Efficient Environmental Taxation Under Worker-Firm Bargaining
AbstractWe study an economy with free firm entry and unemployment due to firm-worker bargaining over each firm's surplus, and where firms cause pollution that can be reduced by initial investments. An uncompensated increase in the pollution tax reduces pollution but increases unemployment, implying a tradeoff between the two. When tax revenues are used to subsidize either firms' hiring or investments, employment may also increase, creating a âdouble dividendâ from the pollution tax. A pollution tax increase used to subsidize current employment is always less effective than a hiring subsidy, and is totally ineffective when subsidies equal pollution tax revenues for each individual firm. We show that the (hypothetical) pollution tax implementing the first-best solution exceeds the Pigouvian tax. The second-best tax exceeds this first-best tax when we have a double dividend, and is below it when we do not. Copyright Kluwer Academic Publishers 1999
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 19/1995.
Length: 28 pages
Date of creation: 1995
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
BARGAINING; ENVIRONMENT; TAX POLICY;
Other versions of this item:
- Jon Strand, 1999. "Efficient Environmental Taxation Under Worker-Firm Bargaining," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 125-141, March.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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urn:nbn:nl:ui:12-152985, Tilburg University.
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