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Double Dividend Revisited: Non-Revenue Neutral Tax Reforms

Author

Listed:
  • TAKUMI HAIBARA

    (Faculty of Economics, Aichi University, 4-60-6 Hiraike-cho, Nakamura-ku, Nagoya, Aichi 453-8777, Japan)

Abstract

The rebound effect requires a rethink of revenue recycling. It is this that this paper offers an alternative to mitigate this effect. Specifically, we adapt and extend the consumption-neutral tax reform of Haibara (Journal of Globalization and Development, 8, 1–11, 2017) to include pollution externalities. Unlike a revenue-neutral tax reform, this reform increases welfare irrespectively of the level of intercommodity tax distortions. With consumption-neutral schemes, exogenous energy efficiency improvements induce higher taxes on the dirty good consumption. Such tax hikes improve welfare more than would be the case in their absence. Consumption-neutral reforms can translate economic costs into a negative rebound effect and increase the first dividend. The double dividend is welcome but need not be a policy priority.

Suggested Citation

  • Takumi Haibara, 2022. "Double Dividend Revisited: Non-Revenue Neutral Tax Reforms," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 1-21, November.
    • Handle: RePEc:wsi:ccexxx:v:13:y:2022:i:04:n:s2010007822500051
    DOI: 10.1142/S2010007822500051
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