Effects of carbon taxes in an economy with large informal sector and rural-urban migration
AbstractI build an equilibrium search and matching model of an economy with an informal sector and rural-urban migration to analyze the effects of budget-neutral green tax policy (raising pollution taxes, while cutting payroll taxes) on the labor market. The key results of the paper suggest that when general public spending varies endogenously in response to tax reform and higher energy taxes can reduce the income from self-employed work in the informal sector, green tax policy can produce a triple dividend: a cleaner environment, lower unemployment rate and higher after-tax income of the private sector. This is due to the ability of the government, by employing public spending as an additional policy instrument, to reduce the overall tax burden when an increase in energy tax rates does not exceed some threshold level. Thus governments should employ several instruments if they are concerned with labor market implications of green tax policies.
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Bibliographic InfoPaper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 139.
Date of creation: Dec 2013
Date of revision:
Other versions of this item:
- Karlygash Kuralbayeva, 2014. "Efects of Carbon Taxes in an Economy with Large Informal Sector and Rural-Urban Migration," OxCarre Working Papers 125, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- Karlygash Kuralbayeva, 2013. "Effects of Carbon Taxes in an Economy with Large Informal Sector and Rural-Urban Migration," Economics Series Working Papers OxCarre Research Paper 12, University of Oxford, Department of Economics.
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-DGE-2013-11-22 (Dynamic General Equilibrium)
- NEP-ENE-2013-11-22 (Energy Economics)
- NEP-ENV-2013-11-22 (Environmental Economics)
- NEP-IUE-2013-11-22 (Informal & Underground Economics)
- NEP-MIG-2013-11-22 (Economics of Human Migration)
- NEP-PBE-2013-11-22 (Public Economics)
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