Document Type
Article
Publication Date
7-2024
Publication Title
Journal of the Association of Environmental and Resource Economists
Abstract
Understanding carbon tax incidence is critical. However, standard approaches for calculating the incidence of subnational policies are prone to inaccuracy due to coarse aggregation. We evaluate an alternative approach: a spatial microsimulation (SMS) method that generates granular household-level incidence estimates. SMS provides unique and more nuanced insights into the distributional consequences of carbon taxes, including across geographies. We demonstrate this method for a recent carbon tax initiative in Washington State and counterfactual variations on its revenue recycling provisions. Comparing across counterfactuals, we pinpoint how different targeting provisions in revenue recycling designs will have disparate consequences for the progressivity/regressivity of the policy package and for the geographic distribution of incidence. We furthermore analyze and discuss potential implications for political economy analysis of carbon taxes. Methodologically, we examine the reliability and robustness of SMS estimates, and we show the superiority of SMS to approaches that aggregate household characteristics over geographic areas. Dataverse data: https://doi.org/10.7910/DVN/MPAOOR
Keywords
Carbon tax, tax incidence, spatial microsimulation, distribution, political economy
Volume
11
Issue
4
First Page
797
Last Page
1063
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Rights
Licensed to Smith College and distributed CC-BY NC ND 4.0 under the Smith College Faculty Open Access Policy.
Version
Author's Accepted Manuscript
Recommended Citation
Chan, Nathan W. and Sayre, Susan Stratton, "Spatial Microsimulation of Carbon Tax Incidence: An Application to Washington State" (2024). Economics: Faculty Publications, Smith College, Northampton, MA.
https://scholarworks.smith.edu/eco_facpubs/118
Comments
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