Efficiency wages, unemployment, and environmental policy

Garth Heutel and Xin Zhang

Energy Economics, 2021, vol. 104, issue C

Abstract: We study the incidence of pollution taxes and their impact on unemployment in an analytical general equilibrium efficiency wage model. We find closed-form solutions for the effect of a pollution tax on unemployment, factor prices, and output prices, and we identify and isolate different channels through which these general equilibrium effects arise. An effect arising from the efficiency wage specification depends on the form of the workers' effort function. Numerical simulations further illustrate our results and show that this efficiency wage effect can fully offset the sources-side incidence results found in models that omit it.

Keywords: Pollution Tax; Tax Incidence; Unemployment; Efficiency Wages (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Working Paper: Efficiency Wages, Unemployment, and Environmental Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:104:y:2021:i:c:s0140988321005004

DOI: 10.1016/j.eneco.2021.105639

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