Capros P. et al. (1996) "Double dividend analysis: First results of a general equilibrium model (GEM-E3) linking the EU-12 countries", in C. Carraro and D. Siniscalco (editors) "Environmental Fiscal Reform and Unemployment" Kluwer Academic Publishers
Prepared by: P. Capros, P. Georgakopoulos, S. Zografakis (NTUA), S. Proost, D. Van Regemorter (CES.KULeuven), C. Conrad, T. Schmidt (Univ. of Mannheim), Y. Smeers, E. Michiels (CORE, UCLeuven)
The paper presents a dynamic general equilibrium model of the European Union economy (the GEM-E3 model) and its use in the analysis of the "Double Dividend" policy issue. GEM-E3 is a large-scale computable general equilibrium model that incorporates links of the economy with the environment and the energy systems. The model can link the 12 member states of European Union through trade. It represents the simultaneous equilibrium in the markets of goods (11 sectors), the labour and the capital markets.
The double dividend analysis is defined as the simultaneous imposition of a CO2-related tax compensated by a reduction of the rate of social security contribution of employers. Possibilities for a double dividend in environment and employment are analysed with different model variants. The full model version performs comparative static analysis for the member states.
The paper examines some of the conditions under which a double dividend could occur. For that purpose it considers the adaptation flexibility of the labour market and the elasticities of substitution in production and the energy use and supply. Differential implications for the member states are also evaluated and "burden sharing" issues are raised. The results should however be considered as preliminary.
The paper included in C. Carraro and D. Siniscalco (editors)"Environmental Fiscal Reform and Unemployment" Kluwer Academic Publishers, ISBN: 978-90-481-4622-2, pp. 193–227.
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