Green Tax Reform and Two-Component Unemployment: Double Dividend or Double Loss?

Max Albert and Jürgen Meckl ()

Journal of Institutional and Theoretical Economics (JITE), 2001, vol. 157, issue 2, 265-281

Abstract: The double-dividend argument (as used in political debates) addresses worries that a green tax may lead to higher unemployment when wages are inflexible. As protection against this possibility, it is proposed to use the green-tax proceeds to reduce the total tax burden of labor. Ideally, this protects the environment and reduces unemployment (double dividend). However, even if the main cause of unemployment is a minimum wage, an additional efficiency-wage component (which explains certain stylized facts) can dominate employment effects. In the worst case, this leads to a "double loss," which is impossible under pure minimum-wage unemployment.

JEL-codes: H20 J31 J64 Q28 (search for similar items in EconPapers)
Date: 2001
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