Recycling of eco-taxes, labor market Effects and the true cost of labor - A CGE analysis
AbstractComputable general equilibrium (CGE) modeling has provided a number of important insights about the interplay between environmental tax policy and the pre-existing tax system. In this paper, we emphasize that a labor market policy of recycling tax revenues from an environmental tax to lower employers’ non-wage labor cost depends on how the costs of labor are modeled. We propose an approach, which combines neoclassical substitutability and fixed factor proportions. Our concept implies a user cost of labor which consists of the market price of labor plus the costs of inputs associated with the employment of a worker. We present simulation results based on a CO2 tax and the recycling of its revenues to reduce the non-wage labor cost. One simulation is based on the market price of labor and the other on the user cost of labor. We found a double dividend under the first approach but not under the second one.
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Bibliographic InfoArticle provided by Universidad del CEMA in its journal Journal of Applied Economics.
Volume (Year): VIII (2005)
Issue (Month): (November)
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market-based environmental policy; carbon taxes; double dividend; computable general equilibrium modeling;
Other versions of this item:
- Löschel, Andreas & Conrad, Klaus, 2002. "Recycling of eco-taxes, labor market effects and the true cost of labor: a CGE analysis," ZEW Discussion Papers 02-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
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