Working paper (2024) | Privacy statement | Media coverage: ESB, NRC, VoxEU
Working paper (2025)
Privacy statement
This paper studies the relationship between climate policy, market power and innovation. Using data on patenting and firms' balance sheets, I document that firms with a higher degree of market power are, on average, more invested in dirty technologies than their direct competitors. I then develop a model of directed technical change with strategic innovation incentives, incorporating the empirical evidence. A carbon tax affects market power and both the intensity and the direction of innovation. In the calibrated model, a carbon tax lowers aggregate markups and increases clean innovation while also increasing dirty innovation by some firms.
This paper investigates the effect of energy prices, a proxy for an energy tax, on the labor share. Using aggregated administrative data from 15 European countries and 56 sectors for the years 2000-2016, and applying a shift-share instrumental variable approach, we find that the energy price has a negative and quantitatively significant effect on the labor share both in the short and medium-run. Exploring the potential mechanisms, we show that the complementarity between labor and energy is the driver of this negative effect while reallocation among firms, changes in aggregate markups and the revenue to value-added ratio induced by energy price shocks have limited effects. We also document that energy prices increase the capital-labor ratio and do not influence the capital share, which indicates that the degree of substitution between energy and labor is lower than the substitution between energy and capital. These results imply potentially sizable distributional impacts of climate change policies as the transitional costs differ across the primary factors.
Other writings (mostly in Dutch)