A Second-Best Analysis of Environmental Subsidies

International Tax and Public Finance, Vol. 5, No. 2, 1998

Posted: 12 Feb 1998

Abstract

This paper examines the complications posed by pre-existing tax distortions in the economy, for the evaluation of a variety of subsidy policies that affect the environment. These complications include not only the efficiency cost of financing the subsidy by distortionary taxation, but also the interaction effects between the subsidized market and markets with preexisting taxes. Studies that ignore both of these effects, or only incorporate the first type of effect, can be highly misleading.

JEL Classification: Q28, H21, H23

Suggested Citation

Parry, Ian W. H., A Second-Best Analysis of Environmental Subsidies. International Tax and Public Finance, Vol. 5, No. 2, 1998, Available at SSRN: https://ssrn.com/abstract=57391

Ian W. H. Parry (Contact Author)

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