Climate policy is more than carbon pricing: successful decarbonization of a national economy creates new rents and affects existing ones, requires public investment, has distributional implications and changes preferences. This thesis argues that economic theory would be better equipped for analyzing the macroeconomic trade-offs of climate change mitigation if it put greater emphasis on three principles: first, a distinction between rents, derived from fixed factors of production, and capital, that can be accumulated, is needed to understand the impact of climate policy on the wealth distribution. Second, for both rent taxation and financing low-carbon public investment, there is no standard equity-efficiency trade-off. Instead, both rent appropriation and public investment can enhance efficiency and reduce inequality at the same time, when designed appropriately. These first two points are substantiated by incorporating fixed factors of production and household heterogeneity in preferences and income sources into otherwise standard models of economic growth, both of the infinitely-lived agent and the overlapping-generations type. Third, to evaluate consumption decisions, a distinction between welfare as subjective well-being and welfare as the satisfaction of preferences is vital. This follows from applying the behavioral account of decision-making to consumer choices in carbon-intensive sectors such as transportation. Specifically, the following results are shown: (1) It is proved that to reach socially optimal outcomes, if there are any rents from (quasi-)fixed factors such as land or the atmospheric sink, these should be taxed and the revenue should be invested into productive public capital or redistributed to poor, newborn generations. (2) Simulations indicate that the timing of public investment relative to the timing of an increase in the carbon price or in technology subsidies matters for avoiding a lock-in. (3) If there are two cohorts of wealth owners in the economy, those who save dynastically and those who save in a life-cycle manner, capital taxation has a special role for changing the wealth distribution provided the revenue is used for public investment. It is proved that capital taxation can be Pareto-improving and inequality-reducing. In contrast, consumption and labor taxation are more efficient, but do not reduce inequality. (4) Given that the transport infrastructure and other contextual factors largely influence actual mobility behavior, evaluating the welfare gain of low-carbon public investment needs to differentiate between subjective well-being and preference satisfaction as distinct welfare conceptions. These results can be seen as steps towards evaluating the extent of the validity of the two major societal narratives about capitalism, which is considered to be either liberation or exploitation, for the transition to a low-carbon economy.


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    Title :

    Rent and redistribution.
    die Wohlfahrtsimplikationen der Finanzierung klimafreundlicher öffentlicher Investitionen


    Subtitle :

    the welfare implications of financing low-carbon public investment


    Additional title:

    Rente und Umverteilung


    Contributors:

    Publication date :

    2015



    Type of media :

    Miscellaneous


    Type of material :

    Electronic Resource


    Language :

    English



    Classification :



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