Lars Haagen Pedersen

Environmental policy, pollution, unemployment, and endogenous growth

The paper develops a model of endogenous economic growth with pollution externalities and a labor market distorted by union monopoly power and by taxes and transfers. We study the optimal second-best pollution tax and abatement policy and find that a shift toward greener preferences will tend to reduce unemployment, although it will hamper growth. We also find that greater labor-market distortions call for higher pollution tax rates. Finally, we show that a switch from quantity control of pollution combined with grandfathering of pollution rights to regulation via emission charges has the potential to raise employment, growth, and welfere without damaging the environment.

Tax policy, housing and the labour market: An intertemporal simulation approach

Abstract This paper develops an intertemporal simulation model designed to analyse tax policies in a small open economy. Within a finite horizon, overlapping generations framework, we introduce imperfect competition in the labour market, consumption and construction of durables in the form of housing units, and a public pension system. We simulate the model to illustrate some macroeconomic, allocative and distributional effects of a policy experiment involving a 10% cut in the capital income tax rate.

Minimum Wage Contracts and Individual Wage Formation: Theory and Evidence from Danish Panel Data

The persistent high levels of registered unemployment in Denmark and other European countries remain one of the main challenges both to economic policy and to economic theory. Labour market reforms, tax reforms and other so-called structural reforms are central policy issues in most European countries in the 1990s. The effects of such reforms to a large extend depend upon how the reforms affect the wage determination in the economy. Against this background this chapter derives and estimates wage equations for six major union groups in the Danish labour market.

The Danish Tax Reform Act of 1993: Effects on the Macroeconomy and on Intergenerational Welfare

In June 1993 the Danish Parliament enacted a tax reform to be phased in over a 5-year period starting in 1994. Following recent trends in the OECD area, the Danish tax reform combined a broadening of the tax base with general cuts in marginal tax rates on income from labour and capital. In terms of the magnitude of the drop in marginal tax wedges, the Danish reform was not as ambitious as the recent tax reforms in the neighbouring Nordic countries (see Sorensen, 1998). On the other hand, a substantial part of the income tax cuts was financed via a rise in various ‘green’ taxes, including excise taxes on energy and water use. The Danish reform bill may therefore be seen as one of the most serious attempts so far to implement an ‘ecological’ tax reform.