Template-Type: ReDIF-Paper 1.0
Author-Name: Alan Finkelstein Shapiro
Author-X-Name-First: Alan
Author-X-Name-Last: Finkelstein Shapiro
Author-Name: Victoria Nuguer
Author-X-Name-First: Victoria
Author-X-Name-Last: Nuguer
Title: Climate policies, labour markets and macroeconomic outcomes in emerging economies
Abstract: We study the labour market and macroeconomic effects of a carbon tax in the energy sector in emerging economies. We build a search and matching macro model with pollution externalities from energy production, endogenous green-technology adoption, and salaried-firm entry that incorporates two key elements of the employment and firm structure of these economies: salaried labor and firm informality and self-employment. Calibrating the model to emerging-economy data, we show that a carbon tax increases green-technology adoption and the share of green energy, but also leads to higher energy prices. As a result, the tax reduces salaried firm creation, the number of formal firms, and formal employment, and leads to an increase in self-employment, labor participation, and unemployment - a response that generates long run output and welfare losses. Green-technology adoption limits while self-employment exacerbates the quantitative magnitude of these losses. A joint policy that combines a carbon tax with a reduction in the cost of firm formality can offset the adverse effects of the tax and generate a transition to a lower-carbon economy with minimal economic costs.
Creation-Date: 2024-08
File-URL: https://www.bis.org/publ/work1204.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1204.htm
File-Format: text/html
Number: 1204
Keywords: environmental and fiscal policy, carbon tax, endogenous firm creation, green technology adoption, search frictions, unemployment and labour force participation, informality and self-employment, emerging economies
Classification-JEL: E20, E24, E61, H23, J46, J64, O44, Q52, Q55
Handle: RePEc:bis:biswps:1204