Optimal taxation, environment quality, socially responsible firms and investors

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

doi:10.1561/101.00000112

Optimal taxation, environment quality, socially responsible firms and investors

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

Authors

Dr Thomas Renstrom t.i.renstrom@durham.ac.uk
Associate Professor

L. Spatarom

Professor Laura Marsiliani laura.marsiliani@durham.ac.uk
Professor

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