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Optimal taxation, environment quality, socially responsible firms and investors

Thomas Renström and Luca Spataro ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: We characterize the optimal pollution-, capital- and labour-tax structure in a continuous-time growth model in the presence of pollution (resulting from production), both in the first- and second-best, allowing investors to be driven by social responsibility objectives. The social responsibility objective takes the form of warm-glow, as in Andreoni (1990) and Dam (2011), inducing firms to reduce pollution through increased abatement activity. Among the results, the first best pollution tax is still positive under warm-glow, the second-best pollution tax displays the additivity property, and we show the circumstances under which the Chamley-Judd zero capital-income tax result does not hold.

Keywords: Socially responsible investment; corporate social responsibility; environmental quality; optimal taxation; pollution (search for similar items in EconPapers)
JEL-codes: D21 D53 G11 H21 H23 M14 Q58 (search for similar items in EconPapers)
Date: 2018-05-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-pbe
Note: ISSN 2039-1854
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Journal Article: Optimal Taxation, Environment Quality, Socially Responsible Firms and Investors (2019) Downloads
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