PSI-PSE (Petit Séminaire Informel de la Paris School of Economics) Seminar

Du 22/10/2024 de 17:30 à 18:30

BARTOLINI Luciana(University of Trieste)
BOB Rijkers(PSE)

Environmental fiscal policy and optimal labour allocation

1) Within an OLG framework, we assume agents are endowed with green preferences that can modify consumption choices. We present a bi-sectoral model that clearly shows the negative and positive externalities on the en- vironment caused by the brown and green sectors. The laissez-faire model is clearly sub-optimal. It allows for larger production and pollution with- out taking into account future generations. We introduce a social planner that demonstrably increases total welfare by accounting for both present and future generations thanks to the social discount factor. We prove that the government can decentralise the social optimum by effectively managing fiscal policy instruments. Indeed, the introduction of govern- ment bonds crowds out investment in physical capital, slowing thus down production and preserving the environment. To illustrate our findings, we have also performed a series of simulations.

2) It is well established that demand can change the direction of product innovation in standard markets. But does this also work in a setting with large negative externalities? Can socially responsible consumers induce Pigouvian innovation by demanding new products that are less harmful to, e.g., the climate, biodiversity, or animal welfare? I propose an empirical test using two decades of US retail scanner data. Identification is based on a shift-share design that exploits exogenous changes in the relative size of different consumer groups.