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Environmental tax reform and induced technological change

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  • YAMAGAMI, Hiroaki

Abstract

This paper examines the importance of induced technological change in considering the efficiency costs of environmental policy. In particular, in modeling an endogenous formation of energy-saving technology through a variety of intermediates, the paper studies the welfare effects of environmental tax reform in a general equilibrium model. Using this model, the paper shows that environmental tax reform induces an expansion of the variety of intermediates by increasing rents from innovating new intermediates and, thereby, brings technological change. Then, the induced variety expansion by environmental tax reform achieves positive externalities and plays an important role both to decrease the efficiency costs and to improve the environmental quality.

Suggested Citation

  • YAMAGAMI, Hiroaki, 2013. "Environmental tax reform and induced technological change," MPRA Paper 46516, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46516
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    File URL: https://mpra.ub.uni-muenchen.de/47178/9/MPRA_paper_47178.pdf
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    References listed on IDEAS

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    3. Hiroaki Yamagami, 2009. "Health Effects, Tax Deductions for Medical Expenditure, and the Double Dividend," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 105-121, March.
    4. Ian W.H. Parry, 2002. "Pollution Taxes and Revenue Reycling," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 15, pages 235-248, Edward Elgar Publishing.
    5. Ian W.H. Parry & Antonio M. Bento, 2002. "Tax Deductions, Environmental Policy, and the "Double Dividend" Hypothesis," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 22, pages 397-426, Edward Elgar Publishing.
    6. Lawrence H. Goulder & Ian W.H. Parry & Dallas Burtraw, 2002. "Revenue-Raising versus Other Approaches to Environmental Protection: The Critical Significance of Preexisting Tax Distortions," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 24, pages 447-470, Edward Elgar Publishing.
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    More about this item

    Keywords

    Double dividend; Energy saving; Environmental tax reform; Induced technological change; Tax-interaction effect;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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