Publications:

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Resource-Driven Victory

Journal of Public Economic Theory, (forthcoming)

https://www.dropbox.com/s/dku4d19le0ztd4u/june2020.pdf?dl=0

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The vast popularity of distributive policies in many resource-rich countries coincided with the oil and gas price hike of 2004. However, following the sharp price decline in late 2014, this popularity started waning and the tendency toward more productive policies gained traction. Using a theoretical model, this paper studies the optimal composition of public spending and demonstrates that, for a sufficiently low amount of any exogenous revenue, e.g., resource revenue, investing revenue in productive public good is preferable. The median voter prefers more distributive policies as resource revenue increases. A key determinant of the optimal composition of public spending is the inherited level of productivity. Countries with too low or too high productivity both find distributive policies more appealing even for a small amount of resource revenue. Yet, they have an essential difference. Resource revenue eradicates individuals incentive to work in countries with low initial productivity while individuals always prefer to work in highly productive countries.

 

 

 

Inequality, Public Good Provision and the Composition of Trade

Economics of Transition and Institutional Change, Volume 28, Issue 2, 265-313 (April 2020)

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This paper investigates the effect of trade liberalization on the provision of public goods and shows that inequality also plays a vital role here. Public goods help enhance the productivity of firms, lower prices and raise profitability. The provision of public goods has different effects in closed and open economies. In an open economy, the impact of productive spending on increasing profit is stronger. Consequently, the opening up of the economy shifts the benefits of productive public goods from consumers to firms. As the median voters’, share of the firm’s profit rises, public goods become more appealing and flourish. Consequently, the manufacturing export is boosted by a rise in productivity.  

 

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Working Papers:

 

The Optimal Tax on Dirty Energy Under Credit Market Imperfection

(with Sjak Smulders) 

 

Credit market imperfections may undermine the effectiveness of market incentive instruments (e.g. dirty input tax and emission fees) to control pollution  in developing countries. Using two different approach to model credit market imperfections, this paper demonstrates that the socially optimal pollution tax is higher in countries with more severe distortions in credit market due to the higher amount of pollution. However, these countries may not impose a higher tax on dirty energy under two circumstances: First, if the clean energy is very expensive, the amount of pollution is high regardless of the level of credit market imperfection. The socially optimal tax may then be lower in a country with less-developed credit market since it is less effective in reducing pollution. Second, the imposed tax may differ from the socially optimal level if it is determined in a political process where the winner party represents a specific group instead of the whole population.