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The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy

The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable... AbstractThis paper explores how environmental taxation affects wage inequality in the presence of subsidizing renewable energy. It is necessary to take both traditional dirty energy and renewable energy into account. Take the case where the renewable energy sector is more skill-intensive than the traditional energy sector as an example. If the final product sector is more skill-intensive than the whole energy sector, an increment of the output tax in the traditional energy sector will widen wage inequality unambiguously. However, if the final product sector is less skill-intensive than the whole energy sector, an increment of the output tax in the traditional energy sector may narrow down wage inequality when the substitution elasticity between energy and labor in the final product sector is sufficiently large. The interaction between environmental taxation and subsidization on renewable energy plays a key role in the mechanism. We also analyze the relationship between environmental taxation and welfare. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B E Journal of Economic Analysis & Policy de Gruyter

The Impact of Environmental Taxation on Wage Inequality in the Presence of Subsidizing Renewable Energy

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References (25)

Publisher
de Gruyter
Copyright
© 2023 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1935-1682
eISSN
1935-1682
DOI
10.1515/bejeap-2022-0236
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper explores how environmental taxation affects wage inequality in the presence of subsidizing renewable energy. It is necessary to take both traditional dirty energy and renewable energy into account. Take the case where the renewable energy sector is more skill-intensive than the traditional energy sector as an example. If the final product sector is more skill-intensive than the whole energy sector, an increment of the output tax in the traditional energy sector will widen wage inequality unambiguously. However, if the final product sector is less skill-intensive than the whole energy sector, an increment of the output tax in the traditional energy sector may narrow down wage inequality when the substitution elasticity between energy and labor in the final product sector is sufficiently large. The interaction between environmental taxation and subsidization on renewable energy plays a key role in the mechanism. We also analyze the relationship between environmental taxation and welfare.

Journal

The B E Journal of Economic Analysis & Policyde Gruyter

Published: Apr 1, 2023

Keywords: environmental taxation; subsidization on renewable energy; wage inequality; welfare; J31; O15; Q52; Q58

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