NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can Pollution Tax Rebates Protect Low-Income Families? The Effects of Relative Wage Rates

Don Fullerton, Holly Monti

NBER Working Paper No. 15935
Issued in April 2010
NBER Program(s):   EEE   PE

Pollution taxes are believed to burden low-income households that spend a greater than average share of income on pollution-intensive goods. Some propose to offset that effect by returning revenue to low-income workers via reduced labor tax. We build analytical general equilibrium models with both skilled and unskilled labor, and we solve for expressions that show the change in the real net wage of each group. A decomposition shows the effect of the tax rebate, the effect on the uses side of income (higher product prices), and the effect on the sources side of income (relative wage rates). We also include numerical examples. Even though the pollution tax injures both types of labor, we find that returning all of the revenue to the low-skilled workers is still not enough to offset the effect of higher product prices. Moreover, changing wage rates may further hurt low-skilled labor. In almost all of our examples, the rebate of all revenue to low-skilled labor still does not prevent a reduction in their overall real net wage.

download in pdf format
   (238 K)

email paper

This paper is available as PDF (238 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15935

Published: “Can Pollution Tax Reba tes Protect Low - Wage Earners? ”, with H. Monti, Journal of Environme ntal Economics and Management ( Vol.66, No.3, November, 2013 ).

Users who downloaded this paper also downloaded these:
Fullerton, Hong, and Metcalf w7259 A Tax on Output of the Polluting Industry is Not a Tax on Pollution: The Importance of Hitting the Target
Fullerton w16703 Six Distributional Effects of Environmental Policy
Fullerton, Leicester, and Smith w14197 Environmental Taxes
Cropper, Jiang, Alberini, and Baur w15904 Getting Cars Off the Road: The Cost-Effectiveness of an Episodic Pollution Control Program
Bovenberg and Goulder w4897 Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us