Pigou's Dividend versus Ramsey's Dividend in the Double Dividend Literature

Abstract

The aims of this paper are to highlight misinterpretations of policy assessments in the double dividend literature, to specify which of the efficiency costs and benefits should be ascribed to each dividend, and then, to propose a definition for the first dividend and the second dividend. We found the Pigou's dividend more appropiate for policy guidance than the usual Ramsey's dividend. Finally, the paper analyzes a green tax reform for the US economy to illustrate the advantages of the new definitions proposed in this paper: i) overcome some shortcoming of the mainstream current definitions in the literature regarding overestimation of the efficiency costs; and, ii) provide information by themselves and not as a partial view of the whole picture.Double dividend, Green Tax Reforms, Ramsey's dividend, Pigou's dividend