FEEM working papers "Note di lavoro" series
2013 .009

Short and Long-term Effects of Environmental Tax Reform


Authors: Walid Oueslati
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Keywords: Tax reform, Endogenous Growth, Human Capital, Environmental Externality, Transitional Dynamics, Welfare cost
JEL n.: E62, I21, H22, Q28, O41, D62

Abstract

This paper examines the macroeconomic effects of an environmental tax reform in a growing economy. A model of endogenous growth based on human capital accumulation is used to numerically simulate the growth effects of different environmental tax reforms and compute their impact on welfare in the short and the long-term. Our results suggest that the magnitude of these effects depends on the type of tax reform. Thus, only environmental tax reform that aims to use the revenue from environmental tax to reduce wage tax and increase the proportion of public spending within GDP, enhances both growth and welfare in the long-term. However, the short-term effect remains negative.

Download file
Download PDF file

FEEM Newsletter

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree