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

  • Albert, Max
  • Meckl, Jürgen

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.

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Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series I with number 297.

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Date of creation: 1999
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Handle: RePEc:zbw:kondp1:297
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  1. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  2. 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.
  3. 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.
  4. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  5. Koskela, Erkki & Schob, Ronnie, 1999. "Alleviating unemployment:: The case for green tax reforms," European Economic Review, Elsevier, vol. 43(9), pages 1723-1746, October.
  6. Erkki Koskela & Ronnie Schob & Hans-Werner Sinn, 1999. "Green Tax Reform and Competitiveness," NBER Working Papers 6922, National Bureau of Economic Research, Inc.
  7. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  8. Schlicht, Ekkehart, 1992. "Wage Generosity," Munich Reprints in Economics 3165, University of Munich, Department of Economics.
  9. Koskela, Erkki & Schöb, Ronnie & Sinn, Hans-Werner, 1998. "Pollution, Factor Taxation and Unemployment," Munich Reprints in Economics 19493, University of Munich, Department of Economics.
  10. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  11. Bovenberg, A. Lans & van der Ploeg, Frederick, 1996. "Optimal taxation, public goods and environmental policy with involuntary unemployment," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 59-83, October.
  12. Albert, Max & Meckl, Jürgen, 1997. "Efficiency wages, unemployment and welfare: A trade theorists' guide," Discussion Papers, Series II 348, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  13. A. Bovenberg, 1998. "Environmental Taxes and the Double Dividend," Empirica, Springer, vol. 25(1), pages 15-35, January.
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