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

  • Tetsuo Ono

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.

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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 63 (2007)
Issue (Month): 1 (March)
Pages: 133-161

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200703)63:1_133:etrega_2.0.tx_2-l
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  1. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
  2. Gilles Rotillon & Pierre-André Jouvet & Philippe Michel, 2004. "Equilibrium with a Market of Permits," Working Papers 2004.94, Fondazione Eni Enrico Mattei.
  3. JOUVET, Pierre-André & MICHEL, Philippe & VIDAL, Jean-Pierre, 1997. "Intergenerational altruism and the environment," CORE Discussion Papers 1997041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, vol. 58(1), pages 127-141, September.
  5. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  6. A. Bovenberg & Ben Heijdra, 2002. "Environmental Abatement and Intergenerational Distribution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(1), pages 45-84, September.
  7. Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
  8. Ono, Tetsuo, 1996. "Optimal tax schemes and the environmental externality," Economics Letters, Elsevier, vol. 53(3), pages 283-289, December.
  9. Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July.
  10. Eric O'N. Fisher & Charles van Marrewijk, 1998. "Pollution and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 55-69.
  11. Ronald Wendner, 2003. "Status, environmental externality, and optimal tax programs," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-10.
  12. Michael Bräuninger, 2005. "Social Security, Unemployment, and Growth," International Tax and Public Finance, Springer, vol. 12(4), pages 423-434, August.
  13. Jouvet, Pierre-Andre & Michel, Philippe & Rotillon, Gilles, 2005. "Optimal growth with pollution: how to use pollution permits?," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1597-1609, September.
  14. repec:ebl:ecbull:v:8:y:2003:i:5:p:1-10 is not listed on IDEAS
  15. Bye, Brita, 2002. "Taxation, Unemployment, and Growth: Dynamic Welfare Effects of "Green" Policies," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 1-19, January.
  16. JOUVET, Pierre André & MICHEL, Philippe & PESTIEAU, Pierre, 1996. "Altruism, voluntary contributions and neutrality. The case of environmental quality," CORE Discussion Papers 1996067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer, vol. 6(3), pages 421-443, August.
  18. Thomas Wagner, 1998. "Limits and Cycles of Environmental Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(2), pages 155-175, March.
  19. Corneo, Giacomo & Marquardt, Marko, 2000. "Public pensions, unemployment insurance, and growth," Journal of Public Economics, Elsevier, vol. 75(2), pages 293-311, February.
  20. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
  21. Mireille Chiroleu-Assouline & Mouez Fodha, 2005. "Double Dividend with Involuntary Unemployment: Efficiency and Intergenerational Equity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(4), pages 389-403, 08.
  22. Ronald Wendner, 2004. "Frames of reference, the environment, and efficient taxation," Economics of Governance, Springer, vol. 6(1), pages 13-31, January.
  23. Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, vol. 67(1), pages 1-24, January.
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