Optimal Differentiation of International Environmental Taxes in the Presence of National Labor Market Distortions
In: Environmental and Resource Economics, Jg. 15 (2000) ; Nr. 1, S. 89-102
Zeitschriftenaufsatz / Fach: Wirtschaftswissenschaften
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.