Performing an environmental tax reform in a regional economy. A computable general equilibrium approach |
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Authors: | Francisco J André M Alejandro Cardenete Esther Velázquez |
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Affiliation: | (1) Department of Economics, Universidad Pablo de Olavide, Carretera de Carmona, km. 1, 41013 Sevilla, Spain |
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Abstract: | We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy
(Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public
deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind
of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment
double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double dividend could also be obtained. No double dividend
appears when Income Tax is reduced to compensate the environmental tax. |
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Keywords: | D58 H21 H23 |
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