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Unemployment and Pollution: Is One Policy Suited for Two Problems?

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  • THORSTEN BAYINDIR‐UPMANN
  • MATTHIAS G. RAITH

Abstract

Frequently, hope is expressed that a revenue‐neutral ecological tax reform may serve as a remedy for both unemployment and pollution. The idea is to recycle the proceeds from green taxes by cutting taxes on labour, thus boosting employment while discouraging polluting activities. We investigate this issue in a general‐equilibrium framework with different non‐competitive labour markets. For all scenarios, we show that a decrease in the labour tax increases employment without letting net‐wage incomes fall. However, this leads to a positive aggregate income effect, which plausibly raises both clean and dirty consumption, leading to a lower environmental quality than before.

Suggested Citation

  • Thorsten Bayindir‐Upmann & Matthias G. Raith, 2005. "Unemployment and Pollution: Is One Policy Suited for Two Problems?," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 378-393, December.
  • Handle: RePEc:bla:ecorec:v:81:y:2005:i:255:p:378-393
    DOI: 10.1111/j.1475-4932.2005.00276.x
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    File URL: https://doi.org/10.1111/j.1475-4932.2005.00276.x
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    Cited by:

    1. Thorsten Upmann & Julia Müller, 2014. "The Structure of Firm-Specific Labour Unions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 336-364, June.
    2. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2019. "The Decomposability of the Nash Bargaining Solution in Labor Markets," Working Papers CIE 128, Paderborn University, CIE Center for International Economics.
    3. Sapkota, Pratikshya & Bastola, Umesh, 2017. "Foreign direct investment, income, and environmental pollution in developing countries: Panel data analysis of Latin America," Energy Economics, Elsevier, vol. 64(C), pages 206-212.
    4. Thomas Eichner & Thorsten Upmann, 2012. "Labor markets and capital tax competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(2), pages 203-215, April.
    5. Thorsten Upmann, 2008. "Labour Unions – To Unite or to Separate?," CESifo Working Paper Series 2413, CESifo.
    6. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2020. "Wage Bargaining and Employment Revisited: Separability and Efficiency in Collective Bargaining," CESifo Working Paper Series 8422, CESifo.
    7. Thorsten Upmann, 2009. "A positive analysis of labor-market institutions and tax reforms," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(5), pages 621-646, October.

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