NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Inkee Hong

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Working Papers and Chapters

January 2001A Tax on Output of the Polluting Industry Is Not a Tax on Pollution: The Importance of Hitting the Target
with Don Fullerton, Gilbert E. Metcalf
in Behavioral and Distributional Effects of Environmental Policy, Carlo Carraro and Gilbert E. Metcalf, editors
July 1999A Tax on Output of the Polluting Industry is Not a Tax on Pollution: The Importance of Hitting the Target
with Don Fullerton, Gilbert E. Metcalf: w7259
We explore the effects of environmental taxes that imprecisely target pollution. A review of actual policies indicates few (if any) examples of a true tax on pollution. More typically, environmental taxes target an input or output that is correlated with pollution. We construct a simple analytical general equilibrium model to calculate the optimum tax rate on the input of the polluting industry, in terms of key behavioral parameters, and we compare this imprecisely-targeted tax to an ideal tax on pollution. Finally, we consider incremental tax reforms such as a change in either tax from some pre-existing level. Using a utility-based money-metric measure of welfare, we examine the losses that arise from not taxing pollution directly. With no existing tax, under our plausible parameter...

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

 
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