The logic of the double-dividend hypothesis may not hold because the Pigouvian tax exacerbates pre-existing distortions in the labour market.
A)True
B)False
C)Uncertain

Question

Quizplus · Accepted Answer

The double-dividend hypothesis suggests that environmental taxes can yield both environmental benefits and economic efficiency gains. However, if a Pigouvian tax worsens existing labor market distortions, it may not lead to the expected economic efficiency gains, thus challenging the hypothesis.

The Logic of the Double-Dividend Hypothesis May Not Hold Because