Arbeitspapier

Environmental taxes in the long run

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The efficiency of the Pigouvian tax suggests that price-based regulation is the proper benchmark for efficient regulation. However, results due to Carlton and Loury (1980, 1986) question this; when harm depends on scale effects a pure Pigou tax is inefficient regulation in the long run. In this note we make precise that there is an efficient tax scheme for controlling harm as long as social optimum exists. In particular, the efficient tax scheme is based on a tax rate equal to marginal harm. Hence, price regulation is the right benchmark for regulation even in the presence of scale effects in the harm function.

Language
Englisch

Bibliographic citation
Series: Economics Discussion Papers ; No. 2013-29

Classification
Wirtschaft
Allocative Efficiency; Cost-Benefit Analysis
Externalities
Subject
externalities
scale effects
Pigou-taxes

Event
Geistige Schöpfung
(who)
Vetter, Henrik
Event
Veröffentlichung
(who)
Kiel Institute for the World Economy (IfW)
(where)
Kiel
(when)
2013

Handle
Last update
10.03.2025, 11:42 AM CET

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Object type

  • Arbeitspapier

Associated

  • Vetter, Henrik
  • Kiel Institute for the World Economy (IfW)

Time of origin

  • 2013

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