Unemployment, Labor Mobility, and Climate Policy / Kenneth A. Castellanos, Garth Heutel.

Format:

Book

Author/Creator:

Castellanos, Kenneth A.

Contributor:

National Bureau of Economic Research.

Heutel, Garth.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25797.

NBER working paper series no. w25797

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

We develop a computable general equilibrium model of the United States economy to study the unemployment effects of climate policy and the importance of cross-industry labor mobility. We consider two alternate extreme assumptions about labor mobility: either perfect mobility, as is assumed in much previous work, or perfect immobility. The effect of a $35 per ton carbon tax on aggregate unemployment is small and similar across the two labor mobility assumptions (0.2-0.4 percentage points). The effect on unemployment in fossil fuel sectors is much larger under the immobility assumption - a 24 percentage-point increase in the coal sector - suggesting that models omitting labor mobility frictions may greatly under-predict sectoral unemployment effects. Returning carbon tax revenue through labor tax cuts can dampen or even reverse negative impacts on unemployment, while command-and-control policies yield less efficient outcomes.

Notes:

Print version record

May 2019.