Environmental Tax Reform in a Small Open Economy With Structural Unemployment

Bertil Holmlund () and Ann-Sofie Kolm

International Tax and Public Finance, 2000, vol. 7, issue 3, 315-333

Abstract: The paper examines the effects of an environmental tax reform in a small open economy with decentralised wage bargaining, monopolistically competitive firms and equilibrium unemployment. There is a tradable and a non-tradable sector and all firms use labour as well as an imported polluting factor of production (“energy”). A key result is that a tax on energy, recycled to reduce the payroll tax, reduces unemployment if there is a tradable sector wage premium. However, even if energy taxes may boost employment, welfare will not necessarily improve. Numerical simulations suggest that energy taxes in general provide an environmental dividend but also reduce real GDP. Copyright Kluwer Academic Publishers 2000

Keywords: environmental tax reform; wage bargaining; equilibrium unemployment (search for similar items in EconPapers)
Date: 2000
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Working Paper: Environmental Tax Reform in a Small Open Economy with Structural Unemployment (1998)
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DOI: 10.1023/A:1008757830467

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