Pollution Taxation and Revenue Recycling Under Monopoly Unions
We consider a model where a given number of firms decide on a pollution-reducing production technology, and then hire workers who subsequently form a monopoly union which sets the wage. We study the possibility of "double dividents", i.e. simultaneous reduction in pollution and increases in employment, when the pollution tax is increased, and tax revenues recycled, in alternative ways. In all cases overall pollution is then reduced.
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