A Second-Best Analysis of Environmental Subsidies

Ian Parry

International Tax and Public Finance, 1998, vol. 5, issue 2, 153-170

Abstract: This paper examines the complications posed by pre-existing tax distortions in the economy, for the evaluation of a variety of subsidy policies that affect the environment. These complications include not only the efficiency cost of financing the subsidy by distortionary taxation, but also the interaction effects between the subsidized market and markets with pre-existing taxes. Studies that ignore both of these effects, or only incorporate the first type of effect, can be highly misleading. Copyright Kluwer Academic Publishers 1998

Keywords: externalities; subsidies; pre-existing taxes; welfare impacts (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (31)

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DOI: 10.1023/A:1008638320593

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