This page contains papers listed by category. Data, code, and working paper versions or appendices with additional results are available for selected manuscripts. Click on names below to reach each category.
CLIMATE CHANGE AND THE SOCIAL COST OF CARBON
- Weather, Climate Change and Death in India: Mechanisms and Implications for Climate Change
(with Robin Burgess, Olivier Deschenes, and Dave Donaldson), Mimeograph, 2017.
Abstract: This paper reveals a stark inequality in the effect of ambient temperatures on death in human populations. Using district-level daily weather and annual mortality data from 1957 to 2000, we find that hot days lead to substantial increases in mortality in rural but not urban India. Despite being far poorer, the mortality response in urban India is not dissimilar to that in the US over the same period. Looking into potential mechanisms we find that the rural death effects are driven by hot days in the growing season which reduce productivity and wages in agriculture. Consistent with a model of endogenous survival in the face of credit constraints, we also find that the expansion of bank branches into rural India helped to mitigate these effects. When coupled with a climatological model that predicts many more hot days in a typical year by the end of this century, these estimates imply considerable reductions in rural Indian, but not urban Indian or US, life expectancy ceteris paribus.
- Adapting to Climate Change: The Remarkable Decline in the U.S. Temperature-Mortality Relationship Over the 20th Century
(with Alan Barreca, Karen Clay, Olivier Deschenes, and Joseph Shapiro), Journal of Political Economy, 2016, 124(1):105-9.
Published Version | Working Paper | Study website
Abstract: This paper examines the temperature-mortality relationship over the course of the twentieth-century United States both for its own interest and to identify potentially useful adaptations for coming decades. There are three primary findings. First, the mortality impact of days with mean temperature exceeding 80°F declined by 75 percent. Almost the entire decline occurred after 1960. Second, the diffusion of residential air conditioning explains essentially the entire decline in hot day–related fatalities. Third, using Dubin and McFadden’s discrete-continuous model, the present value of US consumer surplus from the introduction of residential air conditioning is estimated to be $85–$185 billion (2012 dollars).
- Convergence in Adaptation to Climate Change: Evidence from High Temperatures and Mortality, 1900-2004
(with Alan Barreca, Karen Clay, Olivier Deschenes, and Joseph S. Shapiro), American Economic Review Papers and Proceedings, 2015, 105(5): 247-51.
Published Version | Working Paper | Appendix
Abstract: This paper combines panel data on monthly mortality rates of US states and daily temperature variables for over a century (1900-2004) to explore the regional evolution of the temperature-mortality relationship and documents two key findings. First, the impact of extreme heat on mortality is notably smaller in states that more frequently experience extreme heat. Second, the difference in the heat-mortality relationship between hot and cold states declined over 1900-2004, though it persisted through 2004. Continuing differences in the mortality consequences of hot days suggests that health motivated adaptation to climate change may be slow and costly around the world.
- Developing a Social Cost of Carbon for US Regulatory Analysis: A Methodology and Interpretation
(with Elizabeth Kopits and Ann Wolverton), Review of Environmental Economics and Policy, 2013, 7(1): 23-46.
Published Version | Working Paper
Abstract: The US government recently developed a range of values representing the monetized global damages associated with an incremental increase in carbon dioxide (CO2) emissions, commonly referred to as the social cost of carbon (SCC). These values are currently used in benefit–cost analyses to assess potential federal regulations. For 2010, the central value of the SCC is $21 per ton of CO2 emissions, with sensitivity analyses to be conducted at $5, $35, and $65 per ton of CO2 (2007 dollars). This article summarizes the methodology and interagency process used to develop these SCC values, offers our own commentary on how the SCC can be used to inform regulatory decisions, and identifies priorities for further research.
- The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Reply
(with Olivier Deschenes), American Economic Review, 2012, 102(7):3761-73.
Published Version | Data and Code | Appendix
- Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US
(with Olivier Deschenes), American Economic Journal: Applied Economics, 2011, 3(4): 152-85.
Published Version | Working Paper | Data and Code | Appendix
Abstract: Using random year-to-year variation in temperature, we document the relationship between daily temperatures and annual mortality rates and daily temperatures and annual residential energy consumption. Both relationships exhibit nonlinearities, with significant increases at the extremes of the temperature distribution. The application of these results to "business as usual" climate predictions indicates that by the end of the century climate change will lead to increases of 3 percent in the age-adjusted mortality rate and 11 percent in annual residential energy consumption. These estimates likely overstate the long-run costs, because climate change will unfold gradually allowing individuals to engage in a wider set of adaptations.
- Comment on ‘On the Economics of Climate Policy’: Is Climate Change Mitigation the Ultimate Arbitrage Opportunity?
(with Manasi Deshpande). B.E. Journal of Economic Analysis & Policy, 2010, 10(2):28-40 (Symposium).
- Climate Change and Birth Weight
(with Olivier Deschenes and Jonathan Guryan), American Economic Review Papers and Proceedings, 2009, 99(2): 211-17.
- The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather
(with Olivier Deschenes), American Economic Review, 2007, 97(1): 354-85.
Published Version | Working Paper | Data and Code | Appendix
Abstract: This paper measures the economic impact of climate change on US agricultural land by estimating the effect of random year-to-year variation in temperature and precipitation on agricultural profits. The preferred estimates indicate that climate change will increase annual profits by $1.3 billion in 2002 dollars (2002$) or 4 percent. This estimate is robust to numerous specification checks and relatively precise, so large negative or positive effects are unlikely. We also find the hedonic approach—which is the standard in the previous literature—to be unreliable because it produces estimates that are extremely sensitive to seemingly minor choices about control variables, sample, and weighting.
- Best Cost Estimate of Greenhouse Gases
(with Richard Revesz, Michael Hanemann, Michael Livermore, Thomas Sterner, Denise Grab, Peter Howard, Jason Schwartz), Science, 2017, 357(6352): 655.
- Opportunities for Advances in Climate Change Economics
(with Marshall Burke, Melanie Craxton, Charles Kolstad, Chikara Onda, Hunt Allcott, Erin Baker, Lint Barrage, Richard Carson, Kenneth Gillingham, Josh Graff-Zivin, Stephane Hallegatte, W. Michael Hanemann, Geoffrey Heal, Solomon Hsiang, Benjamin Jones, David Kelly, Robert Kopp, Matthew Kotchen, Robert Mendelsohn, Kyle Meng, Gilbert Metcalf, Juan Moreno-Cruz, Robert Pindyck, Steven Rose, Ivan Rudik, James Stock, Richard S.J. Tol), Science, 2016, 352(6283): 292-293.
Abstract: There have been dramatic advances in understanding the physical science of climate change, facilitated by substantial and reliable research support. The social value of these advances depends on understanding their implications for society, an arena where research support has been more modest and research progress slower. Some advances have been made in understanding and formalizing climate-economy linkages, but knowledge gaps remain [e.g., as discussed in (1, 2)]. We outline three areas where we believe research progress on climate economics is both sorely needed, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon (SCC), (ii) improving understanding of the consequences of particular policies, and (iii) better understanding of the economic impacts and policy choices in developing economies.
- An Economic Perspective on the EPA’s Clean Power Plan
(with Meredith Fowlie, Matthew Kotchen, Severin Borenstein, James Bushnell, Lucas Davis, Lawrence Goulder, Charles Kolstad, Christopher Knittel, Robert Stavins, Michael Wara, Frank Wolak and Catherine Wolfram), Science, 2014, 346(6211): 815-816.
Abstract: In June, the Obama Administration unveiled its proposal for a Clean Power Plan, which it estimates would reduce carbon dioxide (CO2) emissions from existing U.S. power plants 30% below 2005 levels by 2030 (see the chart). Power plant emissions have declined substantially since 2005, so the plan is seeking reductions of about 18% from current levels. Electricity generation accounts for about 40% of U.S. CO2 emissions.
- Using and Improving the Social Cost of Carbon
(with William Pizer, Matthew Adler, Joseph Aldy, David Anthoff, Maureen Cropper, Kenneth Gillingham, Michael Greenstone, Brian Murray, Richard Newell, Richard Richels, Arden Rowell, Stephanie Waldhoff, Jonathan Wiener), Science, 2014, 346(6214): 1189-1190.
Abstract: The social cost of carbon (SCC) is a crucial tool for economic analysis of climate policies. The SCC estimates the dollar value of reduced climate change damages associated with a one-metric-ton reduction in carbon dioxide (CO2) emissions. Although the conceptual basis, challenges, and merits of the SCC are well established, its use in government cost-benefit analysis (CBA) is relatively new. In light of challenges in constructing the SCC, its newness in government regulation, and the importance of updating, we propose an institutional process for regular SCC review and revision when used in government policy-making and suggest how scientists might contribute to improved SCC estimates.
ENERGY AND ENVIRONMENT IN DEVELOPING COUNTRIES
- The Value of Discretion in the Enforcement of Regulation: Experiment Evidence and Structural Estimates from Environmental Inspections in India
(with Esther Duflo, Rohini Pande and Nicholas Ryan), Forthcoming, Econometrica, 2018.
Abstract: In collaboration with a state environmental regulator in India, we conducted a field experiment to raise the frequency of environmental inspections to the prescribed minimum for a random set of industrial plants. The treatment was successful when judged by process measures, as treatment plants, relative to the control group, were more than twice as likely to be inspected and to be cited for violating pollution standards. Yet the treatment was weaker for more consequential outcomes: the regulator was no more likely to identify extreme polluters (i.e., plants with emissions five times the regulatory standard or more) or to impose costly penalties in the treatment group. In response to the added scrutiny, treatment plants only marginally increased compliance with standards and did not significantly reduce mean pollution emissions. To explain these results and recover the full costs of environmental regulation, we model the regulatory process as a dynamic discrete game where the regulator chooses whether to penalize and plants choose whether to abate to avoid future sanctions. We estimate this model using original data on 10,000 interactions between plants and the regulator. Our estimates imply that the costs of environmental regulation are largely reserved for extremely polluting plants. Applying the cost estimates to the experimental data, we find the average treatment inspection imposes about half the cost on plants that the average control inspection does, because the randomly assigned inspections in the treatment are less likely than normal discretionary inspections to target such extreme polluters.
- New Evidence On The Impact of Sustained Exposure to Air Pollution on Life Expectancy From China’s Huai River Policy
(with Avraham Ebenstein, Maoyong Fan, Guojun He and Maigeng Zhou), Proceedings of the National Academy of Sciences, 2017, 114(39): 10384-10389.
Published Version | Working Paper | Research Summary | Data and Code
Abstract: This paper finds that a 10-μg/m3 increase in airborne particulate matter [particulate matter smaller than 10 μm (PM10)] reduces life expectancy by 0.64 years (95% confidence interval = 0.21–1.07). This estimate is derived from quasiexperimental variation in PM10 generated by China’s Huai River Policy, which provides free or heavily subsidized coal for indoor heating during the winter to cities north of the Huai River but not to those to the south. The findings are derived from a regression discontinuity design based on distance from the Huai River, and they are robust to using parametric and nonparametric estimation methods, different kernel types and bandwidth sizes, and adjustment for a rich set of demographic and behavioral covariates. Furthermore, the shorter lifespans are almost entirely caused by elevated rates of cardiorespiratory mortality, suggesting that PM10 is the causal factor. The estimates imply that bringing all of China into compliance with its Class I standards for PM10 would save 3.7 billion life-years.
- Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves
(with Rema Hanna and Esther Duflo), American Economic Journal: Economic Policy, 2016, 8(1): 80-114.
Published Version | Working Paper | Study website | Data and Code
Abstract: Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.
- Toilets Can Work: Short and Medium Run Health Impacts of Addressing Complementarities and Externalities in Water and Sanitation
(with Esther Duflo, Raymond Guiteras, and Thomas Clasen), Mimeograph, 2015.
Abstract: Poor water quality and sanitation are leading causes of mortality and disease in developing countries. However, interventions providing toilets in rural areas have not substantially improved health, likely because of incomplete coverage and low usage. This paper estimates the impact of an integrated water and sanitation improvement program in rural India that provided household-level water connections, latrines, and bathing facilities to all households in approximately 100 villages. The estimates suggest that the intervention was effective, reducing treated diarrhea episodes by 30-50%. These results are evident in the short term and persist for 5 years or more. The annual cost is approximately US$60 per household.
- Growth, Pollution, and Life Expectancy: China from 1991-2012
(with Avraham Ebenstein, Maoyong Fan, Guojun He, and Maigeng Zhou), American Economic Review Papers and Proceedings, 2015, 105(5): 226-231.
Published Version | Working Paper | Data and Code | Appendix
Abstract: This paper examines the relationship between income, pollution, and mortality in China from 1991-2012. Using first-difference models, we document a robust positive association between city-level GDP and life expectancy. We also find a negative association between city-level particulate air pollution exposure and life expectancy that is driven by elevated cardiorespiratory mortality rates. The results suggest that while China's unprecedented economic growth over the last two decades is associated with health improvements, pollution has served as a countervailing force.
- Envirodevonomics: A Research Agenda for an Emerging Field
(with B. Kelsey Jack), Journal of Economic Literature, 2015, 53(1): 5-42.
Abstract:Environmental quality in many developing countries is poor and generates substantial health and productivity costs. However, the few existing measures of marginal willingness to pay (MWTP) for environmental quality improvements indicate low valuations by affected households. This paper argues that this seeming paradox is the central puzzle at the intersection of environmental and development economics: Given poor environmental quality and high health burdens in developing countries, why is MWTP seemingly so low? We develop a conceptual framework for understanding this puzzle and propose four potential explanations for why environmental quality is so poor: (1) due to low income levels, individuals value increases in income more than marginal improvements in environmental quality; (2) the marginal costs of environmental quality improvements are high; (3) political economy factors undermine efficient policymaking; and (4) market failures such as weak property rights and missing capital markets distort MWTP for environmental quality. We review the literature on each explanation and discuss how the framework applies to climate change, which is perhaps the most important issue at the intersection of environment and development economics. The paper concludes with a list of promising and unanswered research questions for the emerging sub-field of "envirodevonomics." ( JEL I15, O10, O44, Q50)
- Lower Pollution, Longer Lives: Life Expectancy Gains if India Reduced Particulate Matter Pollution
(with Janhavi Nilekani, Rohini Pande, Nicholas Ryan, Anant Sudarshan, and Anish Sugathan), Economic and Political Weekly, 2015, 50(8): 40-46.
Abstract: India's population is exposed to dangerously high levels of air pollution. Using a combination of ground-level in situ measurements and satellite-based remote sensing data, this paper estimates that 660 million people, over half of India's population, live in areas that exceed the Indian National Ambient Air Quality Standard for fine particulate pollution. Reducing pollution in these areas to achieve the standard would, we estimate, increase life expectancy for these Indians by 3.2 years on average for a total of 2.1 billion life years. We outline directions for environmental policy to start achieving these gains.
- Environmental Regulations, Air and Water Pollution, and Infant Mortality in India
(with Rema Hanna), American Economic Review, 2014, 104(10): 3038-72.
Published Version | Working Paper | Data and Code | Appendix
Abstract: Using the most comprehensive developing country dataset ever compiled on air and water pollution and environmental regulations, the paper assesses India's environmental regulations with a difference-in-differences design. The air pollution regulations are associated with substantial improvements in air quality. The most successful air regulation resulted in a modest but statistically insignificant decline in infant mortality. In contrast, the water regulations had no measurable benefits. The available evidence leads us to cautiously conclude that higher demand for air quality prompted the effective enforcement of air pollution regulations, indicating that strong public support allows environmental regulations to succeed in weak institutional settings.
- Truth-Telling by Third-Party Auditors and the Response of Polluting Firms: Experimental Evidence from India
(with Esther Duflo, Rohini Pande and Nicholas Ryan), Quarterly Journal of Economics, 2013, 128(4):1499-1545.
Published Version | Working Paper | Study Website
Abstract: In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This article reports on a two-year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.
- Evidence on the Impact of Sustained Exposure to Air Pollution on Life Expectancy from China’s Huai River Policy
(with Yuyu Chen, Avraham Ebenstein, and Hongbin Li), Proceedings of the National Academy of Sciences, 2013, 110(32): 12936-12941.
Abstract: This paper's findings suggest that an arbitrary Chinese policy that greatly increases total suspended particulates (TSPs) air pollution is causing the 500 million residents of Northern China to lose more than 2.5 billion life years of life expectancy. The quasi-experimental empirical approach is based on China’s Huai River policy, which provided free winter heating via the provision of coal for boilers in cities north of the Huai River but denied heat to the south. Using a regression discontinuity design based on distance from the Huai River, we find that ambient concentrations of TSPs are about 184 μg/m3 [95% confidence interval (CI): 61, 307] or 55% higher in the north. Further, the results indicate that life expectancies are about 5.5 y (95% CI: 0.8, 10.2) lower in the north owing to an increased incidence of cardiorespiratory mortality. More generally, the analysis suggests that long-term exposure to an additional 100 μg/m3 of TSPs is associated with a reduction in life expectancy at birth of about 3.0 y (95% CI: 0.4, 5.6).
- What Does Reputation Buy? Differentiation in a Market for Third-Party Auditors
(with Esther Duflo, Rohini Pande and Nicholas Ryan), American Economic Review Papers and Proceedings, 2013, 103(3): 314-19.
Abstract: We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.
- Winter Heating or Clean Air? Unintended Impacts of China’s Huai River Policy
(with Douglas Almond, Yuyu Chen, and Hongbin Li). American Economic Review Papers and Proceedings, 2009, 99(2): 184-90.
Published Version | Working Paper
- Particulate Matter Matters
(with Francesca Dominici and Cass R. Sunstein), Science, 2014, 344(6181): 257-259.
Abstract: April 22nd is the 45th Earth Day, which marks the birth of the modern environmental movement that helped lead to the creation of the U.S. Environmental Protection Agency, the Clean Air Act Amendments, and the Clean Water Act. The result has been substantial improvements in environmental quality in the United States. Today, developing countries are contending with levels of pollution that are even higher than those in the United States before the first Earth Day. And in a period of considerable economic difficulty, the United States is trying to strike the right balance between the benefits and costs of further reductions in pollution.
- Water Pollution and Public Health in India: The Potential for a Market-Friendly Approach
(with Raahil Madhok, Rohini Pande, and Hardik Shah), Health and South Asia, Cambridge: Harvard South Asia Institute, 2013, pp. 61-65
- Cooking Stoves, Indoor Air Pollution, and Respiratory Health in Rural Orissa
(with Esther Duflo and Rema Hanna), Economic and Political Weekly, 2008, 43(32): 71-76.
Abstract: Indoor air pollution emitted from traditional fuels and cooking stoves is a potentially large health threat in rural regions. This paper reports the results of a survey of traditional stove ownership and health among 2,400 households in rural Orissa. We find a very high incidence of respiratory illness. About one-third of the adults and half of the children in the survey had experienced symptoms of respiratory illness in the 30 days preceding the survey, with 10 per cent of adults and 20 per cent of children experiencing a serious cough. We find a high correlation between using a traditional stove and having symptoms of respiratory illness. We cannot, however, rule out the possibility that the high level of observed respiratory illness is due to other factors that also contribute to a household's decision to use a traditional stove, such as poverty, health preferences and the bargaining power of women in the household.
- Indoor Air Pollution, Health, and Economic Well-Being
(with Esther Duflo and Rema Hannah), Surveys and Perspectives Integrating Environment and Society, 2008, 1(1).
Abstract: Indoor air pollution (IAP) caused by solid fuel use and/or traditional cooking stoves is a global health threat, particularly for women and young children. The WHO World Health Report 2002 estimates that IAP is responsible for 2.7% of the loss of disability adjusted life years (DALYs) worldwide and 3.7% in high mortality developing countries. Despite the magnitude of this problem, social scientists have only recently begun to pay closer attention to this issue and to test strategies for reducing IAP. In this paper, we provide a survey of the current literature on the relationship between indoor air pollution, respiratory health and economic well-being. We then discuss the available evidence on the effectiveness of popular policy prescriptions to reduce IAP within the household.
THE COSTS AND BENEFITS OF ENVIRONMENTAL QUALITY IN THE U.S.
ENERGY SUPPLY AND DEMAND IN THE U.S.
- Hydraulic Fracturing and Infant Health: New Evidence from Pennsylvania
(with Janet Currie and Katherine Meckel), Science Advances, 2017, 3(12): 1-9.
Published Version | Research Summary
Abstract: The development of hydraulic fracturing (“fracking”) is considered the biggest change to the global energy production system in the last half-century. However, several communities have banned fracking because of unresolved concerns about the impact of this process on human health. To evaluate the potential health impacts of fracking, we analyzed records of more than 1.1 million births in Pennsylvania from 2004 to 2013, comparing infants born to mothers living at different distances from active fracking sites and those born both before and after fracking was initiated at each site. We adjusted for fixed maternal determinants of infant health by comparing siblings who were and were not exposed to fracking sites in utero. We found evidence for negative health effects of in utero exposure to fracking sites within 3 km of a mother’s residence, with the largest health impacts seen for in utero exposure within 1 km of fracking sites. Negative health impacts include a greater incidence of low–birth weight babies as well as significant declines in average birth weight and in several other measures of infant health. There is little evidence for health effects at distances beyond 3 km, suggesting that health impacts of fracking are highly local. Informal estimates suggest that about 29,000 of the nearly 4 million annual U.S. births occur within 1 km of an active fracking site and that these births therefore may be at higher risk of poor birth outcomes.
- The Continuing Impact of Sherwin Rosen’s “Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition”
Journal of Political Economy, 2017, 125(6): 1891-1902.
- Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program
(with Olivier Deschenes, Joseph S. Shapiro), American Economic Review, 2017, 107(10): 2958-89.
Published Version | Working Paper | Research Summary | Data and Code
Abstract: The demand for air quality depends on health impacts and defensive investments, but little research assesses the empirical importance of defenses. A rich quasi-experiment suggests that the Nitrogen Oxides (NOx) Budget Program (NBP), a cap-and-trade market, decreased NOx emissions, ambient ozone concentrations, pharmaceutical expenditures, and mortality rates. The annual reductions in pharmaceutical purchases, a key defensive investment, and mortality are valued at about $800 million and $1.3 billion, respectively, suggesting that defenses are over one-third of willingness-to-pay for reductions in NOx emissions. Further, estimates indicate that the NBP's benefits easily exceed its costs and that NOx reductions have substantial benefits.
- Environmental Health Risks and Housing Values: Evidence from 1600 Toxic Plant Openings and Closings
(with Janet Currie, Lucas Davis, and Reed Walker), American Economic Review, 2015, 105(2): 678-709.
Published Version | Working Paper | Data and Code | Appendix
Abstract: Regulatory oversight of toxic emissions from industrial plants and understanding about these emissions' impacts are in their infancy. Applying a research design based on the openings and closings of 1,600 industrial plants to rich data on housing markets and infant health, we find that: toxic air emissions affect air quality only within 1 mile of the plant; plant openings lead to 11 percent declines in housing values within 0.5 mile or a loss of about $4.25 million for these households; and a plant's operation is associated with a roughly 3 percent increase in the probability of low birthweight within 1 mile.
- The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing
(with John A. List and Chad Syverson), 2013. Revision requested by Quarterly Journal of Economics.
Abstract: The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, which is about 8.8 percent of manufacturing sector profits in this period.
- Superfund Cleanups and Infant Health
(with Janet Currie and Enrico Moretti), American Economic Review Papers and Proceedings, 2011, 101(3): 435-41.
Abstract: We are the first to examine the effect of Superfund cleanups on infant health rather than focusing on proximity to a site. We study singleton births to mothers residing within 5km of a Superfund site between 1989-2003 in five large states. Our "difference in differences" approach compares birth outcomes before and after a site clean-up for mothers who live within 2,000 meters of the site and those who live between 2,000-5,000 meters of a site. We find that proximity to a Superfund site before cleanup is associated with a 20 to 25% increase in the risk of congenital anomalies.
- Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program
(with Justin Gallagher), Quarterly Journal of Economics, 2008, 123(3): 951-1003.
Published Version | Working Paper | Data and Code
Abstract: This paper uses the housing market to develop estimates of the local welfare impacts of Superfund-sponsored cleanups of hazardous waste sites. We show that if consumers value the cleanups, then the hedonic model predicts that they will lead to increases in local housing prices and new home construction, as well as the migration of individuals that place a high value on environmental quality to the areas near the improved sites. We compare housing market outcomes in the areas surrounding the first 400 hazardous waste sites chosen for Superfund cleanups to the areas surrounding the 290 sites that narrowly missed qualifying for these cleanups. We find that Superfund cleanups are associated with economically small and statistically insignificant changes in residential property values, property rental rates, housing supply, total population, and types of individuals living near the sites. These findings are robust to a series of specification checks, including the application of a regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the local benefits of Superfund cleanups are small and appear to be substantially lower than the $43 million mean cost of Superfund cleanups.
- Does Air Quality Matter? Evidence from the Housing Market
(with Kenneth Chay). Journal of Political Economy, 2005, 113(2): 376-424.
Abstract: We exploit the structure of the Clean Air Act to provide new evidence on the capitalization of total suspended particulates (TSPs) air pollution into housing values. This legislation imposes strict regulations on polluters in “nonattainment” counties, which are defined by concentrations of TSPs that exceed a federally set ceiling. TSPs nonattainment status is associated with large reductions in TSPs pollution and increases in county‐level housing prices. When nonattainment status is used as an instrumental variable for TSPs, we find that the elasticity of housing values with respect to particulates concentrations ranges from −0.20 to −0.35. These estimates of the average marginal willingness to pay for clean air are robust to quasi‐experimental regression discontinuity and matching specification tests. Further, they are far less sensitive to model specification than cross‐sectional and fixed‐effects estimates, which occasionally have the “perverse” sign. We also find modest evidence that the marginal benefit of reductions of TSPs is lower in communities with relatively high pollution levels, which is consistent with preference‐based sorting. Overall, the improvements in air quality induced by the mid‐1970s TSPs nonattainment designation are associated with a $45 billion aggregate increase in housing values in nonattainment counties between 1970 and 1980.
- Did the Clean Air Act Cause the Remarkable Decline in Sulfur Dioxide Concentrations?
Journal of Environmental Economics and Management, 2004, 47(3): 585-611.
Abstract: Over the last three decades, ambient concentrations of sulfur dioxide (SO2) air pollution have declined by approximately 80%. This paper tests whether the 1970 Clean Air Act and its subsequent amendments caused this decline. The centerpiece of this legislation is the annual assignment of all counties to SO2 nonattainment or attainment categories. Polluters face stricter regulations in nonattainment counties. There are two primary findings. First, regulators pay little attention to the statutory selection rule in their assignment of the SO2 nonattainment designations. Second, SO2 nonattainment status is associated with modest reductions in SO2 air pollution, but a null hypothesis of zero effect generally cannot be rejected. This finding holds whether the estimated effect is obtained with linear adjustment or propensity score matching. Overall, the evidence suggests that the nonattainment designation played a minor role in the dramatic reduction of SO2 concentrations over the last 30 years.
- The Clean Air Act of 1970 and Adult Mortality
(with Kenneth Chay and Carlos Dobkin), Journal of Risk and Uncertainty, 2003, 27(3): 279-300.
Abstract: Previous research has established an association between air pollution and adult mortality. However, studies utilizing short-term fluctuations in pollution may detect mortality changes among the already ill or dying, while prospective cohort studies, which utilize geographic differences in long-run pollution levels, may suffer from severe omitted variables bias. This study utilizes the long-run reduction in total suspended particulates (TSPs) pollution induced by the Clean Air Act of 1970, which mandated aggressive regulation of local polluters in heavily polluted counties. We find that regulatory status is associated with large reductions in TSPs pollution but has little association with reductions in either adult or elderly mortality. These findings are interpreted with caution due to several caveats.
- The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession
(with Kenneth Chay), Quarterly Journal of Economics, 2003, 118(3): 1121-67. Awarded Kenneth J. Arrow Award for Best Paper in Field of Health Economics in 2003.
Abstract: The 1981–1982 recession induced substantial variation across sites in air pollution reductions. This is used to estimate the impact of total suspended particulates (TSPs) on infant mortality. We find that a 1-percent reduction in TSPs results in a 0.35 percent decline in the infant mortality rate at the county level, implying that 2500 fewer infants died from 1980–1982 than would have in the absence of the TSPs reductions. Most of these effects are driven by fewer deaths occurring within one month of birth, suggesting that fetal exposure is a potential pathophysiologic mechanism. The analysis also reveals nonlinear effects of TSPs pollution and greater sensitivity of black infant mortality at the county level. Importantly, the estimates are stable across a variety of specifications.
- Estimating Regulation-Induced Substitution: The Effect of the Clean Air Act on Water and Ground Pollution
American Economic Review Papers and Proceedings, 2003, 93(2): 442-48.
- Air Quality, Infant Mortality, and the Clean Air Act of 1970
(with Kenneth Chay). NBER Working Paper No. 10053, 2003.
Abstract:We examine the effects of total suspended particulates (TSPs) air pollution on infant health using the air quality improvements induced by the 1970 Clean Air Act Amendments (CAAA). This legislation imposed strict regulations on industrial polluters in nonattainment' counties with TSPs concentrations exceeding the federal ceiling. We use nonattainment status as an instrumental variable for TSPs changes to estimate their impact on infant mortality changes in the first year that the 1970 CAAA was in force. TSPs nonattainment status is associated with sharp reductions in both TSPs pollution and infant mortality from 1971 to 1972. The greater reductions in nonattainment counties near the federal ceiling relative to the attainment' counties narrowly below the ceiling suggest that the regulations are the cause. We estimate that a one percent decline in TSPs results in a 0.5 percent decline in the infant mortality rate. Most of these effects are driven by a reduction in deaths occurring within one month of birth, suggesting that fetal exposure is a potential biological pathway. The results imply that roughly 1,300 fewer infants died in 1972 than would have in the absence of the Clean Air Act.
- The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufacturers
Journal of Political Economy, 2002, 110(6): 1175-219.
Abstract: This paper estimates the impacts of the Clean Air Act's division of counties into pollutant‐specific nonattainment and attainment categories on measures of industrial activity obtained from 1.75 million plant observations from the Census of Manufactures. Emitters of the controlled pollutants in nonattainment counties were subject to greater regulatory oversight than emitters in attainment counties. The preferred statistical model for plant‐level growth includes plant fixed effects, industry by period fixed effects, and county by period fixed effects. The estimates from this model suggest that in the first 15 years in which the Clean Air Act was in force (1972–87), nonattainment counties (relative to attainment ones) lost approximately 590,000 jobs, $37 billion in capital stock, and $75 billion (1987 dollars) of output in pollution‐intensive industries. These findings are robust across many specifications, and the effects are apparent in many polluting industries.
- Tradable Water Rights
THE VALUE OF A STATISTICAL LIFE
- Do Energy Efficiency Investments Deliver? Evidence from the Weatherization Assistance Program
(with Meredith Fowlie and Catherine Wolfram), Quarterly Journal of Economics, 2018.
Published Version | Working Paper | Research Summary | Data and Code
Abstract: A growing number of policies and programs aim to increase investment in energy efficiency, because conventional wisdom suggests that people fail to take up these investments even though they have positive private returns and generate environmental benefits. Many explanations for this energy efficiency gap have been put forward but there has been surprisingly little field testing of whether the conventional wisdom is correct. This article reports on the results of an experimental evaluation of the nation’s largest residential energy efficiency program – the Weatherization Assistance Program – conducted on a sample of approximately 30,000 households in Michigan. The findings suggest that the upfront investment costs are about twice the actual energy savings. Further, the model-projected savings are more than three times the actual savings. While this might be attributed to the “rebound” effect – when demand for energy end uses increases as a result of greater efficiency – the article fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits derived from emissions reductions, the costs still substantially outweigh the benefits; the average rate of return is approximately -7.8% annually.
- Measuring the Welfare Effects of Residential Energy Efficiency Programs
(with Hunt Allcott), April 2017.
Working Paper | Research Summary
Abstract: We introduce a framework to evaluate the welfare effects of residential energy efficiency programs and estimate key parameters using a 100,000-household field experiment. Results generally contradict conventional wisdom: there is no evidence of informational or behavioral market failures, efficiency investments entail large non-monetary costs and benefits, and realized energy savings are just 58% of engineering predictions. The programs we study reduce social welfare by $0.18 per subsidy dollar, because investment subsidies are poorly targeted to externality damages and marginal program participants are unlikely to make externality-reducing investments. Such self-selection may undermine socially desirable program expansion in this and other domains.
- The Local Economic and Welfare Consequences of Hydraulic Fracturing
(with Alexander W. Bartik, Janet Currie, and Christopher Knittel), December 2016.
Working Paper | Research Summary
Abstract: Exploiting geological variation within shale deposits and timing in the initiation of hydraulic fracturing, this paper ﬁnds that allowing fracing leads to sharp increases in oil and gas recovery and improvements in a wide set of economic indicators. At the same time, estimated willingness-to-pay (WTP) for the decrease in local amenities (e.g., crime and noise) is roughly equal to -$1000 to -$1,600 per household annually (-1.9% to -3.1% of mean household income). Overall, we estimate that WTP for allowing fracing equals about $1,300 to $1,900 per household annually (2.5% to 3.7%), although there is substantial heterogeneity across shale regions.
- Will We Ever Stop Using Fossil Fuels?
(with Thomas Covert and Christopher R. Knittel), Journal of Economic Perspective. 2016, 30(1): 117-38.
Published Version | Working Paper | Infographic Summary | Data and Code
Abstract: Scientists believe significant climate change is unavoidable without a drastic reduction in the emissions of greenhouse gases from the combustion of fossil fuels. However, few countries have implemented comprehensive policies that price this externality or devote serious resources to developing low-carbon energy sources. In many respects, the world is betting that we will greatly reduce the use of fossil fuels because we will run out of inexpensive fossil fuels (there will be decreases in supply) and/or technological advances will lead to the discovery of less-expensive low-carbon technologies (there will be decreases in demand). The historical record indicates that the supply of fossil fuels has consistently increased over time and that their relative price advantage over low-carbon energy sources has not declined substantially over time. Without robust efforts to correct the market failures around greenhouse gases, relying on supply and/or demand forces to limit greenhouse gas emissions is relying heavily on hope.
- Are the Non-Monetary Costs of Energy Efficiency Investments Large? Understanding Low Take-up of a Free Energy Efficiency Program
(with Meredith Fowlie and Catherine Wolfram), American Economic Review Papers and Proceedings, 2015, 105(5): 201-204.
Published Version | Working Paper | Data and Code
Abstract: We document very low take-up of an energy efficiency program that is widely believed to be privately beneficial. Program participants receive a substantial home "weatherization" retrofit; all installation and equipment costs are covered by the program. Less than 1 percent of presumptively eligible households take up the program in the control group. This rate increased only modestly after we took extraordinary efforts to inform households—via multiple channels—about the sizable benefits and zero monetary costs. These findings are consistent with high non-monetary costs associated with program participation and/or energy efficiency investments.
- Paying Too Much for Energy? The True Costs of Our Energy Choices
(with Adam Looney), Daedalus, 2012, 241(2): 10-30.
Abstract: Energy consumption is critical to economic growth and quality of life. America’s energy system, however, is malfunctioning. The status quo is characterized by a tilted playing field, where energy choices are based on the visible costs that appear on utility bills and at gas pumps. This system masks the “external” costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security. As a result, we pay unnecessarily high costs for energy. New “rules of the road” could level the energy playing field. Drawing from our work for The Hamilton Project, this paper offers four principles for reforming U.S. energy policies in order to increase Americans’ well-being.
- Is There an Energy Efficiency Gap?
(with Hunt Allcott), Journal of Economic Perspectives, 2012, 26(1): 3-28.
Published Version | Working Paper
Abstract: Many analysts of the energy industry have long believed that energy efficiency offers an enormous "win-win" opportunity: through aggressive energy conservation policies, we can both save money and reduce negative externalities associated with energy use. In 1979, Daniel Yergin and the Harvard Business School Energy Project estimated that the United States could consume 30 or 40 percent less energy without reducing welfare. The central economic question around energy efficiency is whether there are investment inefficiencies that a policy could correct. First, we examine choices made by consumers and firms, testing whether they fail to make investments in energy efficiency that would increase utility or profits. Second, we focus on specific types of investment inefficiencies, testing for evidence consistent with each. Three key conclusions arise: First, the evidence presented in the long literature on the subject frequently does not meet modern standards for credibility. Second, when one tallies up the available empirical evidence from different contexts, it is difficult to substantiate claims of a pervasive Energy Efficiency Gap. Third, it is crucial that policies be targeted. Welfare gains will be larger from a policy that preferentially affects the decisions of those consumers subject to investment inefficiencies.
- Reforming the U.S. Coal Leasing Program
(with Kenneth Gillingham, James Bushnell, Meredith Fowlie, Charles Kolstad, Alan Krupnick, Adele Morris, Richard Schmalensee, James Stock), Science, December 2016, 54(6316): 1096-1098.
Abstract: About 40% of all coal mined in the United States is extracted from lands owned by the federal government, under leases managed by the U.S. Department of the Interior (DOI). Burning that coal accounts for 13% of U.S. energy-related greenhouse gas (GHG) emissions (1). With the largest and lowest-cost reserves in the United States, federal coal alone—estimated at nearly 10% of the world's known reserves—has potential to contribute substantially to atmospheric CO2 concentrations (2). In response to calls for reform, DOI has issued a moratorium on new leases while it develops a Programmatic Environmental Impact Statement to guide the first major reform of the program since 1982. We review existing knowledge of key issues relevant to reform, highlighting the social costs of coal extraction, the extent of substitution away from federal coal induced by raising additional leasing revenue, the lack of competition in the leasing auctions, and the incentives inherent in the current leasing program structure. We then turn to critical areas of research that can be done in the near term and would contribute to more informed debate and policy development.
- The Value of a Statistical Life: Evidence from Military Retention Incentives and Occupation-Specific Mortality Hazards
(with Kyle Greenberg, Stephen Ryan and Michael Yankovich), Mimeograph, 2017.
- Estimating the Value of a Statistical Life: The Importance of Omitted Variables and Publication Bias
(with Orley Ashenfelter), American Economic Review Papers and Proceedings, 2004, 94(2): 454-60.
Published Version | Working Paper
- Using Mandated Speed Limits to Measure the Value of a Statistical Life
(with Orley Ashenfelter), Journal of Political Economy, 2004, 112(1): 226-67.
Published Version | Working Paper
Abstract: In 1987 the federal government permitted states to raise the speed limit on their rural interstate roads, but not on their urban interstate roads, from 55 mph to 65 mph. Since the states that adopted the higher speed limit must have valued the travel hours they saved more than the fatalities incurred, this institutional change provides an opportunity to estimate an upper bound on the public’s willingness to trade off wealth for a change in the probability of death. Our estimates indicate that the adoption of the 65‐mph limit increased speeds by approximately 4 percent, or 2.5 mph, and fatality rates by roughly 35 percent. Together, the estimates suggest that about 125,000 hours were saved per lost life. When the time saved is valued at the average hourly wage, the estimates imply that adopting states were willing to accept risks that resulted in a savings of $1.54 million (1997 dollars) per fatality, with a sampling error roughly one‐third this value. We set out a simple model of states' decisions to adopt the 65‐mph limit that turns on whether their savings exceed their value of a statistical life. The empirical implementation of this model supports the claim that $1.54 million is an upper bound, but it provides imprecise estimates of the value of a statistical life.
- A Reexamination of Resource Allocation Responses to the 65-Mph Speed Limit
Economic Inquiry, 2002, 40(2): 271-78.
In a recent issue of Economic Inquiry (354
: 614–20) Lave and Elias (1997) contend that the 1987 increase in speed limits to 65 mph on rural interstate roads caused a reduction in statewide fatality rates. They argue that increased fatality rates on rural interstates were counterbalanced by declines on other roads due to compensatory reallocations of drivers and state police. This article is unable to find any empirical evidence of these reallocations. This removes the empirical basis for their hypothesis and implies that the effect of the 65-mph speed limit can be inferred from an analysis of rural interstates only. On these roads, fatality rates increased dramatically.
MOVING TOWARD EVIDENCE-BASED POLICYMAKING
- Do Credit Market Shocks Affect the Real Economy? Quasi-Experimental Evidence from the Great Recession and ‘Normal’ Economic Times
(with Alex Mas and Hoai-Luu Nguyen), 2015.
Abstract: This paper uses comprehensive data on bank lending and establishment-level outcomes from 1997-2011 to test whether changes in small business bank lending affect the real economy. The shift-share style research design predicts county-level lending shocks using variation in pre-existing bank market shares and estimated bank supply-shifts. Counties with negative predicted supply shocks experienced declines in small business loan originations throughout the entire period, indicating that it is costly for these businesses to find new lenders. Using confidential microdata from the Longitudinal Business Database, we find the predicted lending shocks led to statistically significant, but economically small, declines in both small firm and overall employment during the Great Recession, but did not affect employment during the 1997-2007 period. Overall, this paper’s evidence fails to support the hypothesis that the small business lending channel is an important determinant of economic activity.
- Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments
(with Paul Oyer and Annette Vissing-Jorgensen). Quarterly Journal of Economics, 2006, 121(2): 399-460.
Published Version | Working Paper
Abstract: The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement thai they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.
- Is The ‘Surge’ Working? Some New Facts
MIT Department of Economics Working Paper, 2007.
- Are There Sectoral Anomalies Too? The Pitfalls of Unreported Multiple Hypothesis Testing and a Simple Solution
(with Paul Oyer), Review of Quantitative Finance and Accounting, 2000, 15(1): 37-55.
Abstract:The recent emphasis on sector-specific investment strategies has led to the emergence of industry-specific calendar anomalies, notably the technology sector “summer swoon”. A standard t-test implies that these price movements provide arbitrage opportunities. However, this test fails to account for the many tests that may have preceded the swoon’s discovery. We propose the use of the Bonferroni correction to account for this unreported testing. Its application reverses the conclusions about the summer swoon and finds no evidence of calendar-based price patterns in any other sector. We also use the Bonferroni correction to revisit previously documented, market-wide, anomalies. Conclusions about the most widely cited anomalies (e.g., the January effect) are unchanged, but evidence for some other “anomalies” is substantially weakened. Our results emphasize that in evaluating a proposed anomaly, sectoral in nature or otherwise, it is crucial to account for the hypotheses that were likely to have been tested but not reported.
- The Next Generation of Transportation Policy
(with Cass Sunstein and Sam Ori), March 2017.
Abstract: Motor vehicle fuel-economy standards have long been a cornerstone of U.S. policy to reduce fuel consumption in the light-duty vehicle fleet. In 2011 and 2012 these standards were significantly expanded in an effort to achieve steep reductions in oil demand and greenhouse gas emissions through 2025, consistent with long-term U.S. policy goals. As a policy approach, however, standards that focus on efficiency alone, as opposed to lifetime consumption, impose unnecessarily high costs and do not deliver guaranteed petroleum savings. On the basis of a commitment to cost-benefit analysis, defining U.S. regulatory policy for more than 30 years, we propose a novel policy solution that would implement a cap-and-trade system in transportation. Acknowledging that the very idea of cap and trade has become controversial, we show that this approach would increase the certainty of reductions in fuel consumption in transportation and do so at a far lower cost per gallon avoided. Such an approach is consistent with the regulatory authority existing at key federal agencies.
- Effective Regulation through Credible Cost-Benefit Analysis: The Opportunity Costs of Superfund
in Edward Balleisen and David Moss (eds.) Government and Markets: Toward a New Theory of Regulation, Cambridge; New York: Cambridge University Press, 2010, pp. 52-91.
- Toward a Culture of Persistent Regulatory Experimentation and Evaluation.
in David Moss and John Cisternino (eds.) New Perspectives on Regulation, Cambridge, MA: The Tobin Project, 2009, pp. 111-126.
Abstract: New regulation shouldn't rely on old ideas. Since the 1960s, influential research on government failure helped to drive the movement for deregulation and privatization. Yet even as this branch of research was flourishing, very different ideas were sprouting in the social sciences with profound implications for our understanding of human behavior and the role of government. Some of these ideas, particularly from the field of behavioral economics, have begun to enter into discussions of regulatory purpose, design, and implementation. The process is far from complete, and many other exciting new lines of research - on everything from social cooperation to co-regulation - have hardly been incorporated at all. It is imperative that lawmakers and their constituents be able to draw on the very latest academic work in thinking anew about the role of government. This is the purpose of this book: to make the newest and most important research accessible to a broad audience.
- Civil Rights, the War on Poverty,and Black-White Convergence in Infant Mortality in the Rural South and Mississippi
(with Douglas Almond and Kenneth Chay), September 2007. Accepted Subject to Minor Revisions at American Economic Review.
Abstract: For the last sixty years, African-Americans have been 75% more likely to die during infancy as whites. From the mid-1960s to the early 1970s, however, this racial gap narrowed substantially. We argue that the elimination of widespread racial segregation in Southern hospitals during this period played a causal role in this improvement. Our analysis indicates that Title VI of the 1964 Civil Rights Act, which mandated desegregation in institutions receiving federal funds, enabled 5,000 to 7,000 additional black infants to survive infancy from 1965-1975 and at least 25,000 infants from 1965-2002. We estimate that by themselves these infant mortality benefits generated a welfare gain of more than $7 billion (2005$) for 1965-1975 and more than $27 billion for 1965-2002. These findings indicate that the benefits of the 1960s Civil Rights legislation extended beyond the labor marker and were substantially larger than recognized previously.
- Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings
(with Richard Hornbeck and Enrico Moretti), Journal of Political Economy, 2010, 118(3): 536-98.
Abstract: We quantify agglomeration spillovers by estimating the impact of the opening of a large manufacturing plant on the total factor productivity (TFP) of incumbent plants in the same county. We use the location rankings of profit-maximizing firms to compare incumbent plants in the county where the new plant ultimately chose to locate (the “winning county”), with incumbent plants in the runner-up county (the “losing county”). Incumbent plants in winning and losing counties have similar trends in TFP in the seven years before the new plant opening. Five years after the new plant opening, TFP of incumbent plants in winning counties is 12% higher than TFP of incumbent plants in losing counties. Consistent with some theories of agglomeration economies, this effect is larger for incumbent plants that share similar labor and technology pools with the new plant. Consistent with a spatial equilibrium model, we find evidence of a relative increase in skill-adjusted labor costs in winning counties. This indicates that the ultimate effect on profits is smaller than the direct increase in productivity.
- Quasi-Experimental and Experimental Approaches to Environmental Economics
(with Ted Gayer), Journal of Environmental Economics and Management, 2009, 57(1): 21-44.
Abstract: This paper argues that an increased application of quasi-experimental and experimental techniques will improve understanding about core environmental economics questions. This argument is supported by a review of the limitations of associational evidence in assessing causal hypotheses. The paper also discusses the benefits of experiments and quasi-experiments, outlines some quasi-experimental methods, and highlights some threats to their validity. It then illustrates the quasi-experimental method by assessing the validity of a new one in environmental economics that seeks to estimate the impact of the Endangered Species Act on property markets in North Carolina. Ultimately, the greater application of experimental and quasi-experimental techniques has the potential to identify efficient policies that increase social welfare.
- Bidding for Industrial Plants: Does Winning a ‘Million Dollar Plant’ Increase Welfare?
(with Enrico Moretti). Mimeograph, 2004.
Abstract: Increasingly, local governments compete by offering substantial subsidies to industrial plants to locate within their jurisdictions. This paper uses a novel research design to examine the consequences of successfully bidding for a plant on county-level labor earnings, property values, and public finances. Each issue of the corporate real estate journal Site Selection includes an article titled The Million Dollar Plant that describes how a large plant decided where to locate. These articles report the county where the plant chose to locate (i.e., the 'winner'), as well as the one or two runner-up counties (i.e., the 'losers'). The losers are counties that have survived a long selection process, but narrowly lost the competition. We use these revealed rankings of profit-maximizing firms to form a counterfactual for what would have happened in the winner counties in the absence of the plant opening. We find that a plant opening is associated with a 1.5% trend break in labor earnings in the new plant's industry in winning counties (relative to losing ones) after the opening of the plant (relative to the period before the opening). Property values may provide a summary measure of the net change in welfare, because the costs and benefits of attracting a plant should be capitalized into the price of land. We find a positive, relative trend break of 1.1% in property values. Further, we fail to find any deterioration in local governments' financial position. Overall, the results undermine the popular view that the provision of local subsidies to attract large industrial plants reduces local residents' welfare.
- The Convergence in Black-White Infant Mortality Rates During the 1960s
(With Kenneth Chay), American Economic Review Papers and Proceedings, 2000, 90(2): 326-32.
- The Wage Consequences of Enclave Residence: Evidence from the 1980 and 1990 Censuses
University of California-Berkeley, Center for Labor Economics Working Paper No. 6, 1998.
- Renewing Economically Distressed American Communities
(with Adam Looney), Issues in Science and Technology, 2011.
- Trends: Men in Trouble
(with Adam Looney), Milken Institute Review, 2011, 13(3): 8-16.
Abstract: the past century, a good job was a ticket to the middle class. Hitched to the locomotive of rapid economic growth, the wages of the typical worker seemed to go in only one direction: up. From 1950 to 1970, the average earnings of male workers increased by about 25 percent each decade. And these gains were not concentrated among some lucky few. Rather, earnings rose for most workers, and almost every prime-aged male (ages 25-64) worked.