Optimal Differentiation of International Environmental Taxes in the Presence of National Labor Market Distortions |
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| Authors: | Stefan Felder Reto Schleiniger |
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| Institution: | (1) Institute for Social Medicine, Epidemiology and Health Economics, Otto-von-Guericke University Magdeburg, Leipziger strasse 40, D-39140 Magdeburg, Germany;(2) Institute for Empirical Research in Economics, University of Zurich, Blümlisalpstr. 10, 8006 Zurich, Switzerland |
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| Abstract: | We explore the implication of the `doubledividend' debate for international environmentaltaxes. In our scenario, small open economies withdifferent labor market distortions follow a commonenvironmental policy and use national environmentaltax revenues to finance labor tax cuts. Since thedouble dividend hypothesis does not hold, a high labortax implies a low environmental tax relative to othercountries. The optimal differentiation ofinternational environmental taxes is proven to be afunction of the national labor tax rates and theuncompensated elasticities of labor supply. |
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| Keywords: | environmental tax reform optimal taxation price-standard approach |
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