how do market reforms affect china s responsiveness to environmental policy a large percentage of total investment in china is allocated by the central government at below market interest rates in pursuit of non economic objectives this has resulted in low rates of return and a high number of non performing loans threatening the future health of the chinese economy as a result reform of capital markets is a high priority of the chinese government at the same time the country is implementing various environmental policies to deal with serious pollution issues in this paper we ask how reforms of the capital market will affect the functioning of a carbon tax this allows us to assess how china s willingness to join global efforts to reduce carbon emissions is influenced by china s current efforts to reduce investment subsidies we compare the costs of a carbon tax in a reformed economy with the costs of a carbon tax in the current subsidized economy we find that in the subsidized economy the tax interaction effect dampens the effect of a carbon tax resulting in smaller reductions in emissions than what would result in a reformed economy importantly we also find that the effect on economic welfare from a carbon tax is lower in the subsidized economy in fact for lower levels of reductions the carbon tax is actually welfare improving these results have important implications for an economy undergoing economic transition the carbon tax rate required to achieve a certain level of emission reductions will be higher in an economy with capital subsidies however the welfare implications of the tax indicate that the current system with capital subsidies is highly distorting implying that there is a high efficiency cost for the non economic objectives the government is pursuing by maintaining this system of subsidies

on cost benefit rules for green taxes this paper concerns the welfare effects of a green tax reform in a dynamic general equilibrium model with preexisting taxes on labor income and capital income in comparison with previous studies on green taxes in dynamic models which have focused their main attention on long run effects of such reforms i derive cost benefit rules for a change in the tax mix by using the properties of the value function in optimal control theory this enables me to relate the welfare effect of a change in the tax mix to responses in employment the capital stock flow emissions and the stock of pollution along the whole general equilibrium path another contribution of the paper is to examine under what conditions an emission tax which is set permanently below the marginal damage of pollution is welfare superior to an emission tax path that fully internalizes the external effect

efficient environmental taxation under worker firm bargaining we study an economy with free firm entry and unemployment due to firm worker bargaining over each firm s surplus and where firms cause pollution that can be reduced by initial investments an uncompensated increase in the pollution tax reduces pollution but increases unemployment implying a tradeoff between the two when tax revenues are used to subsidize either firms hiring or investments employment may also increase creating a double dividend from the pollution tax a pollution tax increase used to subsidize current employment is always less effective than a hiring subsidy and is totally ineffective when subsidies equal pollution tax revenues for each individual firm we show that the hypothetical pollution tax implementing the first best solution exceeds the pigouvian tax the second best tax exceeds this first best tax when we have a double dividend and is below it when we do not

environmental taxation inequality and engel s law the double dividend of redistribution empirical evidence shows that low income households spend a high share of their income on pollution intensive goods this fuels the concern that an environmental tax reform could be regressive we employ a framework which accounts for the distributional effect of environmental taxes and the recycling of the revenues on both households and firms to quantify changes in the optimal tax structure and the equity impacts of an environmental tax reform we characterize when an optimal environmental tax reform does not increase inequality even if the tax system before the reform is optimal from a non environmental point of view if the tax system before the reform is calibrated to stylized data and is thus non optimal we find that there is a large scope for inequality reduction even if the government is restricted in its recycling options

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

optimal environmental charges taxes easy to estimate and surplus yielding the estimation of the optimal charges taxes on environmental disruption and the financing of the spending on the abatement of environmental disruption are important practical problems this paper shows that for most cases where some abatement is desirable both the estimation and the financing problems may be easily solved it is desirable to charge disruption at least at the marginal cost of abatement which is easier to estimate than the marginal damage of disruption and such a charge will normally yield total revenue in excess of the amount of abatement spending

the ir relevance of real wage rigidity in the new keynesian model with search frictions we explore the role of real wage dynamics in a new keynesian business cycle model with search and matching frictions in the labor market both job creation and destruction are endogenous we show that the model generates counterfactual inflation and labor market dynamics in particular it fails to generate a beveridge curve vacancies and unemployment are positively correlated introducing real wage rigidity leads to a negative correlation and increases the magnitude of labor market flows to more realistic values however inflation dynamics are only weakly affected by real wage rigidity this is because of the presence of labor market frictions which generate long run employment relationships the measure of real marginal cost that is relevant for inflation dynamics via the phillips curve contains a dynamic component that does not necessarily move with real wages

new keynesian perspectives on labor market dynamics abstract we find that demand shocks play an important role for business cycle fluctuations in unemployment and job vacancies the reason is that those shocks give a strong incentive to demand constrained firms to adjust production and thereby labor input furthermore we argue that whether real wage rigidity a la hall 2005 employment fluctuations with equilibrium wage stickiness american economic review 95 50 65 helps explain the remaining part of the unemployment volatility puzzle depends critically on assumptions regarding the form of the wage bargain between firms and workers real wage rigidity tends to generate volatility in employment only in the case in which hours are chosen efficiently if on the other hand the real wage is allowed to affect firms s choices of hours directly the feature of real wage rigidity loses its ability to increase employment volatility

incentives and loss of control in an optimal hierarchy this paper studies incentives and loss of control in a hierarchy model which combines and generalizes the models of williamson calvo wellisz and keren levhari in our model of the hierarchy the levels of effort from managers and workers the wage scales the span of control and in particular the total number of tiers are all endogenous using optimal control techniques we show that in the optimal hierarchy the wage scales and effort levels decrease as one moves down the hierarchy as the hierarchy expands with no technological progress workers exert less effort and are paid less top managers work harder and are paid more and the wage distribution becomes increasingly skewed

fiscal interactions and the case for carbon taxes over grandfathered carbon permits this paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with pre existing tax distortions in the labour market both policies reduce labour supply as they increase product prices and reduce real household wages the resulting efficiency losses in the labour market can be substantial relative to partial equilibrium abatement costs however much of this added cost can be offset and perhaps more than offset when additional distortions from the tax system are considered if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes consequently there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits copyright 2003 oxford university press

second best taxation of emissions and polluting goods abstract this paper studies the problem of the design of an integrated system of second best emission and output taxes in a model where production costs are negatively correlated with their emissions it shows that i the first best pigouvian rule of equating the marginal private benefit of emissions in production to the marginal social damage of emissions must be modified in the second best ii implementation of the modified pigouvian rule requires all firms to face the same marginal emission tax equal to the marginal social damage of emissions plus an adjustment term reflecting optimal tax objectives iii it may not be necessary to directly tax the polluting goods the latter taxes can be subsumed in the emission tax function iv output taxes must be set solely on the basis of optimal tax objectives no pigouvian adjustment is required v if emission taxes are restricted to be proportional and commodity taxes are constrained the modified pigouvian rule will no longer be optimal vi if preferences are weakly separable in emissions and other goods the pigouvian rule remains valid the marginal emission tax is pigouvian and emission and commodity tax instruments can be set separately to address different objectives a proportional emission tax corrects for externalities while commodity taxes are determined solely on the basis of optimal tax considerations

environmental policy public goods and the marginal cost of public funds if private goods are perfect substitutes for public goods and environmental quality greener preferences reduce employment raise abatement and improve environmental quality if the elasticity of substitution between private goods and leisure exceeds one the tax rate increases thereby reducing private consumption however if labor supply bends backwards private utility rises while the tax rate and public consumption fall with imperfect substitution between private and public consumption greener policies boost labor supply if the substitution elasticity between private and public consumption and the elasticity of the effectiveness of public abatement are small and the labor supply curve bends backwards copyright 1994 by royal economic society

ex post redistribution in a federation implications for corrective policy abstract this paper analyzes whether changes in the timing of equalizing transfers to state governments necessitate an adjustment in federal corrective policy according to the existing literature assuming an ex ante choice of transfers the corrective grant is equal to the marginal damage benefit inflicted by externality generation when the federal government accommodates state finances ex post the grant differs in formula from existing prescription allocative federal policy corrects state policy incentives twofold it entails a correction for the distortion in the marginal benefit of state spending as in earlier literature and for the distortion in the marginal cost of public funds induced by the ex post provision of transfers the required grant rule is generically disproportionate to the equilibrium externality even with lump sum taxation furthermore the ex post provision of transfers is critical for the nature of the equilibrium inefficiency equalizing transfers at least partly internalize consumption spill overs but simultaneously establishes a new source of inefficiency as a final result the existing prescription for allocative federal policy continues to apply if the public good is pure

why do investment euler equations fail this article isolates sources of misspecification in neoclassical investment euler equations without ad hoc alterations of the basic model first allowing for nonlinear marginal investment adjustment costs improves model performance slightly some further improvement results from isolating firms whose optimality conditions hold even in the presence of fixed costs of adjustment or costly reversibility finally i identify which instruments contribute to model failure via standard gmm based tests and also via the empirical likelihood estimator of imbens which allows testing overidentifying restrictions individually both methods show that financial instruments contribute to rejection of the overidentifying restrictions for all firms however only the empirical likelihood estimator shows that they are a source of failure for firms that attain an interior optimum

intra firm bargaining under non binding contracts we present a new methodology for studying the problem of intra firm bargaining based on the notion that contracts cannot commit the firm and its agents to wages and employment we develop and analyse a general non cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party equilibrium firm profits are characterizable as both a weighted average of a neo classical non bargaining firm s profits and a generalization of shapley value for a corresponding cooperative game furthermore the resulting payoffs induce economically significant distortions in the firm s input and organizational design decisions

wages and labor management in african manufacturing using matched employer employee data on 10 african countries this paper examines the relationship beween wages worker supervision and labor productivity in manufacturing wages increase with rm size for both production workers and supervisors we develop a two tier model of supervision that can account for this stylized fact and we t the structural model to the data employee data is used to derive a rm speci c wage premium that is purged of the effect of worker observables we nd as trong effect of both supervision and wages on effort and hence on labor productivity labor management in sub saharan africa appears problematic with much higher supervisor to worker ratios than in morocco and a higher elasticity of effort with respect to supervision

internal labor markets too many theories too few facts that firms employ internal labor markets in which wages and careers are partly shielded from the vagaries of external labor markets seems well accepted yet peter doeringer and michael piore s 1985 seminal work on internal labor markets has had a rather limited impact on the economics profession in contrast to textbooks on human resource management which have adopted their paradigm wholeheartedly labor economics texts tend to pay only cursory attention to internal labor markets the competitive model in which wages reflect an individual s marginal product remains the paradigm of choice there are many reasons for this lackluster reception including intellectual convenience a more acceptable excuse is that while doeringer and piore s study which was based on interviews with 75 companies identified several key regularities ports of entry career ladders etc that have come to shape our perception of internal labor markets the book never presented a theory to explain these findings with the advent of information economics and contract theory models of internal labor markets or at least selected features of these markets have begun to emerge the objective of these theories is to show that internal labor market outcomes can be construed as second best solutions to contracting problems under incomplete information for instance tournament theory edward lazear and sherwin rosen 1981 sees the attachment of wages to jobs as part of an efficient incentive scheme michael waldman 1984 explains the same phenomenon as an insurance arrangement against variations in individual productivity seniority rules in promotion and wagesetting can be understood as responses to problems of collusion or influence activities paul milgrom and john roberts 1988 the list could be extended at this point there is hardly any feature of internal labor markets that cannot be given some logical explanation using the right combination of uncertainty asymmetric information and opportunism doeringer and piore 1985 in the preface to the second printing of their book take exception with this line of theoretical research they believe that internal labor markets are inherently a social group phenomenon and that something fundamental is missed by pursuing individualistic models be that as it may we think there is another more serious problem with the direction that this research has taken too much of it relies on the old empirical stereotype the original study was done 25 years ago and focused almost exclusively on blue collar male unionized manufacturing workers one might rightly wonder how relevant these findings are in today s environment and whether they extend to white collar work as most discussions seem to assume before proceeding with the theory it is prudent to ask do we have the facts right in this paper we report on two recent case studies of individual firms that use personnel records to analyze wage and career paths of managerial workers lazear 1992 and baker et al 1994a b 1 person

non convexities in the adjustment of different capital inputs a firm level investigation recent developments in investment research have highlighted the importance of non convexities and irreversibilities in firms adjustment of quasi fixed inputs aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets lack of suitable data is one of the reasons why empirical work has typically relied on the assumption of capital homogeneity in this paper we exploit a data set of 1539 italian firms which allows us to disaggregate capital into equipment and structures and purchases and sales of assets we construct measures of fundamental q to capture investment opportunities associated with each asset we uncover the pattern of dynamic adjustment by using non parametric techniques to relate each individual investment to its own fundamental q

environmental policy public finance and the labour market in a second best world abstract environmental and tax policies and the optimal provision of clean and dirty public goods are analysed within the context of a second best framework of optimal taxation households consume both clean and dirty commodities degradation of the natural environment occurs due to the consumption of dirty private and public goods but can be offset when the government engages in abatement activities increased environmental concern implies a higher dirt tax a lower tax on labour less employment more public abatement and a cleaner environment if the elasticity of substitution between private consumption commodities and leisure is large and that between clean and dirty goods is small public consumption may expand while private consumption contracts otherwise public consumption falls

micro and macro labor supply elasticities a reassessment of conventional wisdom the response of aggregate labor supply to various changes in the economic environ ment is central to many economic issues especially the optimal design of tax policies conventional wisdom based on studies in the 1980s and 1990s has long held that the analysis of micro data leads one to conclude that aggregate labor supply elasticities are quite small in this paper we argue that this conventional wisdom does not hold up to empirically reasonable and relevant extensions of simple life cycle models that served as the basis for these conclusions in particular we show that several pieces of conventional wisdom fail in the presence of human capital accumulation or labor supply decisions that allow for adjustment along both the extensive and intensive margin we conclude that previous estimates of small labor supply elasticities based on micro data are fully consistent with large aggregate labor supply elasticities jel d91 e24 j22

how robust is the uniform emissions pricing rule to social equity concerns abstract this paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework we characterize the drivers for non uniform optimal taxes stemming from the interaction of household heterogeneity with social preferences quantitatively assessing the case of price based co2 emissions control in the u s economy we find that uniform emissions pricing is approximately optimal when social concerns are defined over inequity induced by the environmental tax the deviation from uniform emissions pricing however becomes non negligible when pollution tax rebates deviate much from optimal transfer schemes or when social concerns are defined over both policy induced impacts and inequity unrelated to environmental policy our results are robust to a number of model extensions including the stringency of the environmental target downstream vs upstream taxation pre existing distortionary taxes and parametric uncertainty in firms and households equilibrium tax responses

carbon taxation when climate affects productivity optimal carbon taxation is evaluated in a model where climate change affects productivity with a numerical us economy model with preexisting taxes the optimal carbon tax is found to exceed marginal social damage by 53 percent and marginal private damage the sum of households marginal willingness to pay by 73 percent the welfare gain from optimal carbon taxation is estimated at 3 58 billion per year when marginal damages are 40 ton employment also increases setting the carbon tax at the pigouvian rate raises welfare by only 3 17 billion the contrasting results in the tax interaction literature are due to the use of marginal private damage when applied to amenity externalities

efficient dynamic pollution taxation in an uncertain environment this paper analyzes efficient pollution taxation within a stochastic model of endogenous growth pollution is a by product of production and causes disutility furthermore the productivity which results from environmental quality is uncertain this reflects e g uncertain capital depreciation induced by natural disasters like hurricanes or floods this uncertainty is shown to raise an ambiguous impact on the optimal pollution level as well as on optimal environmental taxation market equilibrium turns out to be suboptimal since the households mis perceive their individual impact on pollution conditions for welfare maximizing pollution taxation are stated and it is shown that a direct pollution tax is not appropriate to yield pareto optimal growth instead a linear capital income tax together with a linear abatement subsidy build an efficient tax scheme if secondarily the governmental budget is balanced moreover an increase in the riskiness of environmental productivity may even lead to an increase in the optimal pollution level and to a decrease in optimal environmental taxation depending predominantly on the preference parameters

optimal gasoline tax in developing oil producing countries the case of mexico this paper uses the methodology of parry and small 2005 to estimate the optimal gasoline tax for a less developed oil producing country the relevance of the estimation relies on the differences between less developed countries ldcs and industrial countries we argue that lawless roads general subsidies on gasoline poor mass transportation systems older vehicle fleets and unregulated city growth make the tax rates in ldcs differ substantially from the rates in the developed world we find that the optimal gasoline tax is 1 90 per gallon at 2011 prices and show that the estimate differences are in line with the factors hypothesized in contrast to the existing literature on industrial countries we show that the relative gasoline tax incidence may be progressive in mexico and more generally in ldcs

employment hours and the welfare effects of intra firm bargaining intra firm bargaining between a multiple worker firm and an individual employee leads to overhiring taking advantage of the decreasing returns to scale in employment the firm can reduce the marginal product by hiring an additional worker thereby reducing the bargaining wage paid to all existing employees we show that this externality is amplified when firms can adjust hours per worker as well as employment hours are too low at the steady state this misallocation of labor leads to sizeable welfare losses our finding is important for economies in which hours adjustment play an important role as it does in many euro area countries

environmental policy tax incidence and the cost of public funds this paper studies under what conditions a double dividend may occur in the sense that both environmental quality and employment rise a simple static general equilibrium model is employed in which tax policy faces the dual task of internalising a negative environmental externality and raising revenue to finance public consumption the model features a clearing labour market with both labour demand and supply and a fixed factor of production e g capital hence we can study tax incidence and its effect on employment environmental quality and the marginal cost of public funds it is shown for the case of an upward sloping labour supply curve and less than full tax shifting by employers that a shift towards greener preferences cannot yield a double dividend even if the fixed factor is important however if labour supply curve bends backwards more environmental concern confers a double dividend

government policy to reduce pollution emissions within the overlapping generations model this article develops an overlapping generations model with multiple categories of capital the importance of this article is in its ability to analyse changes in the distribution of various categories of capital along the growth path of the economy economic growth is accompanied by capital growth as well as increase in pollution emissions implementing a government policy to reduce pollution emission would change the equilibrium path of capital distribution within the model the government builds a corporate tax function that defines the tax rate as a function of a desired pollution level the tax rate decreases as the desired pollution level is higher when the desired pollution level is higher than the actual pollution level production is subsidized and pollution levels rise an example and a simulation are presented in order to confirm the theoretical results and demonstrate that the model can be used for empirical analysis

choosing the right instrument the role of public revenues for environmental policy this paper analyses the optimal choice of second best optimal environmental policies using a partial equilibrium model the paper first reconfirms the well known result that the existence of a double dividend in its weak definition favours environmental policy instruments which maximise tax revenues for a given improvement in environmental quality additional revenues can be used to reduce the distortion of existing taxes such as taxes on labour and capital income without uncertainty environmental taxes and auctioned permits are equally appropriate in the presence of uncertainty however the optimal choice of taxes or tradable permits depends on the relative magnitudes of the marginal environmental damage and the marginal benefit from consuming a polluting good in the second part the paper therefore analyses how the revenue capacity affects the optimal choice of environmental policy instruments in the presence of uncertainty the paper shows that the first best choice rule between price and quantity regulation weitzman 1974 remains valid in a second best world with distortionary taxation

anticipated environmental policy and transitional dynamics in an endogenous growth model this paper makes a new attempt toinvestigate how an anticipatedenvironmental policy governs the transitionaldynamics of an economy when pollutionexternality is taken into account themodeling strategy we use is an ak technologyendogenous growth framework with an endogenousleisure labor choice it is found that unlikeinelastic labor supply framework a rise inpublic abatement expenditure will stimulate thebalanced economic growth rate it is alsofound that public abatement technology plays animportant role in determining the transitionaladjustment of the economic growth rate inresponse to a pre announced environmentalpolicy

a theory of wages and labor demand with intra firm bargaining and matching frictions this article provides a model of labor market equilibrium with search and within firm strategic bargaining we yield explicit closed form solutions with heterogeneous labor inputs and capital the solution exhibits overemployment we show that higher relative bargaining power for some groups of workers may lead to overemployment relative to other groups with such other groups being underemployed instead if they have a lower relative bargaining power similarly the hold up problem between capitalists and employees does not necessarily lead to underinvestment in physical capital beyond the neo classical analysis firms are the field of several strategic interactions between capital owners and labor between marginal employees and incumbents and more generally between different groups with various bargaining positions within the firm it is usually considered that the bargaining power of workers entails an employment level that is lower than in a competitive labor market and any increase in the bargaining power of workers raises unemployment these results are true for a wide class of models and notably in the now standard framework to analyze unemployment namely search and matching models of pissarides 2000 however stole and zwiebel 1996a 1996b show that the above results are totally changed in the intra firm bargaining model where employees engage in individual wage negotiation with the firm in fact under the assumption that contract incompleteness does not enable either party to commit to future wages and employment decisions they show that intra firm bargaining yields no rent for employees and gives rise to overemployment compared to a competitive labor market the basic idea of stole and zwiebel is that a firm with a diminishing marginal productivity of labor can decrease the bargained wage which increases in the marginal productivity of labor by raising employment in stole and zwiebel s setting firms overemploy strategically up to the point where workers get their reservation wage

the substantial bias from ignoring general equilibrium effects in estimating excess burden and a practical solution we show that under typical conditions the simple excess burden triangle formula substantially underestimates the excess burden of commodity taxes in some cases by a factor of 10 or more this formula performs poorly because it ignores general equilibrium interactions most important interactions between the taxed commodity and the labor market many prior studies have shown that general equilibrium interactions affect excess burden but have not appreciated the bias associated with ignoring these interactions or the quantitative importance of this bias we derive an implementable alternative to the simple formula this alternative formula captures interactions that the simple formula omits as a result it is both unbiased and usually more accurate

the welfare effects of environmental taxation recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second best setting than in a first best setting this question has mainly been addressed indirectly by asking whether the second best optimal environmental tax is higher or lower than the first best pigouvian rate even this indirect question has itself been approached indirectly comparing the second best optimal environmental tax to a proxy for its first best value marginal social damage msd on closer examination however msd becomes ambiguously defined and variable in a second best setting making it an unreliable proxy for the pigouvian rate given these observations the current analysis reevaluates these welfare questions and finds that when compared directly to its first best value the second best optimal environmental tax generally rises with increased revenue requirements even in cases where the second best environmental tax is lower than its first best value the welfare gains may be greater than in a first best setting these results suggest that the marginal fiscal benefit revenue recycling effect exceeds the marginal fiscal cost tax base effect over a range of environmental tax rates that for benchmark models extends above the first best pigouvian rate these findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods

carbon taxation in russia prospects for a double dividend and improved energy efficiency russia is not only one of the world s major sources of carbon based energy coal oil and gas but is also one the most intensive users of energy furthermore russia accounts for a disproportionately large share of global carbon dioxide emissions some 5 to 6 of global carbon dioxide emissions eia 2011a it has been estimated world bank 2008 that russia could reduce its use of primary energy use by 45 with consequent economic and environmental benefits high energy and carbon intensity of the russia economy is inter alia explained by low energy prices due to high export taxes as well as administrative regulation of domestic prices of gas and electricity and low environmental taxes carbon taxes are one such pigouvian tax and they would address concerns on several fronts simultaneously in the short to medium term they would inter alia lead to lower ghg emissions and encourage the diffusion of more energy efficient technologies in the longer term the increased cost of energy inputs is expected to induce technological progress in this analysis the macroeconomic and sectoral effects of carbon taxes on the russia economy are examined this analysis addresses the following objectives i to test the double dividend hypothesis under perfect and imperfect competition in output markets to analyse ii the incidence of carbon taxes iii impacts on sectoral competitiveness iv effects on income equity and v interactions of carbon taxes with other taxes a computable single country multi sector comparative static cge model is employed russland verfugt nicht nur uber einen der grosten vorrate an kohlenstoffbasierter energie wie kohle rohol und gas sondern ist auch einer der grosten energieverbraucher daruber hinaus ist russland fur einen uberproportional grosen anteil von kohlendioxid emission etwa 5 bis 6 der weltweiten kohlendioxidemission verantwortlich mit der einfuhrung einer kohlendioxidsteuer konnten gleichzeitig unterschiedliche wirkungen erzielt werden kurz und mittelfristig wurden kohlenstoffsteuern sowohl zu einer reduzierung von treibhausgasemissionen als auch zur einfuhrung von energieeffizienteren technologien fuhren langfristig wird erwartet dass hohe energiekosten den anreiz zur entwicklung und zur investition in energiesparenden technischen fortschritt erhohen die vorliegende arbeit analysiert und bewertet die makrookonomischen und sektoralen auswirkungen einer einfuhrung von kohlenstoffsteuern auf die russische wirtschaft die ziele der arbeit bestehen darin die hypothese der doppelten dividende fur den fall des vollkommenen und des unvollkommenen wettbewerbs auf gutermarkten zu uberprufen und die inzidenz einer kohlenstoffsteuer ihre auswirkungen auf die sektorale wettbewerbsfahigkeit ihre auswirkungen auf die einkommensverteilung und die interaktion von kohlenstoffsteuern mit anderen steuern zu analysieren und zu bewerten als methodischer ansatz wurde ein single country und multi sektor model gewahlt

joint trade liberalization and tax reform in a small open economy the case of egypt abstract we develop a cge model of the egyptian economy to analyze the impact of various trade liberalization scenarios allowing distortionary domestic taxes to vary endogenously in order to satisfy a fixed real government revenue target we decompose computed welfare gains into effects from tax reform trade reform and their interaction scenarios include removal or unification of the consumption tax capital tax or both and tariff unification a free trade agreement with the european union and unilateral tariff elimination welfare effects depend critically on the type of revenue replacement tax while both are important neither trade policy reform nor tax reform dominates

nonseparable utility and the double dividend debate reconsidering the tax interaction effect the literature on the use of environmental taxes inthe presence of distortionary labor taxes warns thata partial equilibrium pigouvian tax analysis is notappropriate because increasing the price of dirtygoods can futher aggravate the prexisting distortions this argument is most frequently made assuming thatlabor is taxed to meet a fixed revenue requirement when a dirty good is also taxed others argue thatthis lowers workers real wages causing people toreduce their labor supply below its already suboptimallevel aggravating labor market distortions however most papers ignore the effect that a cleanerenvironment can have on labor supply that is mostpast work has assumed that the quality of theenvironment is weakly separable in the utilityfunction we argue that a cleaner environment canincrease labor supply at least partially offsettingany incentive for workers to decrease their laborsupply further we show explicitly how relaxing theseparability assumption affects the standardresults

pollution the cost of public funds and endogenous growth abstract theories of endogenous growth are used to investigate the effect of environmental policy on the rate of economic growth and the provision of public goods in a second best market outcome pollution gives rise to a negative environmental externality and is modeled as an inevitable by product of production the government faces the dual task of on the one hand internalising environmental externalities and on the other hand raising public funds to finance public spending a tougher environmental policy reduces the rate of economic growth improves environmental quality raises the optimal tax rate and changes the composition of public spending away from productive government spending towards public consumption and abatement the marginal cost of public funds falls rises if productive government spending is negligible substantial relative to public consumption and abatement

biofuel subsidies versus the gas tax the carrot or the stick abstract this paper provides an analytical framework to examine the relative efficiencies of a revenue neutral biofuel subsidy and a gas tax in the presence of pre existing distortions and growing substitutability between fuels both policies are set to achieve a targeted reduction in gasoline use at the state level the model is then calibrated for a small open economy such as illinois which is one of the largest producers of biofuels such as ethanol in the u s the main result of the paper shows that raising the biofuel subsidy use reduces overall welfare by more than a higher gas tax both aimed to achieve a targeted reduction in pure gasoline the relative efficiency of the higher gas tax is primarily due to it exacerbating the pre existing distortion in the biofuel market by less than the subsidy moreover for current parameter estimates welfare improving policy combinations for achieving a targeted amount of energy security are higher gas taxes combined with lower biofuel subsidies and a lower tax on income however the preference for a gasoline labor tax swap shrinks as the elasticity of substitution between the two fuels rises

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

environmental levies and distortionary taxation pigou taxation and pollution i note an important distinction between the optimal price of environmental quality in a second best world and the optimal level of environmental quality using an analytical general equilibrium model i show that for reasonable parameter values an increase in tax distortions arising from an increase in required tax revenues leads to a fall in the optimal pigouvian tax rate even while environmental quality improves in general knowledge of the direction of changes in optimal environmental tax rates due to changes in the economy is not sufficient for understanding the impact on environmental quality 2003 elsevier science b v all rights reserved

some stylized facts on organization and its evolution abstract there is a striking difference between the large number of theoretical papers on firm organization and the lack of quantitative empirical evidence if on the one side economists are increasingly concerned with organization of firms on the other side organization still remains an ambiguous concept hardly analyzed empirically in this paper we develop a new empirical methodology based upon business history and previous theoretical works which allows us to describe some aspects of the organization of firms in quantitative terms this approach is instrumental to analyzing the hierarchical structure and the allocation of decision making activities in a sample composed of 438 italian metalworking plants we also study the dynamics of firm organization in the period 1975 1997 the results of the analysis show that the static choice of the organizational form crucially relies upon the loss of control phenomenon they also illustrate that the dynamics of hierarchical structure follows an inertial process characterized by incremental adjustments lastly both the organization of firms and more interestingly its evolution differ from one category of firms to another depending crucially on firm size

environmental taxes with heterogeneous consumers an application to energy consumption in france abstract this paper constructs a model with four groups of households who have preferences over labor supply consumption of polluting energy related and non polluting non energy goods and emissions it quantifies the model for the french economy and computes its optimal tax equilibria under nine second best tax regimes we find that the redistributive role of environmental taxes requires the polluting goods to be taxed at a rate much below their marginal social damage these goods may even require an outright subsidy if the society values equality a lot secondly if environmental taxes that have an exclusively externality correcting role they benefit all types although the gains are rather modest the gains and losses become more substantial when environmental taxes have a redistributive role as well third setting the environmental tax at its pigouvian level rather than its optimal externality correcting cum redistributive level benefits the high income group at the expense of the low income groups fourth nonlinear taxation of polluting goods and nonlinear commodity taxation in general is a powerful redistributive mechanism fifth introducing environmental taxes in the current french tax system with its suboptimal income taxes results in substantial welfare gains for the highest income group and a sizable loss for the least well off persons

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

economic growth and global warming a model of multiple equilibria and thresholds abstract we presume a simple endogenous growth model where global warming affects economic growth and analyze the dynamics of the competitive economy and of the social optimum our regulatory instrument is an emission tax rate we demonstrate that for certain values of the emission tax ratio the competitive economy exhibits multiple equilibria and a threshold may exist that separates the domains of attraction for the growth paths there exist paths to high growth rates and low temperature and low growth rates and high temperature for the planner s problem the long run equilibrium is unique unless the damage of global warming is very small

optimal taxation with rent seeking we develop a framework for optimal taxation when agents can earn their income both in traditional activities where private and social products coincide and in rent seeking activities where private returns exceed social returns either because they involve the capture of pre existing rents or because they reduce the returns to traditional work we characterize pareto optimal income taxes that do not condition on how much of an individual s income is earned in each of the two activities these optimal taxes feature an externality corrective term the magnitude of which depends both on the pigouvian correction that would obtain if rent seeking incomes could be perfectly targeted and on the relative impact of rent seeking externalities on the private returns to traditional and to rent seeking activities if rent seeking externalities primarily affect other rent seekers for example the optimal correction lies strictly below the pigouvian correction a calibrated model indicates that the gap between the pigouvian and optimal correction can be quantitatively important our results thus point to a hefty informational requirement for correcting rent seeking externalities through the income tax code

energy taxes in the netherlands what are the dividends in this paper the environmental and economic effects of the introduction of a unilateral energy tax in the netherlands are analysed using an applied general equilibrium age model the effects of a small user energy tax and a general energy tax are compared while taking into account different tax recycling mechanisms the model contains a great level of detail with respect to emissions and environmental indicators greenhouse effect acidification eutrophication and waste which is helpful for assessing environmental quality the results show that the introduction of a small environmental tax reform not only improves the environment but also raises non environmental welfare which is due to an improvement of the efficiency of the tax structure

the role of labor markets for euro area monetary policy in this paper we explore the role of labor markets for monetary policy in the euro area in a new keynesian model in which labor markets are characterized by search and matching frictions we first investigate to which extent a more flexible labor market would alter the business cycle behavior and the transmission of monetary policy we find that while a lower degree of wage rigidity makes monetary policy more effective i e a monetary policy shock transmits faster onto inflation the importance of other labor market rigidities for the transmission of shocks is rather limited second having estimated the model by bayesian techniques we analyze to which extent labor market shocks such as disturbances in the vacancy posting process shocks to the separation rate and variations in bargaining power are important determinants of business cycle fluctuations our results point primarily towards disturbances in the bargaining process as a significant contributor to inflation and output fluctuations in sum the paper supports current central bank practice which appears to put considerable effort into monitoring euro area wage dynamics and which appears to treat some of the other labor market information as less important for monetary policy

optimal green tax reforms yielding double dividend in an stylized endogenous growth economy with a negative externality created by co2 emissions and in which abatement activities are made by private firms we find a wide range of dynamically feasible green tax reforms yielding the double dividend without any need to assume a complex production structure or tax system or a variety of externalities in production as a remarkable finding we obtain certain scenarios in which increasing the emissions tax up to the pigouvian level and removing completely the income tax is dynamically feasible and also it is the second best reform hence as a difference to previous literature in these scenarios the first best tax mix is implementable allowing for the elimination of both environmental and non environmental inefficiencies our result arises because of the consideration of public debt issuing and the management of the government budget balance with an intertemporal perspective the result is obtained for an intermediate range of environmental bearing in preferences the valid range being contingent on the pre existing income tax rate the type of tax reform that we propose could also be implemented for different energy taxes

the effects of emission permits on growth and the environment we develop an overlapping generations model of growth and the environment in which industrial firms produce environmentally harmful emissions a government controls the emissions by assigning emission quotas to firms and permits could be issued and freely traded as financial instruments across firms on the basis of the quotas we show that an environmental policy that decreases an aggregate number of emission quotas could degenerate economic growth and lower environmental quality in the long run we also show the implications of this result for environmental policy

optimal monetary policy with labor market frictions the role of the wage channel this paper introduces right to manage bargaining into a labor search model with sticky prices instead of standard efficient bargaining and examines the ramsey optimal monetary policy without real wage rigidity even when the steady state is inefficient price stability is nearly optimal in response to technology or government shocks right to manage bargaining creates the wage channel to inflation because there is a direct relationship between real wages and real marginal cost in the presence of the wage channel price markups consist of only real marginal cost and real wages and hours per worker are determined such as in the walrasian labor market

does collective wage bargaining restore efficiency in a search model with large firms existing search and bargaining models show that firms hire an inefficiently large number of workers we ask whether decentralised collective wage bargaining may result in a second best allocation collective bargaining restores efficiency when the bargained wage is independent of employment conditions that we characterise firms then behave as if collective bargaining was over both wages and employment thus linking the large firm search and bargaining environment to the efficient bargaining model mcdonald and solow 1981 under more realistic conditions workers can bargain for a share of output so that the wage is then a function of employment in equilibrium firms are too large and firm entry is inefficient

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

comparing shocks and frictions in us and euro area business cycles a bayesian dsge approach this paper estimates a dsge model with many types of shocks and frictions for both the us and the euro area economy over a common sample period 1974 2002 the structural estimation methodology allows us to investigate whether differences in business cycle behaviour are due to differences in the type of shocks that affect the two economies differences in the propagation mechanism of those shocks or differences in the way the central bank responds to those economic developments our main conclusion is that each of these characteristics is remarkably similar across both currency areas copyright 2005 john wiley sons ltd

can environmental taxation stimulate growth the role of indeterminacy in endogenous growth models with environmental externalities abstract this paper examines the effects of environmental taxation on long run growth in an infinitely lived representative agent model of endogenous growth with negative pollution externalities the novelty of this paper lies in its investigation of how the long run effects of environmental taxes are affected by the possible emergence of indeterminacy of equilibria in romer s 1986 increasing returns and long run growth journal of political economy 94 1002 1037 learning by doing model with endogenous labor supply the analysis shows that environmental taxation generally enhances harms long run growth when the balanced growth path is indeterminate determinate

redistribution and pollution taxes with non linear engel curves abstract this paper analyses optimal corrective taxation and optimal income redistribution the pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages moreover under general utility functions optimal pollution taxes should be set below the pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods however if engel curves are linear optimal pollution taxes should follow the first best rule for the pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods the often used quasi linear ces and stone geary utility functions all have linear engel curves if engel curves are linear and if pollution taxes are not optimised pareto improving green tax reforms exist that move the pollution tax closer to the pigouvian tax simulations demonstrate that optimal corrective taxes should be pigouvian if the demand for polluting goods is derived from a les demand system but deviate from the pigouvian taxes if demand for polluting goods demand is derived from a piglog demand system

on environmental taxation under uncertain environmental damage this paper addresses optimal taxation when therelationship between the consumption of a dirty good and the resulting environmentaldamage is uncertain and treated as a randomvariable by policy makers the main purpose isto analyze how increased uncertainty measuredas a mean preserving increase in the spread ofthis random variable affects the optimalcommodity tax on the dirty consumption good incase the only task of government is to correctthe environmental externality and if thepreferences are characterized by nondecreasingabsolute risk aversion we find that thecommodity tax on the dirty consumption goodincreases in response to additionaluncertainty if on the other hand thegovernment provides a public good and uses alump sum tax in addition to the commodity tax it is possible that the commodity tax decreasesas a response to additional uncertainty evenif the preferences are characterized bynondecreasing absolute risk aversion a similarresult emerges although for different reasons if the lump sum tax is replaced by a laborincome tax

monetary policy and labor market frictions a tax interpretation replicating the flexible price allocation in models with nominal rigidities and labor market frictions that lead to an inefficient matching of unemployed workers with job vacancies even if feasible is generally not desirable we characterize the tax instruments that implement the first best allocation and examine the trade offs faced by monetary policy if these tax instruments are unavailable our tax interpretation helps explain why the welfare cost of inefficient labor market search can be large while the incentive to deviate from price stability is small gains from deviating from price

the impact of hierarchies on wages abstract hierarchical production theory has only one consistent prediction that wages increase with level in a hierarchy theoretical disagreement exists as to what causes this wage premium and how it might be affected by the number of levels of superiors above an employee by empirically analyzing these issues we find that i level one supervisors receive a premium due to some unobserved characteristic ii higher level supervisors receive a premium through higher rates of return on human capital and iii the marginal effect on wages of increasing the level of an employee declines with the number of levels above the employee

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

the two part instrument in a second best world abstract standard pigovian tax theory has been extended in two directions first many polluting activities are difficult to tax because they are not market transactions and so recent papers have shown that the same effects can be achieved by use of a two part instrument 2pi a tax on output or income and a subsidy for clean alternatives to pollution it is a generalization of a deposit refund system drs second a different literature concerns the second best pollution tax in the presence of other tax distortions here we combine the two extensions by looking at the second best 2pi when government needs revenue is the deposit larger and the rebate smaller we find explicit solutions for each tax and subsidy in a general equilibrium model with other tax distortions and we compare these to the rates in a first best model the tax subsidy combination is explained in terms of a tax effect an environmental effect and a revenue effect the model allows for flexible interpretation to show various applications of the 2pi we also discuss important caveats

environmental tax design with endogenous earning abilities with applications to france abstract this paper studies environmental taxation in a mirrlees setting with two novel features first energy a polluting good is used both as a factor of production and a final consumption good second the wage is determined endogenously while labor of different individual types remain homogeneous the model is calibrated for the french economy we show that i the optimal tax is less than the marginal social damage of emissions and turns into an outright subsidy when the inequality aversion index is high ii the optimal tax on energy as an input is always equal to its marginal social damage iii the social welfare gain due to lowering the current energy taxes to their optimal levels with the general income tax being set optimally in both cases is between 17 and 32 euro per household this hurts the rich and benefits the poor

alleviating unemployment the case for green tax reforms abstract it has been argued recently that imposing taxes on pollution produces additional tax revenues which can be used to replace labour taxes and thus reap a double dividend in the form of improving environmental quality and alleviating unemployment this paper analyses the employment effects of revenue neutral green tax reforms by focusing on the revenue recycling effect our model contains three features which are important when looking at the employment effects of green tax reforms first there is unemployment in equilibrium second wages are determined endogenously third various institutional arrangements for taxing unemployment benefits for the price indexation of unemployment benefits and the personal tax exemption are considered it is shown that these institutional arrangements are crucial for the effectiveness of green tax reforms a revenue neutral green tax reform will boost employment if unemployment benefits are nominally fixed and taxed at a lower rate than labour income employment actually falls if unemployment benefits are price indexed and taxed at the same rate a revenue neutral green tax reform which increases the personal tax credit will never increase employment

search frictions real rigidities and inflation dynamics the standard new keynesian model suffers from the so called macro micro pricing conflict in order to match the dynamics of inflation implied by macroeconomic data the model needs to assume an average duration of price contracts which is much longer than what is observed in micro data here i show how departing from the standard model s assumption of a perfectly competitive labor market can help resolve the pricing conflict i do so by assuming search frictions in the labor market in this framework labor becomes firm specific and marginal cost curves become upward sloping this mechanism reduces the slope of the new keynesian phillips curve given a frequency of price adjustment conversely given an estimate of this slope my model implies shorter price durations than the standard model for a plausible calibration and for different slope values my model consistently delivers price durations that are roughly half of those implied by the standard model

two generalizations of a deposit refund system this paper suggests two generalizations of the deposit refund idea in the first we apply the idea not just to solid waste materials but to any waste from production or consumption including wastes that may be solid gaseous or liquid using a simple general equilibrium model we derive the optimal combination of a tax on a purchased commodity and subsidy to a clean activity such as emission abatement recycling or disposal in a sanitary landfill this two part instrument is equivalent to a pigovian tax on the dirty activity such as emissions dumping or litter in the second generalization we consider the case where government must use distorting taxes on labor and capital incomes to help meet the revenue requirement would the optimal deposit be raised and the refund reduced we derive the second best revenue raising drs or two part instrument to answer that question this abstract was borrowed from another version of this item

a note on optimal taxation in the presence of externalities abstract i consider the problem of optimal taxation with externalities in a general setup encompassing most of optimal taxation models found in the literature it is demonstrated that when direct taxation of externalities is possible optimal taxes can be expressed as the sum of the optimal pigouvian taxes and the optimal taxes in a related problem without externalities regardless of what other tax instruments are available this result generalizes the so called principle of targeting

taxation unemployment and growth dynamic welfare effects of green policies abstract this paper analyzes the effects of environmental tax reforms on a small open economy the labor market is characterized by union wage setting the carbon tax acts as an implicit tariff which gives rise to terms of trade gains the terms of trade effect together with the union wage setting leads to a positive relationship between the capital labor ratio and net foreign wealth in the short run the disinvestments in real and financial capital give temporary room for higher consumption and instantaneous utility the long run effect on instantaneous utility is more uncertain a strong double dividend may exist

investment and competition this paper examines how industry structure affects corporate investment patterns real options theory shows that deferring irreversible investment in the face of uncertainty is valuable theory also shows that the value of waiting to invest falls if investment opportunities are contestable consistent with these theories we find that firms in monopolistic industries exhibit lower investment q sensitivity and are slower to invest than firms in competitive industries however we find that investment q sensitivity and investment speed are highest in oligopolistic industries suggesting that the value of investing strategically can outweigh the value of waiting indeed oligopolistic industries experience less entry and more exit than other industries

employment and hours of work abstract this paper develops a dynamic model of the labor market in which the degree of substitution between employment and hours of work is determined as part of a search equilibrium each firm chooses its demand for working hours and number of vacancies and the earnings profile is determined by nash bargaining the earnings profile is generally nonlinear in hours of work and defines the trade off between employment and hours of work concave production technology induces firms to overemploy and as a result hours of work are below their optimal level the hosios condition is not sufficient for efficiency when there are two industries workers employed by firms with higher recruitment costs work longer and earn more that is good jobs require longer hours of work interestingly technology differentials cannot account for working hours differentials