Environmental tax reform in a federation with rent-induced migration

Jean-Denis Garon and Charles Séguin

No 2015.13, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We study the welfare effects of a revenue-neutral green tax reform in a federation. The reform consists of increasing a tax on a polluting input and reducing that on labor income. Households are fully mobile within the federation. Regions are unequally endowed with a nonrenewable natural resource. Resource rents are owned by regions and are redistributed to citizens on a residence basis, which generates a motive for inefficiently relocating to the resource-rich jurisdiction. Since the resource-poor region has a higher marginal product of labor than does the resource-rich region, the tax reform mitigates the scope of inefficient migration. This positive welfare effect may significantly reduce abatement costs of pollution and calls for higher environmental tax, as compared with a model where migration is assumed away.

Keywords: Federalism; Environment; Taxation; Equalization; Mobility (search for similar items in EconPapers)
JEL-codes: D62 H21 H23 H77 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-09
New Economics Papers: this item is included in nep-ene, nep-env, nep-mig, nep-pbe and nep-pub
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Downloads: (external link)
http://faere.fr/pub/WorkingPapers/Garon_Seguin_FAERE_WP2015.13.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Environmental Tax Reform in a Federation with Rent-Induced Migration (2021)
Working Paper: Environmental Tax Reform in a Federation with Rent-Induced Migration (2015)
Working Paper: Environmental Tax Reform in a Federation with Rent-Induced Migration (2015)
Working Paper: Environmental Tax Reform in a Federation with Rent-Induced Migration (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2015.13

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