Green Taxes and Double Dividends in a Dynamic Economy

Gerhard Glomm (), Daiji Kawaguchi and Facundo Sepulveda ()
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Facundo Sepulveda: Universidad de Santiago de Chile

No 2006-017, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: This paper examines a revenue neutral green tax reform along the lines of the Double Dividend hypothesis. Using a dynamic general equilibrium model calibrated to the US economy, we find that increasing gasoline taxes and using the revenue to reduce capital income taxes does indeed deliver both types of welfare gains: from higher consumption of market goods (an efficiency dividend), and from a better environmental quality (a green dividend), even though in the new steady state environmental quality may worsen. We also find that, given the available evidence on how much households are willing to pay for improvements in air quality, the size of the green dividend is very small in absolute magnitude, and much smaller than the efficiency dividend.

Keywords: Green taxes; Double Dividends; Capital Accumulation; Welfare (search for similar items in EconPapers)
JEL-codes: E6 H2 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006-11
New Economics Papers: this item is included in nep-acc, nep-dge, nep-ene, nep-env, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Green taxes and double dividends in a dynamic economy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:inu:caeprp:2006017

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