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A CGE Analysis of the Employment Double Dividend-Hypothesis : Substitution Patterns in Production, Foreign Trade, and Labour Market Imperfections

Koschel, Henrike

German Title: Analyse der Beschäftigungseffekte einer ökologischen Steuerreform im Rahmen eines CGE-Modells : Substitutionselastizitäten, Außenhandel und unvollkommene Arbeitsmärkte

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Translation of abstract (English)

This thesis deals with the employment double dividend (EDD) hypothesis which claims that an ecological tax reform leads to both a reduction in the unemployment rate and to lower pollution. It assesses the employment effects of ecological tax reforms in a computable general equilibrium (CGE) model framework for 14 countries of the European Union. The literature survey points to three main determinants for the EDD outcome in empirical models: the substitution elasticities in production, the foreign trade, and the labour market specification. Next, the influence of substitution patterns in production on the EDD outcome is tested. Econometric estimates of substitution elasticities for German production and service sectors are rarely available in the literature. Therefore, sectorally disaggregated substitution elasticities between capital, labour, material, electricity, and fossil fuels are estimated using a non-nested and a nested translog cost function. Sensitivity analyses with respect to substitution elasticities show that the CGE model produces an EDD for all parameter choices considered. This is mainly due to tax shifting processes towards capital income and the foreign sector. Then, Armington elasticities of substitution in the rest of the world?s import demand function as well as price elasticities of the rest of the world?s export supply function are modified in order to test the CGE model?s sensitivity with respect to terms-of-trade effects. The result is that employment effects of an EU-wide ecological tax reform are positive in all cases. Finally, the assumption of the neoclassical labour market is replaced by the assumption of an imperfect labour market with involuntary unemployment. First, exogenous real wage rigidities are assumed; then, a monopoly union model with different ways of unemployment benefits indexation is introduced. The simulation results confirm that labour market imperfections may enhance the chance for an EDD.

Document type: Dissertation
Supervisor: Requate, Prof. Dr. Till
Date of thesis defense: 4 December 2001
Date Deposited: 15 Jan 2002 00:00
Date: 2001
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
DDC-classification: 330 Economics
Controlled Keywords: Allgemeines Gleichgewichtsmodell, Ökologische Steuerreform, Steuerüberwälzung, Arbeitsmarkttheorie, Faktorsubstitution
Uncontrolled Keywords: CGE-Analysis
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