Environmental Policy Reforms and the Labor Market in a Global Economy

Thomas Aronsson (), Thomas Jonsson () and Tomas Sjögren ()
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Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Thomas Jonsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 629, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: In this paper, we consider the welfare effects of environmental policy cooperation in a two-country economy. We assume that the countries finance their public expenditures by using distortionary taxes, and that the countries differ with respect to competition in the labor market. The purpose is to characterize the cost benefit rule for a policy reform, where the countries involved agree to slightly increase their expenditures on abatement. We show how the welfare effect of the policy reform depends on changes in environmental damage, employment and work hours. We also relate the welfare effects of policy cooperation to the characteristics of the fiscal policies in the prereform equilibrium.

Keywords: Policy cooperation; distortionary taxes; labor market; Nash game; Stackelberg game (search for similar items in EconPapers)
JEL-codes: H41 J51 J60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-pbe
Date: 2004-03-18
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