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| Author: | Bento, A.M. Jacobsen, M. |
| Title: | Ricardian rents, environmental policy and the "double-dividend" hypothesis |
| Journal: | Journal of Environmental Economics and Management
2006 : JAN, VOL. 53:1, p. 17-31 |
| Index terms: | dividends environmental policy rents |
| Language: | eng |
| Abstract: | Studies on the so-called double dividend hypothesis show that environmental tax swaps add on the costs of the tax system and therefore do not produce a double dividend. This paper extends these models by incorporating a fixed-factor in the production of the polluting good and, therefore, allowing Ricardian rents to be generated in the economy. In this situation, an environmental tax reform with revenues used to cut pre-existing labour taxes can produce a double dividend. Moreover, the overall costs of environmental tax swaps are negative up to 11 percent of emission reductions, suggesting the potential for a strong double dividend and confirming that environmental taxes should be part of the optimal tax system. |
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