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A NOTE ON ENVIRONMENTAL POLICY AND PUBLIC DEBT STABILIZATION

Published online by Cambridge University Press:  19 December 2011

Mouez Fodha  and
Thomas Seegmuller
Mouez Fodha*
Affiliation:
University Paris 1 Panthéon-Sorbonne
Thomas Seegmuller
Affiliation:
CNRS and GREQAM
*
Address correspondence to: Mouez Fodha, Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Maison des Sciences Economiques, 106-112 Bld de l'Hôpital, 75013 Paris Cedex, France; e-mail: fodha@univ-paris1.fr.
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Abstract

This article analyzes the consequences of environmental tax policy under public debt stabilization constraint. A public sector of pollution abatement is financed by a tax on pollutant emissions and/or by public debt. At the same time, households can also invest in private pollution abatement activities. We show that the economy may be characterized by an environmental-poverty trap if debt is too large or public abatement is not sufficiently efficient with respect to the private one. However, there exists a level of public abatement and debt at which a stable steady state is optimal.

Keywords

Environmental TaxationPublic and Private AbatementsPublic DebtTrapOptimality
Type
Notes
Information
Macroeconomic Dynamics , Volume 16 , Issue 3 , June 2012 , pp. 477 - 492
Copyright
Copyright © Cambridge University Press 2011

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