A Note on Weak Double Dividends

Mustafa H. Babiker, Gilbert Metcalf and John Reilly

No 307, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: A weak double-dividend is the proposition that the welfare improvement from a tax reform, where environmental taxes are used to lower distorting taxes, must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion. A general consensus has emerged that the weak double-dividend is an uncontroversial idea. We show in this note that a weak double-dividend need not hold in a world with multiple distortions.

Keywords: environmental tax policy; second-best taxation; general equilibrium analysis (search for similar items in EconPapers)
JEL-codes: H2 Q2 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-res
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