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Should pollution taxes be targeted at income redistribution?

Abstract:

This paper analyses optimal corrective taxation and optimal income redistribution. Under general utility functions, the Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods. However, if preferences for commodities are of the Gorman (1961) polar form, optimal pollu...

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Publication status:
Published
Peer review status:
Reviewed (other)
Version:
Accepted Manuscript

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Institution:
University of Oxford
Division:
Social Sciences Division
Department:
Economics
Publisher:
CESifo Publisher's website
Issue:
6599
Publication date:
2017-08-16
Pubs id:
pubs:931133
URN:
uri:f4e70a94-4b70-49c0-9559-5b6e1c223c41
UUID:
uuid:f4e70a94-4b70-49c0-9559-5b6e1c223c41
Local pid:
pubs:931133

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