2010 Discussion Papers
School of Economics Discussion Paper 10/01
The Double Dividend Hypothesis in a CGE Model:
Specific Factors and Variable Labour Supply
Iain Fraser and Robert Waschik
University of Kent, La Trobe University
Employing a CGE model we examine the Double Dividend (DD) hypothesis for Australia and UK. Following Bento and Jacobsen (2007), we analyze specific factors in the production of energy goods and the impact on the DD. By incorporating endogenous labour supply we examine the labour market effect of targeted abatement policies. For Australia the DD is significantly larger with the specific factor characterisation of the economy when recycling revenue through reductions in consumption taxes, but there is no evidence of a DD when employing income tax. We find minimal evidence of a DD for UK for either recycling instrument.
JEL Classification: Q52, Q48, C68
Keywords: Environmental Taxes, Double Dividend, Specific Factors.
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