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Do carbon taxes kill jobs? firm-level evidence from British Columbia

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  • Azevedo, Deven
  • Wolf, Hendrik
  • Yamazaki, Akio

Abstract

This paper investigates the employment impacts of British Columbia’s revenue neutral carbon tax. Using the synthetic control method with firm-level data, we find considerable heterogeneity in employment responses to the policy. We show that firm size matters. In particular, the carbon tax had a negative impact on large emissionintensive firms, but simultaneous tax cuts and transfers increased the purchasing power of low income households, substantially benefiting small businesses in the service sector and food/clothing manufacturing. Furthermore, we find that aggregate employment was not adversely affected by the policy. Our results provide additional insight for the “job-shifting hypothesis” of revenue neutral carbon taxes.

Suggested Citation

  • Azevedo, Deven & Wolf, Hendrik & Yamazaki, Akio, 2023. "Do carbon taxes kill jobs? firm-level evidence from British Columbia," LSE Research Online Documents on Economics 117346, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:117346
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    File URL: http://eprints.lse.ac.uk/117346/
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    References listed on IDEAS

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    1. Petrick, Sebastian & Wagner, Ulrich J., 2014. "The impact of carbon trading on industry: Evidence from German manufacturing firms," Kiel Working Papers 1912, Kiel Institute for the World Economy (IfW Kiel).
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    3. World Bank & Ecofys, 2018. "State and Trends of Carbon Pricing 2018," World Bank Publications - Books, The World Bank Group, number 29687.
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    5. Jared C. Carbone & Nicholas Rivers & Akio Yamazaki & Hidemichi Yonezawa, 2020. "Comparing Applied General Equilibrium and Econometric Estimates of the Effect of an Environmental Policy Shock," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(4), pages 687-719.
    6. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    7. Yip, Chi Man, 2018. "On the labor market consequences of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 136-152.
    8. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    9. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
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    11. World Bank & Ecofys, "undated". "State and Trends of Carbon Pricing 2018," World Bank Publications - Reports 29687, The World Bank Group.
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    Cited by:

    1. Sileci, Lorenzo, 2023. "Carbon pricing with regressive co-benefits: evidence from British Columbia’s carbon tax," LSE Research Online Documents on Economics 121047, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    carbon tax; employment; unilateral climate policy; firms;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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