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North Carolina State University
This paper develops a neoclassical growth model with heterogeneous firms to study the effects of environmental policies. The model framework links the distribution of plants to an endogenous capital accumulation and technology adoption decision, making it the first to study both the timing of capital replacement and the endogenous movements in the plant distribution following environmental policy legislation. The main contribution is to demonstrate that the plant distribution should be of interest to policymakers. Short-run qualitative and quantitative responses to a carbon tax enactment vary depending upon whether or not plants vary in emission rates. Heterogeneous emission rates, a feature consistent with plant-level data, induce the economy’s average energy efficiency to rise following a carbon tax and imply dynamics that differ from a representative firm model. Policies that initially exempt older establishments and alternative revenue-recycling scenarios alter the short and long run effects as well.
This paper studies how exogenous changes in oil price uncertainty affect GDP and other macroeconomic variables. To identify exogenous changes in oil price uncertainty in a VAR, we introduce an article count index related to OPEC, which rises following important OPEC meetings, political upheaval in OPEC nations, and terrorist attacks. Positive innovations in the index lead to increased oil price uncertainty and small but statistically significant declines in the growth rate of U.S. real GDP. A New Keynesian model in which oil usage is required for the utilization of both capital and durable goods also produces declines in GDP and other macroeconomic variables following an increase in real oil price uncertainty. Both the empirical and theoretical results are shown to be robust to a number of variations to the models.
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