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Working Paper
Unequal Climate Policy in an Unequal World
Hur, Sewon; Carroll, Daniel R.; Belfiori, Elisa (2025-01-31)
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a flat carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. We show that the constrained optimal carbon tax in a heterogeneous economy is heterogeneous: Higher-income households face a ...
Globalization Institute Working Papers , Paper 427

Working Paper
Politically influenced counterterrorism policy and welfare efficiency
Sandler, Todd; Bandyopadhyay, Subhayu (2022-03)
The paper examines how two targeted countries strategically deploy their counterterror forces when lobbying defense firms influence counterterror provision. For proactive measures, lobbying activities in a single targeted country lessen underprovision, raise overall counterterrorism, and reduce terrorism. Welfare decreases in the politically influenced country but increases in the other targeted country owing to enhanced free riding. Lobbying influence on the targeted countries’ welfare is tied to terrorists’ targeting preferences and how the lobbied government weighs citizens’ welfare. ...
Working Papers , Paper 2022-007

Report
U.S. Banks’ Exposures to Climate Transition Risks
Seltzer, Lee; Santos, João A. C.; Jung, Hyeyoon (2023-04-01)
We build on the estimated sectoral effects of climate transition policies from the general equilibrium models of Jorgenson et al. (2018), Goulder and Hafstead (2018), and NGFS (2022a) to investigate U.S. banks’ exposures to transition risks. Our results show that while banks’ exposures are meaningful, they are manageable. Exposures vary by model and policy scenario with the largest estimates coming from the NGFS (2022a) disorderly transition scenario, where the average bank exposure reaches 9 percent as of 2022. Banks’ exposures increase with the stringency of a carbon tax policy but ...
Staff Reports , Paper 1058

Working Paper
The Macro Effects of Climate Policy Uncertainty
Fried, Stephie; Peterman, William B.; Novan, Kevin (2021-03-19)
Uncertainty surrounding if and when the U.S. government will implement a federal climate policy introduces risk into the decision to invest in capital used in conjunction with fossil fuels. To quantify the macroeconomic impacts of this climate policy risk, we develop a dynamic, general equilibrium model that incorporates beliefs about future climate policy. We find that climate policy risk reduces carbon emissions by causing the capital stock to shrink and become relatively cleaner. Our results reveal, however, that a carbon tax could achieve the same reduction in emissions at less than half ...
Finance and Economics Discussion Series , Paper 2021-018

Report
Optimal Income Taxation: Mirrlees Meets Ramsey
Tsujiyama, Hitoshi; Heathcote, Jonathan (2015-01-22)
What structure of income taxation maximizes the social benefits of redistribution while minimizing the social harm associated with distorting the allocation of labor input? Many authors have advocated scrapping the current tax system, which redistributes primarily via marginal tax rates that rise with income, and replacing it with a flat tax system, in which marginal tax rates are constant and redistribution is achieved via non-means-tested transfers. In this paper we compare alternative tax systems in an environment with distinct roles for public and private insurance. We evaluate ...
Staff Report , Paper 507

Working Paper
Unequal Climate Policy in an Unequal World
Belfiori, Elisa; Carroll, Daniel R.; Hur, Sewon (2024-07-16)
We study climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good. Using household expenditure and emissions data, we document that low-income households have higher emissions per dollar spent than high-income households, making a carbon tax regressive. We build a model that captures this fact and study climate policies that are neutral with respect to the income distribution. A central feature of these policies is that resource transfers across consumers are ruled out. We show that the constrained optimal ...
Globalization Institute Working Papers , Paper 427

Working Paper
The Heterogeneous Effects of Government Spending : It’s All About Taxes
Navarro, Gaston; Ferrière, Axelle (2018-08-22)
This paper investigates how government spending multipliers depend on the distribution of taxes across households. We exploit historical variations in the financing of spending in the U.S. since 1913 to show that multipliers are positive only when financed with more progressive taxes, and zero otherwise. We rationalize this finding within a heterogeneous-household model with indivisible labor supply. The model results in a lower labor responsiveness to tax changes for higher-income earners. In turn, spending financed with more progressive taxes induces a smaller crowding-out, and thus larger ...
International Finance Discussion Papers , Paper 1237

Working Paper
Does Access to Free Pre-Kindergarten Increase Maternal Labor Supply?
Ilin, Elias; Shampine, Samantha; Terry, Ellyn (2022-02-02)
In this paper, we evaluate the effects of free pre-kindergarten (pre-K) programs on the labor force participation (LFP) of mothers. We use variation in pre-K rules across all US states, including income eligibility requirements in some states. To estimate the causal effects of access to pre-K on labor supply, we exploit the panel aspect of the monthly Current Population Survey between 2002 and 2019. Specifically, we look at the change in labor market behavior of women when their child becomes age-eligible for pre-K, controlling for individual factors. We find that access to free pre-K ...
FRB Atlanta Working Paper , Paper 2022-3

Working Paper
These Caps Spilleth Over: Equilibrium Effects of Unemployment Insurance
Doniger, Cynthia L. (2022-11-04)
The design of US unemployment insurance (UI) policy--which features benefits assigned as a percentage of past wages up to a cap--engenders tests for spillovers from policy variation to workers who are not directly treated. We test for and find a pattern of spillovers from state-level UI policy changes that cannot be neatly reconciled with workhorse or cutting-edge models of UI spillovers. Instead, we show that the documented pattern conforms with the predictions of a canonical model of information frictions: wage posting with random search. Taken together, our results provide novel evidence ...
Finance and Economics Discussion Series , Paper 2022-074

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