Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labor Markets
Diane Aubert and
Mireille Chiroleu-Assouline ()
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Diane Aubert: PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique
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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 France than for Germany and UK.
Keywords: Welfare analysis; Tax progressivity; Environmental tax reform; Heterogeneity; Unemployment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env, nep-eur and nep-upt
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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 (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-01550000
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