Table B2: Parameter description, calibration, and restrictions (Part A)

|Paramet|er Description|Value|Source|
|---|---|---|---|
|Househo|lds|||
|_β_|Intertemporal discount factor|0.99|Calibrated to literature|
|_ψA_|Utility from wealth scaling|1|Calibrated (only afects restrictions)<br><sup> ̃</sup>|
|_ψC_|Utility from consumption scaling|19.631|Restricted such that _GDP_ =<br>_GDP_|
|_ψH_|Disutility from labor scaling for H-hhs|554147|Restricted s.t. _LH/LL_ =<br>_LH/LL_|
|Γ_B_<br>|Flight-to-safety gov. bonds risk premium<br>|0.001<br>|Calibrated to empirical equivalent<br>|
|Γ_S_|Equity risk premium|0.013|Calibrated to empirical equivalent|
|_γW_|RoW net-debt ef. on RoW bond risk prem.|0.003|Restricted s.t. _E_(_BW/GDP_) =<br>_E_(_BW/GDP_)<br>|
|_μH_|High-skilled wage mark-up|0.2|Calibrated to literature|
|Firms||||
|_μZ_|Core good price mark-up|0.2|Calibrated to literature|
|_δZ_|Capital depreciation rate for core frms|0.025|Calibrated to literature|
|_δR_|Capital depreciation rate for renew. energy|0.03|Calibrated to literature|
|_δF_|Capital depreciation rate for fossil energy frms|0.02|Calibrated to literature|
|_φER_|Learning by doing rate|0.1|Calibrated to literature<br>|
|_λ_|All frms debt-capital ratio|0.339|Restricted s.t. <sup> ̃</sup>_BP /_ <sup> ̃</sup>_GDP_ =<br>_BP/GDP_|
|_τ_|Linearcaitalutilizationcosts|0046|Restrictedst_u_=<br>_u_|
|_Z_1|p|.|.. _Z_ <br>_Z_|
|Input sh|are parameters in Constant-Elasticity-of-Substitu<br>|tion functi<br>|ons<br>|
|_αO_|Imports share of fossil fuel consumption|0.870|Calibrated to empirical equivalent<br><sup> ̃ ̃</sup>|
|_αKZ_|Private cap. in core good cap. services|0.736|Restricted s.t. _IPZ/_ _GDP_ =<br>_IP Z/GDP_<br><sup> ̃ ̃</sup>|
|_αKR_|Private cap. in renew. energy cap. services|0.502|Restricted s.t. _IPR/_ _GDP_ =<br>_IP R/GDP_<br><sup> ̃ ̃</sup>|
|_αKF_|Private cap. in fossil energy cap. services|0.537|Restricted s.t. _IPF /_ _GDP_ =<br>_IP F/GDP_<br><sup> ̃ ̃</sup>|
|_αE_|Renew. energy to fossil energy|0.122|Restricted s.t. _pER_ _ER/pEF_ _EF_ =<br>_pERER/pEF EF_<br><sup> ̃</sup>|
|_αVZ_|Cap. in value added of core frms|0.414|Restricted s.t. ̃_pLLZ/pZ_ _Z_ =<br>_CEZ/Z_|
|_αVR_|Cap. in value-added of renew. energy|0.998|Restricted s.t. _LR/LF_ =<br>_LR/LF_<br><sup> ̃ ̃</sup>|
|_αVF_|Cap. in value-added of fossil energy|0.992|Restricted s.t.<br> ̃<br>_pL_(_LR_ + _LF_)_/_(_pER_ _ER_ + _pEF_ _EF_) =<br>_CEE/E_<br>|
|_αEF_|Value added in output of fossil frms|0.243|Restricted s.t. _O/_ <sup> ̃</sup>_GDP_ =<br>_O/GDP_|
|_αZ_|Value added in output of core frms|0.921|Restricted s.t. _EY /EZ_ =<br>_EY/EZ_<br>|
|_αY_|Wholesale goods in retail goods|0.733|Restricted s.t. ̃_pE_(_EY_ +_EZ_)_/_ <sup> ̃</sup>_GDP_ =<br>_pEE/GDP_<br><br>|
|_αW_|Domestic core goods in wholesale goods|0.815|Restricted s.t. _E_( ̃_p_<sup>_∗_</sup><br>_Z_ <sup> ̃</sup><sup>_Z∗_</sup><br>_e_ <sup>+</sup><sup>_αO_</sup> <sup> ̃</sup><sup>_p∗_</sup><br>_O_<sup>_O_)</sup><sup>_/_ ̃</sup><sup>_GDP_ =</sup><br>_M/GDP_|
|_αW ∗_|RoW core goods in RoW wholesale goods|0.742|Restricted s.t. _E_ =<br>_E_<br><sup> ̃ ̃</sup>|
|_αL_|High-skilled labor in labor services|0.762|Restricted s.t. _CH/_ _CL_ =<br>_CH/CL_|
|Taxes<br> ̃|||<sup> ̃ ̃</sup>|
|_TLL_|Transfers to L-hhs|0.081|Restricted s.t. _BG/_ _GDP_ =<br>_BG/GDP_|
|_tC_|Final sales tax rate|0.16|Calibrated s.t. cons. taxes over GDP are 0.11|
|_tA_|Wealth tax rate|0.0003|Calibrated s.t. property taxes over GDP are 0.01|
|_tR_|Tax rate on hhs. cap. income and cap. gains|0.008|Calibrated s.t. pers. inc. taxes over GDP are 0.04|
|_tH_|High-skilled labor income tax rate|0.08|Calibrated s.t. pers. inc. taxes over GDP are 0.04|
|_tL_|Low-skilled labor income tax rate|0.06|Calibrated s.t. pers. inc. taxes over GDP are 0.04|
|_tS_|Firm contr. labor tax rate (payroll tax)|0.17|Calibrated s.t. payroll taxes over GDP are 0.07|
|_tP_|Corporate income tax rate<br>|0.045<br>|Calibrated s.t. corp. inc. taxes over GDP are 0.02<br>|
|_tEF_|Fuel tax rate|0.025|Calibrated s.t. energy taxes over GDP are 0.02|
|_tO_|Carbon tax rate|1E-05|Calibrated to empirical equivalent|

_Notes_ : H-hhs and L-hhs stands for high-skilled labor households and low-skilled labor households, respectively. RoW stands for the rest of the world. Data sources reported in the main text.

61