Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy

Tetsuo Ono

FinanzArchiv: Public Finance Analysis, 2007, vol. 63, issue 1, 133-161

Abstract: This paper develops an overlapping-generations model characterized by endogenous growth, unemployment, and pollution. The paper focuses on the replacement ratio, which measures the proportion of after-tax work earnings replaced by unemployment benefits, and considers a replacement-ratio-neutral reform in whichthe environmental tax is devoted to cutting the employees' rate of contribution to unemployment insurance. Under this reform, (i) the growth rate is increased, the unemployment rate is unchanged, and pollution is decreased; (ii) there is a trade-off of nonenvironmental utility between current and future generations; and (iii) when the reform is associated with an intergenerational transfer from the young to the old, the nonenvironmental utility of every generation can be improved.

Keywords: economic growth; environmental tax reform; overlapping generations; replacement ratio; unemployment (search for similar items in EconPapers)
JEL-codes: E60 H55 J21 J51 J65 Q38 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (5)

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DOI: 10.1628/001522107X186755

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