Research

Carbon policies are essential policy tools for reducing emissions, but stricter policies involve a trade-off: faster decarbonization can come at the expense of economic output. This paper examines how EU carbon policies have shaped firms' adoption of abatement technologies and identifies the optimal path to reach the EU's 2050 net zero target, particularly in a unilateral context. I develop a dynamic model of heterogeneous manufacturing firms operating under progressively stringent carbon policies, where firms can discretely adopt new technologies to lower emissions. Estimation using panel data from EU ETS manufacturing firms (2005 - 2020) shows that most emission reductions come from the largest polluters and are primarily driven by capital investments, highlighting the importance of a long-run catch-up mechanism. The model rationalizes the low carbon prices observed in the previous decade. Long-term output losses remain modest (~4%), highlighting the crucial role of technology adoption and phased carbon pricing in effective climate policy.  Simulations indicate that gradually increasing carbon prices - faster than the current EU trajectory but slower than a globally coordinated approach - can reduce output losses by ~12% op GDP relative to the current scenario. 

This paper explores the long-term macroeconomic impact of start-up taxation reforms, focusing on a policy introduced by the Belgian government in 2016, that reduced the social security contribution of first employees for new startups. Using an event-study methodology, the analysis reveals outcomes that challenge the traditional free-entry condition commonly assumed in models of firm dynamics. Instead, the findings emphasize the role of the non-employer market as a critical stepping stone before firms enter the labor market. More than 75% of firms that enter the labor market start out as non-employer. The paper develops a novel model capable of capturing the observed labor market entry decision and evaluates its performance relative to conventional models. The study concludes by analyzing the long term macroeconomic implications of this start-up taxation reform.

This paper studies the importance of initial conditions on long-run firm performance. We analyze annual accounts data from 1985 to 2019 for all for-profit firms in Belgium. By modeling the autocovariance structure for firm productivity, we find that 20 years after incorporation still 15% of the dispersion is determined by the ex-ante factors: the conditions and characteristics of the firms at birth. The importance of the ex-ante factors becomes even more pronounced for the input factor employment (24%) than for productivity. Our findings hold steady within a structural model of firm dynamics, where we explore the role of adjustment costs in greater depth. Notably, we observe that adjustment costs contribute to a reduction in economic dynamism, thereby amplifying the importance of ex-ante conditions, more in terms of employment than for productivity. The adjustment costs thus explain the discrepancy between the results for employment and productivity. Lastly, we document that the recent trend in the decline in business dynamism aligns with a rising cost of adjustment and subsequent rising importance of the ex-ante conditions. 

Carbon forward guidance 

Greener Giants: The regressive nature of climate policies and market power. 

Energy reduction: Reallocation Within firms Between plants