Research

This paper quantifies the local economic impact of Special Economic Zones (SEZs) that were established in India between 2005-2013. Based on a novel data set that combines census data on the universe of Indian firms with georeferenced data on SEZs, we find that SEZs increased manufacturing and service employment with positive spillover effects up to 10km. This employment gain was paralleled by a decline in local agricultural employment, in particular of women, suggesting that the policy contributed to structural change. We find no evidence for heterogeneous effects between privately and publicly run SEZs or zones with different industry denominations.

The latest generation of global climate models robustly projects that monsoon rainfall anomalies in India will significantly increase in the 21st century due to global warming. This raises the question of the impact of these changes on the agricultural yield. Based on annual district data for the years 1966-2014, we estimate the relationship between weather indices (amount of seasonal rainfall, number of wet days, average temperature) and the most widely grown kharif crops, including rice, in a flexible non-parametric way. We use the empirical relationship in order to predict district-specific crop yield based on the climate projections of eight evaluated state-of-the-art climate models under two global warming scenarios for the years 2021-2100. We find that the loss in rice yield by the end of the 21st century lies on average between 3 - 22% depending on the underlying emission scenario. For the sustainable scenario impacts range from an increase of 3.2% to a decrease of 12.1% for individual districts. In the worst-case scenario, all districts are negatively affected, with a predicted decrease in rice yield ranging from 34% to a decrease of 11.5% in the long run. Potential gains due to increasing rainfall are more than offset by the negative impacts of increasing temperature. Adaptation efforts in the worst-case global warming scenario would need to cut the negative impacts of temperature by 50% in order to reach the outcome of the sustainable scenario.

Air pollution has become an increasing health threat for the local population in many cities around the world. Using high resolution remote sensing data on nightlights and fine particulate matter (PM2.5) for the years 1998-2013, I study the contemporary nexus between city shape and air pollution in India. I find that the compactness of a city has statistically significant and negative effects on local air quality. The results are more pronounced in larger cities and robust with respect to different compactness measures. While geographic dispersion allows for more fresh air corridors, differences in commuting patterns could serve as an additional explanation. People in less compact cities are more likely to use public transport and thereby reducing the overall road traffic within cities translating into less pollution. However, the statistically significant effects do not translate into substantial changes in the relative risk of PM2.5-induced diseases.

This paper presents the first comprehensive analysis of how firms respond to carbon taxation in emerging economies. Our evidence builds on exhaustive administrative data from South Africa, the 13th largest emitter worldwide. The results are twofold. First, we establish stylized facts on the types of firms that are affected, how much revenue is generated from which sector, and which share of national emissions the tax is able to capture. Second, we study the dynamic impacts of the carbon tax on firm-level outcomes such as profits, sales, capital, and labor inputs. We show that the design of the South African carbon tax leads to substantial heterogeneity across sectors in terms of how strongly firms are affected. Contrary to the concern that carbon tax may hinder economic growth, we measure no negative effects on firm performance on average.

This paper quantifies distributional effects of the recently proposed EU-CBAM on Households in EU trading partner countries. We develop a Ricardian type trade model to derive sectoral income and price effects of the CBAM. We combine the model output with detailed household-level consumption data and thereby explore horizontal and vertical distributional impacts of the EU-CBAM at the household-level.

This paper presents a Melitz-style model of asymmetric countries to identify the optimal environmental policy response to a Border Carbon Adjustment (BCA) from an emerging economy perspective. We calibrate the model with detailed Indian firm data on emissions, productivity and exports. In a quantitative simulation, we show that the presence of a BCA strongly reduces the welfare costs of raising India’s emission tax to the level of that of the EU. Further analysis shows that there are substantial differences in the distribution of welfare costs across sectors. Finally, we show that this welfare smoothing effect is decreasing in productivity and thereby limiting the incentive to raise domestic carbon price in the least developed countries.

This chapter conceptualizes the distributional impacts of energy innovation adoption. Following the existing literature on energy innovation, we provide a conceptual framework to map costs and benefits from energy innovation adoption at various levels, including households, firms, and governments. We first conceptualize the relevant decision-making dimensions at the micro and the macro level for determining distributional effects of energy innovation adoption. We then illustrate how the conceptualization can be applied to Indian household consumption data. Our results are twofold. First, the conceptual findings res- onate well with empirical findings showing that early adopters of energy innovation tend to be richer households. Second, as long as energy innovation policy induced costs are propor- tional to income, they do not create additional vertical distributional impacts. Finally, we discuss how costs and benefits of energy innovation on avoided climate impacts and stranded assets would be distributed.