Per Strömberg

Sweden was one of the first countries to introduce a carbon tax back in 1991. We assemble a unique data set tracking CO2 emissions from Swedish manufacturing firms over 26 years to estimate the impact of carbon pricing on firm-level emission intensities. We estimate an emission-to-pricing elasticity of around two, with substantial heterogeneity across subsectors and firms, where higher abatement costs and tighter financial constraints are associated with lower elasticities. A simple calibration suggests that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing. (JEL H23, Q54, Q58, G32)

Financial sector wages have increased extraordinarily over the last decades. We address two potential explanations for this increase: (1) rising demand for talent and (2) firms sharing rents with their employees. Matching administrative data of Swedish workers, which include unique measures of individual talent, with financial information on their employers, we find no evidence that talent in finance improved, neither on average nor at the top. The increase in relative finance wages is present across talent and education levels, which together can explain at most 20% of it. In contrast, rising financial sector profits that are shared with employees account for up to half of the relative wage increase. The limited labour supply response may partly be explained by the importance of early-career entry and social connections in finance. Our findings alleviate concerns about "brain drain" into finance but suggest that finance workers have captured rising rents over time.

We develop a model of private equity capturing two fundamental features of this market: the fund structure and illiquidity. A fund structure with sequential capital calls arises as an optimal solution to fund managers' (GPs) moral hazard problem but exposes investors (LPs) to illiquidity risk. Funds with more illiquidity-tolerant LPs realize higher returns, leading to different expected returns across both funds and LPs in equilibrium. GPs may inefficiently accelerate drawdowns to avoid default by LPs on capital commitments. With a secondary market for LP claims, differences in fund returns are attenuated but differences in LP returns remain. The model can rationalize several empirical findings on primary and secondary private equity markets.

Financial sector wages have increased extraordinarily over the last decades. We address two potential explanations for this increase: (1) rising demand for talent and (2) firms sharing rents with their employees. Matching administrative data of Swedish workers, which include unique measures of individual talent, with financial information on their employers, we find no evidence that talent in finance improved, neither on average nor at the top. The increase in relative finance wages is present across talent and education levels, which together can explain at most 20% of it. In contrast, rising financial sector profits that are shared with employees account for up to half of the relative wage increase. The limited labor supply response may partly be explained by the importance of early-career entry and social connections in finance. Our findings alleviate concerns about "brain drain" into finance but suggest that finance workers have captured rising rents over time.

Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.

Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking all CO2 emissions from the Swedish manufacturing sector to estimate the impact of carbon pricing on firm-level emission intensities. In panel regressions, spanning 26 years and around 4,000 firms, we find a statistically robust and economically meaningful negative relationship between emissions and marginal carbon pricing. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across manufacturing subsectors. A simple calibration implies that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing