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Environmental effectiveness of tax compliance policy in the presence of labor unions

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  • Tsaur‐Chin Wu
  • Ching‐Yang Liang
  • Kun‐Li Lin

Abstract

This paper investigates the impact of a stricter tax compliance policy on firms’ pollution emissions in the presence of labor market frictions. In contrast to a situation with perfect labor markets, we find that under the right‐to‐manage wage formation, a stricter compliance policy increases emissions when the shadow cost of the emission limit is excluded, whereas it has no impact when the shadow cost is included. With efficient bargaining, a stricter compliance policy decreases (or increases) pollution emissions under employment (wage) orientation but has no impact on pollution emissions under wage neutrality.

Suggested Citation

  • Tsaur‐Chin Wu & Ching‐Yang Liang & Kun‐Li Lin, 2022. "Environmental effectiveness of tax compliance policy in the presence of labor unions," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(2), pages 137-153, June.
    • Handle: RePEc:bla:ijethy:v:18:y:2022:i:2:p:137-153
    DOI: 10.1111/ijet.12256
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