The Double Dividend Hypothesis and Trade Liberalization

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Abstract

This paper studies how simultaneously liberalizing trade and tightening environmental policy affect welfare in a second-best world. We consider a three-good two-factor small open economy. We allow for non-tradables and for market power in the export market. The government is constrained to balance its budget at all times through distortionary taxes: a given income transfer has to be financed out of tariff and pollution tax revenue. We show that the switch from trade tariffs to environmental taxes can yield an increase in real income thus providing a second dividend in addition to the environmental improvement.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages22
Volume2000-06
Publication statusPublished - 2000

Publication series

NameCentER Discussion Paper
Volume2000-06

Fingerprint

Tariffs
Trade liberalization
Double dividend
Tax revenues
Income transfers
Market power
Nontradables
Environmental taxes
Pollution tax
Export markets
Environmental policy
Dividends
Distortionary taxes
Government
Small open economy
Real income
Budget balance
Factors

Keywords

  • environmental policy
  • trade liberalization
  • double dividend
  • non-tradables

Cite this

Sen, P., & Smulders, J. A. (2000). The Double Dividend Hypothesis and Trade Liberalization. (CentER Discussion Paper; Vol. 2000-06). Tilburg: Macroeconomics.
Sen, P. ; Smulders, J.A. / The Double Dividend Hypothesis and Trade Liberalization. Tilburg : Macroeconomics, 2000. (CentER Discussion Paper).
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Sen, P & Smulders, JA 2000 'The Double Dividend Hypothesis and Trade Liberalization' CentER Discussion Paper, vol. 2000-06, Macroeconomics, Tilburg.

The Double Dividend Hypothesis and Trade Liberalization. / Sen, P.; Smulders, J.A.

Tilburg : Macroeconomics, 2000. (CentER Discussion Paper; Vol. 2000-06).

Research output: Working paperDiscussion paperOther research output

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Sen P, Smulders JA. The Double Dividend Hypothesis and Trade Liberalization. Tilburg: Macroeconomics. 2000. (CentER Discussion Paper).