Identifying Reduced-Form Relations with Panel Data

The literature that tests for U-shaped relationships using panel data, such as those between pollution and income or inequality and growth, reports widely divergent (parametric and non-parametric) empirical findings. We explain why lack of identification lies at the root of these differences. To deal with this lack of identification, we propose an identification strategy that explicitly distinguishes between what can be identified on the basis of the data and what is a consequence of subjective choices due to a lack of identification. We apply our methodology to the pollution-income relationship of both CO2- and SO2-emissions. Interestingly, our approach yields estimates of both income (scale) and time (composition and/or technology) effects for these reduced-form relationships that are insensitive to the required subjective choices and consistent with theoretical predictions

Coalition Formation and the Ancillary Benefits of Climate Policy

Several studies found ancillary benefits of environmental policy to be of considerable size. These additional private benefits imply not only higher cooperative but also noncooperative abatement targets. However, beyond these largely undisputed important quantitative effects, there are qualitative and strategic implications associated with ancillary benefits: climate policy is no longer a pure but an impure public good. In this paper, we investigate these implications in a setting of non-cooperative coalition formation. In particular, we address the following questions. 1) Do ancillary benefits increase participation in international environmental agreements? 2) Do ancillary benefits raise the success of these treaties in welfare terms