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I therefore present an empirically grounded method to introduce imperfect labor mobility into a computable general equilibrium (CGE) framework in Chapter 2, using sector-specific human capital and non-pecuniary preferences. Specifically, a one-period CGE model is linked and iteratively solved with an econometrically estimated labor model of sectoral choice involving worker characteristics and predicted wages based on sector-specific skills accumulated through experience. This setup allows me to introduce imperfect labor mobility in two ways. First, workers have sector-specific experience, which enter the wage equation and introduce lost wages upon moving across sectors. Second, individuals' choices over the work alternatives are based on a random utility framework in which workers' preferences are affected by demographic and household characteristics, in addition to the wages obtained in that sector.

I apply this linked CGE--microsimulation model of imperfect labor mobility to an analysis of the impact of a carbon tax on the U.S. economy in Chapter 3. I find that a carbon tax set at a central estimate of the social cost of carbon leads to a modest change in aggregate employment, ranging from a 0.06% reduction to a 0.04% gain (71,000 jobs lost to 42,000 jobs gained), depending on revenue recycling assumptions, though the impact is much larger in the fossil fuel extraction sector, where both wages and employment fall. Though imperfect labor mobility is welfare-reducing, the revenue recycling assumptions drive the distributional outcomes. In particular, rebating the carbon tax revenue on a per-capita basis is highly progressive, as found in the literature. On the other hand, using the revenue to fund a carbon tax cut is the most efficient and leads to a slight increase in employment relative to the no-policy case. The microsimulation structure of the model allows me to evaluate a set of illustrative retraining programs. I find that though such programs increase the welfare of retrained workers, the low responsiveness of sectoral choice to wages means that gains are small and largely from modest increases in coal wages, rather than a movement into the target sectors. This said, fossil-fuel workers represent such a small share of the overall workforce that such a program can be funded while still leaving the vast majority of revenue for other uses.