The Annals of Regional Science

, Volume 39, Issue 2, pp 375–392

Performing an environmental tax reform in a regional economy. A computable general equilibrium approach

  • Francisco J. André
  • M. Alejandro Cardenete
  • Esther Velázquez
Article

DOI: 10.1007/s00168-005-0231-3

Cite this article as:
André, F.J., Cardenete, M.A. & Velázquez, E. Ann Reg Sci (2005) 39: 375. doi:10.1007/s00168-005-0231-3

Abstract

We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double dividend could also be obtained. No double dividend appears when Income Tax is reduced to compensate the environmental tax.

JEL classification

D58 H21 H23 

Copyright information

© Springer-Verlag 2005

Authors and Affiliations

  • Francisco J. André
    • 1
  • M. Alejandro Cardenete
    • 1
  • Esther Velázquez
    • 1
  1. 1.Department of EconomicsUniversidad Pablo de OlavideSevillaSpain

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