Research
Research
Abstract: I study the distributional and welfare effects of U.S. residential solar subsidies. While these subsidies appear regressive because higher-income households claim most benefits, I show that accounting for learning-by-doing and unequal pollution exposure damages reverses this conclusion. Using installation-level data, I document learning spillovers and estimate learning elasticities to discipline a heterogeneous-agent model with incomplete markets and irreversible adoption. The model shows that uniform refundable subsidies financed by a flat labor tax raise welfare and accelerate adoption, whereas progressive financing or nonrefundable credits reduce support among lower-wealth households. When pollution damages are considered, subsidies become universally welfare-improving and strongly progressive.
Abstract: Externalities from carbon emissions and market power work in opposite directions: emissions lead to overproduction, while market power leads to underproduction. Addressing only one failure can worsen outcomes. I develop a dynamic general equilibrium model to derive an optimal output tax formula that depends on firm-level market power and carbon intensity. Calibrated to the top five carbon-intensive US sectors, the optimal tax gets significantly smaller than the tax without considering market power, as competition decreases. In a set of policy experiments, I show that policies designed for incorrect market structures could be more detrimental than not intervening at all.