The Macroeconomic Effects of Environmental Taxes: A Closer Look at the Feasibility of 'Win-Win' Outcomes
35 Pages Posted: 15 Feb 2006
Date Written: May 1998
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: Abatement, environmental taxes, double dividend, endogenous growth, green tax reform, optimal taxation, pollution
JEL Classification: E62, H21, H41, Q28, Q41
Suggested Citation: Suggested Citation