Skip to main content

Samuel Kortum Publications

Environmental and Energy Policy and the Economy
Abstract

Climate policies vary widely across countries, with some countries imposing stringent emissions policies and others doing very little. When climate policies vary across countries, energy-intensive industries have an incentive to relocate to places with few or no emissions restrictions, an effect known as leakage. Relocated industries would continue to pollute but would be operating in a less desirable location. We consider solutions to the leakage problem in a simple setting where one region of the world imposes a climate policy and the rest of the world is passive. We solve the model analytically and also calibrate and simulate the model. Our model and analysis imply: (1) optimal climate policies tax both the supply of fossil fuels and the demand for fossil fuels; (2) on the demand side, absent administrative costs, optimal policies would tax both the use of fossil fuels in domestic production and the domestic consumption of goods created with fossil fuels, but with the tax rate on production lower due to leakage; (3) taxing only production (on the demand side), however, would be substantially simpler and almost as effective as taxing both production and consumption, because it would avoid the need for border adjustments on imports of goods; and (4) the effectiveness of the latter strategy depends on a low foreign elasticity of energy supply, which means that forming a taxing coalition to ensure a low foreign elasticity of energy supply can act as a substitute for border adjustments on goods.

American Economic Review
Abstract

We develop a dynamic multicountry general equilibrium model to investigate forces acting on the global economy during the Great Recession and ensuing recovery. Our multisector framework accounts completely for countries' trade, investment, production, and GDPs in terms of different sets of shocks. Applying the model to 21 countries, we investigate the 29 percent drop in world trade in manufactures during the period 2008-2009. A shift in final spending away from tradable sectors, largely caused by declines in durables investment efficiency, accounts for most of the collapse in trade relative to GDP. Shocks to trade frictions, productivity, and demand play minor roles.

Econometrica
Abstract

We develop a Ricardian trade model that incorporates realistic geographic features into general equilibrium. It delivers simple structural equations for bilateral trade with parameters relating to absolute advantage, to comparative advantage (promoting trade), and to geographic barriers (resisting it). We estimate the parameters with data on bilateral trade in manufactures, prices, and geography from 19 OECD countries in 1990. We use the model to explore various issues such as the gains from trade, the role of trade in spreading the benefits of new technology, and the effects of tariff reduction.