This project will develop a formal theoretical model to produce testable predictions, relating to the impacts of carbon taxes and energy subsidies on households that face credit constraints. For this purpose, the grantee will gather a large set of household-level data on appliance ownership and usage, energy prices, and household financial frictions from low-income countries such as India, Kenya, Mexico, and Brazil. Finally, she will use these data to calibrate the model and estimate the welfare implications of different policies, subject to key parameters. This will allow a policymaker to understand in which specific contexts a subsidy may be more efficient than a tax.
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