Environmental tax reform and income distribution with imperfect heterogeneous labour markets
Diane Aubert and
European Economic Review, 2019, vol. 116, issue C, 60-82
This paper investigates the distributional and efficiency consequences of an environmental tax reform that distributes the revenue from a green tax according to varying labour tax rates. We build a general equilibrium model with heterogeneous workers, imperfect labour markets (search and match), and pollution consumption externalities. Preferences are non-homothetic (Stone–Geary utility) to take into account the potential regressivity of green taxes (the polluting good is assumed to be a necessary good). If the reform appears regressive, the gains from the double dividend can achieve Pareto improvement, using a redistributive non-linear income tax if the redistribution is not too great initially. Increasing progressivity influences the unemployment rate and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for France and conduct sensitivity analysis.
Keywords: Environmental tax reform; Heterogeneity; Unemployment; Welfare analysis; Tax progressivity (search for similar items in EconPapers)
JEL-codes: D62 D63 H23 Q52 Q58 (search for similar items in EconPapers)
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Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2017)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:116:y:2019:i:c:p:60-82
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