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Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy

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  • Tetsuo Ono

Abstract

This paper develops an overlapping-generations model characterized by endogenous growth, unemployment, and pollution. The paper focuses on the replacement ratio, which measures the proportion of after-tax work earnings replaced by unemployment benefits, and considers a replacement-ratio-neutral reform in whichthe environmental tax is devoted to cutting the employees' rate of contribution to unemployment insurance. Under this reform, (i) the growth rate is increased, the unemployment rate is unchanged, and pollution is decreased; (ii) there is a trade-off of nonenvironmental utility between current and future generations; and (iii) when the reform is associated with an intergenerational transfer from the young to the old, the nonenvironmental utility of every generation can be improved.

Suggested Citation

  • Tetsuo Ono, 2007. "Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 133-161, March.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200703)63:1_133:etrega_2.0.tx_2-l
    DOI: 10.1628/001522107X186755
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    References listed on IDEAS

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    Cited by:

    1. Chu, Hsun & Lai, Ching-chong, 2014. "Abatement R&D, market imperfections, and environmental policy in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 20-37.
    2. Lars Kunze & Christiane Schuppert, 2010. "Financing social security by taxing capital income: A bad idea?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(3), pages 243-262, September.
    3. Lars Kunze & Christiane Schuppert, 2009. "Financing Social Security by Taxing Capital Income – A Bad Idea?," Ruhr Economic Papers 0090, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. repec:zbw:rwirep:0090 is not listed on IDEAS

    More about this item

    Keywords

    economic growth; environmental tax reform; overlapping generations; replacement ratio; unemployment;

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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