Pollution and Labor Market Search Externalities Over the Business Cycle / John Gibson, Garth Heutel.

Format:

Book

Author/Creator:

Gibson, John.

Contributor:

National Bureau of Economic Research.

Heutel, Garth.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27445.

NBER working paper series no. w27445

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We study the relationship between unemployment, environmental policy, and business cycles. We develop a dynamic stochastic general equilibrium real business cycle model that includes both a pollution externality and congestion externalities from labor market search frictions, which generate unemployment. We consider two policies to address the market failures: an emissions tax and a tax or subsidy on job creation. With both policies present, the efficient outcome can be achieved. When one policy is constrained or absent, we solve for the second best. The absence of a vacancy policy to address the congestion externalities substantially affects the value of the emissions tax, both in steady state and over the business cycle.

Notes:

Print version record

June 2020.