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Modelling the carbon/energy tax and the nairu


In certain circles environmental regulation is often considered a drag on economic growth and in general on macroeconomic performances. Recently, however, it has been suggested that governments should use an increase in pollution taxes to reduce payroll taxes. By doing so they could achieve a double dividend: improving environmental quality and expanding employment.
In a recent White Paper (December,1993) the EC has promoted the idea that the carbon/energy tax can be repackaged specifically as an employment measure.
The object of my research is to analyze the long-run impact on the NAIRU (Non Accelerating Inflation Rate of Unemployment) of environmental tax reforms.
The research will be divided in three parts: theoretical modelling of labour market and taxation, empirical modelling using new econometric techniques such as cointegration, related tests and Johansen procedure, and finally simulations for Italy of the EC carbon/energy tax under different assumption regarding revenue recycling (lump sum restitution, labour tax rebate, income and VAT rebates)

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London Business School
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Sussex Place
NW1 4SA London
United Kingdom

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