Saturday, November 18, 2017

[twbhlwpx] Gasoline tax and illiquid labor

With a high gasoline (or carbon) tax, people prefer to commute a lesser distance to work.  This induces geographic monopoly (actually monopsony) effects in the labor market; an employee can't as easily quit and work somewhere else without incurring higher commuting costs or high moving costs.  Previously similar.

In practice, many employers within the same industry might set up shop near each other, perhaps in a dense urban city where there are many consumers, so this will not be much of a problem in those industries.  Where (both geographically and across industries) might we see labor problems induced by a gasoline tax?

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