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Environmental taxation, employment and public spending in developing countries

Kuralbayeva, Karlygash (2018) Environmental taxation, employment and public spending in developing countries. Environmental and Resource Economics. ISSN 0924-6460

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This paper investigates the consequences of environmental tax reforms for unemployment and welfare, in the case of developing countries with a large informal sector, rural-urban migration, and three different assumptions about public spending: (1) as part of a revenue-neutral policy, (2) fixed, and (3) varying endogenously. Under the indexation of unemployment benefits and informal-sector income that give rise to a double dividend, a lower level of public spending is associated with a smaller negative impact on the after-tax income of households and a higher increase in employment. These policies, however, still lead to a reduction in social welfare; even more so in the case of endogenous public spending, although it is associated with a higher increase in employment and a smaller reduction in private-sector incomes. The model implies that complementary policy, in terms of lower public spending, is unlikely to be socially acceptable, and does not support the case for a green tax reforms in developing countries.

Item Type: Article
Official URL:
Additional Information: © 2018 Springer Science+Business Media B.V.
Divisions: Grantham Research Institute
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HJ Public Finance
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
Date Deposited: 04 Jan 2018 11:46
Last Modified: 29 Jun 2024 00:06
Projects: ES/KOO6576/1
Funders: Economic and Social Research Council, Global Green Growth Institute, Grantham Foundation for the Protection of the Environment

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