Optimal taxation, environment quality, socially responsible firms and investors

Renstrom, T.; Spatarom, L.; Marsiliani, L.

Abstract

We characterize the optimal pollution-, capital- and labour-tax structure in a continuous-time model in the presence of pollution (resulting from production), both in the first- and second-best, allowing investors to be driven by social responsibility objectives. The social responsibility objective takes the form of warm-glow, as in Andreoni (1990) and Dam (2011), inducing firms to reduce pollution through increased abatement activity. Among the results, the second-best pollution tax displays an additivity property and the Chamley–Judd zero capital-income tax can be violated under warm-glow preferences. We also show that first- and second-best pollution taxes are positive, under warm-glow preferences, and, under mild assumptions, the latter yield lower first-best pollution taxes and lower pollution intensity.

Citation

Renstrom, T., Spatarom, L., & Marsiliani, L. (2019). Optimal taxation, environment quality, socially responsible firms and investors. International review of environmental and resource economics, 13(3-4), 339-373. https://doi.org/10.1561/101.00000112

• Journal Article Type: Article
• Acceptance Date: Aug 2, 2019
• Online Publication Date: Sep 18, 2019
• Publication Date: Jan 1, 2019
• Deposit Date: Aug 5, 2019
• Publicly Available Date: Mar 18, 2020
• Journal: International Review of Environmental and Resource Economics
• Print ISSN: 1932-1465
• Electronic ISSN: 1932-1473
• Publisher: Now Publishers
• Peer Reviewed: Peer Reviewed
• Volume: 13
• Issue: 3-4
• Pages: 339-373
• DOI: https://doi.org/10.1561/101.00000112
• Public URL: https://durham-repository.worktribe.com/output/1296016