Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 629: Environmental Policy Reforms and the Labor Market in a Global Economy
Thomas Aronsson (), Thomas Jonsson () and Tomas Sjögren ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Thomas Jonsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Tomas Sjögren: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Abstract: In this paper, we consider the welfare effects of environmental policy cooperation in a two-country economy. We assume that the countries finance their public expenditures by using distortionary taxes, and that the countries differ with respect to competition in the labor market. The purpose is to characterize the cost benefit rule for a policy reform, where the countries involved agree to slightly increase their expenditures on abatement. We show how the welfare effect of the policy reform depends on changes in environmental damage, employment and work hours. We also relate the welfare effects of policy cooperation to the characteristics of the fiscal policies in the prereform equilibrium.
Keywords: Policy cooperation; distortionary taxes; labor market; Nash game; Stackelberg game
25 pages, March 18, 2004
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