Premium
Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint
Author(s) -
MICHAEL MICHAEL S.,
LAHIRI SAJAL,
HATZIPANAYOTOU PANOS
Publication year - 2015
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12092
Subject(s) - economics , consumption (sociology) , constraint (computer aided design) , production (economics) , welfare , revenue , government (linguistics) , budget constraint , pollution , general equilibrium theory , tax revenue , public economics , microeconomics , consumption tax , macroeconomics , indirect tax , monetary economics , tax reform , market economy , finance , mechanical engineering , ecology , social science , linguistics , philosophy , sociology , engineering , biology
The literature on indirect tax reforms in pollution‐ridden economies is quite limited. This paper, using a general equilibrium model of a perfectly competitive small open economy with both production‐ and consumption‐generated pollution, considers the welfare implications of tax reforms that take the structure of consumption and production taxes toward uniformity. Specifically, both in the presence and absence of a binding government revenue constraint, we derive sufficient conditions for welfare improvement in the case where we implement (i) reforms in either production or consumption taxes, and (ii) reforms in both consumption and production taxes.