New holder of the Torsten Söderberg Research Chair to study how economic policy can be made more efficient and fairer

The research project starts from the premise that people's living conditions differ across more dimensions than income, such as in their exposure to environmental degradation, the educational opportunities available to them, and the extent to which they respond to social comparisons and perceived fairness. By combining mathematically formulated economic theory with experimental studies, Olof Johansson-Stenman aims to contribute to a better understanding of how policy instruments can be designed to be as efficient as possible while also taking distributional concerns and perceived fairness into account.

"I will examine some of the major societal challenges of our time: growing inequality, climate change and broader environmental degradation, and the need for education that creates better life chances. By bringing together research on redistribution, environmental policy and human capital, I want to contribute new knowledge on how policy reforms can be designed to generate the greatest possible benefit to society. I am very grateful that the Torsten Söderberg Research Chair gives me this opportunity," says Olof Johansson-Stenman.

A central part of the research project concerns environmental policy, including climate policy, carbon taxes and public investment in environmental public goods. The research will examine how environmental policy instruments can be designed so that they not only reduce emissions or improve environmental quality at the lowest possible social cost, but also take into account how different groups are affected and who benefits.

"A carbon tax can be a cost-effective policy instrument for the climate, but it can affect households unevenly depending on where people live, how they heat their homes or what transport options are available to them. We therefore need to understand when and how distributional concerns and fairness should be built into environmental policy from the outset, and when they are better handled through the tax-and-transfer system," says Olof Johansson-Stenman.

Another strand of the research project concerns the joint design of education policy and tax policy. In a sub-project on education and crime, the research analyses how investment in basic education, particularly for groups with less favourable starting points, can reduce incentives to choose crime rather than regular work. If such education reduces crime and social exclusion, it can benefit society as a whole, not only those who receive the education.

"Education does not only affect an individual's future income. It also affects how opportunities, incomes and life chances are distributed in society. Education can therefore be viewed as a form of predistribution, a preventive distributional policy: instead of only redistributing income after the event, society can try to influence people's opportunities from the start," says Olof Johansson-Stenman.

Project title: Optimal Public Policy, The Environment, and Human Capital under Multidimensional Heterogeneity.