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Double Dividend in an Endogenous Growth Model with Pollution and Abatement

Author

Listed:
  • Esther Fernández Casillas

    (Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales (ICEI))

  • Rafaela Pérez Sánchez

    (Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales (ICEI))

  • Jesús Ruiz Andujar
Abstract
In a very stylized endogenous growth economy with pollution and private abatement activities and without any production externality, we show that the government may exploit dynamic Laffer effects to achieve a double dividend through an environmental tax reform, while fulfilling its commitment to provide an exogenously specified sequence of expenditures in the form of lump-sum transfers to consumers.

Suggested Citation

  • Esther Fernández Casillas & Rafaela Pérez Sánchez & Jesús Ruiz Andujar, 2008. "Double Dividend in an Endogenous Growth Model with Pollution and Abatement," Working Papers del Instituto Complutense de Estudios Internacionales 0803, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    • Handle: RePEc:ucm:wpaper:0803
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    References listed on IDEAS

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    1. A. Lans Bovenberg & Frederick van der Ploeg, 2002. "Environmental Policy, Public Finance and the Labour Market in a Second-Best World," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 6, pages 112-153, Edward Elgar Publishing.
    2. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    3. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November.
    4. Ligthart, Jenny E. & van der Ploeg, Frederick, 1994. "Pollution, the cost of public funds and endogenous growth," Economics Letters, Elsevier, vol. 46(4), pages 339-349, December.
    5. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
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    7. Frank Hettich, 2000. "Economic Growth and Environmental Policy," Books, Edward Elgar Publishing, number 2086.
    8. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
    9. S. Proost & D. van Regemorter, 2002. "The Double Dividend and the Role of Inequality Aversion and Macroeconomic Regimes," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 30, pages 596-608, Edward Elgar Publishing.
    10. Novales, Alfonso & Ruiz, Jesus, 2002. "Dynamic Laffer curves," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 181-206, December.
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    12. Ian W.H. Parry, 2002. "Pollution Taxes and Revenue Reycling," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 15, pages 235-248, Edward Elgar Publishing.
    13. Pecorino, Paul, 1995. "Tax rates and tax revenues in a model of growth through human capital accumulation," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 527-539, December.
    14. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 559-571, June.
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    Cited by:

    1. Fernández, Esther & Pérez, Rafaela & Ruiz, Jesús, 2010. "Double dividend, dynamic Laffer effects and public abatement," Economic Modelling, Elsevier, vol. 27(3), pages 656-665, May.

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    More about this item

    Keywords

    Double dividend; Green tax reform; Abatement activities; Environmental taxes; Environmental externalities; Endogenous growth; Dynamic Laffer effect.;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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