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http://ssrn.com/abstract=75112
 
 

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Pollution, Factor Taxation and Unemployment


Erkki Koskela


University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute); Bank of Finland - Research Department; Institute for the Study of Labor (IZA)

Ronnie Schöb


Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

Hans-Werner Sinn


CESifo (Center for Economic Studies and Ifo Institute); National Bureau of Economic Research (NBER); Ludwig-Maximilians-Universität München


International Tax and Public Finance, Vol. 5, Issue 3, 1998

Abstract:     
When consumers choose between clean and dirty goods and the labor market clears, a green tax reform may not bring about a double dividend in the sense of increasing environmental quality and increasing employment. However, when firms choose between clean and dirty factors of production, and when there is unemployment, such a result is very likely to occur. The paper investigates a model of a monopolistic firm where labor and energy are factors of production and trade unions negotiate the wage rate, accepting some unemployment as a result of aggressive wage demands. It is shown that, in such a framework, a green tax reform will boost employment provided it does not increase the net-of-tax wage rate by too much. This is the case when the elasticity of substitution between labor and energy is greater than one, equal to one or not too far below one.

JEL Classification: H20, J51

Accepted Paper Series





Not Available For Download

Date posted: April 14, 1998  

Suggested Citation

Koskela, Erkki and Schöb, Ronnie and Sinn, Hans-Werner, Pollution, Factor Taxation and Unemployment. International Tax and Public Finance, Vol. 5, Issue 3, 1998. Available at SSRN: http://ssrn.com/abstract=75112

Contact Information

Erkki Koskela (Contact Author)
University of Helsinki - Department of Political and Economic Studies ( email )
P.O. Box 54
FIN-00014 Helsinki
Finland
+358 9 191 8894 (Phone)
+358 9 191 8877 (Fax)
HOME PAGE: http://www.cesifo.de/servlet/page?_pageid=56&_dad=portal30&_schema=PORTAL30&pa_id=7298
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Bank of Finland - Research Department ( email )
P.O. Box 160
FIN-00101 Helsinki
Finland
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Ronnie Schöb
Freie Universitaet Berlin ( email )
Kaiserswerther Str. 16-18
Berlin, Berlin 14195
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Hans-Werner Sinn
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany
+49 89 9224 1276 (Phone)
+49 89 9224 1409 (Fax)
HOME PAGE: http://www.cesifo.de
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Ludwig-Maximilians-Universität München
Geschwister-Scholl-Platz 1
Munich, 80539
Germany
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