A BEJEAP Topics article.

Abstract

A weak double-dividend is the proposition that the welfare improvement from a green tax reform, where the revenue from an environmental tax is used to reduce other tax rates, must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion. We show in this note that a weak double-dividend need not hold in a world with multiple distortions. In an economy with multiple distortions one must choose carefully which tax rates to reduce, or one can do worse than a lump sum redistribution of the environmental tax revenues.

Submitted: February 13, 2004 · Accepted: February 18, 2004 · Published: February 23, 2004

Originally published in Topics in Economic Analysis & Policy.

Recommended Citation

Metcalf, Gilbert E.; Babiker, Mustafa H.; and Reilly, John (2004) "A Note on Weak Double Dividends," Topics in Economic Analysis & Policy: Vol. 4 : Iss. 1, Article 2.
Available at: http://www.bepress.com/bejeap/topics/vol4/iss1/art2