Environmental effectiveness of tax compliance policy in the presence of labor unions

Tsaur‐Chin Wu, Ching‐Yang Liang and Kun‐Li Lin

International Journal of Economic Theory, 2022, vol. 18, issue 2, 137-153

Abstract: This paper investigates the impact of a stricter tax compliance policy on firms’ pollution emissions in the presence of labor market frictions. In contrast to a situation with perfect labor markets, we find that under the right‐to‐manage wage formation, a stricter compliance policy increases emissions when the shadow cost of the emission limit is excluded, whereas it has no impact when the shadow cost is included. With efficient bargaining, a stricter compliance policy decreases (or increases) pollution emissions under employment (wage) orientation but has no impact on pollution emissions under wage neutrality.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:18:y:2022:i:2:p:137-153

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