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Distributional effects of environmental taxation: An approximation with a meta-regression analysis

Maximiliano Alvarez ()

Economic Analysis and Policy, 2019, vol. 62, issue C, 382-401

Abstract: Environmental taxes are usually perceived as regressive. However, delving into the literature of the distributional effects of environmental taxation reveals that the heterogeneity within and between studies lead to divergent conclusions. This paper employs a meta-regression analysis of the existing studies about the effects of ecological taxes on distribution to investigate the sources of variation of the distributional outcomes. Using a multinomial logit model, it is found that the distributional implications significantly vary with the adoption of revenue-neutral schemes and the stage of development of the analyzed economy. In particular, environmental taxes have an expected probability of being regressive (progressive) of about 0.84 (0.10) when the policy is not accompanied by any revenue-recycling package, the incidence of the tax is measured based on households’ current income, and it is performed in a developed country. However, that expected probability falls (rises) to 0.04 (0.91) when the revenue raised by the policy is progressively recycled, the incidence is measured using expenditure data, and the study is performed in a developing economy. In contrast, other features such as the type of tax or methodological issues do not seem to significantly influence the results. This study aims to inform policymakers, especially in developing countries, to design a socially desired environmental policy.

Keywords: Environmental taxes; Mitigation policies; Distributional effects (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.eap.2018.10.003

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