Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households by Marcelo Pedroni

Join us for this weeks Macroeconomics Research Seminar, Summer Term 2024.

Marcelo Pedroni, from the University of Amsterdam, will present this weeks Macroeconomics seminar on Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households.

Abstract

We study optimal fiscal policy to address climate change and inequality. We theoretically characterize optimal carbon and income taxes and quantify them for the US economy with a climate model calibrated to DICE. In contrast to the representative-agent setting, we find that (i) tax distortions have a negligible effect on the optimal carbon tax; (ii) inequality only slightly reduces it; (iii) the revenue from carbon taxes is optimally split halfway between reducing tax distortions and increasing transfers. Unlike the double-dividend policy, optimal carbon taxation has progressive welfare effects and low-income households benefit even in the short run.

This seminar will be held on campus in the Economics Common Room at 1.30pm on Tuesday 28th May 2024. This event is open to all levels of study and is also open to the public. To register your place, please contact the seminar organisers.

This event is part of the Macroeconomics Research Seminar Series.