nep-res New Economics Papers
on Resource Economics
Issue of 2021‒01‒04
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Taking Time Seriously: Implications for Optimal Climate Policy By Michael Grubb; Rutger-Jan Lange; Nicolas Cerkez; Pablo Salas; Jean-Francois Mercure; Ida Sognnaes
  2. Optimal Linear Income Taxation and Education Subsidies under Skill-Biased Technical Change By Bas Jacobs; Uwe Thuemmel

  1. By: Michael Grubb (University College London); Rutger-Jan Lange (Erasmus University of Rotterdam); Nicolas Cerkez (University College London); Pablo Salas (University of Cambridge); Jean-Francois Mercure (University of Exeter); Ida Sognnaes (University of Oslo)
    Abstract: Induced innovation and associated issues of path dependence and inertia are of critical importance in the transition to a carbon free economy. We develop a model that, instead of modeling these processes themselves, models the implications of these characteristics and in the process allows us to shed a more nuanced light on this transition phase, an often neglected task. The resulting policy recommendations emphasize the advantages of immediate action and show under what conditions optimal policy might differ from one sector to another. The model thus generates important and policy-relevant insights while seriously considering transition dynamics.
    Keywords: abatement, DICE, energy economics, inertia, innovation, path dependence, transition
    JEL: C61 O30 Q30 Q42 Q43 Q54 Q58
    Date: 2020–12–21
  2. By: Bas Jacobs (Erasmus University Rotterdam); Uwe Thuemmel (University of Zurich)
    Abstract: This paper studies how linear tax and education policy should optimally respond to skill-biased technical change (SBTC). SBTC affects optimal taxes and subsidies by changing i) direct distributional benefits, ii) indirect redistributional effects due to wage-(de)compression, and iii) education distortions. Analytically, the effect of SBTC on these three components is shown to be ambiguous. Simulations for the US economy demonstrate that SBTC makes the tax system more progressive, since SBTC raises the direct distributional benefits of income taxes, which more than offset their larger indirect distributional losses, and it increases education distortions. Also, SBTC lowers optimal education subsidies, since SBTC generates larger direct distributional losses of education subsidies, which more than offset their larger indirect distributional gains, and it exacerbates education distortions.
    Keywords: Human capital, General equilibrium, Optimal taxation, Education subsidies, Technological change
    JEL: O3 H2 H5 I2 J2
    Date: 2020–12–28

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