Carbon Taxation, Firm Performance, and Labor Demand [JOB MARKET PAPER]
Carbon taxation is one of the main policy instruments for reducing greenhouse gas emissions, yet there is still limited evidence on its effects on firms and workers. This paper studies the environmental and economic effects of carbon taxation, with a particular focus on heterogeneity in labor demand across worker groups. I exploit a reform that increased the effective carbon tax for a subset of Swedish manufacturing firms between 2011 and 2018, and combine administrative firm data with matched employer-employee records in a difference-in-differences design. The reform reduced emissions by about 30%, primarily through substitution away from fossil fuels toward biofuels and district heating. It also reduced revenue and employment, with the strongest negative effects concentrated among emission-intensive firms. The employment effects are driven mainly by older workers without a high school degree, although older highly educated workers are also negatively affected in the most exposed firms. Additional evidence suggests that firms adjusted labor demand primarily through lower hiring rather than higher separations. Scaled by the average increase in effective tax rates (measured in euro per ton CO2), the estimates imply semi-elasticities of -0.58% for emissions and -0.20% for employment among low-educated workers. These results suggest that carbon taxation can substantially reduce industrial emissions, but with concentrated labor-market costs.
Carbon Taxation and Local Labor Markets
This project studies the effects of a carbon tax reform on local labor markets in Sweden. I exploit spatial variation in exposure to the reform which removed manufacturing rebates to the carbon tax from 2011 to 2018, based on the geographical distribution of affected firms. Using matched employer-employee population data, I develop a Difference-in-Differences framework which indirectly controls for confounders using the Generalized Propensity Score for continuous treatments. I find no significant effects on local employment rates or labor force participation. The heterogeneity analysis reveals similar zero-to-moderate employment effects regardless of education level. The result indicates low distributional costs of a higher carbon tax after allowing for local spillovers.
Climate Policy Shocks and Wage Adjustments
This project studies rent sharing between firms and workers exposed to exogenous shocks induced by climate policy. Following the previous literature on productivity shocks and wage adjustments, I exploit fluctuations in permit prices under the European Union Emissions Trading System (EU ETS) to study the effects on profit and wages among Swedish regulated firms. I use matching techniques, comparing regulated firms with unregulated firms with overlapping characteristics, in combination with time variation in permit prices, to identify the effects of shocks to climate policy stringency. I allow for different effects for net buyers versus net sellers of pollution permits, in order to investigate whether wage effects depend on the sign of the shock.
Karlsson, J. (2021). Temperature and Exports: Evidence from the United States. Environmental and Resource Economics, 80(2), 311-337.
This paper estimates the effect of exogenous short-term temperature changes on the economy of the United States, using high-resolution data on monthly exports which has not been previously exploited in the literature. The detailed disaggregation of U.S. export data into sectors enables a top-down estimation of the net effect of temperature, while also identifying potential mechanisms at the micro level. Using an econometric specification which allows high parametric flexibility, I find significantly negative effects of both high and low temperatures. The magnitude of the effects corresponds to an average reduction of annual U.S. exports by 0.20%, following a uniform 2°C temperature increase. Industry heterogeneity in the temperature effect suggests disparate mechanisms behind hot and cold days, which are important to take into account when forecasting the future economic damages of climate change in the United States.