DO CARBON TAXES KILL JOBS? FIRM-LEVEL EVIDENCE FROM BRITISH COLUMBIA

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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 emission-intensive 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.

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Azevedo, D., Wolff, H., & Yamazaki, A. (2023). DO CARBON TAXES KILL JOBS? FIRM-LEVEL EVIDENCE FROM BRITISH COLUMBIA. Climate Change Economics, 14(2). https://doi.org/10.1142/S2010007823500100

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