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Green Tax Reform and Two-Component Unemployment: Double Dividend or Double Loss?

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  • Max Albert
  • Jürgen Meckl

Abstract

The double-dividend argument (as used in political debates) addresses worries that a green tax may lead to higher unemployment when wages are inflexible. As protection against this possibility, it is proposed to use the green-tax proceeds to reduce the total tax burden of labor. Ideally, this protects the environment and reduces unemployment (double dividend). However, even if the main cause of unemployment is a minimum wage, an additional efficiency-wage component (which explains certain stylized facts) can dominate employment effects. In the worst case, this leads to a "double loss," which is impossible under pure minimum-wage unemployment.

Suggested Citation

  • Max Albert & Jürgen Meckl, 2001. "Green Tax Reform and Two-Component Unemployment: Double Dividend or Double Loss?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(2), pages 265-281, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200106)157:2_265:gtratu_2.0.tx_2-1
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    Cited by:

    1. Manash Ranjan Gupta & Priya Brata Dutta, 2022. "Taxation, capital accumulation, environment and unemployment in an efficiency wage model," Journal of Economics, Springer, vol. 135(2), pages 151-198, March.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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