The Effect of Pollution-making Government’s Fiscal Policy on Economic Growth, Environmental Pollution, and Social Welfare
Date Issued
2010
Date
2010
Author(s)
Yu, Chung-Han
Abstract
The assumptions of the government in the most literatures are to maintain the budgets balanced, or to help the economic growth. Compared to the literatures in the past, the government used in this paper contains both positive and negative effects to the society, which mean that government possesses positive effect on economic growth but negative effect, such as environmental pollution, to the environment. By using this theoretical framework, we want to know whether the government can achieve high economic growth and low pollution in the long-run equilibrium under these two opposite forces. Three different government attitudes of revenue and expenditure are defined here: fixed-expenditure, expenditure according to revenue, and revenue according to expenditure. This paper discusses the effects of the change of pollution tax rate to economy. The results dose not support the double dividend hypothesis. At the same time, no matter what kind of the government is, it is impossible to achieve both high ecomonic growth and low pollution simultaneously. In other words, only one of these objectives is achievable. This conclusion not only consistent with the literatures, but also reflects the real development process of many countries. In addition, the results also find that under the fixed-expenditure government structure, the increase of the capital income tax rate with the increasing-pollution tax rate will increase the social welfare at a higher level.
Subjects
government expenditure
economic growth
pollution tax rate
pollution
welfare
Type
thesis
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