Read full paper at: http://www.scirp.org/journal/PaperInformation.aspx?PaperID=52309#.VI-oYMnQrzE Author(s) Bidisha Lahiri * Affiliation(s) Department of Economics and Legal Studies, Oklahoma State University, Stillwater, USA . ABSTRACT This paper examines the effects of environmental taxes on the demand and supply sides of the economy and uncovers two opposite forces on long-term production. An increase in the environmental tax stimulates abatement behavior as producers lower production from the same capital stock but simultaneously lower per-unit emissions increases consumers’ demand for the cleaner goods hence increasing the capital stock. Starting from a low level of environmental taxes, my model finds...
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