Effect of environmental policy on labor market
Mousavi Almaleki, Mohammad Reza
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This thesis examines the effect of environmental policy, i. e. tax on carbon emission, on the labor market as assessed in a directed technology change environment. Considerably positive and constructive effect on the labor market is demonstrated by this model, as are increases in both demand and wage of labor. Labor wage in free market is clearly less than the optimal wage, as predicted in the model. Labor wage has an increasing rate of return in optimal market. Clean technology and skilled labor are increasing as a result of the model, at the same time we see that labor wage is also increasing. The relation between clean technology and skilled labor is the key property of the optimal economy which makes the relation between supply of labor and their wage positive which is at odds with traditional economics. It is also interesting to notice that even if we change the production function from Cobb-Douglas to CES form we get similar results, regardless of the elasticity of substitution between factors the skill premium is increasing in the energy saving technology. Increases in the level of clean energy resulted in increases in wages and labor. Clean energy is benefiting the whole economy regardless of the elasticity of substitution between input factors.