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Optimal taxation and environmental policy in a decentralized economic federation with environmental and labor market externalities
Umeå University, Faculty of Social Sciences, Department of Economics.
2010 (English)In: Public Finance and Management, ISSN 1523-9721, Vol. 10, no 2, 284-330 p.Article in journal (Refereed) Published
Abstract [en]

This paper concerns optimal taxation and environmental policy in the presence of transboundary environmental damage and labor market distortions, where the latter gives rise to wage bargaining externalities between countries. I consider a decentralized economic federation where the federal government chooses emission targets to be implemented by the national governments. The results show that the labor market externality will influence the target levels for emissions chosen by the central government. I then proceed to characterize the optimal tax policy at the national level. The decentralized federation structure produces incentives for the national governments to use the tax policy to influence the policies chosen by the federal level. It is shown how these objectives interact with the additional objective to minimize the distortion on the national labor market.

Place, publisher, year, edition, pages
2010. Vol. 10, no 2, 284-330 p.
Keyword [en]
Taxation, Environmental policy, Labor supply, Labor market, Externalities (Economics), Administration of air and water resource and solid waste management programs, Public Finance Activities, Decentralization in government
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URN: urn:nbn:se:umu:diva-40980OAI: diva2:404036
Available from: 2011-03-15 Created: 2011-03-15 Last updated: 2011-06-22Bibliographically approved

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Sjögren, Tomas
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Department of Economics

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