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Are Pollution Permit Markets Harmful for Employment?

  • Nicolas Sanz

    (CEREGMIA, Université des Antilles et de la Guyane)

  • Sonia Schwartz

    (CAE, Université Paul Cézanne)

This paper investigates if pollution permit markets are harmful for employment within a Wage Setting-Price Setting (WS-PS) model. The employment level is determined according to several financing unemployment benefits: a wage tax or the revenue of the pollution permit auction. We first show that a permit market weakens the union market power. Whatever the way that unemployment benefits are financed, the choice of the pollution cap is always neutral on the employment levels, and these latter always increase if the technology to reduce pollution become more efficient. Depending on the value of the wage tax, the employment level can be higher or lower when unemployment benefits are financed by pollution permits rather than a wage tax.

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Paper provided by CEREGMIA, Université des Antilles et de la Guyane in its series Documents de Travail with number 2011-04.

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Length: 21 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:crg:wpaper:dt2011-04
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