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Author: Fleurbaey, Marc × Type: Text ×

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    When redistribution makes personalized pricing of externalities useless
    (Oxford : Wiley-Blackwell, 2021) Fleurbaey, Marc; Kornek, Ulrike
    We consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income-dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well-off and weakly increases the government's budget. The result depends on whether a linear pricing scheme exists that keeps the aggregate amount of consumption at its initial level observed under nonlinear pricing. We provide sufficient conditions for the assumption to hold. If adjusting the income tax rate is not available, personalized prices for an externality can enhance social welfare if they are redistributive, that is, favor consumers with a larger marginal social value of income.
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    The social cost of carbon and inequality: When local redistribution shapes global carbon prices
    (Amsterdam [u.a.] : Elsevier, 2021) Kornek, Ulrike; Klenert, David; Edenhofer, Ottmar; Fleurbaey, Marc
    The social cost of carbon is a central metric for optimal carbon prices. Previous literature shows that inequality significantly influences the social cost of carbon, but mostly omits heterogeneity below the national level. We present an optimal taxation model of the social cost of carbon that accounts for inequality between and within countries. We find that climate and distributional policy can generally not be separated. If only one country does not compensate low-income households for disproportionate damages, the social cost of carbon tends to increase globally. Optimal carbon prices remain roughly unchanged if national redistribution leaves inequality between households unaffected by climate change and if the utility of households is approximately logarithmic in consumption.