Epsilon Open Archive

Abstract

This paper looks at the distributional effect of an environmental tax on meat in Sweden, if such a tax was to be introduced. Welfare effects are measured as Compensation Variation (CV) for multiple price changes where Hicksian cross price elasticities, household expenditures and price
changes are used in the calculations. Results show that taxes on meat are neutral over households when expenditures on meat are used as welfare indicators, and regressive if
income is used. This can be explained as households use similar shares of total expenditures on meat. The households with the smallest income levels need to be compensated with 950 SEK per person and year to feel that utility is not lowered if taxes on meat are introduced, and the households with the highest income levels need to be compensated with 1176 SEK per person and year. This corresponds to 0.78% and 0.80% of total expenditures for the groups respectively. Compared to income levels this is 1.04% for the households with the smallest income levels and 0.52% for the households with the largest income.