TITLE:
The Effects of Greenhouse Gases Regulation on Wages and Rents: Policy Issues and General Equilibrium Analysis
AUTHORS:
Meng-Jieu Chen
KEYWORDS:
Environmental Policy, General Equilibrium Model, Lobby, Incentive, Wage, Rent
JOURNAL NAME:
American Journal of Climate Change,
Vol.5 No.4,
November
4,
2016
ABSTRACT: The stringency of environmental policy is likely to change the gains of economic agents. Using a general equilibrium model and an assumption that capital-intensive industries tend to be intensive emitters of greenhouse gases (GHG), we find that a stricter GHG emission scheme will reduce the rent for capital owners but increase the wage for workers. This effect could motivate capital owners or workers to oppose or support a stricter GHG policy. The paper also empirically assesses the model’s key assumption by using production input (capital stock and labor), output, and GHG emission data from U.S industrial sectors. The regression result supports a strong positive relationship between the capital-labor ratio and the pollution-output ratio. Therefore, the theoretical analysis is relevant to the actual economy.