Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy

Barrage, Lint

doi:10.1093/restud/rdz055

Cited by 78 publications

(134 citation statements)

References 70 publications

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“…There is, of course, a long literature on both of these topics, but they are generally only included in growth models to achieve specific aims. For example, energy is generally only included in growth models when studying the depletion of finite resources (e.g., Hotelling, 1931;Heal, 1976) or climate change (e.g., Golosov et al, 2014;Barrage, 2019). Directed technical change is often used to understand the evolution of relative wages between different groups of workers (e.g., Acemoglu, 1998Acemoglu, , 2002Acemoglu and Restrepo, 2016).…”

Section: Implications Of the Endogenous Growth Modelmentioning

confidence: 99%

A Multi-Factor Uzawa Growth Theorem And Endogenous Capital-Augmenting Technological Change

Casey

Horii

2019

SSRN Journal

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We prove a generalized, multi-factor version of the Uzawa steady state growth theorem. In the two-factor case, the theorem implies that a neoclassical growth model cannot be simultaneously consistent with empirical evidence on both capital-augmenting technical change and the elasticity of substitution between labor and reproducible capital. In the multi-factor case, balanced growth with capital-augmenting technical change is possible as long as capital has a unitary elasticity of substitution with any single non-reproducible factor, significantly increasing the likelihood that neoclassical models can be consistent with empirical findings. To illustrate the importance of this result, we also build a three-factor growth model with endogenous and directed technical change and show that is has a locally stable balanced growth path with a strictly positive rate of capital-augmenting technical change. and the production function is given by Y t =F (K t , ·; t). Suppose that the growth factor of

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Section: Implications Of the Endogenous Growth Modelmentioning

confidence: 99%

A Multi-Factor Uzawa Growth Theorem And Endogenous Capital-Augmenting Technological Change

Casey

Horii

2019

SSRN Journal

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“…It is unlikely that a modern economy could ever use carbon tax as a primary revenue source. Further, even if the carbon price is set at a high level to maximize carbon tax revenue, if there are offsetting reductions in other sources of distortionary taxes, the total revenues could still be neutral when viewed from the perspective of overall receipt of governmental revenues [40].…”

Section: Comparison Of Scenarios Maximizing Welfare and Carbon Tax Rementioning

confidence: 99%

Will the use of a carbon tax for revenue generation produce an incentive to continue carbon emissions?

Rong

Moreno‐Cruz

Caldeira

2017

Environ. Res. Lett.

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Integrated assessment models are commonly used to generate optimal carbon prices based on an objective function that maximizes social welfare. Such models typically project an initially low carbon price that increases with time. This framework does not reflect the incentives of decision makers who are responsible for generating tax revenue. If a rising carbon price is to result in near-zero emissions, it must ultimately result in near-zero carbon tax revenue. That means that at some point, policy makers will be asked to increase the tax rate on carbon emissions to such an extent that carbon tax revenue will fall. Therefore, there is a risk that the use of a carbon tax to generate revenue could eventually create a perverse incentive to continue carbon emissions in order to provide a continued stream of carbon tax revenue. Using the Dynamic Integrated Climate Economy (DICE) model, we provide evidence that this risk is not a concern for the immediate future but that a revenue-generating carbon tax could create this perverse incentive as time goes on. This incentive becomes perverse at about year 2085 under the default configuration of DICE, but the timing depends on a range of factors including the cost of climate damages and the cost of decarbonizing the global energy system. While our study is based on a schematic model, it highlights the importance of considering a broader spectrum of incentives in studies using more comprehensive integrated assessment models. Our study demonstrates that the use of a carbon tax for revenue generation could potentially motivate implementation of such a tax today, but this source of revenue generation risks motivating continued carbon emissions far into the future.

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“…The baseline specification of the formal urban‐sector production function is assumed to be Cobb–Douglas:

Y_{m} = A_{m} K_{m}^{α_{1}} {(false(1 - u false) L_{m})}^{α_{2}} E_{m}^{1 - {normalα}_{1} - {normalα}_{2}},

which in intensive form is given by

A_{m} f false(k_{m}, e_{m} false) = A_{m} k_{m}^{α_{1}} e_{m}^{1 - {normalα}_{1} - {normalα}_{2}} .

Cobb–Douglas technology has been widely used – see Golosov et al. () as well as Barrage () and references therein – and, as argued by Hassler et al. (), seems to be a reasonable representation of energy input use with a longer time horizon.…”

Section: Parameterizationmentioning

confidence: 99%

“…The estimates of 35 and 17 percent are the values of energy input per unit of value added in non‐metallic mineral products and paper and in paper products, respectively, across developing countries (Upadhyaya, ). However, much lower values for the expenditure share of energy, such as

1 - {normalα}_{1} - {normalα}_{2} = 0.03

, have also been used in recent macroeconomic models of climate change (see, for example, Golosov et al., ; Barrage, ). To accommodate these estimates, I perform a sensitivity analysis on my results.…”

Section: Parameterizationmentioning

confidence: 99%

“…Formal employment in the informal sector, however, represents only a very small fraction of non‐agricultural employment. To illustrate this point, I also compute the informal employment in informal sector as share of non‐agricultural employment, by using the data (ILO, ) on the number of people in informal employment and the number of people in informal employment outside the informal sector. The estimate is 33.5 percent.…”

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confidence: 96%

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Unemployment, rural–urban migration and environmental regulation

Kuralbayeva

2017

Review Development Economics

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This paper develops a general equilibrium model that incorporates specific features pertaining to developing countries: a large informal sector and rural-urban migration. A calibrated version of the model is used to study the effects of energy tax changes and a reduction in agricultural-sector energy subsidies on labor market outcomes.The results indicate that the incidence of energy taxes is partly shifted on to the rural sector through rural-urban migration. The results thus highlight the importance of modeling the features particular to developing countries and the economic general equilibrium effects when assessing the impact of environmental taxation in those countries.

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Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy

Cited by 78 publications

References 70 publications

A Multi-Factor Uzawa Growth Theorem And Endogenous Capital-Augmenting Technological Change

A Multi-Factor Uzawa Growth Theorem And Endogenous Capital-Augmenting Technological Change

Will the use of a carbon tax for revenue generation produce an incentive to continue carbon emissions?

Unemployment, rural–urban migration and environmental regulation

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