WELFARE MEASUREMENT, GREEN ACCOUNTING AND DISTORTIONARY TAXES

This paper concerns welfare measurement in the presence of distortiona ry taxes. One purpose is to explain why the traditional green NNP meas ure fails as a welfare indicator when distortionary taxes are present. Another is to derive a green NNP analogue in a second best environmen t. In the second best optimum, the efficiency cost off taxation will a ffect both the form of the national welfare measure and the proper pri nciples of accounting for pollution. (C) 1998 Elsevier Science S.A. Al l rights reserved.