Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets

Diane Aubert and Mireille Chiroleu-Assouline

No 6498, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the distributional and efficiency consequences of an environmental tax reform, when the revenue from the green tax is recycled by varying labor tax rates. We build a general equilibrium model with imperfect heterogeneous labor markets, pollution consumption externalities, and non-homothetic preferences (Stone-Geary utility). We show that in the case where the reform appears to be regressive, the gains from the double dividend can be made Pareto improving by using a redistributive non-linear income tax if redistribution is initially not too large. Moreover, the increase of progressivity acts on unemployment and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for three European countries featuring different labor market behaviors. We show that a double dividend may be obtained without worsening the initial inequalities if the green tax revenues are redistributed with a progressivity index lower for UK than for France and Germany.

Keywords: environmental tax reform; heterogeneity; unemployment; welfare analysis; tax progressivity (search for similar items in EconPapers)
JEL-codes: D62 D63 H23 Q52 Q58 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur, nep-pub and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Environmental tax reform and income distribution with imperfect heterogeneous labour markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets (2019)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets (2017)
Working Paper: Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6498

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