School of Economics

2010 Discussion Papers

School of Economics Discussion Paper 10/01
April 2010

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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