Optimal Taxation on Profit and Pollution with a Macroeconomic Framework

摘要

A macroeconomic model of optimal profit taxation developed by Gradus (see PB90-133406) is extended through incorporation of a tax rate on pollution. It is assumed that the representative firm owns two different stocks of capital goods. The first one is productive but also generates pollution, and the second one is nonproductive but cleans pollution. The problem is modelled as a Stackelberg differential game such that the government is the leader; the firms and consumers, each represented by one, are the followers playing Nash against each other. Open-loop and feedback equilibria are studied and a numerical example is used to gain some further insights. The authors show that the open-loop Stackelberg equilibrium leads to a higher level of welfare, but not necessarily to a lower level of pollution.