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Accessible Unlicensed Requires Authentication Published by De Gruyter April 12, 2005

Second-Best Pollution Taxation and Environmental Quality

Thomas Gaube


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.

Published Online: 2005-04-12

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