Can a green tax reform entail employment double dividend in european and non-european countries? A survey of the empirical evidence

Maruf Rahman Maxim, Kerstin Zander

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper synthesises the simulation studies concerning green tax reform (GTR) and employment double dividend (EDD) in European and non-European countries. The studies included investigate the effect of GTR on employment. We compared the simulation results between European and non-European countries to understand the impact of study region and our findings are fivefold. First, the simulation results suggest that GTR-driven EDD is observed in both European and non-European countries, but the average effect on employment in European countries (0.67%) is significantly greater than in non-European countries (0.18%). Second, optimal tax and tax revenue recycling policies in European and non-European countries for EDD are not identical. Reducing employers’ social security contributions (SSC) has the potential to generate EDD in both countries. However, a reduction in value added tax has the highest average effect on employment in European countries (1.62%), which negatively affects employment in non-European countries (−0.02%). Third, a reduction in personal income tax as a tax recycling method creates a marginally average employment dividend in non-European countries (0.16%) but is counterproductive in European countries (−0.15%). Fourth, other taxes, which predominantly represent mixed taxes, exhibit the highest EDD potential in both European (1.01%) and non-European (0.46%) countries. Finally, employment dividend diminishes over time, but a weak quadratic pattern has been observed that reveals an accelerating effect on employment in the long term. These reflections should be considered before employing GTR in non-European countries in order to yield EDD.

Original languageEnglish
Pages (from-to)218-228
Number of pages11
JournalInternational Journal of Energy Economics and Policy
Volume9
Issue number3
DOIs
Publication statusPublished - Jun 2019

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Taxation
Empirical evidence
Double dividend
Green tax reform
Recycling

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title = "Can a green tax reform entail employment double dividend in european and non-european countries? A survey of the empirical evidence",
abstract = "This paper synthesises the simulation studies concerning green tax reform (GTR) and employment double dividend (EDD) in European and non-European countries. The studies included investigate the effect of GTR on employment. We compared the simulation results between European and non-European countries to understand the impact of study region and our findings are fivefold. First, the simulation results suggest that GTR-driven EDD is observed in both European and non-European countries, but the average effect on employment in European countries (0.67{\%}) is significantly greater than in non-European countries (0.18{\%}). Second, optimal tax and tax revenue recycling policies in European and non-European countries for EDD are not identical. Reducing employers’ social security contributions (SSC) has the potential to generate EDD in both countries. However, a reduction in value added tax has the highest average effect on employment in European countries (1.62{\%}), which negatively affects employment in non-European countries (−0.02{\%}). Third, a reduction in personal income tax as a tax recycling method creates a marginally average employment dividend in non-European countries (0.16{\%}) but is counterproductive in European countries (−0.15{\%}). Fourth, other taxes, which predominantly represent mixed taxes, exhibit the highest EDD potential in both European (1.01{\%}) and non-European (0.46{\%}) countries. Finally, employment dividend diminishes over time, but a weak quadratic pattern has been observed that reveals an accelerating effect on employment in the long term. These reflections should be considered before employing GTR in non-European countries in order to yield EDD.",
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Can a green tax reform entail employment double dividend in european and non-european countries? A survey of the empirical evidence. / Maxim, Maruf Rahman; Zander, Kerstin.

In: International Journal of Energy Economics and Policy, Vol. 9, No. 3, 06.2019, p. 218-228.

Research output: Contribution to journalArticleResearchpeer-review

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