Environmental Policy, Full-Employment Models, and Employment: A Critical Analysis
This article in JAERE assesses the use of full-employment computable-general equilibrium (CGE) models to evaluate labor-market effects of environmental policy.
This paper assesses the use of full-employment computable-general equilibrium (CGE) models to evaluate labor-market effects of environmental policy. Specifically, it compares a full-employment model to two alternatives: a Balistreri model that introduces unemployment through an endogenous wage premium and a search-CGE model that uses a search-and-matching friction to introduce unemployment (extending Hafstead and Williams). We find that some key results are robust across the three models, such as the reallocation of labor across sectors in response to a carbon tax, but that small differences for each industry add up to larger differences across models at the aggregate level. Applying a full-time-equivalent assumption to the full-employment model seriously overestimates the economy-wide net change in jobs (by a factor of more than 2.4 for a carbon tax with revenues returned lump sum and by a factor of almost 2.7 when carbon tax revenue reduces payroll taxes) relative to the search-CGE model.
Roberton C. Williams III
Rob Williams is a senior fellow at RFF. He studies both environmental policy and tax policy, with a particular focus on interactions between the two.
On the Issues — Apr 21, 2023
On the Issues: Happy Earth Day!, US Road Infrastructure, and More
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: happy Earth Day!, US Road Infrastructure, and more.
Press Release — Apr 13, 2023
Updated Tax Policies Could Secure Road Infrastructure Funding While Supporting the Energy Transition
Using the organization’s modeling capabilities, a team of researchers from Resources for the Future (RFF) analyzed several policy options that would maintain America’s roadways while supporting the transition to a cleaner transportation network.
Working Paper — Apr 13, 2023
Transportation Taxes and Energy Transitions: Alternative Policy Designs for Funding US Road Infrastructure and Pricing Externalities
In this working paper, the authors use an economic model of the US household vehicle market to estimate the effects of three alternative revenue policies for funding transportation infrastructure construction and maintenance.
Common Resources — Apr 7, 2023
Takeaways from the New Federal Guidance on the Tax Credit for Energy Communities
The Biden administration has released new guidance on which areas in the United States qualify as so-called “energy communities.” RFF Fellow Daniel Raimi discusses what’s notable about this guidance.