Dewit, Gerda and Leahy, Dermot
Tax uniformity: A commitment device for restraining opportunistic behaviour.
Department of Economics Finance & Accounting NUI Maynooth.
We investigate whether and to what extent uniform and differentiated tax
systems diverge in their propensity to create distortionary opportunistic behaviour. The
set-up in which we carry out our analysis features polluting firms that are confronted with
a Pigovian emission tax. Firms can invest in pollution abatement. We first show that the
existence of emission taxes, although optimally chosen, create strategic incentives for
firms to distort their abatement investment. Second, we find that a system of
differentiated emission taxes has a greater propensity to foster strategic distortions in
abatement investment than a uniform emission tax regime.
||Uniform tax, Differentiated taxes, Emission tax, Short-run policy
commitment, Pollution-abating investment, Strategic investment.
||Faculty of Social Sciences > Economics, Finance and Accounting
Ms Sandra Doherty
||28 Nov 2008 13:59
||Department of Economics Finance & Accounting NUI Maynooth
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