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Title:Green tax reform and competitiveness PDF Logo
Authors:Koskela, Erkki
Schöb, Ronnie
Sinn, Hans-Werner
Issue Date:2000
Series/Report no.:ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 731
Abstract:This paper studies a revenue-neutral green tax reform that substitutes energy for wage taxes in an open economy with unemployment. As long as the labour tax rate exceeds the energy tax rate, such a reform will increase employment, reduce the domestic firms' unit cost of production and hence increase international competitiveness and output of the economy. The driving force behind these results is the technological substitution process that a green tax reform will bring about. The resulting reduction in unemployment is welfare increasing since energy, which the country has to buy at its true national opportunity cost, is replaced with labour, whose price is above its social opportunity cost.
Subjects:Green tax reform
involuntary unemployment
competitiveness
JEL:H20
J51
Document Type:Working Paper
Appears in Collections:ETLA Discussion Papers, Research Institute of the Finnish Economy

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