Pigouvian taxes

Agnar Sandmo
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

Pigouvian taxes are taxes designed to correct for negative external effects. The idea is originally due to Pigou (1920), and has received increased attention in recent years because of the concern with environmental issues. This article sets out the basic theoretical argument and considers the modifications of the theory that have to be made when these taxes are seen in the context of an otherwise distortionary tax system. It also briefly considers the issue of the ‘double dividend’ from a green tax reform.
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How to cite this article

Sandmo, Agnar. "Pigouvian taxes." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 21 October 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_P000351> doi:10.1057/9780230226203.1289

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