Pollution Externalities and Corrective Taxes in a Dynamic Small Open Economy

• Yanase, Akihiko

• Nakamoto, Yasuhiro

抄録

This study examines the effects of tax policies in a dynamic model of a polluted small open economy with two sources of flow pollution--consumption and production--controlled by consumption and income taxes. In this setting, accumulated pollution has a negative effect on households' utility. We show that in a decentralized dynamic competitive equilibrium under exogenous tax rates, whereas a permanent increase in consumption and income taxes unambiguously reduces the steady-state pollution stock, a temporary increase in these taxes may lead to more pollution in the long run. This outcome suggests that more stringent environmental policies might be ineffective if the regulation is only temporary. We also derive the socially optimal solution and examine the optimal tax paths to achieve the social optimum. If distaste and leisure effects are sufficiently strong, tax rates decrease along the optimal path as pollution increases over time, and vice versa.

収録刊行物

• Economic Research Center Discussion Paper

  Economic Research Center Discussion Paper (E19-5), 1-39, 2019-06

  名古屋大学大学院経済学研究科附属国際経済政策研究センター

キーワード

• Pollution externalities
• Small open economy
• Permanent environmental policies
• Temporary environmental policies
• Optimal tax paths

詳細情報

• CRID: 1050001202566920576
• NII論文ID: 120006645119
• HANDLE: 2237/00030470
• Web Site: https://nagoya.repo.nii.ac.jp/records/28274
• 本文言語コード: en
• 資料種別: departmental bulletin paper
• データソース種別:
  • IRDB
  • CiNii Articles