By: |
Aronsson, Thomas (Department of Economics, Umeå University);
Persson, Lars (Department of Economics, Umeå University);
Sjögren, Tomas (Department of Economics, Umeå University) |
Abstract: |
This paper analyzes the welfare consequences of coordinated tax reforms in an
economy where a transboundary environmental externality and an international
wage bargaining externality are operative at the same time. We assume that the
wage in each country is decided upon in a bargain between trade-unions and
firms, and the wage bargaining externality arises because the fall-back profit
facing firms depends on the profit they can earn if moving production abroad.
Using the noncooperative Nash equilibrium as a reference case, our results
imply that the international wage bargaining externality may either reinforce
or weaken the welfare gain of a coordinated increase in environmental
taxation, depending on (among other things) how the reform affects the wage.
For a special case, we also derive an exact condition under which a
coordinated increase in the environmental tax leads to higher welfare. |
Keywords: |
Environmental taxes; externalities; policy coordination; trade-unions |
JEL: |
H23 J51 |
Date: |
2008–11–03 |
URL: |
http://d.repec.org/n?u=RePEc:hhs:umnees:0754&r=res |