Environmental policy, pollution, unemployment and endogenous growth

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The paper develops a model of endogenous economic growth with pollution externalities and a labor market distorted by union monopoly power and by taxes and transfers. We study the optimal second-best pollution tax and abatement policy and find that a shift toward greener preferences will tend to reduce unemployment, although it will hamper growth. We also find that greater labor-market distortions call for higher pollution tax rates. Finally, we show that a switch from quantity control of pollution combined with grandfathering of pollution rights to regulation via emission charges has the potential to raise employment, growth, and welfere without damaging the environment
TidsskriftInternational Tax and Public Finance
Udgave nummer2
Sider (fra-til)185-205
StatusUdgivet - 1995

ID: 156204