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Green tax reform and two-component unemployment: Double dividend or double loss?

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  • Albert, Max
  • Meckl, Jürgen

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 proceeds of the green tax to subsidize employment. In the best case, 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

  • Albert, Max & Meckl, Jürgen, 1999. "Green tax reform and two-component unemployment: Double dividend or double loss?," Discussion Papers, Series I 297, University of Konstanz, Department of Economics.
  • Handle: RePEc:zbw:kondp1:297
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    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
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    More about this item

    Keywords

    double dividend; efficiency wages; green tax reform; unemployment;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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