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The Effect of Green Taxes on Labor Productivity in the Iranian Economy

Author

Listed:
  • Reyhaneh Sedehi

    (Faculty of Economics, University of Tehran, Tehran, Iran.)

  • Homa Esfahanian

    (Faculty of Economics, University of Tehran, Tehran, Iran.)

Abstract

This study attempts to examine the empirical relationship between gasoline taxes (as the most effective energy carrier of emissions) and labor productivities in the case of Iran using the time series data for the period 1990-2015 usingthe autoregressive distributed lag (ARDL) approach. This research tests the interrelationship between the variables using the bounds testing to cointegration procedure. First, we estimated gasoline demand function by ARDL method and thereafter we subordinated the estimated gasoline demand as regressors in the per capita of labor productivity function. According to price variation in the gasoline demand, we calculated the effect of the green tax on labor productivity over three scenarios. The results imply green tax over three scenarios even though Porter Hypothesis has a negative impact on the labor productivity. Estimating the Error Correction model reveals that the speed of adjustment to restore equilibrium is a stable long-run relationship.

Suggested Citation

  • Reyhaneh Sedehi & Homa Esfahanian, 2019. "The Effect of Green Taxes on Labor Productivity in the Iranian Economy," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 23(4), pages 1041-1055, Autumn.
    • Handle: RePEc:eut:journl:v:23:y:2019:i:4:p:1041
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