Climate policies, labour markets and macroeconomic outcomes in emerging economies

Alan Finkelstein Shapiro and Victoria Nuguer

No 1204, BIS Working Papers from Bank for International Settlements

Abstract: We study the labour market and macroeconomic effects of a carbon tax in the energy sector in emerging economies. We build a search and matching macro model with pollution externalities from energy production, endogenous green-technology adoption, and salaried-firm entry that incorporates two key elements of the employment and firm structure of these economies: salaried labor and firm informality and self-employment. Calibrating the model to emerging-economy data, we show that a carbon tax increases green-technology adoption and the share of green energy, but also leads to higher energy prices. As a result, the tax reduces salaried firm creation, the number of formal firms, and formal employment, and leads to an increase in self-employment, labor participation, and unemployment - a response that generates long run output and welfare losses. Green-technology adoption limits while self-employment exacerbates the quantitative magnitude of these losses. A joint policy that combines a carbon tax with a reduction in the cost of firm formality can offset the adverse effects of the tax and generate a transition to a lower-carbon economy with minimal economic costs.

Keywords: environmental and fiscal policy; carbon tax; endogenous firm creation; green technology adoption; search frictions; unemployment and labour force participation; informality and self-employment; emerging economies (search for similar items in EconPapers)
JEL-codes: E20 E24 E61 H23 J46 J64 O44 Q52 Q55 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-dge, nep-ene, nep-iue and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/work1204.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work1204.htm (text/html)

Related works:
Working Paper: Climate Policies, Labor Markets, and Macroeconomic Outcomes in Emerging Economies (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1204

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().