 Increasing taxes on ‘bads’ and reducing them on ‘goods’: A double dividend hypothesis of carbon taxationGurleen Kaur Malhotra and Amlendu Dubey Journal of Policy Modeling, 2025, vol. 47, issue 1, 118-133 Abstract: We analyse the effect of adoption of a carbon tax on the effective labour tax rates using a difference-in-difference framework in which we incorporate staggered treatment adoption and account for heterogeneous causal effects. We use data on 143 countries during 1985–2018. We conduct our analysis using DID estimation developed by Borusyak et al. (2024) and Callaway and Sant’Anna (2021) followed by sensitivity analysis and placebo tests. We find that enacting a carbon tax on an average lowers the labour tax rate by 1.32 % points. In country-specific analysis we find that carbon tax implementation is reducing labour tax by around 3.57 % for Sweden and Norway, however, the effect is insignificant for Denmark. Our findings indicate that implementing a carbon tax can help to reduce the tax burden on labour. Countries experiencing substantial welfare losses due to their present tax structure might implement carbon taxes as a means to mitigate these losses. Keywords: Carbon taxation; Difference-in-difference; Labour taxation; Double-dividend hypothesis (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:jpolmo:v:47:y:2025:i:1:p:118-133 DOI: 10.1016/j.jpolmod.2024.11.002 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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