On the Double Dividend under Imperfect Competition |
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Authors: | Thorsten Bay?nd?r-Upmann |
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Institution: | (1) Institute of Mathematical Economics, University of Bielefeld, P.O. Box 100 131, 33501 Bielefeld, Germany |
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Abstract: | We investigate whether, and under which conditions, a revenue-neutral environmental tax reform may yield an employment double dividend, i.e., an improvement of environmental quality and an increase in aggregate employment. Using a model with two market imperfections – a rigid real wage and imperfect competition in one industry – we show that an employment dividend is plausibly obtained. However, for countries where labor taxes are high and households spend a large share of their income in favor of environmentally harmful consumption goods a double dividend can nevertheless not be obtained, for under these conditions environmental quality deteriorates. |
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Keywords: | double dividend environmental tax reform imperfect competition pollutant emissions rigid real wage |
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