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.
Media Highlight — Sep 24, 2023
The Hill: “Biden Makes Case That Climate, Labor Interests Can Go Hand in Hand as Auto Strike Fuels Attacks”
A story about the relationship between climate action and jobs quotes RFF Fellow Daniel Raimi, who references his recent work on the labor needs for clean energy.
Media Highlight — Aug 23, 2023
New Mexico Outlets: "New Mexico Public Land Offered for Oil Drilling Amid Calls for Federal Energy Reforms"
Originally published by the Carlsbad Current-Argus, a piece syndicated by other New Mexico news outlets cites a new RFF report about the state's energy transition.
Report — Aug 21, 2023
Can Federal Efforts Help Build Economic Resilience in New Mexico’s Oil and Gas Communities?
In this analysis, the report authors interview stakeholders in New Mexico’s oil- and gas-producing regions to understand how the federal government can support local efforts to strengthen economic diversification.