Abstract
We investigate whether, and under which conditions, a revenue-neutral environmental tax reform may yield an employment double dividend, i.e., an improvement of environmental quality and an increase in aggregate employment. Using a model with two market imperfections – a rigid real wage and imperfect competition in one industry – we show that an employment dividend is plausibly obtained. However, for countries where labor taxes are high and households spend a large share of their income in favor of environmentally harmful consumption goods a double dividend can nevertheless not be obtained, for under these conditions environmental quality deteriorates.
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Bayındır-Upmann, T. On the Double Dividend under Imperfect Competition. Environmental and Resource Economics 28, 169–194 (2004). https://doi.org/10.1023/B:EARE.0000029917.57621.df
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DOI: https://doi.org/10.1023/B:EARE.0000029917.57621.df