Understanding the Inequality and Welfare Impacts of Carbon Tax Policies

Stephie Fried, Kevin Novan and William Peterman

Journal of the Association of Environmental and Resource Economists, 2024, vol. 11, issue S1, S231 - S260

Abstract: This study develops a general equilibrium life-cycle model to explore the welfare and inequality implications of different ways to return carbon tax revenue back to households. We find that the welfare-maximizing rebate uses two-thirds of carbon-tax revenue to reduce the distortionary tax on capital income while using the remaining one-third to increase the progressivity of the labor income tax. This recycling approach attains higher welfare and more equality than the lump-sum rebate approach preferred by policymakers as well as the approach originally prescribed by economists—which called exclusively for reductions in distortionary taxes.

Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1086/732842 (application/pdf)
http://dx.doi.org/10.1086/732842 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Understanding the Inequality and Welfare Impacts of Carbon Tax Policies (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jaerec:doi:10.1086/732842

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().