effect of a green tax reform differs substantially from the case of certainty. The critical parameters determining the existence of a second dividend are the lump-sum transfers, the relative substitutability of the two goods for leisure, and the initial tax rates relative to their optimal that determine also the response of labour supply to a change in the tax mix.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Uncertainty and the Double Dividend Hypothesis (2007)
Working Paper: Uncertainty and the Double Dividend Hypothesis (2007)
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:cup:endeec:v:14:y:2009:i:05:p:565-585_00

Access Statistics for this article

More articles in Environment and Development Economics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().