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Journal Articles Journal of Public Economic Theory Year : 2017

Are the Laffer curve and the green paradox mutually exclusive ?

Abstract

In this paper, we study the relationship between the Laffer curve and the green paradox in the context of a Ramsey model with endogenous labor supply in which pollution increases consumer demand (through a compensation effect). We find that—in the long run—the conditions under which a Laffer curve and a green paradox emerge are mutually exclusive. Indeed, the Laffer curve exists under a weak compensation effect, while the green paradox requires a strong effect. Also, we find that, in the short run, limit cycles may arise in the presence of a Laffer curve, while they never occur under a green paradox.

Dates and versions

hal-01745432 , version 1 (28-03-2018)

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Stefano Bosi, David Desmarchelier. Are the Laffer curve and the green paradox mutually exclusive ?. Journal of Public Economic Theory, 2017, 19 (5), pp.937 - 956. ⟨10.1111/jpet.12242⟩. ⟨hal-01745432⟩
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