Associated Programs
Program Publications
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Working Paper No. 1041 | February 2024
Can Green Spending Reduce Gender and Race Inequalities?
Announced in June 2021, the never-implemented Green Recovery Plan for the Brazilian Legal Amazon Region (GRP) would be a green transition initiative to be carried out by the state governments of the region. The GRP represented the first large-scale proposal aiming at the transition to a low-carbon economy in Brazil and offered a preliminary framework to evaluate the opportunities and limitations of green development in Global South economies. The GRP's initial phase would provide an investment of 1.5 billion reais (around $315 million in September 2023) in four areas: control of illegal deforestation, sustainable development, green technology, and green infrastructure. This article presents a counterfactual analysis by assessing the impacts of green spending in Amazon on the labor market, quantitatively—in terms of the number of jobs created—and qualitatively—exploring the distribution of those jobs by region and according to gender and race categories. We build synthetic sectors representing each area of investment in a two-region input-output matrix (“Brazilian Amazon” and “Rest of Brazil”). Using employment multipliers, we simulate a demand shock on the Amazonian economy and its impact on job creation in the two regions. Results suggest that green spending in the Amazon offers good perspectives (but also highlights limitations) for a just transition to a low-carbon economy in Brazil: the effects on employment favored the female workforce (both black and white) relative to the male and black workforce in the Amazon, leading to inequality-reducing composition changes in the Brazilian workforce as whole.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):Latin America
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Working Paper No. 1040 | February 2024Against the backdrop of COP28, this paper investigates the impact of intergovernmental fiscal transfers (IGFT) on climate change commitments in India. Within the analytical framework of environmental federalism, we tested the evidence for the Environmental Kuznets Curve (EKC) using a panel model covering 27 Indian states from 2003 to 2020. The results suggest a positive and significant relationship between IGFT and the net forest cover (NFC) across Indian states. The analysis also suggests an inverse-U relationship between Gross State Domestic Product (GSDP) and the environmental quality, indicating a potential EKC for India. The findings substantiate the fiscal policy impacts for climate change commitments within the fiscal federal frameworks of India, and the significance of IGFT in increasing the forest cover in India. This has policy implications for the Sixteenth Finance Commission of India in integrating a climate change–related criterion in the tax-transfer formula in a sustainable manner.Download:Associated Program(s):Author(s):Related Topic(s):Region(s):Asia
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Working Paper No. 1033 | November 2023The research leverages yearly variations in climate variables, such as rainfall and temperature, across the West Bank from 1999 to 2018 to assess their influence on individuals' decisions to stay in the agricultural sector. The main findings suggest that an increase in rainfall in the previous year is associated with a higher proportion of workers in the agricultural sector, especially in regions where agriculture is the primary economic activity. Temperature variation is also an important factor. An increase in the maximum temperature will generally have a negative effect on the supply of labor in the agricultural sector, while an increase in the minimum temperature may have a positive effect. However, this effect varies across different regions of the West Bank, reflecting the diverse agricultural practices and irrigation methods employed. The study also examines two potential mechanisms through which climate change affects labor decisions: agricultural labor migration to the Israeli labor market and how climate shocks affect agricultural wages.Download:Associated Program(s):Author(s):Sameh Hallaq Yousuf DaasRelated Topic(s):Region(s):Middle East
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Working Paper No. 1031 | October 2023This study aims to develop an ecological stock-flow consistent (SFC) model based on the Latin American–stylized facts regarding economic, financial, and environmental features. We combine the macro-financial theoretical framework by Pérez-Caldentey et al. (2021, 2023) and the ecological modeling of Carnevali et al. (2020) and Dafermos et al. (2018). We discuss two scenarios that test exogenous climate-related shocks. The first scenario presents the case in which international regulation on commodity trade becomes more stringent due to environmental concerns, thus worsening the balance-of-payment constraint of the region. The second scenario concerns the increase in frequency and intensity of adverse climate events in the region. Both scenarios show that the financial external constraint that determines the growth path of Latin American economies may be further exacerbated due to environmental-related issues.Download:Associated Program(s):Author(s):Lorenzo Nalin Giuliano Toshiro Yajima Leonardo Rojas Rodriguez Esteban Pérez Caldentey José Eduardo AlatorreRelated Topic(s):Climate change Climate Change and Economic Policy Latin America Stock-flow consistency Stock-flow consistent (SFC) modelingRegion(s):Latin America
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Working Paper No. 1023 | July 2023
Evidence From an Emerging Country, India
According to the theory of efficient markets, economic agents use all available information to form rational expectations. The rational expectations hypothesis asserts that information is scarce, the economic system generally does not waste information, and that expectations depend specifically on the structure of the entire system. Fiscal marksmanship—the accuracy of budgetary forecasting—can be one important piece of such information that rational agents must consider in forming expectations. Against the backdrop of fiscal rules, our paper explores the budgetary forecast errors of climate change–related public spending in India. The fiscal rules stipulate that fiscal deficit–to–GDP ratio should be maintained at 3 percent. However, in the post-COVID fiscal strategy, a medium-term fiscal consolidation path of 4.5 percent fiscal deficit–to–GDP is envisioned by 2025–26. Within this fiscal consolidation framework, we analyzed the budget credibility of fiscal commitments for climate change in India. We analyzed the fiscal behavioral variables in terms of bias, variation, and randomness, and captured the systemic variations in budgetary forecast related to climate change for a period 2017–18 to 2020–21 across sectors. We identified the sectors where systematic components of forecasting errors are relatively higher than random components, where minimizing errors through altering the fiscal behavioral models is done by revising the assumptions and by applying better forecasting methods. A state-level decomposition of the public spending revealed that disaggregated fiscal space available for developmental spending constitutes around 60 percent of the total. However, identifying the specifically targeted public spending related to climate change across all states and analyzing its fiscal markmanship can further the subnational inferences.Download:Associated Program(s):Author(s):Related Topic(s): -
Working Paper No. 1013 | January 2023
A Sectoral Multiplier Analysis for the United States
We assess the sectoral impact of the implementation of a “green” employer of last resort (ELR) program in the US, based on an environmental modification of an extended Kurz’s (1985) multiplier framework and data from OECD Input-Output tables. We use these multipliers to estimate the impact of an “optimal” ELR, designed to maximize the impact on both output and employment while minimizing both imports and carbon emissions. We then test several alternative policy scenarios based upon different compositions of US government expenditure. We provide evidence that (1) investing in the optimal sectors in terms of output, employment, Co2, and import multipliers does not always deliver optimal results in the aggregate; (2) ecological sustainability for the US economy also fosters import sustainability; (3) a rebounding effect in Co2 emissions may be tamed if the ELR satisfies the abovementioned optimality condition, though this undermines its success in terms of output and employment.Download:Associated Program(s):The State of the US and World Economies Climate Change and Economic Policy Economic Policy for the 21st CenturyAuthor(s):Related Topic(s):Climate Change and Economic Policy Employer of Last Resort (ELR) policy Employment guarantee Green jobs Green New Deal Job guarantee Structural changeRegion(s):United States -
Working Paper No. 995 | November 2021
A Stock-Flow Consistent Analysis
The health and economic crises of 2020–21 have revived the debate on fiscal policy as a major tool for stabilization and meeting long-term goals. The massive surge in unemployment, due to the economic disruption of the lockdown measures, has increased the interest in policies that target employment directly instead of trying to achieve it via a general “demand push.” One of the proposals currently under debate is the job guarantee. Under such a policy the government would act as an “employer of last resort” by offering a job to everyone that is able and wants to work but cannot find a job in the private sector. This paper argues that a carefully designed scheme of direct employment and public provision by the state—addressing both the low- and high-skill workforce—can have permanent effects and promote the economy’s structural transformation, in particular by fostering energy transition and a lower carbon footprint. Starting from this point, a stock-flow consistent model is developed to study the long-run effect of the job guarantee’s implementation, inspired by the work of Godin (2013) and Sawyer and Passarella (2021).Download:Associated Program(s):Author(s):Related Topic(s): -
Working Paper No. 990 | July 2021
Analyzing the Flypaper Effects
Using panel data models, we analyze the flypaper effects—whether intergovernmental fiscal transfers or states’ own income determine expenditure commitments—on ecological fiscal spending in India. The econometric results show that the unconditional fiscal transfers, rather than the states’ own income, determine ecological expenditure in the forestry sector at subnational levels in India. The results hold when the models are controlled for ecological outcomes and demographic variables.Download:Associated Program(s):Author(s):Related Topic(s): -
Public Policy Brief No. 148 | January 2020In this policy brief, Yeva Nersisyan and Senior Scholar L. Randall Wray argue that assessing the “affordability” of the Green New Deal is a question of whether there are suitable and sufficient real resources than can be mobilized to implement this ambitious approach to climate policy. Only after a careful resource accounting can we address the question of whether taxes and other means might be needed to reduce private spending to avoid inflation as the Green New Deal is phased in.
Nersisyan and Wray provide a first attempt at resource budgeting for the Green New Deal, weighing available resources—including potential excess capacity and resources that can be shifted away from existing production—against what will be needed to implement the major elements of this plan to fight climate change and ensure a just transition to a more sustainable economic model.Download:Associated Program(s):The State of the US and World Economies Economic Policy for the 21st Century Climate Change and Economic PolicyAuthor(s):Related Topic(s):Region(s):United States -
Working Paper No. 931 | May 2019This paper follows the methodology developed by J. M. Keynes in his How to Pay for the War pamphlet to estimate the “costs” of the Green New Deal (GND) in terms of resource requirements. Instead of simply adding up estimates of the government spending that would be required, we assess resource availability that can be devoted to implementing GND projects. This includes mobilizing unutilized and underutilized resources, as well as shifting resources from current destructive and inefficient uses to GND projects. We argue that financial affordability cannot be an issue for the sovereign US government. Rather, the problem will be inflation if sufficient resources cannot be diverted to the GND. And if inflation is likely, we need to put in place anti-inflationary measures, such as well-targeted taxes, wage and price controls, rationing, and voluntary saving. Following Keynes, we recommend deferred consumption as our first choice should inflation pressures arise. We conclude that it is likely that the GND can be phased in without inflation, but if price pressures do appear, deferring a small amount of consumption will be sufficient to attenuate them.Download:Associated Program(s):The State of the US and World Economies Economic Policy for the 21st Century Climate Change and Economic PolicyAuthor(s):Related Topic(s):Region(s):United States
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