Double dividend hypothesis

The double-dividend hypothesis (English: double dividend hypothesis ) is concerned with the theory of a revenue-neutral tax reform . The starting point is that every tax or duty can lead to distortions in the market. This can be avoided by designing eco taxes as incentive taxes : The pricing of environmental damage , i.e. the inclusion ( internalization ) of external costs in the sales price, can even have double positive effects:

• The first dividend is based on the assumption that environmental taxes have a steering function. The market participants ( companies and consumers ) are encouraged to behave in an environmentally friendly manner and thus improve the quality of the environment. Pollution is avoided.

• A second dividend arises when the state returns the taxes it collects to market participants (e.g. by lowering corporate taxes or income taxes , lowering social contributions , per capita reimbursement with an eco bonus ). The work factor is relieved. The welfare state is strengthened by the income from the ecological taxes.

Market failure

Even if the theory of perfect competition likes to suggest that the markets heal themselves , there are reasons why the market can fail (main article: market failure ). In theory, the following reasons for state intervention are given:

• Protection of public goods
• Merit goods
• Positive and negative externalities
• Natural monopoly
• Ruinous competition
• Asymmetrical information from market participants

The double dividend hypothesis is based on the theory of negative externalities . Environmental damage is typically viewed as an outsourced cost to business because it causes society and nature itself to be detrimental.

The soft double dividend

The soft form of the double dividend is relatively unproblematic. This is because it abstracts from possible distortions that could result from an environmental tax. The eco-tax therefore corresponds to a first-class solution, as the levying of the eco-tax does not result in any additional burden on the payment burden. Basically, this corresponds to the idea of ​​a Pigou tax .

The middle double dividend

There is at least one distorting tax for which a reduction in the eco-tax revenue leads to an overall reduced or at least constant burden on the economy as a whole.

The strict double dividend

The introduction of an eco tax leads to fewer costs than would result from a typical or representative distorting tax. This is stricter because an environmental tax always leads to fewer welfare losses than any existing tax or levy. If an ecological tax stands up to this postulate, then a tax reform may also be desirable if it does not lead to any improvement in the environment. However, it would then no longer be a “double dividend”, since the first dividend would break away as an argument.

Third dividend

There are also proponents of a potential third dividend. By reducing existing distortions in the labor market, positive employment effects could arise. If this is the case, one can also speak of three dividends. First, the quality of the environment is improved (1st dividend). Second, the tax system will become more efficient and equalized (2nd dividend). Finally, there are positive employment effects (3rd dividend).

Intertemporal double dividend

An intertemporal double dividend could be seen as a discounted calculation between non-environmental and environmental welfare increases over generations.

This approach analyzes welfare over generations and not just statically. The positive welfare effects from the beginning to the end of the introduction of an environmental tax are offset against the welfare losses from beginning to end in a steady state . The social welfare criterion leads to a modified golden rule , since ethical and practical problems are included. If the current generation foregoes environmental damage, the next generation will benefit from the foresight.

The second dividend would therefore not be seen as an equalization of the tax system, but rather in the welfare gains of future generations.

literature

Books

• Giacomo Corneo: Public Finance: Spending Policy. 2nd edition, Mohr Siebeck, 2007, ISBN 978-3-16149200-6 .
• Ruud A. de Mooij: Environmental Taxation and the Double Dividend. North Holland, 2000, ISBN 0-44450491-5 .
• Manfred Rose: COMPSTAT Lectures: Integrated Tax and Social System. Physica-Verlag, Heidelberg, ISBN 978-3-79080008-1 .
• Ary Lans Bovenberg , Sijbren Cnossen: Public Economics and the Environment in an Imperfect World. Kluwer Academic Publishers, 1995, ISBN 0792396189 , pp. 151-156.

Journal articles and reports

• Lawrence H. Goulder: Environmental Taxation and the Double Dividend, A Reader's Guide. In: International Tax and Public Finance. 1994, pp. 157-184.
• Ary Lans Bovenberg: Green Tax Reforms and the Double Dividend, A Reader's Guide. In: International Tax and Public Finance. 1999, pp. 421-443.
• Ary Lans Bovenberg, Ruud A. de Mooij: Environmental Levies and Distortionary Taxation , In: American Economic Review. 1994, pp. 1085-1089.
• Ary Lans Bovenberg, Frederick van der Ploeg: Consequences of Environmental Tax Reform for Unemployment and Welfare. In: Environmental and Resource Economics. 1998, pp. 137-150.
• Thomas Aronsson: Environmental Policy, Efficient Taxation and Unemployment. In: International Tax and Public Finance. 2005, pp. 131-144.
• Johanna Elisabeth Ligthart, Frederick van der Ploeg: Pollution, the Cost of Public. Funds and Endogenous Growth. In: Economics Letters. 1994, pp. 339-348.
• Frank Hettich: Growth effects of a revenue-neutral environmental tax reform. In: Journal of Economics. 1998, pp. 287-316.
• Don Fullerton, Gilbert E. Metcalf: Environmental Taxes and the Double-Dividend Hypothesis: Did You Really Expect Something for Nothing? In: Chicago-Kent Law Review 73, 1998, pp. 221-256.
• Christian M. Scholz: Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis: A Comment. In: The Scandinavian Journal of Economics 100, No. 3, 1998, pp. 663-664.
• Ronnie Schöb: The Double Dividend Hypothesis of Environmental Taxes: A Survey. In: FEEM Working Paper. No. 60; CESifo Working Paper Series. No. 946, 2003 ( doi : 10.2139 / ssrn.413866 , PDF ).
• Mireille Chiroleu-Assouline, Mouez Fodha: Double Dividend Hypothesis, Golden Rule and Welfare Distribution (PDF; 211 kB) In: Journal of Environmental Economics and Management , 51 (3), 2006, pp. 323-335.

Individual evidence

1. ↑ http://www.keei.re.kr/web_keei/en_publish.nsf/5ec83c28b6f89c21492570ea00404b8e/754dccd1d0e583c549256ccc002058a0/$FILE/BR2002-10.pdf
2. ↑ Martin Baur: Basics for an ecological tax reform , Eidgenössische Finanzverwaltung (FFA), July 2012, accessed December 31, 2012. ( (PDF; 241 kB) ( Memento of the original from September 23, 2015 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. ) 
3. ↑ http://www.worldbank.org/html/dec/Publications/Workpapers/wps2000series/wps2119/wps2119.pdf
4. ↑ Archive link ( Memento of the original from February 15, 2010 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.  
5. ↑ http://halshs.archives-ouvertes.fr/docs/00/08/98/95/PDF/MCA-MF_JEEM.pdf