Optimal taxation and environmental policy in a decentralized economic federation with environmental and labor market externalities

• 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.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

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

Economics

Nationalekonomi

nationalekonomi

Economics

Publikations- och innehållstyp

ref (ämneskategori)

art (ämneskategori)