Recycling of eco-taxes, labor market effects and the true cost of labor: a CGE analysis

Andreas Löschel and Klaus Conrad

No 02-31, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Computable general equilibrium (CGE) modeling has provided a number of important insights about the interplay between environmental tax policy and the pre-existing tax system. In this paper, we emphasize that a labor market policy of recycling tax revenues from an environmental tax to lower employers? non-wage labor cost depends on how the costs of labor are modeled. We propose an approach which combines neoclassical substitutability and fixed factor proportions. Our concept implies a user cost of labor which consists of the market price of labor plus the costs of inputs associated with the employment of a worker. We present simulation results based on a CO2 tax and the recycling of its revenues to reduce the nonwage labor cost. One simulation is based on the market price of labor and the other on the user cost of labor. We found a double dividend under the first approach but not under the second one.

Keywords: Market-based environmental policy; carbon taxes; double dividend; computable general equilibrium modeling (search for similar items in EconPapers)
JEL-codes: D58 J30 Q25 (search for similar items in EconPapers)
Date: 2002
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Related works:
Journal Article: Recycling of Eco-Taxes, Labor Market Effects and the True Cost of Labor- a CGE Analysis (2005)
Journal Article: Recycling of eco-taxes, labor market Effects and the true cost of labor - A CGE analysis (2005)
Journal Article: Recycling of Eco-Taxes, Labor Market Effects and the True Cost of Labor- a CGE Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:866

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