Although international programs for carbon offsets play an important role in current and prospective climate-change policy, they continue to be very controversial. Asymmetric information creates several incentive problems, include adverse selection and moral hazard, in offset markets. The...

This article describes the anatomy of health insurance. It begins by considering the optimal design of health insurance policies. Such policies must make tradeoffs appropriately between risk sharing on the one hand and agency problems such as moral hazard (the incentive of people to seek more...

We develop a dynamic equilibrium model of labor demand with adverse selection. Firms learn the quality of newly hired workers after a period of employment. Adverse selection makes it costly to hire new workers and to release productive workers. As a result, firms hoard labor and under-react to...

We study the relationship between unemployment, environmental policy, and business cycles. We develop a dynamic stochastic general equilibrium real business cycle model that includes both a pollution externality and congestion externalities from labor market search frictions, which generate...

We study the incidence of pollution taxes and their impact on unemployment in an analytical general equilibrium efficiency wage model. We find closed-form solutions for the effect of a pollution tax on unemployment, factor prices, and output prices, and we identify and isolate different channels...

While prior literature has identified various effects of environmental policy, this note uses the example of a proposed carbon permit system to illustrate and discuss six different types of distributional effects: (1) higher prices of carbon-intensive products, (2) changes in relative returns to...

The computable general equilibrium models used in the literature tend to be a bit of a black box. This paper provides some intuition behind what goes on in these black boxes by laying out a simple general equilibrium model and intuitively explaining what lies behind the demand for emissions. It...

An important component of the debate surrounding climate legislation in the United States is its potential impact on labor markets. Theoretically the connection is ambiguous and depends on the sign of cross-elasticity of labor demand with respect to energy prices, which is a priori unknown. This...

Judged by the principle of intertemporal Pareto optimality, insecure property rights and the greenhouse effect both imply overly rapid extraction of fossil carbon resources. A gradual expansion of demand-reducing public policies -- such as increasing ad-valorem taxes on carbon consumption or...