This paper develops a model of a small open economy that produces an export good with domestic labour and imported energy and is stuck in an unemployment situation resulting from an excessive fixed net-of-tax wage rate. We study a revenue-neutral green tax reform that substitutes energy for wage...

This paper shows that a small open economy should levy positive source-based taxes on capital income to fight involuntary unemployment and increase welfare. A revenue-neutral tax reform which increases the capital tax rate and reduces the labour tax rate will induce firms to substitute labour...

When consumers choose between clean and dirty goods and the labor market clears, a green tax reform may not bring about a double dividend in the sense of increasing environmental quality and increasing employment. However, when firms choose between clean and dirty factors of production, and when...

According to conventional wisdom the total tax wedge, which is the sum of payroll and wage taxes is sufficient to specify the distortion of wage formation caused by labour taxation. This paper casts doubt on this view by providing two reasons why this irrelevance conjecture may not hold in...

The double-dividend hypothesis claims that green taxes will both improve the environment and reduce the distortions of existing taxes. According to the earlier literature on the double dividend the tax rate for polluting goods should be higher than the Pigovian tax which fully internalizes the...

When consumers choose between clean and dirty goods and the labour market clears, a green tax reform may not bring about a double dividend in the sense of increasing environmental quality and increasing employment. However, when firms choose between clean and dirty factors of production, and...

We analyze the analytical structure of optimal taxation of polluting and non-polluting goods in a second-best world where lump-sum taxes are infeasible. After deriving the environmental tax rate which exactly internalizes the external effect, we show how to separate the analysis of second-best...

Using survey data from the China Family Panel Studies (CFPS) from 2010 to 2018, this paper analyzes the relationship between income inequality, group-specific income redistribution, and subjective well-being among China’s urban, rural, and migrant populations. Using narrowly defined reference...

It has been argued recently that imposing taxes on pollution produces additional tax revenues, which can then be used to replace labor taxes and thus reap a double dividend in the form of improving environmental quality and alleviating unemployment. This paper analyzes the employment effects of...

Many countries suffer from persistently high unemployment rates. The scope for labour market reforms is often limited to measures that hurt neither shareholders nor workers. This paper develops a policy proposal, which allows the government to reduce wage costs without changing the income...