--- title: "Firm Productivity and the Composition of Jobs in the Green Economy: Factor Reallocation with Heterogeneous Clean Destinations" authors: - name: "Kuusela, Olli-Pekka" - name: "Kuusi, Tero" url: "https://www.etla.fi/henkilot/kuusi-tero/" sameAs: - "https://twitter.com/TeroKuusi" date_published: "2026-11-02" series: "ETLA Working Papers" series_number: "154" issn: - "2323-2420" - "2323-2439" jel_codes: - "E24" - "E32" - "J64" - "Q52" - "Q58" language: "en" publisher: "ETLA Economic Research" pdf_url: "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-154.pdf" keywords: - "Carbon tax" - "Green transition" - "Firm heterogeneity" - "Search frictions" - "Technology adoption" - "Capital adjustment costs" - "Finland" identifier: "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-154" abstract: "We study the macroeconomic consequences of emissions reductions in a model with heterogeneous firms, search-and-matching frictions, endogenous technology adoption, and sector-specific capital adjustment costs. Extending the framework of Finkelstein Shapiro and Metcalf (2023) and calibrating to Finland, we distinguish between high- and low-productivity clean technologies within a three-sector framework. Our results show that an emission reduction policy implemented via a carbon tax induces modest losses in output and consumption, as part of the reallocation away from emissions-intensive sector is absorbed by lower-productivity clean sector. By contrast, the standard two-sector model with a single clean technology shows slightly positive output effects due to a greater increase in average firm productivity. These findings highlight that the macroeconomic costs of climate policies depend on the productivity composition of the expanding clean sector. Within the emissions-intensive sector, emissions are mainly reduced through abatement activities, but the degree of factor reallocation is still substantial: under the baseline calibration, employment in the emissions-intensive sector declines by nearly one-quarter in response to a 40% emissions reduction target. Lower abatement costs reduce the extent of factor reallocation required to achieve a given emissions reduction target." --- # Firm Productivity and the Composition of Jobs in the Green Economy: Factor Reallocation with Heterogeneous Clean Destinations **Published:** 2026-11-02 **Categories:** Working Papers **Tags:** ETLA-WEF **URL:** https://www.etla.fi/en/publications/working-papers-en/firm-productivity-and-the-composition-of-jobs-in-the-green-economy-factor-reallocation-with-heterogeneous-clean-destinations/ #### Abstract We study the macroeconomic consequences of emissions reductions in a model with heterogeneous firms, search-and-matching frictions, endogenous technology adoption, and sector-specific capital adjustment costs. Extending the framework of Finkelstein Shapiro and Metcalf (2023) and calibrating to Finland, we distinguish between high- and low-productivity clean technologies within a three-sector framework. Our results show that an emission reduction policy implemented via a carbon tax induces modest losses in output and consumption, as part of the reallocation away from emissions-intensive sector is absorbed by lower-productivity clean sector. By contrast, the standard two-sector model with a single clean technology shows slightly positive output effects due to a greater increase in average firm productivity. These findings highlight that the macroeconomic costs of climate policies depend on the productivity composition of the expanding clean sector. Within the emissions-intensive sector, emissions are mainly reduced through abatement activities, but the degree of factor reallocation is still substantial: under the baseline calibration, employment in the emissions-intensive sector declines by nearly one-quarter in response to a 40% emissions reduction target. Lower abatement costs reduce the extent of factor reallocation required to achieve a given emissions reduction target. --- ## Additional Information **Kirjoittajat:** Kuusela, Olli-Pekka - Kuusi, Tero **Kansikuva:** https://www.etla.fi/wp-content/uploads/etla-working-papers-154-kansi.jpg **Lataa Pdf:** https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-154.pdf **Key Words:** Carbon tax, Green transition, Firm heterogeneity, Search frictions, Technology adoption, Capital adjustment costs, Finland **Jel:** E24, E32, J64, Q52, Q58 **Paivays:** 02.11.2026 **Sivuja:** 52 **Kieli:** en **Sarja:** ETLA Working Papers **Sarja Nro:** 154 **Issn:** 2323-2420, 2323-2439 (Pdf) **Saatavuus:** 2 ## Bibliographic metadata (JSON-LD) ```json { "@context": "https://schema.org", "@type": "ScholarlyArticle", "@id": "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-154", "headline": "Firm Productivity and the Composition of Jobs in the Green Economy: Factor Reallocation with Heterogeneous Clean Destinations", "inLanguage": "en", "publisher": { "@type": "Organization", "name": "ETLA Economic Research", "url": "https://www.etla.fi", "logo": { "@type": "ImageObject", "url": "https://www.etla.fi/wp-content/uploads/logo-etla_logo.svg" } }, "datePublished": "2026-11-02T00:00:00+00:00", "author": [ { "@type": "Person", "name": "Kuusela, Olli-Pekka" }, { "@type": "Person", "name": "Kuusi, Tero", "url": "https://www.etla.fi/henkilot/kuusi-tero/", "sameAs": [ "https://twitter.com/TeroKuusi" ] } ], "abstract": "We study the macroeconomic consequences of emissions reductions in a model with heterogeneous firms, search-and-matching frictions, endogenous technology adoption, and sector-specific capital adjustment costs. 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