Evidence from a current panel of harmonized worldwide data highlights a robust negative effect of income inequality on economic growth that we trace back to its transmission channels. Less equal societies tend to have less educated populations and higher fertility rates, but not necessarily...

The relationship between income inequality and economic growth is complex. Some inequality is integral to the effective functioning of a market economy and the incentives needed for investment and growth. But inequality can also be destructive to growth, for example by amplifying the risk of...

Employing a two-period model with an environmental externality, this paper investigates the relation between emission taxation and the optimal level of public debt. The central insight is that the effect of emission taxation on optimal borrowing is ambiguous and may lead to lower or higher...

We examine the industrial effects of two measures aimed at mitigating carbon leakage: the EU's scheduled Carbon Border Adjustment Mechanism (CBAM) and the allocation of free emission allowances. Currently, the EU allocates free emission allowances based on output (known as outputbased...

We collect data on 24,000 state aid cases within the European Union to create granular measures of national environmental support and study their interactions with the European Union Emissions Trading System (EU ETS). Exploiting variation in regulated installations' exposure to carbon prices and...

We study the heterogeneous pass-through of carbon pricing on investment across firms. Using balance sheet data of 1.2 million European firms and identified carbon policy shocks, we find that higher carbon prices reduce investment, on average. However, less carbon-intensive firms and sectors...

The Inflation Reduction Act (IRA), passed under the Biden administration in August 2022, is the biggest US climate bill to date. Its focus on subsidy-driven decarbonization incentives marks a potential turning point in US industrial policy and might prevent its repeal under the upcoming Trump...

Biased beliefs affect real-world decisions, including political solutions to societal challenges. One crucial example is environmental policy: people tend to underestimate the incentive effect of Pigouvian policies. Addressing biased beliefs at scale is then paramount. In the days leading up to...

A formula is derived for the social cost of carbon (SCC) that takes account of intragenerational income inequality and its evolution with economic growth. The social discount rate (SDR) should be adjusted to account for intragenerational and intergenerational inequality aversion and for risk...

A two-tier climate club exploits the comparative advantage of large countries to mete out punishments through trade, while taking their capacity to resist punishment as a constraint. Countries outside the coalition price carbon at a fixed fraction of the average carbon price adopted within the...