Harvard University Job Market Candidate Papers

• Environmental Policy and Directed Technical Change in a Global Economy: Is There a Case for Carbon Tariffs?-Job Market Paper Online appendix
  Abstract: In an open economy, can unilateral environmental policies undertaken by a group of committed countries ensure sustainable growth? This paper addresses this question in a dynamic model with directed technical change. There are two countries and two tradeable goods. One of the two goods is produced with a clean input and a dirty input, which causes a global externality. Innovation can be targeted at both sectors and, within the polluting sector, at clean or dirty technologies. For most of the analysis, innovation is local. I show that carbon taxes in a single country are generally unable to ensure sustainable growth, that is, to prevent environmental quality from falling below some critical threshold. A temporary combination of clean research subsidies and a tariff in a single country can ensure sustainable growth - in some cases, clean research subsidies alone may not do so. I characterize the first best policy, the world optimal policy under the constraint that one country must be in laissez-faire, and the optimal policy from the point of view of a single country. Calibrated numerical simulations show that, relative to autarky, trade accelerates environmental degradation, but that when one country undertakes the appropriate policies, trade helps reducing environmental degradation. Finally, I add knowledge spillovers and show that carbon taxes in a single country are still generally unable to ensure sustainable growth.
• Long-term Relationships, Static Gains and Dynamic Inefficiencies (with Morten Olsen)
  Abstract: Do contractual frictions matter when firms are engaged in repeated interactions? This paper formalizes the idea that long-term relationships allow firms to (partly) overcome the static costs associated with low contractibility, but this comes at the cost of dynamic inefficiencies. We consider the interaction between final good producers and intermediate input suppliers, where the provision of the intermediate input is noncontractible, but where the repetition of the interaction can (partly) overcome the associated inefficiencies. A producer/supplier pair can be a good match or a bad match, with bad matches featuring lower productivity. This allows us to build a cooperative equilibrium where producers can switch suppliers and start cooperating right away with new suppliers. Every period one supplier has the opportunity to innovate. We then show (i) that innovations need to be larger to break up existing relationships in the cooperative equilibrium than in either a set-up where the input is contractible or when we preclude cooperation in long-term relationships, (ii) that the rate of innovation is lower than in the contractible case, and may also be lower than when we preclude cooperation in the noncontractible setting, (iii) that cooperation may therefore reduce welfare, (iv) that cooperation in long-term relationships becomes a better substitute for good institutions for less developed countries and when patents are well enforced.
• Testing for Path Dependence in Clean versus Dirty Innovation: Evidence from the Automotive Industry (with Philippe Aghion, Antoine Dechezlepretre, Ralf Martin and John Van Reenen).

Publications