Environmental Protection and Urban Unemployment: Environmental Policy Reform in a Polluted Dualistic Economy

Abstract

This paper explores sufficient conditions for the welfare-improving environmental policy reform in the Harris-Todaro economy. A rise in the pollution tax rate in the urban manufacturing has spillover effects on the two labor market distortions: the less-than-optimal manufacturing employment and the urban unemployment. If both are weakened the welfare improves. Otherwise, we need to develop an alternative sufficient condition. It is shown that there exists a range of welfare-improving pollution tax rates, and that it corresponds to the lower values of tax rate. This range may shrink by the wage subsidy policy and the technological change toward less pollution-intensive techniques.

Environmental Policy and Labour Market Imperfection

“…One of the interesting issues of the developing countries is whether environmental preservation policy can raise formal employment or not. The results which are obtained by many studies including Dean and Gangopadhyay (1997), Chao et al (2000), Daitoh (2003Daitoh ( , 2008Daitoh ( , 2012, Beladi and Chao (2006), Rapanos (2007), Tsakiris et al (2008), Daitoh and Omote (2011), and Ko et al (2017) are inconclusive.…”

“…When those developing countries increase national income through industrialization, the environmental quality also deteriorates due to industrial pollution, as discussed, for example, in Beghin et al . (), Daitoh () and Daitoh and Omote (). However, after economic development, casual observation shows that those developing countries start to be concerned with the issue of environmental protection.…”

“…The results which are obtained by many studies including Dean and Gangopadhyay (), Chao et al . (), Daitoh (, , ), Beladi and Chao (), Rapanos (), Tsakiris et al . (), Daitoh and Omote (), and Ko et al .…”

Pollution from consumption and urban unemployment in a dual economy

“…In the mobile capital HT model, paradoxical results are obtained regarding factor accumulation: labor expansion decreases the level of unemployment, but capital expansion increases it. Afterwards, several studies have incorporated the environment into the HT model (Chao et al 2000;Daitoh 2003;Tawada and Nakamura 2009;Nakamura 2013;Yabuuchi 2013;Pan and Zhou 2013;Li et al 2014).…”

The incidence of environmental regulation in a developing economy with sector-specific unemployment: a note

“…Rapanos (1992) argued that "the theory of externalities has gained new life recently, primarily because of the increasing concerns for environmental problems (p.226)" and provided an analysis on production externality and taxation. Frasca (1999) extended Wang's (1990) model by including an urban non-polluting sector, and Daitoh (2003) argued that a rise in the pollution tax rate in the urban manufacturing has spillover effect on the two labor market distortion which will provide sufficient conditions for the welfare-improving environmental policy reform in the Harris-Todaro economy. Recently, Rapanos (2007) followed Wang's (1990) model but considered the case of a production-production externality with the urban sector emitting a negative externality on the agriculture sector.…”