Efficient Environmental Taxation Under Worker-Firm Bargaining
We study an economy with free firm entry and unemployment due to firm-worker bargaining over each firm's surplus, and where firms cause pollution that can be reduced by initial investments. An uncompensated increase in the pollution tax reduces pollution but increases unemployment, implying a tradeoff between the two. When tax revenues are used to subsidize either firms' hiring or investments, employment may also increase, creating a ‘double dividend’ from the pollution tax. A pollution tax increase used to subsidize current employment is always less effective than a hiring subsidy, and is totally ineffective when subsidies equal pollution tax revenues for each individual firm. We show that the (hypothetical) pollution tax implementing the first-best solution exceeds the Pigouvian tax. The second-best tax exceeds this first-best tax when we have a double dividend, and is below it when we do not. Copyright Kluwer Academic Publishers 1999
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|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway|
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Fax: 22 85 50 35
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- Strand, Jon, 1998.
" Pollution Taxation and Revenue Recycling under Monopoly Unions,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 100(4), pages 765-80, December.
- Strand, J., 1996. "Pollution Taxation and Revenue Recycling Under Monopoly Unions," Memorandum 16/1996, Oslo University, Department of Economics.
- Bovenberg, A.L. & de Mooij, R.A., 1994.
"Environmental levies and distortionary taxation,"
Other publications TiSEM
4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
- Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 593-610, September.
- Schneider, Kerstin, 1997. " Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 45-49, March.
- Bovenberg, A Lans & van der Ploeg, Frederick, 1994. " Green Policies and Public Finance in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 343-63.
- Bovenberg, A Lans & van der Ploeg, Frederick, 1993.
"Green Policies in a Small Open Economy,"
CEPR Discussion Papers
785, C.E.P.R. Discussion Papers.
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