DOCUMENTS DE TRAVAIL / WORKING PAPERS

DOCUMENTS DE TRAVAIL / WORKING PAPERS 2017-66 How shifting investment towards low-carbon sectors impacts employment: three determinants under scrutiny Quentin Perrier 1, *, Philippe Quirion 1,2 September 2017 1 CIRED, 45 bis, avenue de la Belle Gabrielle, 94736 Nogent-sur-Marne Cedex, France 2 CNRS * Corresponding author. Tel.: +33663246813 - Email addresses: perrier@centre-cired.fr (Quentin Perrier), quirion@centre-cired.fr (Philippe Quirion)

d p p d = Z d i + d d m = Z m i + d m p d Z d Z m d d d m m i d t = d d + d m Z t = Z d + Z m p d =(I A d ) 1 d d I A =(a ij ) Z = A p τ m =1 dd d d d t x ˆxˆxˆx x ii = x i x ij =0 i j p d =(I A d ) 1 (I τ m τ m ) d t

ẽẽẽ = fte/p fte ẽẽẽ FTE FTE = t ẽẽẽ (I A d ) 1 (I τ m τ m ) d d t t ẽẽẽ ẽ va p Z va j = p j i Z i,j =(1 i a i,j ) p j va =(I i t A d ) p t ẽẽẽ t e (I i t A d ) e FTE = t e Q d (I τ τ m ) d d t Q d =(I i t A d ) (I A d ) 1 Q d Q d Q d Q d e

Z 11 Z 12 D 1 P 1 Z 21 Z 22 D 2 P 2 K 1 K 2 L 1 L 2 P 1 P 2 ( ) e1 e = e 2 ( ) 1 θ1 θ Q = 2 θ 1 1 θ 2 ( I τ m τ 1 τ m m = 1 0 0 1 τ2 m θ 1 θ 2 (1 τ m 2 ) [(1 θ 2 )e 2 + θ 2 e 1 ] > (1 τ m 1 ) [(1 θ 1 )e 1 + θ 1 e 2 ] ce d ) i, ce d i = i e i Q d ij Q d ij i Qd ij =1 τ m i ce d i Q d

θ i (1 τ m 2 ) e 2 > (1 τ m 1 ) e 1 τ e e ρ e e i = FTE i /V A i τ L w L i

e = FTE i VA i = FTE i L i = τ i L L i VA i w i

Current Acccount (billion euros) 200 100 0 France Germany 2000 2005 2010 2015 Year (1 τ m 2 ) τ L 2 w 2 > (1 τ m 1 ) τ L 1 w 1

Z j = scz j ( h δ h,j F ρz h,j )1/ρz Z j =min h ( F h,j ) a h,j ) F h,j =(scz ρz j δ h,j p z j /p f h )σz Z j F h,j = a h,j Z j Inc = h pf h FF h C i = α i p c (Inc S p ) C i = C i i U =1 FF LAB/P op p f Lab =1 log( pf LAB pc )= γ log( U U 0 ) p f Lab =1 FF CAP = FF CAP p f Cap =1 I i = I i idem S p = i pc i I i idem Z i = C i + I i idem FF h = j F h,j idem p c i = p z i idem p c = i (pc i ) α i idem idem p z j = h pf h az h,j Z j = b j h F β h,j h,j F h,j = a z h,j Z j F h,j = β h,j p z j Z j/p f h γ =0 γ =0.05

γ =0 γ σ KL =0 σ KL =0.5 σ KL =1 γ =0

S f ϵ ϵ ϵ S f ϵ S f

Z j = scz j ( h δ h,jf ρz h,j )1/ρz Z j = min h ( F h,j ) a h,j ) F h,j =(scz ρz j δ h,j p z j /p f h )σz Z j F h,j = a h,j Z j Inc = h pf h FF h idem C i = αu p x (Inc S p ) C i = C i i U =1 FF LAB/P op p f Lab =1 log( pf LAB )= γlog(u/u 0 ) pc p Lab =1 FF CAP = FF CAP p f CAP =1 I = I idem S p = i px i I i ϵ S f idem S f = S f ϵ = ϵ ϵ = ϵ Q i = C i + I i idem FF h = j F h,j idem p x i = p z i idem p c = i (px i ) αu i idem p e i = ϵ p We i E i = E i p m i = ϵ p Wm idem i pwe i Q i = scq i(αi m M ρ Q i ( M i = scq ρ Q i αi m pq i p m i ( D i = scq ρ Q i αi d pq i p d i i E i + S f = i pwm i M i idem + αi d Q D ρ i ) 1/ρ Q p Q i Qi + pe i E i ) σq Q i M i = λ m = p m i M i + p d i D i i (Q i + E i) ) σq Q i Z i = λ z i (Q i + E i) Z i = E i + D i idem p e i = p z i idem p d i = p z i idem

S f ϵ

e σ KL γ

γ σ KL =1 σ KL =0.5 σ KL =0

S f ϵ

A d A d = ( Z11 P 1 Z21 P 1 Z12 P 2 Z22 P 2 ) ( ) a b = c d ( ) I A d 1 d b = c 1 a =det(i A d ) Q =(I A d ) 1 ( ) 1 d b Q = 1 c 1 a (va) i =(VA i /P i) ( ) va1 0 <va> Q = Q = 1 ( ) va1 (1 d) va 1 b 0 va 2 va 2 c va 2 (1 a) <va> Q = 1 ( ) (1 a c) (1 d) (1 a c) b (1 b d) c (1 b d) (1 a) ( ) 1 θ1 θ <va> Q = 2 θ 1 1 θ 2 θ 1 = (1 b d) c (1 a)(1 d) bc θ 2 = (1 a c) b (1 a)(1 d) bc δ (1 θ 1 ) δ θ 1 δ e (e i )=(E i /V A i ) E i VA i ce d (ce d ) t = e t <va> Q = ( e 1 (1 θ 1 )+e 2 θ 1 ; e 1 θ 2 + e 2 (1 θ 2 ) ) δ

( ) ( ) d d δ (1 τ1 ) =< < 1 τ m > = δ δ 1 τ 2 (1 τ 2 ) ((1 θ 2 )e 2 + θ 2 e 1 ) (1 τ 1 ) ((1 θ 1 )e 1 + θ 1 e 2 ) (1 τ 2 ) ((1 θ 2 )e 2 + θ 2 e 1 ) > (1 τ 1 ) ((1 θ 1 )e 1 + θ 1 e 2 ) (1 τ 2 ) ce d 2 > (1 τ 1 ) ce d 1

Income Utility Aggregate private consumption UU Savings Domestic good equilibrium! "#! "$ % "$ Private consumption Investment & "# Domestic output Domestic production function ' ()*,"$ ',)-,"$ Labor factor Capital factor u i(u) j(u) h(u) Z j F h,j FF h Inc C i p x i p z i p f h pc

S p U UU α i σ z ρ z = σz 1 σ z δ h,j scz j β h,j b j a h,j γ U 0

Income Utility Aggregate private consumption UU Savings Domestic good equilibrium! "#! "$ % "$ Private consumption Investment & "# Domestic output Domestic production function Labor factor ' ()*,"$ ',)-,"$ Capital factor. (/0,"$. 1234,"$ Low skilled High skilled u i(u) j(u) h(u) s

Utility Aggregate private consumption UU Income Savings! "#! "$ % "$ Private consumption Investment Composite good market equilibrium Composite good. "$ Composite good Production function Transformation function (CET) Domestic output production function / "$ 0 "$ 1 "$ Imports Domestic good Exports & "$ Gross domestic output ' ()*,"$ ',)-,"$ Labor factor Capital factor u i(u) h(u) Z j FF h F h,j Inc C i E i M i

Q i D i pf h p x i p z j p q i p e i p m i p d i ϵ p c S p S f U UU αi u σ z ρ z = σz 1 σ z δ h,j scz j σ q ρ q = σq 1 σ q α m i αi d scq i γ U 0

ϵ

Utility UU Aggregate private consumption! "#! "$ Private consumption Composite good market equilibrium Composite good Production function Transformation function (CET) + "$ / "$ 7 "$ 0 1 "$,2 Investment Government consumption 2 Intermediate uses Composite good, "$ - "$. "$ Imports Domestic good Exports % "$ Gross domestic output Domestic output production function Composite factor production function Labor factor Composite factor & '(),"$ 4 "$ & 5(6,"$ Capital factor 1 "#,"$ 1 "$,"$ Intermediate inputs Composite labor 8 '9:,"$ 8 ;<=>,"$ Low skilled High skilled

Y j Inc N(s, j) K j L j KK NN(s) X(i, j) Z j C i G i I i E i M i Q i D i p k p l j p n s p y j p z j p q i

p e i p m i p d i ϵ S p S g S f T d Tj z T p T v KK NN s pc UU σ Y ρ Y = σy 1 σ Y σ i η i = σz 1 σ z ψ i φ i = ψz 1 ψ z α i δj l δj k scy β N(s, j) scl j

ax(i, j) ay j µ i λ i δ m i δi d scq i ξi d ξi e θ i ssg τ d Pop U 0 s p We i p Wm i τi z τ p τ v Pop γ

Y j = scy j (δ k j Kρ Y j + δ l j Lρ Y j ) ( 1/ρ Y ) K j =(scy ρ Y j δ k j py j /pk ) σy Y j L j =(scy ρ Y j δ l j py j /pl j )σy Y j X i,j = ax i,j Z j Y j = ay j Z j p z j = ay j p y j + i ax i,j p q i L j = scl j s N βn s,j s,j N s,j = βs,j N pl j L j/p n s U s =1 NN s /P op s log(p n s /p c )= γ log( Us Us 0 KK = KK T d = τ d Inc T z j = τ z j pz j Z j T p = τ p j pq j C j T v = τ v j pq j I j G i = µ i (T d + j T z j + T p + T v S g )/p q i S p = i (1 + τ v ) p q i I i S g ϵ S f S g = ssg (T d + j T z j + T p + T v ) Inc = p k KK + s pn s NN s C i = α i (Inc S p T d )/((1 + τ p ) p q i ) p e i = ϵ pw e i p m i = ϵ p Wm i i pwe i E i + S f = i pwm i M i S f = S f ϵ = ϵ Q i = scq i (αi mm ρ Q i + αi ddρ Q ( ) i M i = scq ρ Q i αi m σq pq i p m Qi ( i) D i = scq ρ Q i αi d σq pq i Qi p d i Z i = θ i (ξi e Eφi i E i =(θ φi i D i =(θ φi i Q i = C i + I i NN s = j N s,j KK = j K j p c i = pz i ) ) 1/ρ Q + ξi d Dφi i ξi e (1 + τ i z) pz i /pe i )(1/(1 φi)) Z i ) (1/φi) ξ d i (1 + τ z i ) pz i /pd i )(1/(1 φi)) Z i

γ σ Armington ψ CET σ KL

5400 Number of jobs created 5100 4800 4500 Technology Solar Weatherization 2 3 4 5 6 Amington elasticity 5400 Number of jobs created 5100 4800 4500 Technology Solar Weatherization 2 3 4 5 6 CET elasticity Number of jobs created 5200 5000 4800 Closure FixedChange FixedDeficit 4600 Solar Weatherization Technology

γ σ KL σ ψ

γ σ KL σ ψ