Unemployment, Labor Mobility, and Climate Policy

Kenneth A. Castellanos and Garth Heutel

No 25797, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a computable general equilibrium model of the United States economy to study the unemployment effects of climate policy and the importance of cross-industry labor mobility. We consider two alternate extreme assumptions about labor mobility: either perfect mobility, as is assumed in much previous work, or perfect immobility. The effect of a $35 per ton carbon tax on aggregate unemployment is small and similar across the two labor mobility assumptions (0.2–0.4 percentage points). The effect on unemployment in fossil fuel sectors is much larger under the immobility assumption – a 24 percentage-point increase in the coal sector – suggesting that models omitting labor mobility frictions may greatly under-predict sectoral unemployment effects. Returning carbon tax revenue through labor tax cuts can dampen or even reverse negative impacts on unemployment, while command-and-control policies yield less efficient outcomes.

JEL-codes: C68 H23 J62 Q52 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-lab
Note: EEE
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Citations: View citations in EconPapers (15)

Published as Kenneth Castellanos & Garth Heutel, 2024. "Unemployment, Labor Mobility, and Climate Policy," Journal of the Association of Environmental and Resource Economists, vol 11(1), pages 1-40.

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Journal Article: Unemployment, Labor Mobility, and Climate Policy (2024)
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