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Environmental Taxes Versus Subsidies with Unionized Labor Markets. A Note on the Role of Wage Setting Structure

  • Cecilia Vergari ORCID logo EMAIL logo und Nicola Meccheri ORCID logo
Veröffentlicht/Copyright: 7. August 2025

Abstract

In the context of a unionized labor market and green consumerism, this paper analyzes, within a vertically differentiated duopoly, which environmental policy – taxes or subsidies – is more efficient in reducing polluting emissions and enhancing social welfare. The structure of wage setting proves to be crucial in determining final outcomes. Specifically, under firm-specific unions with decentralized wage setting, a subsidy policy is more efficient than a tax policy. Conversely, when an industry-wide union sets wages centrally, the tax policy outperforms the subsidy policy.

JEL Classification: J51; L13; L15

Corresponding author: Cecilia Vergari, Department of Economics and Management, University of Pisa, Pisa, Italy, E-mail: 

We are extremely grateful to the Editor Matthew McGinty and to two anonymous referees for their insightful and helpful comments and suggestions. We would like to thank also all the participants at the workshop on “Environmental and corporate social responsibility, green consumerism and firms’ strategic behavior” (Rome 2024). This study received funding from the European Union – Next-GenerationEU – National Recovery and Resilience Plan (NRRP) – MISSION 4 COMPONENT 2, INVESTMENT N. 1.1, CALL PRIN 2022 D.D. 104 02-02-2022 – (Environmental and corporate social responsibility, green consumerism and firms’ strategic behavior) CUP N. I53D23002520006.


Funding source: NextGenerationEU

Award Identifier / Grant number: CUP N. I53D23002520006

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Received: 2025-01-07
Accepted: 2025-07-16
Published Online: 2025-08-07

© 2025 Walter de Gruyter GmbH, Berlin/Boston

Heruntergeladen am 7.11.2025 von https://www.degruyterbrill.com/document/doi/10.1515/bejeap-2025-0013/html?lang=de
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