Abstract

In this paper we present a meta-regression analysis of simulation studies concerning green tax reform (GTR). Our study investigates the employment effect of GTR across European and non-European countries. The existing literature postulates that employment double dividend (EDD) is achievable; however, the majority of the studies come from European countries. In this paper, we compared the performance of GTR led EDD in European and non-European contexts to observe whether there is any notable difference across country groups. Our results show that both tax and tax revenue recycle policies play a significant role in determining the employment effect. However, the optimal policy mix is not identical for European and non-European countries. Region specific policy design is required for optimal employment effect.

Highlights

  • Ecological taxation, known as green tax or environmental tax, is an alternative form of taxation that addresses the failure of environmental preservation in a free market economy

  • Out of the 146 simulations we analysed regarding the employment effect, 95 measured an environmental effect and 20 were from non-European countries. This underlines the fact that studies on employment double dividend (EDD) in non-European countries, which has started in recent years following European footsteps, are generally accepting the environmental dividend as a stylised fact and primarily focus on the second dividend

  • The comparison of environmental and employment effects between European and non-European countries conforms with the findings of Anger et al (2010) as it shows higher emissions reduction in non-European countries is coupled with lower employment effect, exhibiting a negative relationship (Table 1)

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Summary

Introduction

Ecological taxation, known as green tax or environmental tax, is an alternative form of taxation that addresses the failure of environmental preservation in a free market economy. The negative environmental externalities of free market activities are often not fully accounted for, which is a major impediment in sustainable development (UNDP, 2003). The environmental efficacy of green tax in reducing pollution is well accepted in mainstream economics and is often recommended as an effective tool to internalise the negative externalities of economic development; i.e., pollution. A tax on pollution internalises the external cost of pollution as businesses need to pay for the right to pollute. This helps to implement the “polluter pays” principle by confronting the producer with the economic and social costs generated by pollution

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