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Double dividend in an endogenous growth model with pollution and abatement


Fernández Casillas, Esther and Pérez Sánchez, Rafaela María and Ruiz Andújar, Jesús (2008) Double dividend in an endogenous growth model with pollution and abatement. [ Working Papers; nº 03, 2008, ]


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This paper discusses wether by implementing an environmental tax reform, a government may achieve a double dividend. We consider the simplest endogenous growth model (AK model) and include a negative environmental externality in the utility function. Pollution flow can be reduced by means of private abatenment activities. There is a predetermined non-optimal level of public spending financed by environmental taxes and pre-existing taxes on income and consumption. The major contribution of the paper is to show that, under this simple framework, a double dividend may arise if tax reform consists of substituing environmental tax for income tax, in such a way that the government budget constraint holds in a present value sense.

Resumen (otros idiomas)

En este artículo se estudia si el gobierno puede obtener un dividendo doble a través de una reforma impositiva medioambiental. Consideramos el modelo de crecimiento endógeno más simple (modelo AK) e incluimos una externalidad medioambiental negativa en la función de utilidad. El flujo de contaminación puede reducirse mediante actividades privadas de abatement. Hay un nivel no óptimo predeterminado de gasto público financiado con impuestos medioambientales e impuestos sobre la renta y el consumo. La mayor contribución del artículo es demostrar que, en este sencillo contexto, puede aparecer un dividendo doble si la reforma sustituye impuestos sobre la renta por impuestos medioambientales, de forma tal que la restricción presupuestaria del gobierno se mantenga en valor presente.

Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Double dividend, Green tax reform, Abatement activities, Environmental taxes, Environmental externalities, Endogenous growth, Dynamic Laffer effect.
Palabras clave (otros idiomas):Doble dividendo, reforma medioambiental verde, Actividades de abatement, Externalidades medioambientales, Impuestos medioambientales, recimiento endógeno, Efecto Laffer dinámico.
Subjects:Social sciences > Economics > Econometrics
JEL:H23, O41, Q28
Series Name:Working Papers
ID Code:7686

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Deposited On:11 Mar 2008
Last Modified:31 May 2016 12:23

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