Ecological Tax Reform and Efficiency of Taxation: A Public Good Perspective

Abstract

Revenue-neutral ecological tax reforms are known to yield a greendividend, but not an efficiency dividend, in general. This result isshown to be not counter-intuitive when one looks at such reforms asproviding more of the costly public good `environmental quality'financed by distortionary taxes. In that perspective the double dividendconjecture is tantamount to assuming that more environmental quality canbe bought for less money, which is rather unlikely even if generalequilibrium interdependencies are accounted for.