Estimation of the optimal pollution tax rate in a stochastic endogenous growth pattern

Taxation of pollution is one of the most important policies of the government to reduce pollution to increase the welfare of society. Accordingly, the main purpose of this study is to calculate the optimal pollution tax rate taking into account environmental considerations using an endogenous growth model in the Iranian economy. The randomness of the production function is one of the most important differences between this model and other similar models performed in this field. After developing the model and solving it by SHBJ method and achieving a relationship determining the optimal rate of income tax, using the parameters of the Iranian economy, the model was calibrated and the optimal amount of pollution tax was calculated. The results of model estimation show that the optimal rate of pollution tax for the Iranian economy is 5.3% of total production. Capital interest rate fluctuations, capital interest rates, production fluctuations, changes in pollution function parameters also affect the optimal rate of pollution tax. The results of the sensitivity analysis for the Iranian economy indicate that with increasing environmental preferences, safe interest rates and fluctuations in the production of the optimal pollution tax rate in the optimal state of social welfare should increase. Pollution tax decreases as capital interest rate fluctuations increase.Keywords: Optimal pollution tax rate, environmental damage, random endogenous growth pattern.