Applied Micro Seminar : Every Tuesday
Time: 12:15 pm – 13:30 pm
Date: September, 8
Room : 3001

Tristan DU PUY  (Sciences Po) “Unintended Environmental Policies: The Impact of European Agricultural Subsidies on Pollution”

Abstract :

I study the environmental impact of production subsidies in polluting markets when producers differ in their pollution intensity. I develop a dynamic model in which the elasticity of substitution between clean and polluting inputs determines the sign of the correlation between firms’ profitability and their pollution intensity. I apply it to EU agricultural subsidies, where a shift-share analysis quantifies their micro-level impacts, and model estimation reveals that profitable farms pollute more. Subsidy designs that alter market selection are consequently found to reduce aggregate pollution. Counterfactuals show that while taxes maximize welfare, subsidies achieve environmental gains without the large consumer and producer surplus losses of taxation.

Organizers:
Benoît SCHMUTZ (Pôle économie du CREST)
Clément MALGOUYRES (Pôle économie du CREST)

Sponsors:
CREST