TY  - JOUR
AU  - Fullerton,Don
AU  - Heutel,Garth
TI  - The General Equilibrium Incidence of Environmental Taxes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11311
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11311
L1  - http://www.nber.org/papers/w11311.pdf
N1  - Author contact info:
Don Fullerton
Department of Finance
University of Illinois
BIF Box#30 (MC520)
515 East Gregory Drive
Champaign, IL  61820
Tel: 217/244-3621
Fax: 217/244-3102
E-Mail: dfullert@illinois.edu

Garth Heutel
Bryan 466, Department of Economics
University of North Carolina at Greensboro
P. O. Box 26170
Greensboro, NC 27402
Tel: 336/334-4872
Fax: 336/334-5580
E-Mail: gaheutel@uncg.edu
AB  - We study the distributional effects of a pollution tax in general equilibrium, with general forms of substitution where pollution might be a relative complement or substitute for labor or for capital in production. We find closed form solutions for pollution, output prices, and factor prices. Various special cases help clarify the impact of differential factor intensities, substitution effects, and output effects. Intuitively, the pollution tax might place disproportionate burdens on capital if the polluting sector is capital intensive, or if labor is a better substitute for pollution than is capital; however, conditions are found where these intuitive results do not hold. We show exact conditions for the wage to rise relative to the capital return. Plausible values are then assigned to all the parameters, and we find that variations over the possible range of factor intensities have less impact than variations over the possible range of elasticities.
ER  -