Recycling of Eco-Taxes, Labor Market Effects and the True Cost of Labor – A CGE Analysis


Conrad, Klaus ; Löschel, Andreas


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URL: http://ub-madoc.bib.uni-mannheim.de/413
URN: urn:nbn:de:bsz:180-madoc-4133
Document Type: Working paper
Year of publication: 2002
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: Q25 D58 J30 ,
Subject headings (SWD): Steuer , Steuerpolitik , Marktpreis , Simulation
Abstract: Computable general equilibrium (CGE) modeling has provided a number of important insights about the interplay between environmental tax policy and the pre-existing tax system. In this paper, we emphasize that a labor market policy of recycling tax revenues from an environmental tax to lower employers’ non-wage labor cost depends on how the costs of labor are modeled. We propose an approach which combines neoclassical substitutability and fixed factor proportions. Our concept implies a user cost of labor which consists of the market price of labor plus the costs of inputs associated with the employment of a worker. We present simulation results based on a CO2 tax and the recycling of its revenues to reduce the nonwage labor cost. One simulation is based on the market price of labor and the other on the user cost of labor. We found a double dividend under the first approach but not under the second one.
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Conrad, Klaus ; Löschel, Andreas (2002) Recycling of Eco-Taxes, Labor Market Effects and the True Cost of Labor – A CGE Analysis. Open Access [Working paper]
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