Research

Working Papers

Geography, uncertainty, and the cost of climate change with Jordan-Rosenthal Kay

Abstract: This paper estimates the global welfare cost of climate change using a Spatially Integrated Assessment Model (SIAM), accounting for climatic uncertainty by integrating over different climate scenarios. SIAMs have the ability to account for adjustment mechanisms (e.g., trade and migration) to climate change which makes them well-suited for this analysis. However, most work in the literature fails to account for uncertainty around the future realizations of climate. Jensen’s inequality suggests that failing to integrate over the full distribution of future climate in a SIAM leads to a biased estimate of the welfare cost when the welfare function is non-linear. We show theoretically that the curvature of welfare to climate depends on the strength of migration, the spatial correlation of climate shocks, and the curvature of the utility function. We then show that these second order effects are quantitatively important using simulations of a baseline model.

Works in Progress

Same taxes, new distortions

Abstract: This paper demonstrates that federal taxation, that is region neutral in its structure, actually has regionally heterogeneous incidences due to its interactions with different local structures. To the extent it influences regions heterogeneously, it distorts the allocation of workers across regions which is a distortionary effect of tax policy that is not often highlighted in discussions around tax policy. I show this in simple theoretical settings to intuitively convey the idea, which revolves around the distortion of fundamentals that determine the spatial optimisation decision for workers. I quantify the strength of this channel in a structural model to highlight when federal taxes can be more or less distortionary, and determine conditions for when federal taxes can alleviate/worsen spatial misallocation.

Trade policy in a carbon conscious world with Thomas Bourany