Camille Hainnaux*, Mykhailo Matvieiev**

phd seminar

Camille Hainnaux*, Mykhailo Matvieiev**

Pollution versus inequality: Tradeoffs for fiscal policy*
Secular stagnation, pension reform and precautionary savings**
Tuesday, May 18 2021| 11:00am to 12:30pm

Anushka Chawla: anushka.chawla[at]
Kenza Elass: kenza.elass[at]
Carolina Ulloa Suarez: carolina.ulloa-suarez[at]


*In this paper, we investigate the impact of redistribution and taxation on inequality and environmental quality. We build a two-sector Ramsey model with a green good, a polluting good, heterogeneous households with non-homothetic preferences and a subsistence level of consumption for the polluting commodity. We find that under heterogeneous preferences, lump-sum transfers are able to reduce inequality but harms environmental quality. In the same vein, increasing the environmental tax under a high level of subsistence consumption leads to lower inequalities when coupled with high redistribution, but increases environmental damages. Therefore, there may be a tradeoff between inequality reduction and pollution mitigation.

**This paper studies the effect of an increase in the retirement age on the natural interest rate. I construct an overlapping generations model in which individuals experience a series of idiosyncratic income shocks over the life cycle. Without perfect insurance against income risk, every additional year on the labor market before retirement boosts income uncertainty and, consequently, increases precautionary saving. An enhanced precautionary motive generates a downward pressure on the interest rate. Under reasonable parametrization, my model generates a decrease in the natural interest rate of about 0.5 percentage points in response to a retirement age increase of one year.

More information