The Macroeconomic Effects of Environmental Taxes: A Closer Look at the Feasibility of 'Win-Win' Outcomes

35 Pages Posted: 15 Feb 2006

See all articles by Jenny E. Ligthart

Jenny E. Ligthart

Tilburg University - CentER, Department of Economics; University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 1998

Abstract

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

Ligthart, Jenny E., The Macroeconomic Effects of Environmental Taxes: A Closer Look at the Feasibility of 'Win-Win' Outcomes (May 1998). IMF Working Paper, Vol. , pp. 1-35, 1998. Available at SSRN: https://ssrn.com/abstract=882358

Jenny E. Ligthart (Contact Author)

Tilburg University - CentER, Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 8755 (Phone)
+31 13 466 4032 (Fax)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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