Job Market Practice Talk: Yang Gao, University of California, Santa Barbara
Biography
Yang's research interests lie primarily in Macroeconomics and Environmental and Energy Economics. Her current research focuses on second-best carbon taxes in the presence of firm capital misallocation and the effectiveness of climate policies considering transition dynamics in factor substitution. Prior to attending UC Santa Barbara, Yang was awarded a Bachelor’s Degree in Economics from Renmin University of China.
Below is a list of her working papers and work in progress:
Working papers:
1. Capital Misallocation and Climate Policy
2. Energy Efficiency Dynamics and Climate Policy
Work in progress:
1. Macroeconomic Evidence on Substitution Between Clean and Dirty Energy
Title
"Beyond Emissions: The Implications of Capital Misallocation on Optimal Carbon Tax"
Abstract
I study optimal carbon taxation when capital is misallocated across firms. Using data on U.S. public firms, I document that firm-level revenue-based emissions intensity is negatively correlated with the return to capital, indicating that capital is misallocated toward dirty firms. Embedding this pattern into a misallocation framework, I uncover a reallocation mechanism: a carbon tax can reduce resource misallocation and boost aggregate productivity by reallocating capital from dirty to clean firms. I develop a dynamic, general-equilibrium climate-economy model with heterogeneous firms and tangibility-dependent financial frictions: dirty firms hold more tangible assets and face looser collateral constraints, attracting excess capital. Calibrated to firm-level balance sheet and emissions data, the model implies that a carbon tax raises aggregate productivity over a wide range of tax rates. The allocative efficiency gains generate welfare improvements beyond those from internalizing emissions, increasing the optimal carbon tax by 75% relative to a benchmark without pre-existing misallocation. Consistent with the same mechanism, removing financial frictions to equalize returns further reduces economy-wide emissions intensity.
