Optimal Differentiation of International Environmental Taxes in the Presence of National Labor Market Distortions

Stefan Felder and Reto Schleiniger

Environmental & Resource Economics, 2000, vol. 15, issue 1, 89-102

Abstract: We explore the implication of the `doubledividend' debate for international environmentaltaxes. In our scenario, small open economies withdifferent labor market distortions follow a commonenvironmental policy and use national environmentaltax revenues to finance labor tax cuts. Since thedouble dividend hypothesis does not hold, a high labortax implies a low environmental tax relative to othercountries. The optimal differentiation ofinternational environmental taxes is proven to be afunction of the national labor tax rates and theuncompensated elasticities of labor supply. Copyright Kluwer Academic Publishers 2000

Keywords: environmental tax reform; optimal taxation; price-standard approach (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1008333918321

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