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Second-Best Pollution Taxation and Environmental Quality

Thomas Gaube1

1Max Planck Institute for Research on Collective Goods,

Citation Information: Frontiers in Economic Analysis & Policy. Volume 1, Issue 1, ISSN (Online) 1538-0629, DOI: 10.2202/1538-0629.1363, April 2005

Publication History

Published Online:
2005-04-12

Abstract

This paper deals with second-best pollution taxation by investigating allocations instead of the corresponding tax rates. Assuming certain restrictions on utility and that the marginal revenue from environmental taxation is positive, it is shown that environmental quality is higher in second best where only distortionary taxes are used to finance public expenditures than in the first-best optimum where lump-sum taxes are available.

Keywords: environmental taxation; public goods

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[1]
Susanne Soretz
Environmental and Resource Economics, 2007, Volume 36, Number 1, Page 57

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