[Research]
[Research]
Chen Y., Paulus N., Wan X. and Zou B. (2025): Timing carbon capture and storage (CCS) deployment across borders: A game-theoretic analysis. Economic Modelling, 151, 107191. https://doi.org/10.1016/j.econmod.2025.107191
Abstract: Carbon capture and storage (CCS) can be considered as one of the key tools in the fight against climate change, providing a promising method to reduce human-generated CO2 emissions. Despite its potential, the high cost of CCS deployment leads to an uneven adoption across countries. This paper employs a differential game model with heterogeneous countries facing transboundary pollution to determine the optimal timing to initiate CCS projects, and delivers analytical results for the existence of Markov Perfect Equilibria and the numerical illustration. We show that: (1) The trigger threshold for CCS deployment depends not only on a country’s own costs, but also on the costs of other countries and the costs associated with pollution damage. (2) The optimal timing for different countries to initiate their CCS projects occurs when a country’s pollution level reaches a critical threshold. (3) Countries are more inclined to free ride on the pollution abatement efforts of others when the pollution damage costs are symmetric rather than asymmetric. (4) Finally, we provide sufficient conditions under which some countries refrain from engaging in CCS, despite facing the same pollution damage costs as others.
Goerke L. and Paulus N. (2024): Collective Bargaining about Corporate Social Responsibility. Canadian Journal of Economics, 57(4), 1285-1313. http://dx.doi.org/10.1111/caje.12736
Abstract: If a firm credibly commits to an employment-enhancing Corporate Social Responsibility (CSR) objective in negotiations with a trade union, the union can reduce its wage demands. Lower wages, ceteris paribus, raise profits, while the increase in employment enhances the payoff of a wage-setting trade union. Therefore, both the firm and the trade union can be better off in the presence of a collectively bargained CSR-objective than in its absence. Accordingly, such a Pareto-improvement can arise endogenously from collective bargaining. In consequence, CSR can mitigate the inefficiency arising from collective wage negotiations.
Chen Y., Paulus N., Wan X., Zou B (2024): Optimal Timing of Carbon Capture and Storage Policies - A Social Planner's View. Energy Economics, 136, 107656. https://doi.org/10.1016/j.eneco.2024.107656
Abstract: Carbon capture and storage (CCS) has a critical role to play in the world’s quest for net zero, by mitigating greenhouse gas (GHG) emissions from major pollution sources.However, the deployment of CCS technologies involves significant costs. This paper studies the social cost of CCS initiatives and GHG damage, adopting the perspective of a central planner to determine the optimal deployment strategy for various stakeholders. The study yields two principal findings. First, due to the diverse cost structures among stakeholders, it is not socially optimal for all to initiate CCS projects simultaneously. Instead, the player with the cost advantage should be the one to initiate a CCS project first. Second, under certain circumstances it may be socially advantageous for the player facing higher costs to refrain from engaging in CCS altogether. We derive the conditions conducive to both scenarios. The latter finding provides a clear guideline for policymakers: reduce the expenses of the high-cost player to foster global GHG emission reductions, contingent upon the objectives of the supranational institution.
Paulus N. (2022): The Anti-Tax-Avoidance Directive: An Initiative to Successfully Curb Prot Shifting? Journal of Public Economic Theory, 24(3), 529-546. https://doi.org/10.1111/jpet.12565
Abstract: On July 16th 2016 the Economic and Financial Council of the European Union adopted the Anti-Tax-Avoidance Directive (ATAD). The proposed controlled-foreign-company (CFC) rule in the ATAD requires a minimum tax rate in the host country of a multinational’s controlled foreign subsidiary in order to avoid the re-attribution of the subsidiary’s income to the country of its parent company. The Directive allows member states to remain free to set the CFC threshold autonomously by laying down a minimum standard. Member states can thus either opt for a loose CFC rule by setting the minimum required control threshold (i.e. 50% of the country’s own corporate income tax rate) or impose a tight CFC rule by applying a higher threshold. Against this background, the present paper analyses the effect of CFC rules on tax competition for foreign direct investments. It appears that, although CFC rules are effective in curbing offshore profit shifting, they can induce non-havens to compete aggressively for mobile capital. In this context, CFC rules can exacerbate capital outflows from the large to the small country to a larger extent than in standard models of tax competition. Moreover, the paper highlights that governments choose between two extreme options when deciding on their CFC rule. Either they opt for the lowest or the highest possible control threshold.
Paulus N., Pieretti P. and Zou B. (2021): Is a Dynamic Approach to Tax Games Relevant? Annals of Economics and Statistics, 144: 113-138. https://doi.org/10.15609/annaeconstat2009.144.0113
Abstract: In this paper, we argue that static models provide an incomplete analysis of inter-jurisdictional tax competition. Accordingly, one can doubt whether a one-shot view is suitable for analyzing real world tax competition. There are basically two ways of introducing a dynamic environment. Either jurisdictions commit to a tax path at the start of the game without future updates (open-loop behavior) or, they continuously update their tax rates according to changing state variables (Markovian behavior). We demonstrate that the intensity of tax competition is impacted by the temporal nature of the game. A commitment to predetermined tax rates leads to less intense competition relative to Markovian and static games. However, comparing the outcome between static and Markovian games is not straightforward. In a Markovian game, tax competition is fiercer than in the static game, if the speed of capital adjustment is high and the marginal valuation of public goods is sufficiently low. This is not the case, if capital adjustment is relatively sluggish and the jurisdictions put a high weight on collecting tax revenue.
Hale G., Halling M., Paulus N. and Pham H.: Climate Fairness and Growth: Allocating the Remaining Carbon Budget. CEPR DP21287.
Chen Y., Paulus N., Ruan W. and Zou B. (2026): Impulse Control and Multi-Dimensional Differential Games: Optimal Timing of Recycling and Substitution under Strategic Interaction. DEM-Discussion Paper 2025-04. (Under Review)
Chen Y., Paulus N., Ruan W. and Zou B. (2025): Strategic Consideration and Optimal Timing of Critical Mineral’s Depletion, Recycling, and Substitution. DEM-Discussion Paper 2025-04. (Under Review)
Paulus N., Pieretti P. and Zou B. (2021): Tax Competition - An Intertemporal Perspective. DEM-Discussion Paper 2018-10
Paulus N., Weihua R. and Zou B.: On the Desirability of a Global Minimum Tax - A Dynamic View.
Paulus N., Ruan W. and Zou B.: Dynamic Tax Competition under Global Minimum Taxation with Forward-Looking Firms.
Chen Y., Paulus N., Wan X. and Zou B.: Is Carbon Capture and Storage Socially Desirable under a Net-Zero Emission Target?
Paulus N. The Impact of Corporate Social Responsibility on Tax Avoidance Practices.
Paulus N. and Pettinger M.: The Impact of Institutions on Job Polarization - A Panel Cointegration Analysis.
Kaprielian J., Mennicken E., Spirinelli F., Paulus N. and Majerus B. (2025): "La compétitivité fiscale du Luxembourg. Perspectives historique, économique, juridique", Luxembourg, Cellule scientifique de la Chambre des Députés. www.chd.lu/fr/note-scientifique-competitivite-fiscale-Luxembourg.
Media Coverage: d'Lëtzebuerger Land, Paperjam, Luxembourg Times.
Presentations: STATEC
El Herfi R., Kaprielian J. and Paulus N. (2024): Peut-on restreindre l’accès à la propriété immobilière aux étrangers non-résidents au Luxembourg ? Étude de la faisabilité juridique et économique d’une loi sur le modèle de la loi suisse "Lex Koller", Luxembourg, Cellule scientifique de la Chambre des Députés. https://www.chd.lu/fr/node/2234.
Media Coverage: Wort.lu, Virgule.lu.