Environmental policy,pollution, unemployment,and endogenous growth |
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Authors: | Søren Bo Nielsen Lars Haagen Pedersen Peter Birch Sørensen |
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Institution: | (1) Economic Policy Research Unit, Copenhagen Business School, Nansensgade 19, 5th floor, DK-1366 Copenhagen K, Denmark |
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Abstract: | The paper develops a model of endogenous economic growth with pollution externalities and a labor market distorted by union monopoly power and by taxes and transfers. We study the optimal second-best pollution tax and abatement policy and find that a shift toward greener preferences will tend to reduce unemployment, although it will hamper growth. We also find that greater labor-market distortions call for higher pollution tax rates. Finally, we show that a switch from quantity control of pollution combined with grandfathering of pollution rights to regulation via emission charges has the potential to raise employment, growth, and welfere without damaging the environment. |
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Keywords: | endogenous growth pollution unemployment abatement optimal environmental policy environmental tax reform |
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