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Environmental Taxation and Redistribution Concerns

Rafael Aigner

FinanzArchiv: Public Finance Analysis, 2014, vol. 70, issue 2, 249-277

Abstract: How is the optimal level of Pigouvian taxation influenced by distributive concerns? With second-best instruments, a higher level of income redistribution calls for a lower level of Pigouvian taxation. More redistribution implies higher distortions from income taxation. Pigouvian tax revenues become more valuable, and the optimal level of environmental taxation decreases. With first-best instruments, however, the relation between levels of redistribution and Pigouvian taxation is reversed. So second-best Pigouvian taxes are very different from their first-best counterpart - despite apparently identical first-order conditions.

Keywords: Pigouvian taxation; comparative statics; externalities; optimal income taxation; second best (search for similar items in EconPapers)
JEL-codes: D62 H21 H23 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Environmental Taxation and Redistribution Concerns (2013) Downloads
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DOI: 10.1628/001522108X681379

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