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

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Gibson, John

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w27445.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w27445 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w27442 Do Bank Insiders Impede Equity Issuances? /	nber w27443 Is Attention Produced Rationally? /	nber w27444 Long-Run Effects of Incentivizing Work After Childbirth /	nber w27445 Pollution and Labor Market Search Externalities Over the Business Cycle /	nber w27446 Measuring Infrastructure in BEA's National Economic Accounts /	nber w27447 Reviving the Salter-Swan Small Open Economy Model /	nber w27448 Early Evidence on the Impact of COVID-19 and the Recession on Older Workers /	Next

June 2020.

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.