Environmental policy under labor unions with endogenous environmental effort

摘要

We consider a model of monopoly unions where workers' efforts also affect pollution from the firm, and the government can impose linear pollution taxes or pollution quotas on the firm. When the union determines environmental effort at the initial stage together with the wage, effort is inefficiently low, and the government may prefer to use pollution quotas over taxes, since quotas generally induce higher effort. When effort is induced ex post through a wage incentive scheme, the government is generally indifferent between instruments, disregarding the revenue effect of taxes. When environmental taxes are used, they should (almost) always be set below marginal social damage cost from pollution. We finally study a model of efficient bargaining over the wage, employment and environmental effort. Here a first-best solution is induced setting the environmental tax equal to marginal damage cost. 12 refs.