The Macroeconomic Effects of Environmental Taxes: A Closer Look at the Feasibility of “Win-Win” Outcomes

Jenny Ligthart

No 1998/075, IMF Working Papers from International Monetary Fund

Abstract: This paper reviews recent literature on the macroeconomic effects of environmental taxes. It attempts to delineate the conditions under which a cleaner environment is compatible with attaining macroeconomic objectives, such as more employment and economic growth. The analysis reveals that an environmentally motivated fiscal reform—using the revenues from environmental taxes to cut labor taxes—may yield employment and environmental dividends if the tax burden can be shifted to agents outside the labor market, such as capitalists, transfer recipients, and foreigners. A cleaner environment and a higher rate of economic growth go hand in hand if the environment is considered an important public input into production.

Keywords: WP; renewable resource; Pigovian tax; public spending; employment dividend; diminishing returns; terms of trade; Abatement; environmental taxes; double dividend; endogenous growth; green tax reform; optimal taxation; pollution.; physical capital; rate of economic growth; public goods; market economy; Environmental policy; Natural resources; Labor taxes (search for similar items in EconPapers)
Pages: 35
Date: 1998-05-01
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Citations: View citations in EconPapers (20)

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