Working Paper: CEPR ID: DP15419
Authors: Tiago Cavalcanti; Zeina Hasna; Cezar Santos
Abstract: We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral input–output linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its Paris Agreement pledge would imply at most a 0.6\% drop in output. This impact is distributed asymmetrically across sectors and individuals. Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force.
Keywords: climate change; carbon taxes; worker heterogeneity; labor reallocation
JEL Codes: E13; H23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| carbon tax (H23) | economic outcomes (F61) |
| carbon tax (H23) | labor reallocation (J69) |
| carbon tax (H23) | changes in sectoral dynamics (O14) |
| carbon tax (H23) | human capital investment (J24) |
| carbon tax (H23) | labor allocation across sectors (J29) |
| dirty energy sector workers (L94) | costs associated with carbon tax (Q52) |
| carbon tax (H23) | wage drops in dirty energy sectors (J39) |
| carbon tax (H23) | labor outflows from dirty energy sectors (J89) |
| revenue recycling methods (H27) | output drop mitigation (C69) |
| carbon tax (H23) | GDP losses (F69) |