Castellanos, Kenneth A. <br/><br/>
Unemployment, Labor Mobility, and Climate Policy / 
Kenneth A. Castellanos, Garth Heutel. 
 - Cambridge, Mass.  National Bureau of Economic Research  2019. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w25797 .
 - Working Paper Series (National Bureau of Economic Research)  no. w25797. .
<br/><br/> May 2019. 
<br/><br/> 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. 
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