Marc A. C. Hafstead

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NBER Working Papers and Publications

April 2018Environmental Policy, Full-Employment Models, and Employment: A Critical Analysis
with Roberton C. Williams III, Yunguang Chen: w24505
This paper assesses the use of full-employment computable-general equilibrium (CGE) models to predict the labor-market effects of environmental policy. Specifically, it compares the predictions of a standard full-employment CGE model with those of a new search-CGE model with labor-search frictions and resulting unemployment (but that is otherwise identical to the full-employment model). The search-CGE captures key labor market details, including a distinction between the extensive margin of labor demand (the number of employees) and the intensive margin (the number of hours each employee works). We find that some key results are robust across the two models, such as the reallocation of labor across sectors in response to a carbon tax and the overall change in total labor demand. However, t...
May 2016Unemployment and Environmental Regulation in General Equilibrium
with Roberton C. Williams III: w22269
This paper analyzes the effects of environmental policy on employment (and unemployment) using a new general-equilibrium two-sector search model. We find that imposing a pollution tax causes substantial reductions in employment in the regulated (polluting) industry, but this is offset by increased employment in the unregulated (nonpolluting) sector. Thus the policy causes a substantial shift in employment between industries, but the net effect on overall employment (and unemployment) is small, even in the short run. An environmental performance standard causes a substantially smaller sectoral shift in employment than the emissions tax, with roughly similar net effects. The effects on the unregulated industry suggest that empirical studies of environmental regulation that focus only on regu...

Published: Marc A.C. Hafstead & Roberton C. Williams, 2018. "Unemployment and environmental regulation in general equilibrium," Journal of Public Economics, vol 160, pages 50-65. citation courtesy of

January 2014General Equilibrium Impacts of a Federal Clean Energy Standard
with Lawrence H. Goulder, Roberton C. Williams III: w19847
Economists have tended to view cap and trade (or, more generally, emissions pricing) as more cost-effective than a clean energy standard (CES) for the purpose of reducing greenhouse gas emissions associated with electricity generation. This stems in part from the finding that, in terms of cost-effectiveness, a CES relies too much on emissions abatement through the channel of fuel-switching and too little on the channel of reduced electricity demand. Recent research reveals, however, that the CES has an advantage over cap and trade in a different dimension. In a realistic economy with prior taxes on factors of production, the adverse "tax-interaction effect" is smaller under the CES than under the equivalent cap-and-trade program. This raises the possibility that the CES might not suffer a...

Published: Lawrence H. Goulder & Marc A. C. Hafstead & Roberton C. Williams III, 2016. "General Equilibrium Impacts of a Federal Clean Energy Standard," American Economic Journal: Economic Policy, American Economic Association, vol. 8(2), pages 186-218, May. citation courtesy of

August 2009Impacts of Alternative Emissions Allowance Allocation Methods under a Federal Cap-and-Trade Program
with Lawrence H. Goulder, Michael S. Dworsky: w15293
This paper examines the implications of alternative allowance allocation designs under a federal cap-and-trade program to reduce emissions of greenhouse gases. We focus on the impacts on industry profits and overall economic output, employing a dynamic general equilibrium model of the U.S. economy. The model's unique treatment of capital dynamics permits close attention to profit impacts. We find that the effects on profits depend critically on the method of allowance allocation. Freely allocating fewer than 15 percent of the emissions allowances generally suffices to prevent profit losses among the eight industries that, without free allowances or other compensation, would suffer the largest percentage losses of profit. Freely allocating 100 percent of the allowances substantially ov...

Published: Impacts of Alternative Emissions Allowance Allocation Methods Under a Federal Cap-and-Trade Program Lawrence H. Goulder, Marc A.C. Hafstead, and Michael Dworsky Journal of Environmental Economics and Management | November 2010 | Vol. 60, No. 3 | pp. 161-181.

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