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Optimal environmental tax swaps and double dividend hypothesis

Su-Mei Chen and Ling-Yun He

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Abstract: Taking environmental tax rate as given, is there an optimal allocation of tax revenues to benefit economic variables? This paper analyzes this issue in an overlapping-generations model with the pollution-related health damage. It finds the optimal allocations towards pollution abatement and labor income to maximize the steady-state lifetime welfare and per-worker output, respectively. Moreover, a greater shift towards labor income might enhance steady-state welfare while reducing per-worker output.

Date: 2015-12
New Economics Papers: this item is included in nep-dge, nep-ene and nep-env
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