Green Tax Reform and Employment: The Interaction of Profit and Factor Taxes
ZEW Discussion Paper No. 01-45 // 2001The employment effects of an ecological tax reform depend decisively on the presence of a profit tax and on the extent to which profits are taxed. This is shown in a model where firms have monopoly power on product markets and bargain over wages with unions on the labour market. In this setting, the value of the employment-maximising energy tax rate depends on the level of the profit tax. The question of whether there is unemployment or not turns out to be less important.