Environmental and Resource Economics

, Volume 12, Issue 2, pp 137–150 | Cite as

Consequences of Environmental Tax Reform for Unemployment and Welfare

  • A. Lans Bovenberg
  • Frederick Van der Ploeg


We investigate the welfare effects of environmental tax reform, i.e. raising environmental taxes and using the proceeds to reduce distortionary taxes on labour. The framework of analysis is a small open economy with involuntary unemployment due to a rigid consumer wage. Environmental tax reform boosts not only environmental quality but also employment if substitution between labour and resources is easy, the production share of the fixed factor is large, and the initial tax rates on resources and profits are small. If the initial tax system is sub-optimal with a negligible tax on resources, profits rise as well.

double dividend environmental quality fixed factor involuntary unemployment labour tax optimal taxation pollution tax reform triple dividend JEL classification: E60, H21, Q3 


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Copyright information

© Kluwer Academic Publishers 1998

Authors and Affiliations

  • A. Lans Bovenberg
    • 1
  • Frederick Van der Ploeg
    • 2
  1. 1.CentERTilburg UniversityTilburgThe Netherlands
  2. 2.FEEUniversity of AmsterdamAmsterdamThe Netherlands

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