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A Second-Best Analysis of Environmental Subsidies

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  • Ian Parry
Abstract
This paper examines the complications posed by pre-existing tax distortions in the economy, for the evaluation of a variety of subsidy policies that affect the environment. These complications include not only the efficiency cost of financing the subsidy by distortionary taxation, but also the interaction effects between the subsidized market and markets with pre-existing taxes. Studies that ignore both of these effects, or only incorporate the first type of effect, can be highly misleading. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • Ian Parry, 1998. "A Second-Best Analysis of Environmental Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 153-170, May.
    • Handle: RePEc:kap:itaxpf:v:5:y:1998:i:2:p:153-170
    DOI: 10.1023/A:1008638320593
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    11. Ian W.H. Parry, 2002. "Environmental Taxes and Quotas in the Presence of Distorting Taxes in Factor Markets," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 23, pages 429-446, Edward Elgar Publishing.
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    14. Ian W.H. Parry, 2002. "Pollution Taxes and Revenue Reycling," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 15, pages 235-248, Edward Elgar Publishing.
    15. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
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