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Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis
Author(s) -
Schneider Kerstin
Publication year - 1997
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00046
Subject(s) - economics , unemployment , environmental quality , dividend , environmental tax , labour economics , wage , welfare , tax revenue , tax reform , involuntary unemployment , revenue , environmental policy , double taxation , macroeconomics , public economics , natural resource economics , market economy , accounting , finance , political science , law
An environmental tax reform might bring about gains over and above improved environmental quality. In particular, if tax revenues from environmental taxes are used to reduce the tax on wage income, positive employment effects can result in second‐best economies. An efficiency wage model is used to analyze the impact of an ecological tax reform on involuntary unemployment. The government controls emissions by selling emission permits. Employment of labor and wages are determined endogenously. Conditions are identified under which an environmental tax reform reduces unemployment and increases welfare.