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Second-Best Pollution Taxation and Environmental Quality

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Gaube,  Thomas
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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Citation

Gaube, T. (2005). Second-Best Pollution Taxation and Environmental Quality.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0028-6E02-9
Abstract
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.