Growth, intergenerational welfare, and environmental policies in an overlapping generations economy

This paper examines the effects of the environmental tax on long‐run growth and intergenerational welfare in a discrete‐time overlapping generations (OLG) model. We highlight that the role regarding how the environmental tax revenues are distributed between the young or old generations has important...

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Bibliographic Details
Published inReview of development economics Vol. 22; no. 2; pp. 844 - 861
Main Authors Chu, Hsun, Cheng, Chu‐chuan, Lai, Ching‐chong
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.05.2018
Subjects
Economic models
Environmental policy
Environmental tax
Simulation
Tax revenues
Taxation
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Summary:This paper examines the effects of the environmental tax on long‐run growth and intergenerational welfare in a discrete‐time overlapping generations (OLG) model. We highlight that the role regarding how the environmental tax revenues are distributed between the young or old generations has important implications for the growth and welfare effects. Our results indicate that raising the environmental tax can exert different effects on the environmental utility of the existing young and old generations, implying an intergenerational welfare conflict of the environmental policy. However, if tax revenues are distributed appropriately, our numerical simulation shows that it is possible for a higher environmental tax to improve the welfare of all generations.
ISSN:1363-6669
1467-9361
DOI:10.1111/rode.12371