 Environmental tax design with endogenous earning abilities (with applications to France)Helmuth Cremer, Firouz Gahvari and Norbert Ladoux () Journal of Environmental Economics and Management, 2010, vol. 59, issue 1, 82-93 Abstract: This paper studies environmental taxation in a Mirrlees setting with two novel features. First, energy, a polluting good, is used both as a factor of production and a final consumption good; second, the wage is determined endogenously while labor of different individual types remain homogeneous. The model is calibrated for the French economy. We show that: (i) The optimal tax is less than the marginal social damage of emissions and turns into an outright subsidy when the inequality aversion index is high; (ii) the optimal tax on energy as an input is always equal to its marginal social damage; (iii) the social welfare gain due to lowering the current energy taxes to their optimal levels, with the general income tax being set optimally in both cases, is between 17 and 32 euro per household. This hurts the rich and benefits the poor. Keywords: The; general; income; tax; Endogenous; earning; abilities; Emission; taxes; Consumption; and; intermediate; goods; Welfare; gains (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:59:y:2010:i:1:p:82-93 Access Statistics for this article Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates More articles in Journal of Environmental Economics and Management from Elsevier |
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