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on Public Economics |
| By: | Barış Kaymak; Immo Schott |
| Abstract: | There is substantial asymmetry in effective corporate income tax rates across firms. While tax asymmetries would reduce productivity in frictionless economies, they can improve efficiency in a distorted economy if taxes alleviate other economic frictions. We develop a framework to estimate to what extent tax asymmetries affect productivity in distorted economies. Using US firm-level balance sheet data alongside measures of effective marginal tax rates, we find a positive correlation between tax rates and factor productivity, suggesting that tax asymmetry exacerbates the distortions from other economic frictions. Eliminating tax rate asymmetries would raise aggregate productivity by 3 to 4 percent if taxes distort capital costs alone. Models where taxes also distort the marginal cost of labor predict potential gains as high as 9 percent. |
| Keywords: | Business Taxation; Aggregate Productivity; TFP; Misallocation |
| JEL: | E23 H25 O47 |
| Date: | 2024–07–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1393 |
| By: | Max Löffler (Maastricht University & University of Cologne); Sebastian Siegloch (University of Cologne) |
| Abstract: | We investigate the welfare implications of property taxation. We apply a sufficient statistics approach that accounts for the distributional effects of tax changes at the household level within a spatial equilibrium framework. We show that equity effects are driven by price adjustments in the housing and labor markets, while efficiency is determined by changes in public goods. Using microdata and exploiting 5, 500 municipal property tax changes in Germany, where assessed housing values remain constant, we find that 83 percent of the tax burden is passed through to rental prices, with modest labor market effects. Simulations of the welfare effects of property taxes reveal that the price effects of property tax hikes are regressive. Despite the low efficiency costs of the tax, it becomes distributionally neutral only if public good preferences are very high. |
| Keywords: | property taxation, welfare, tax incidence, local labormarkets, rental housing |
| JEL: | H22 H41 H71 R13 R31 R38 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:331 |
| By: | Katy Bergstrom (Tulane University); William Dodds (Tulane University) |
| Abstract: | This paper develops a general theory to recover the inverse welfare function that rationalizes a given tax schedule as optimal. Our theory allows for complex environments including the presence of multidimensional tax schedules, bunching/jumping behavior, optimization frictions, general equilibrium effects, and externalities. We show how inverse welfare functions can be used to assess the desirability of tax reforms and to test for Pareto efficiency. We numerically construct several inverse welfare functions for piecewise-linear income taxation, taxation with optimization frictions, joint income and property taxation, income taxation with labor demand and endogenous wages, and taxation with inequality aversion. |
| Keywords: | inverse welfare function, inverse welfare weights, frictions, multidimensional taxation, general equilibrium, Pareto efficiency |
| JEL: | H21 H31 D60 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2408 |
| By: | Pawel Doligalski; Luis Rojas |
| Abstract: | We characterize the welfare effects of the informal sector by proposing a decomposition into efficiency and redistribution components. We focus on an economy where a planner wants to redistribute income with taxation and sets the optimal tax scheme. Since the informal sector can limit the taxation possibilities for the government but at the same time provide a shelter against tax distortions for individuals we show that the net welfare effect can be positive or negative. We show that the relative advantage between informal and formal employment across different income levels is the key dimension that shapes the welfare costs of the informal sector. Using the model estimated with Colombian microdata, we show that, conditional on the optimal tax policy, the Colombian shadow economy benefits efficiency at the expense of redistribution. Consequently, the presence of the informal sector reduces welfare only when preferences for redistribution are strong. |
| Keywords: | shadow economy, informal labor market, income taxation, redistribution |
| JEL: | H21 H26 J46 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1452 |
| By: | Mukherjee, Sacchidananda (National Institute of Public Finance and Policy); Jadhav, Vivek (National Institute of Public Finance and Policy); Badola, Shivani (National Institute of Public Finance and Policy) |
| Abstract: | We assess the revenue potential of states in the Passenger and Goods Tax (PGT) collection based on available information in the public domain. Taxes on Goods and Passengers (also known as PGT) is a tax on services provided by commercial vehicles for carrying goods and passengers on roads or inland waterways. This tax is not subsumed into the GST, except under Entry 52 of the State List (List II of the Seventh Schedule of the Indian Constitution) "Taxes on the entry of goods into a local area for consumption, use or sale therein" (also known as entry tax) has been subsumed into the GST, as per the Constitution One Hundred and First Amendment Act, 2016. Many states do not exercise the taxation power of PGT, and there is scope for reforms in this tax handle in terms of revising the tax rate structure and expanding the tax base. With the increasing penetration of Electric Vehicles (EVs) both in passenger and goods transport fleets in India, it will be important to explore possibilities of shifting points of taxation from owning the vehicle (e.g., registration fee and associated taxes) and consumption of fuels (fossil) to uses (mobility) of the vehicle. Any tax on the mobility of the vehicles could be introduced using the provisions under the PGT Act of state governments. |
| Keywords: | Revenue potential ; State Finances ; Taxes on passengers and goods ; Externalities ; Tax on Mobility ; India |
| JEL: | H20 H71 H23 I18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:npf:wpaper:24/416 |
| By: | Christos Kotsogiannis; Luca Salvadori; John Karangwa; Innocente Murasi |
| Abstract: | Difficult to find another policy shift that has promised as much for tax compliance in developing countries as digitalization. Yet the evidence on its impact is scant. Using the universe of tax filings in Rwanda over the period 2012-2019, this paper investigates the extent to which digitalization (in the form of e-invoicing) has impacted on VAT compliance and, in particular, the effectiveness of tax audits. The evidence suggests that while e-invoicing adoption per se has increased firms’ net VAT payments, this impact is quantitatively limited, as firms seem to re-adjust their expenses so to keep VAT payments low. Interestingly, e-invoicing had a sizable compliance impact on net VAT liabilities re- ported by audited firms, with this impact being attributed to tax audits becoming more efficient, rather than to VAT registered firms becoming more cautious following their participation in the e-invoicing mechanism. |
| Keywords: | tax audit evaluation, technological change, digitalisation initiatives, tax administration, Tax evasion, tax compliance |
| JEL: | H25 H26 H32 O17 O33 D02 D22 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1454 |
| By: | Mukherjee, Sacchidananda (National Institute of Public Finance and Policy); Badola, Shivani (National Institute of Public Finance and Policy) |
| Abstract: | State excise, the third largest source of the state's own tax revenue (OTR), is a crucial aspect of state finances in India. This study is important as it delves into the factors influencing state excise collection from alcoholic beverages. The tax base of state excise is the consumption of alcoholic beverages (viz., IMFL, country liquor, beer) and other narcotics (opium, Indian hemp, and other narcotic drugs and narcotics) in the state. Some states also collect sales tax on alcoholic beverages in addition to state excise. Combined revenue from the state excise and sales tax on alcoholic beverages constitutes a major share of the OTR. The tax administration of state excise is subject to complex processes and procedures. In this study, we provide a comprehensive summary of the regulatory structure of states related to State excise duties. |
| Keywords: | Revenue mobilisation ; State Finances ; Taxation of alcoholic beverages ; State Excise ; State Sales Tax ; India |
| JEL: | H20 H71 H23 H26 I18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:npf:wpaper:24/415 |
| By: | Audrey Guo |
| Abstract: | Economic models assume that payroll tax burdens fall fully on workers, but where does tax incidence fall when taxes are firm-specific and time-varying? Unemployment insurance in the United States has the key feature of varying both across employers and over time, creating the potential for labor demand responses if tax costs cannot be fully passed through to worker wages. Using state policy changes and administrative data of matched employer-employee job spells, I study how employment and earnings respond to unexpected payroll tax increases for highly exposed employers. I find significant drops in employment growth driven by lower hiring, and minimal evidence of passthrough to earnings. The negative employment effects are strongest for young workers and single-establishment firms. |
| Keywords: | unemployment insurance, labor demand, payroll taxation |
| JEL: | H25 H71 J23 J65 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-35 |
| By: | Bellani, Luna (Ulm University); Berriochoa, Kattalina (University of Konstanz); Kapteina, Mark (University of Konstanz); Schwerdt, Guido (University of Konstanz) |
| Abstract: | We study the effects of information on attitudes towards inheritance taxation using survey experiments fielded in Germany. We show that information about tax allowances increases demand for higher taxes and shifts public opinion from favoring abolition to supporting the tax. Effects are primarily due to a prevalent underestimation of tax allowances and the alteration of people's expectations of being affected by such taxes. In contrast, information highlighting the increasing proportion of inherited wealth only negligibly affects policy demand. Our results suggest that pocketbook motives and misinformation may contribute to explaining the paradox of limited demand for inheritance taxation despite growing inequality concerns. |
| Keywords: | capital taxation, equality of opportunity, inheritance tax, information, randomized experiment |
| JEL: | H20 D72 D83 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17099 |
| By: | Bruno Bosco (Department of Economics, Management and Statistics, University of Milano-Bicocca); Carlo Federico Bosco (University of Pavia); Paolo Maranzano (Department of Economics, Management and Statistics, University of Milano-Bicocca and Fondazione Eni Enrico Mattei) |
| Abstract: | This paper uses the Italian income tax treatment of 2006/7 as a quasi-natural tax experiment to offer some fresh empirical evidence on how labour supply responds to exogenous income tax hikes. We adopt the identification strategy based on TWFE panel data Difference-in-Differences (DID) model to define the correct statistical framework of the study, and to benefit from the specific features of the above tax experiment, namely homogeneity and contemporaneity of the treatment. Results show that the extensive negative adjustments of various response variables measuring the supply of labour services offered by treated taxpayers are statistically significant, rapid, and strong but not long-time lasting. Not surprisingly, we also find that that treated families reduce in a similar manner their consumption with respect to families in the control groups. Analogous adjustment responses to tax hikes characterise the growth of per-capita regional GDP. The estimated aggregate effects of tax hikes are further compared with the spatial-temporal patterns observed for every response variable in treated and untreated regions. |
| Keywords: | Income Taxation, extensive labour supply change, TWFE Panel Data DID, convergence tests, taxation and regional growth |
| JEL: | C10 C18 C21 H2 E2 E32 E62 C23 C26 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2024.16 |
| By: | Nathalie Etchart-vincent (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Marisa Ratto (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique); Emmanuelle Taugourdeau (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Our experimental study investigates the impact of information about others' tax behaviour on the subjects' subsequent tax decisions. A novel framework allows us to test the taste for social conformity and behavioural convergence hypothesis. Two kinds of individual information are introduced, namely information about the income reported on average, within the whole subject's group and within a subgroup, made of either peers or non peers and chosen by the subject. Our main results are fourfold. First, we replicate usual results as regards the influence of tax morale, probability of audit and redistribution on tax compliance. Second, our data show that many subjects are more interested in non-peers' than peers' tax behaviour. Third, with regard to our main point, our data display a huge variety of behavioural responses at the individual level. Roughly 50% of the subjects, most of whom are full tax compliers, are insensitive to others' tax behaviour, thereby exhibiting strong intrinsic preferences towards taxes. At the same time, our data provide strong evidence of behavioural convergence towards others' average behaviour, and a taste for social anti-conformity is also found for a minority of subjects. Finally, the kind of information appears to matter, and we find some asymmetry in upward and downward behavioural variations. |
| Keywords: | Tax compliance, Information, Tax morale, Peer effects, Social norms, Behavioral contagion, Social conformity, Artefactual field experiment |
| Date: | 2024–07–05 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-04635966 |
| By: | Alessandro Citanna (New York University Abu Dhabi, UAE); Mich Tvede (School of Economics, University of Sheffield, Sheffield S1 4DT, UK) |
| Abstract: | Should the government run an uncertain fiscal policy to finance its liabilities? We call the resulting uncertainty taxspots, and study conditions that make taxspots optimal, and recurrent, in standard Ramsey problems. We show that prudence and market incompleteness play a role in sustaining taxspots, and that equal-treatment randomizations can be decentralized via taxspots even in the absence of financial markets. |
| Keywords: | Ramsey taxation, sunspots, lottery equilibrium |
| JEL: | D51 D52 D84 E62 H21 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2024006 |
| By: | Thomas Aronsson (Umea University); Olof Johansson-Stenman (University of Gothenburg); Ronald Wendner (University of Graz) |
| Abstract: | This paper analyzes optimal taxation of charitable giving to a public good in a Mirrleesian framework with social comparisons. When there are no transaction costs of giving, charitable giving should be subsidized to such an extent that government contributions are completely crowded out, regardless of whether the government is welfarist or non-welfarist, in which case it does not acknowledge the warm glow of giving. Under welfarism, stronger concerns for relative charitable giving support lower marginal subsidies, whereas relative consumption concerns work in the opposite direction. We also show that a simple flat-rate subsidy is optimal under welfarism, while the marginal subsidy increases in income under non-welfarism. |
| Keywords: | Conspicuous charitable giving, conspicuous consumption, optimal taxation, public good provision, warm glow. |
| JEL: | D03 D62 H21 H23 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2024-05 |
| By: | GRUNBERGER Klaus (European Commission - JRC); DERNDORFER Judith; SCHNETZER Matthias |
| Abstract: | Since the end of inheritance and gift tax in 2008, there has been hardly any data on the distribution and volume of inheritances in Austria. Voluntary household surveys capture past inheritances, but there is a lack of current values as well as forecasts on the future development of inheritances. Using data from the Household Finance and Consumption Survey (HFCS) and the microsimulation model INTAXMOD, this paper estimates the annual inherited wealth and the potential tax revenue up to 2050. The results show (a) a doubling of the annual inheritance volume between 2025 and 2050 from approximately €21 to 41 billion, (b) a strong concentration in the upper percentile of the inheritance distribution, and (c) potential tax revenues of over €1 billion per year from inheritance taxes with tax exemption of €1 million. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202404 |
| By: | Andreas Schaefer (University of Bath); Maik T. Schneider (University of Graz) |
| Abstract: | With the 4th Industrial Revolution ahead there is huge uncertainty about the likely labour market impacts ranging from massive layoffs as a response to Automation and AI to the view that overall more jobs will be created than lost. Whatever the outcome in the end, there will be major structural change with substantial implications for individual labour income risk. We argue that precautionary savings are an ineffective protection against labour market risk arising from major technological shifts and discuss four policy instruments, 1) a private insurance scheme, 2) a universal basic income, 3) a robot tax, and 4) a governmental insurance scheme. Further, we examine whether these policy instruments are suitable to achieve high and inclusive growth. |
| Keywords: | Artificial Intelligence, Economic Growth, Endogenous Technological Change, Industrial Revolution, Robot Tax, Universal Basic Income. |
| JEL: | H20 O33 O38 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2024-06 |
| By: | Julio López-Laborda |
| Abstract: | The paper determines the conditions for inheritances or gifts, first, and the Inheritance and Gift Tax (IGT), next, to reduce wealth inequality in the short run. The results show that it may not be sufficient for IGT to be progressive to reduce inequality in the distribution of wealth, but that it must be progressive enough to reinforce or reverse, as appropriate, the effect of inheritances on wealth inequality. The paper shows the conditions for this requirement to be met. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2024-06 |
| By: | Breyer, Friedrich; Sterba, Maj-Britt |
| Abstract: | How shall publicly provided excludable goods be financed - by general taxation or user fees? Prominent applications are in education, notably universities and early childcare. The general conclusion of the existing literature is that exclusive tax financing is neither efficient nor desirable under widely shared distributive goals. A striking example is childcare because here fees are often made dependent on parents' income. Given the rather clear arguments in favor of user fees for formal childcare, it is surprising to notice that some German states with leftist governments have abolished user fees and replaced them with pure tax financing. It is the purpose of this research to investigate the attitudes of politicians towards user fees for publicly funded childcare and to explore the justifications given for these attitudes. This was done within face-to-face online interviews with an embedded survey with members of eight federal state legislatures. The survey results confirm the experience of real political decisions in that left-leaning politicians tend to oppose parental fees. They do so mainly with the justification that "education must be free for all". Right-leaning politicians tend to support fees and consider an abolition as helping mainly the rich and a problem for the quality of childcare. We discuss how these results can be reconciled with the redistributive goals of leftist parties. |
| Keywords: | Childcare fees, legislators, Germany, survey |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cexwps:300231 |
| By: | Morgan Maneely; Mr. Lev Ratnovski |
| Abstract: | Since 2022, EU banks have been enjoying historically high profits. The profits are mostly driven by the delayed pass-through of the rapid monetary policy tightening to deposit rates and as such are likely transitory. Against this background, almost half of EU countries have introduced new taxes on banks. This paper documents the significant diversity in the design of the new bank taxes—in terms of their tax base, rate, duration, and burden. The paper discusses several trade-offs in the design of bank taxes and argues that an alternative or complementary policy response to temporarily high bank profits is to lock them in as usable bank capital, for example through an increase in countercyclical capital buffer rates. |
| Keywords: | European banks; bank profits; bank taxation; credit supply; bank capital; CCyB; European Union; the ECB |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/143 |
| By: | Frondel, Manuel; Thiel, Patrick; Vance, Colin |
| Abstract: | Exploiting exogenous variation in retail fuel prices from a temporary fuel tax discount in Germany, we estimate how the pass-through of the discount varies over space and time. We draw on daily gasoline prices of virtually all gas stations in Germany and neighboring France, with France serving as a control, and estimate an event study model covering the full period of the discount from June to August 2022. We find average pass-through rates on the order of 87% for diesel and 71% for petrol, but with substantially lower rates in high-income regions and in regions with a low degree of competition. More strikingly, our results suggest pronounced heterogeneity over time: The magnitude of the pass-through rate dissipates sharply over the three months in which the discount was in effect, dropping to 50% by the final month, a pattern consistent with retailer responses to short-term changes in consumer attention. Taken together, our results indicate that average pass-through estimates may obscure a high degree of spatial and temporal heterogeneity that bears upon the assessment of competition and distributional effects: While our estimation of the budgetary costs of the discount confirms the government's a priori estimate of €3.1 billion, we find that about 61% of the discount's financial relief accrues to households with above-median incomes. |
| Abstract: | Unter Ausnutzung exogener Schwankungen der Einzelhandelspreise für Kraftstoffe, die sich aus einer zeitlich begrenzten Ermäßigung der Kraftstoffsteuer in Deutschland ergeben, schätzen wir, wie sich die Weitergabe der Ermäßigung über Raum und Zeit verändert. Wir greifen auf die täglichen Benzinpreise von praktisch allen Tankstellen in Deutschland und dem benachbarten Frankreich, wobei Frankreich als Kontrollgruppe dient, zurück und schätzen ein Event-Study-Modell, das den gesamten Zeitraum des Rabatts von Juni bis August 2022 abdeckt. Wir finden durchschnittliche Überwälzungsraten in der Größenordnung von 87 % für Diesel und 71 % für Benzin, wobei die Raten in Regionen mit hohem Einkommen und in Regionen mit geringem Wettbewerb deutlich niedriger sind. Noch auffälliger ist, dass unsere Ergebnisse auf eine ausgeprägte Heterogenität im Zeitverlauf hindeuten: Die Höhe der Weitergabequote nimmt im Laufe der drei Monate, in denen der Rabatt in Kraft war, stark ab und sinkt bis zum letzten Monat auf 50 %, ein Muster, das mit den Reaktionen der Einzelhändler auf kurzfristige Veränderungen der Verbraucheraufmerksamkeit übereinstimmt. Insgesamt deuten unsere Ergebnisse darauf hin, dass die Schätzungen des durchschnittlichen Pass-Through ein hohes Maß an räumlicher und zeitlicher Heterogenität verdecken können, die sich auf die Bewertung der Wettbewerbs- und Verteilungseffekte auswirkt: Während unsere Schätzung der Haushaltskosten des Rabatts die A-priori-Schätzung der Regierung von 3, 1 Milliarden Euro bestätigt, stellen wir fest, dass etwa 61% der finanziellen Entlastung durch den Rabatt Haushalten mit überdurchschnittlichem Einkommen zugute kommt. |
| Keywords: | Competition, demand elasticity, fuel tax discount, gasoline market |
| JEL: | L13 L81 D43 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:300564 |
| By: | Giupponi, Giulia; Landais, Camille |
| Abstract: | Short-time work (STW) policies provide subsidies for hour reductions to workers in firms experiencing temporary shocks. They are the main policy tool used to support labour hoarding during downturns and were aggressively used during the coronavirus disease 2019 (COVID-19) pandemic. Yet, very little is known about their employment and welfare consequences. This article leverages unique administrative social security data from Italy and quasi-experimental variation in STW policy rules to offer evidence on the effects of STW on firms’ and workers’ outcomes during the Great Recession. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. We then analyse whether these positive employment effects are welfare enhancing, distinguishing between temporary and more persistent shocks. We first provide evidence that liquidity constraints and rigidities in wages and hours may make labour hoarding inefficiently low without STW. Then, we show that adverse selection of low productivity firms into STW reduces the long-run insurance value of the program and creates significant negative reallocation effects when the shock is persistent. |
| Keywords: | short time work; employment; reallocation; social insurance; #679704; OUP deal |
| JEL: | H20 J20 J65 |
| Date: | 2023–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:115372 |
| By: | Teresa Lackner (University of Graz); Luca E. Fierro (International Institute for Applied Systems Analysis (IIASA)); Patrick Mellacher (University of Graz) |
| Abstract: | The paper introduces an integrated approach, blending Opinion Dynamics with a Macroeconomic Agent-Based Model (OD-MABM). It aims to explore the co-evolution of climate change mitigation policy and public support. The OD-MABM links a novel opinion dynamics model that is calibrated for European countries using panel survey data to the Dystopian Schumpeter meeting Keynes model (DSK). Opinion dynamics regarding stringent climate policy arise from complex interactions among social, political, economic and climate systems where a household’s opinion is affected by individual economic conditions, perception of climate change, industry-led (mis-)information and social influence. We examine 133 pathways for climate change mitigation policies in the EU, integrating various carbon tax schemes and revenue recycling mechanisms. Our findings reveal that while effective carbon tax policies initially lead to a decline in public support due to substantial macroeconomic transition costs, they concurrently drive a positive social tipping point in the future. This shift stems from the evolving economic and political influence associated with the fossil fuel-based industry, gradually diminishing as the transition unfolds. Second, hybrid revenue recycling strategies that combine green subsidies with climate dividends successfully address this intertemporal tradeoff, broadening public support right from the introduction of the carbon tax. A decomposition of opinion dynamics into the different channels reveals the important role of social influence through which individual experience can propagate within social networks giving rise to rapid and non-linear opinion swings. |
| Keywords: | Climate change, mitigation policy, opinion dynamics, agent-based models, transition risks. |
| JEL: | C63 H31 Q43 Q50 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2024-07 |