September 25, 2011

Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households

by Sebastian Rausch, Gilbert E. Metcalf and John M. Reilly

- The impact of carbon pricing is determined by heterogeneity in household spending patterns across income groups as well as heterogeneity in factor income patterns across income groups. It is also affected by precise formulation of the policy as well as the treatment of other government policies . What is often neglected in analyses of policy is the heterogeneity of impacts across households even within income or regional groups. In this paper, we incorporate 15,588 households from the U.S. Consumer and Expenditure Survey data as individual agents in a comparative-static general equilibrium framework. These households are represented within the MIT USREP model, a detailed general equilibrium model of the U.S. economy.

Rausch, S., G. Metcalf and J.M. Reilly (2011). "Distributional Impacts of Carbon Pricing: A General Equilibrium Approach with Micro-Data for Households." MIT Joint Program Report Series No. 202, Jul 2011.