Environmental tax reform with irreversible investment, technological progress and unemployment

Christian M. Scholz

No 798, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper analyzes if unemployment can be reduced through labor tax cuts that are financed in a revenue neutral way through energy tax increases. In contrast to other papers on this topic we consider investment behavior of firms in energy saving technologies, irreversibilities, embodied technological progress and involuntary unemployment. Arguments are presented that reducing the sunk costs instead of the labor tax seems to be the better instrument to reduce energy input and unemployment since this puts more pressure on firms that are using old technologies to adopt a more efficient energy saving technology.

JEL-codes: E60 H32 J3 J5 (search for similar items in EconPapers)
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:798

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