Environmental Policy and Optimal Taxation in a Decentralized Economic Federation

Thomas Aronsson Aronsson, Thomas Jonsson and Tomas Sjögren
Authors registered in the RePEc Author Service: Thomas Bergman ()

FinanzArchiv: Public Finance Analysis, 2006, vol. 62, issue 3, 437-454

Abstract: This paper deals with environmental policy in an economic federation, where each national (lower level) government faces a mixed tax problem. We assume that the federal government sets emission targets, which are implemented at the national level. We also assume that the economic federation is decentralized, meaning that the national governments are first movers vis-à-vis the federal government. Our results show that each country uses its policy instruments, at least in part, to influence the emission target. This has several implications: first, the commodity taxes do not satisfy the so-called additivity property often emphasized in earlier literature, and, second, it provides an argument for using distortionary labor income taxation.

Keywords: income and commodity taxation; economic federation; environmental policy (search for similar items in EconPapers)
JEL-codes: D62 H21 H70 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Environmental Policy and Optimal Taxation in a Decentralized Economic Federation (2006)
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DOI: 10.1628/001522106X153464

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