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Denmark has a highly ambitious goal of reducing greenhouse gas emissions 70 percent below 1990 levels by 2030. While there is general agreement that carbon pricing should be the centerpiece of Denmark’s mitigation strategy, pricing needs to be effective, address equity and leakage concerns, and be reinforced by additional measures at the sectoral level. The strategy Denmark develops can be a good prototype for others to follow. This paper discusses mechanisms to scale up domestic carbon pricing, compensate households, and possibly combine pricing with a border carbon adjustment. It also recommends the use of revenue-neutral feebate schemes to strengthen mitigation incentives, particularly for transportation and agriculture, fisheries and forestry, though these schemes could also be applied more widely.

This dissertation explores the impact of government interventions on economic outcomes. In the first chapter, my colleague Juan Carlos Suárez Serrato and I propose a new identification strategy to measure the causal impact of government spending on the economy. Our methodology isolates exogenous cross-sectional variation in government spending using a novel instrument. We use the fact that a large number of federal spending programs depend on local population levels. Every ten years, the Census provides a count of local populations. A different method is used to estimate non-Census year populations and this discontinuous change in methodology leads to variation in the allocation of billions of dollars in federal spending. We use this variation to analyze the effect of exogenous changes in federal spending across counties on local economic outcomes. Our IV estimates imply that government spending has a local income multiplier of 1.88 and an estimated cost per job of $30,000 per year. These estimates are robust to the inclusion of potential confounders, such as local demand shocks. We also show that the local effects of government spending are not larger than aggregate effects at the MSA and state levels. Finally, we characterize the cross-sectional heterogeneity of the impacts of government spending. These results confirm that government spending has a higher impact in low growth areas and leads to reduction of inequality in economic outcomes.The second chapter uses timing of childbirth to measure the income effect of taxes on parents' labor supply. The IRS Residency Test states that families can claim a dependent for the entire fiscal year if the child was born at any time during the year. This rule provides an exogenous source of variation in tax liabilities for births that occur late in the year versus those that occur early the following year. By measuring the difference in earnings in the subsequent year for parents of December and January births, I can identify the impact of a one-time non-labor income shock on parents' labor supply since both groups face on average the same future stream of tax schedules after birth. Using data from two large scale household surveys in the United States, I find that a temporary increase in after-tax income leads to a significant decrease in mothers' earnings with an estimated income effect of -0.9. This result demonstrates that the income effect of taxes on labor supply can potentially be very large. It also highlights the crucial role of liquidity constraints in parents' labor supply decisions around the time of birth.The third chapter also uses timing of childbirth to measure the income effect of taxes on mothers' labor supply. The analysis is done using Canadian data. Until 1992, various provisions in the Canadian tax code gave important tax reductions to low and middle-income parents of eligible children. Families could claim a child as a dependent for the entire fiscal year if the child was born at any time during the year. In 1992, the last year the Canadian tax code featured these fiscal benefits, a two parent family claiming a dependent could save nearly a thousand dollars in taxes due to the Child Tax Credit, the dependent amount and the GST credit. Using this variation in tax liabilities, it is possible to identify the impact of a one-time non-labor income shock on mothers' labor supply. This important parameter has not been systematically measured in the literature on the effect of taxes on labor supply. Using natural experiments provided by tax reforms in various countries, the literature has mostly focused on changes in earnings due to the price effect of marginal tax rate changes. However, if the income effect of a tax change is large, observed elasticities of income with respect to net-of-tax rates understate the distortions associated with these changes.

This paper describes a model, implemented in an Excel spreadsheet, for evaluating a wide range of fiscal and regulatory instruments policymakers might consider for implementing their Paris mitigation pledges. Policies are evaluated against a range of metrics, including impacts on carbon dioxide (CO2) emissions, revenue, deaths from local air pollution, economic welfare benefits and costs, and incidence across household and industry groups. The model is applied to China, the world's largest emitter, but could be readily transferred to most other countries.

This paper estimates the pass through of VAT changes to consumer prices, using a unique dataset providing disaggregated, monthly data on prices and VAT rates for 17 Eurozone countries over 1999-2013. Pass through is much less than full on average, and differs markedly across types of VAT change. For changes in the standard rate, for instance, final pass through is about 100 percent; for reduced rates it is significantly less, at around 30 percent; and for reclassifications it is essentially zero. We also find: differing dynamics of pass through for durables and non-durables; no significant difference in pass through between rate increases and decreases; signs of non-monotonicity in the relationship between pass through and the breadth of the consumption base affected; and indications of significant anticipation effects together with some evidence of lagged effects in the two years around reform. The results are robust against endogeneity and attenuation bias.