Doctoral Programme Quantitative Economics

Mireille Chiroleu-Assouline - Université Paris 1 Panthéon-Sorbonne: "Environmental Tax Reform and Income Distribution with Imperfect Heterogenous Labor Markets"

Jan 11, 2016 from 04:15 PM to 05:45 PM

CAU - Wilhelm-Seelig-Platz 1 - Room 401

This paper investigates the distributional and efficiency consequences of an environmental tax reform, when the revenue of the green tax is recycled by a variation of labor tax rates. We build a general equilibrium model with heterogeneous imperfect labor markets, pollution consumption externalities, and non homothetic preferences (Stone-Geary utility). We show that whereas the uses side of green taxes impacts are unambiguously regressive, the sources side effects could appear progressive depending on the differences between low-paid and high-paid employment responses to taxes. In the case where the reform appears to be regressive, the gains from the double dividend can be made Pareto improving by using a redistributive non-linear income tax if redistribution is initially not too large. Moreover, the increase of progressivity acts on unemployment and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for the French case.

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