OPTIMAL TAXATION, PUBLIC-GOODS AND ENVIRONMENTAL-POLICY WITH INVOLUNTARY UNEMPLOYMENT

The implications of more environmental concern for the optimal provisi on of public goods, tax structure, and involuntary unemployment are de rived within a second-best framework in which lump-sum taxes are not a vailable and labour supply is rationed owing to a rigid consumer wage. A shift towards greener preferences may boost employment and public c onsumption if initial environmental concern is small, a fixed factor p lays a major role in production, and pollution is reduced through more labour-intensive production rather than a lower level of output.