Non-Homothetic Preferences and the Non-Environmental Effects of Environmental Taxes

Charles Ballard (), John Goddeeris and Sang-Kyum Kim ()

International Tax and Public Finance, 2005, vol. 12, issue 2, 115-130

Abstract: We show that, if the utility function is non-homothetic, environmental taxes can have positive non-environmental effects. These effects are illustrated with specific reference to taxes on gasoline and tobacco, in the context of a computational model. We also clarify the relationship between the “double dividend” (associated with a marginal change from a tax system with low reliance on environmentally motivated taxes) and the situation in which the optimal environmental tax rate is greater than the Pigouvian tax rate. These two situations are generated by rather similar combinations of parameters. Copyright Springer Science + Business Media, Inc. 2005

Keywords: environmental taxation; general-equilibrium efficiency analysis (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s10797-005-0496-6

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