April 2024
Climate change threatens global food systems, but the extent to which adaptation will reduce losses remains unknown. Here, we empirically estimate the net impact of producer adaptations around the world using longitudinal data on six staple crops spanning 12,658 sub-national units, capturing two-thirds of global crop calories. We project that adaptation and income growth nearly halve global losses at end-of-century, but substantial residual losses remain for all staples except rice. Global damages are dominated by losses to modern-day breadbaskets that currently exhibit limited adaptation due to favorable climates. We estimate global production declines 5.8 x 10^14 kCal annually per 1C rise in global mean surface temperature (4.6% of current production or 130kCal/person/day, per 1C; p < 0.001). These results suggest a scale of innovation, cropland expansion and/or additional adaptation that might be necessary to ensure global food security in a changing climate.
Resubmitted, Nature. April 2024
The most prevalent climate policies in the U.S. are Renewable Portfolio Standards (RPS), which mandate a specified share of electricity come from sources such as wind and solar. Using a comprehensive data set and a difference-in-differences style research design, we find that electricity prices are 11% higher seven years after RPS passage and carbon emissions are 11-24% lower. Point estimates suggest that the cost per ton of CO2 abatement ranges from $80-$210 in preferred specifications. We also find suggestive evidence that the cost of each increment of mandated renewable generation has declined over time as the costs of renewable energy sources have fallen.
Resubmitted, JPE Micro. July 2024
Market-based environmental regulations are seldom used in developing countries, where pollution is the highest but state capacity is often low. We experimentally evaluate a new particulate matter emissions market, the first in the world, covering industrial plants in a large Indian city. There are three main findings. First, the market functioned well: permit trade was active and plants obtained permits to meet their compliance obligations almost perfectly. Second, treatment plants, randomly assigned to the emissions market, reduced pollution emissions by 20% to 30%, relative to control plants. Third, the market, holding emissions constant, reduces abatement costs by 11% to 14%. These cost estimates are based on a model that estimates heterogeneous plant marginal abatement costs from plant bids for emissions permits. More broadly, we find that emissions can be reduced at small increases in abatement costs. The pollution market therefore has health benefits that exceed costs by at least twenty-five times.
Resubmitted, The Quarterly Journal of Economics, April 2024
Falling off-grid solar prices and subsidized grid extension are revolutionizing choice for the billion people without electricity. We use experimental price variation to estimate demand over all electricity sources in Bihar, India, during a four-year period when electrification rates leapt from 27% to 64%. We find that household surplus from electrification tripled, with gains due nearly as much to off-grid solar as to the subsidized grid. Choice matters—the surplus from electrification is 3-5× greater than from any one source. Nonetheless, we project future electrification will come mainly from the grid, since households prefer the grid as they grow wealthier.
April 2024
This paper develops the first globally comprehensive and empirically grounded estimates of worker disutility due to future temperature increases caused by climate change. Harmonizing daily worker-level data from seven countries representing nearly a third of the world’s population, we first evaluate the causal effect of daily temperature on labor supply, recovering an inverted U-shaped relationship where extreme cold and hot temperatures lead to labor supply losses for workers in weather-exposed industries. We then develop the first micro-founded, global estimates for how future climate change will impact workers, accounting for expected shifts in the global workforce towards less weather-exposed industries. Interpreting labor supply impacts of climate change through a simple theoretical framework, we monetize the implied disutility to workers of a warmer climate, a welfare cost not captured in any existing estimates. Under a high emissions scenario, we estimate the increase in labor disutility is valued at roughly 1.8% of global GDP in 2099, with damages being especially large in today’s poor and/or hot locations while cold locations benefit. Finally, we estimate that the release of an additional ton of CO2 today will cause expected labor disutility damages of $17.0 under a high emissions scenario and $10.8 under a moderate scenario, using a 2% discount rate that is justified by US Treasury rates over the last two decades. Accounting for uncertainty in these marginal damages when individuals are risk averse increases their value by 31% (high emissions scenario) and 62% (moderate scenario) under a standard parameterization of the utility function.
Under Review, April 2024
With the U.S. Environmental Protection Agency, we developed a machine learning model to predict sites where inspections would uncover severe violations of hazardous waste regulations. We estimate that using our model to target inspections will increase the “hit rate” by 46%. As is often the case, the model’s data are highly selected (representing about ~2% of sites), suggesting that classic selection bias concerns make our estimate’s relevance to the full population unknown. We therefore conducted a national field test of the model’s versus the EPA’s inspection targets; the model’s relative performance was even better, increasing the hit rate by 79%.
April 2024
The demand for clean air is a key input in assessing the benefits and costs of air pollution policies, yet there are few estimates of this demand in the world’s most polluted cities. We present results from a field experiment designed to estimate the marginal willingness-to-pay (MWTP) for clean air in a representative sample of the urban poor in Delhi, India. Specifically, we estimate the trade-off between pollution exposure and prices revealed by individual decisions to adopt pollution masks. By combining random variation in the price of masks with weekly variation in ambient air pollution, we estimate average MWTP of $0.26 per unit reduction in fine particulate matter (PM2.5), an estimate that is lower than comparable measures from other settings. We find no evidence that demand is meaningfully higher when: (i) we provide information about the health impacts of PM2.5 and (ii) the government rolls out an unprecedented-scale mask distribution campaign. Mean estimates of MWTP, however, mask substantial heterogeneity: our data suggest that demand for clean air is significantly higher for high-income, more-educated, and male individuals. This suggests economic growth may be critical for India to substantially clean its air, over the short and medium-term.
April 2024
We use a randomized experiment and a structural model to evaluate two home energy retrofit programs, which subsidized energy efficiency investments such as new insulation and heating systems. Two empirical findings drive the welfare analysis. First, the average energy savings were only 68 percent of the predictions provided to participants. Second, the programs’ subsidies were not closely aligned with environmental externality reductions. In our model, the inflated savings predictions and misaligned subsidies mean that the programs reduced total surplus, but with correct savings predictions, a program that aligns subsidies with externality reductions would generate positive social returns. Energy efficiency programs deliver much smaller gains than Pigouvian energy taxes, both because few households participate in the programs and because program participants still consume too much energy when energy prices are below social marginal cost.
April 2024
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.
April 2024
We estimate the value of a statistical life (VSL), or the willingness to trade-off wealth and mortality risk, among 430,000 U.S. Army soldiers choosing whether to reenlist from 2002-2010. Using a discrete choice random utility approach and significant variation in retention bonuses and mortality risk, we recover average VSL estimates between $500,000 and $900,000, an order of magnitude smaller than U.S. civilian labor market estimates. We then document substantial heterogeneity by recovering indifference curves between wealth and mortality risk. The VSL increases with mortality risk within type, and soldiers in combat occupations have lower VSLs than those in noncombat occupations.
Becker Friedman Institute for Economics WP#2021-75, September 2021
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.
September 2015
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.
MIT Department of Economics Working Paper No.12-24, September 2012. Revision requested by Quarterly Journal of Economics.
There is a paucity of facts about the effects of the recent military “Surge” on conditions in Iraq and whether it is paving the way for a stable Iraq. Selective, anecdotal and incomplete analyses abound. Policy makers and defense planners must decide which measures of success or failure are most important, but until now few, if any, systematic analyses were available on which to base those decisions. This paper applies modern statistical techniques to a new data file derived from more than a dozen of the most reliable and widely-cited sources to assess the Surge’s impact on three key dimensions: the functioning of the Iraqi state (including violent civilian casualties); military casualties; and financial markets’ assessment of Iraq’s future. The new and unusually rigorous findings presented here should help inform current evaluations of the Surge and provide a basis for better decision making about future strategy.
The analysis reveals mixed evidence on the Surge’s effect on key trends in Iraq. The security situation has improved insofar as violent civilian fatalities have declined without any concurrent increase in casualties among coalition and Iraqi troops. However, other areas, such as oil production and the number of trained Iraqi Security Forces have shown no improvement or declined. Evaluating such conflicting indicators is challenging.
There is, however, another way to assess the Surge. This paper shows how data from world financial markets can be used to shed light on the central question of whether the Surge has increased or diminished the prospect of today’s Iraq surviving into the future. In particular, I examine the price of Iraqi state bonds, which the Iraqi government is currently servicing, on world financial markets. After the Surge, there was a sharp decline in the price of those bonds, relative to alternative bonds. This decline signals a 40% increase in the market’s expectation that Iraq will default. This finding suggests that, to date, the Surge is failing to pave the way toward a stable Iraq and may in fact be undermining it.
MIT Department of Economics Working Paper, November 2007. Revision requested by B.E. Journal of Economic Analysis & Policy.
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.
MIT Department of Economics Working Paper No. 07-04, February 2007. Accepted subject to minor revisions at American Economic Review.
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.
November 2004.
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.
NBER Working Paper No. 10053, March 2004.
In the last century Irish, German, Italian, Jewish and other immigrant groups have tended to congregate in ethnic enclaves upon their arrival in the U.S. Over time members of these groups moved away from enclaves and assimilated into the mainstream society and economy. Today, Hispanics appear to be following this same pattern. While these broad patterns of movement are well documented, little is known about immigrants’ labor market experience inside the enclave that might motivate them.
This paper uses the 1980 and 1990 5% Census samples to investigate the wage consequences of enclave residences for Hispanic males. There are three principal findings. First, there are important citywide and Hispanic-specific demand shocks that influence where Hispanics choose to settle and affect their wage rates. Any examination of Hispanics’ wages should control for these factors. Second, on average Hispanics choose to live in cities with a large existing stock of Hispanics. There is heterogeneity, however, across Hispanics sub-populations; the lesser skilled (i.e., immigrants and the English deficient) aggregates are drawn to enclaves, while natives and the English proficient tend to leave high-Hispanic cities. Third across a number of specifications, I find that enclave residence reduces the relative (compared to white natives) wages of Hispanics. In the least restrictive specification, I instrument for the 1980 to 1990 change in Hispanics’ citywide share of the labor force with the 1980 share and find that a 1-percentage point increase in the share Hispanics in a city reduces the Hispanic citywide relative wage by approximately 1%. This result holds across broadly defined Hispanic sub-populations, although the evidence is strongest among the least skilled.
University of California-Berkeley, Center for Labor Economics Working Paper No. 6, November 1998.
We examine data from a serological study that randomized participation incentives ($0, $100, $500). Minority and poor households are underrepresented at lower incentives. We develop a framework that uses randomized incentives to disentangle non-contact and hesitancy and find that underrepresentation occurs because minority and poor households are more hesitant to participate, not because they are harder to contact. In particular, reservation payments for contacted households in minority and poor neighborhoods are substantially more likely to exceed $100. The $500 incentive closes hesitancy gaps and restores representativeness on observable dimensions including hospitalization and insurance rates, and a COVID-19 risk index.
American Economic Review: Insights (Forthcoming)
Rather than facing an isolated climate change challenge, this paper argues that the world must confront the Global Energy Challenge (GEC) that requires all countries to make trade-offs between three often competing and interrelated goals: inexpensive and reliable energy, clean air, and limiting damages from climate change. This paper presents seven facts that help illuminate the contours of the GEC and the interactions between the three goals. It concludes by outlining potential solutions: pricing energy at its full social cost, investing in technical and policy innovation, improving information on pollution and climate damages, and treating energy as a private good.
AEA Papers and Proceedings. May 2024, 114: 1-30.
We conducted a nationwide field experiment in China to evaluate the direct and indirect impacts of assigning firms to public or private citizen appeals treatments when they violate pollution standards. There are three main findings. First, public appeals to the regulator through social media substantially reduce violations and pollution emissions, while private appeals cause more modest environmental improvements. Second, experimentally adding “likes” and “shares” to social media appeals increases regulatory effort, suggesting visibility as an important mechanism. Third, treatment pollution reductions are not offset by control firm increases, based on randomly varying the proportion of treatment firms at the prefecture-level.
American Economic Review, March 2024, 114(3): 815-850.
The US Securities and Exchange Commission recently proposed a rule that would mandate that public companies report their greenhouse gas (GHG) emissions. This follows similar efforts in the European Union (EU) and United Kingdom. One rationale is that disclosure will provide information on material risks to investors, making it evident which firms are most exposed to future climate policies. In addition, some believe that reporting will galvanize pressure from companies’ key stakeholders (e.g., customers and employees), leading them to voluntarily reduce their emissions. This reasoning is in line with evidence for financial markets and disclosure mandates that form the third wave of environmental policy, which follows a wave of direct regulation and a wave of market-based approaches. But what might such disclosure reveal? We provide a first-cut preview of what we might learn about the climate damages caused by each company’s GHG emissions by drawing on one of the largest global datasets, which covers roughly 15,000 public companies.
Science, August 2023, 381: 837-840.
Global sea level rise (SLR) may impose substantial economic costs to coastal communities worldwide, but characterizing its global impact remains challenging because SLR costs depend heavily on natural characteristics and human investments at each location—including topography, the spatial distribution of assets, and local adaptation decisions. To date, several impact models have been developed to estimate global costs of SLR, yet the limited availability of open-source and modular platforms that easily ingest up-to-date socioeconomic and physical data sources limits the ability of existing systems to transparently incorporate new insights. In this paper, we present a modular open-source platform designed to address this need, providing end-to-end transparency from global input data to a scalable least-cost optimization framework that estimates adaptation and net SLR costs for nearly 10,000 global coastline segments and administrative regions. Our approach accounts both for uncertainty in the magnitude of global SLR and spatial variability in local relative sea level rise. Using this platform, we evaluate costs across 110 possible socioeconomic and SLR trajectories in the 21st century. We find annual global SLR costs of $180 billion to $200 billion in 2100 assuming optimal adaptation, moderate emissions (RCP 4.5) and middle-of-the-road (SSP 2) socioeconomic trajectories. Under the highest SLR scenarios modeled, this value ranges from $400 billion to $520 billion. We make this platform publicly available in an effort to spur research collaboration and support decision-making, with segment level physical and socioeconomic input characteristics provided at https://doi.org/10.5281/zenodo.6449231, source code for this dataset at https://doi.org/10.5281/zenodo.6456115, the modeling framework at https://doi.org/10.5281/zenodo.6453099, and model results at https://doi.org/10.5281/zenodo.6014086.
Geoscientific Model Development, July 2023, 16(14): 4331-4366.
We use data from a serological study that experimentally varied financial incentives for participation to detect and characterize selection bias. Participants are from neighborhoods with substantially lower COVID-19 risks. Existing methods to account for the resulting selection bias produce wide bounds or estimates that are inconsistent with the population. One explanation for these inconsistent estimates is that the underlying methods presume a single dimension of unobserved heterogeneity. The data suggest that there are two types of nonparticipants with opposing selection patterns. Allowing for these different types may lead to better accounting for selection bias.
American Economic Association Papers and Proceedings, May 2023, 113: 526-566.
New technologies allow perfect detection of environmental violations at near-zero marginal cost, but take-up is low. We conducted a field experiment to evaluate enforcement of water conservation rules with smart meters in Fresno, CA. Households were randomly assigned combinations of enforcement method (automated or in-person inspections) and fines. Automated enforcement increased households’ punishment rates from 0.1 to 14%, decreased water use by 3%, and reduced violations by 17%, while higher fine levels had little effect. However, automated enforcement also increased customer complaints by 1,102%, ultimately causing its cancellation and highlighting that political considerations limit technological solutions to enforcement challenges.
The Review of Economics and Statistics, March 2023, 1-36.
Using 40 countries’ subnational data, we estimate age-specific mortality-temperature relationships and extrapolate them to countries without data today and into a future with climate change. We uncover a U-shaped relationship where extreme cold and hot temperatures increase mortality rates, especially for the elderly. Critically, this relationship is flattened by both higher incomes and adaptation to local climate. Using a revealed preference approach to recover unobserved adaptation costs, we estimate that the mean global increase in mortality risk due to climate change, accounting for adaptation benefits and costs, is valued at roughly 3.2% of global GDP in 2100 under a high emissions scenario. Notably, today’s cold locations are projected to benefit, while today’s poor and hot locations have large projected damages. Finally, our central estimates indicate that the release of an additional ton of CO2 today will cause mortality-related damages of $36.6 under a high emissions scenario and using a 2% discount rate, with an interquartile range accounting for both econometric and climate uncertainty of [-$7.8, $73.0]. Under a moderate emissions scenario, these damages are valued at $17.1 [-$24.7, $53.6]. These empirically grounded estimates exceed the previous literature’s estimates by an order of magnitude.
Quarterly Journal of Economics, November 2022, 137(4): 2037-2105.
Since its release in 2010, the US government’s social cost of carbon (SCC) has played a central role in climate policy both domestically and internationally. However, rapid progress in climate science and economics over the past decade means that the original SCC estimate is no longer based on the frontier of scientific knowledge. Specifically, extensive new research about the climate, the economy, and their relationship has altered our understanding of the magnitudes of the projected physical and economic impacts of climate change, as well as their heterogeneity across space and time. This article, which was written as the Biden presidential administration was actively rebuilding the US SCC, provides concrete recommendations on how to base the SCC on the most recent research advances and thus return it to the scientific frontier.
Review of Environmental Economics and Policy, July 2022, 16(2): 196-218.
We examine the introduction of automatic air pollution monitoring to counter suspected tampering at the local level, a central feature of China’s “war on pollution.” Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find an immediate and lasting increase of 35% in reported PM10 concentrations post–automation. Moreover, automation’s introduction increased online searches for face masks and air filters that are strong predictors of purchases. Overall, our findings suggest that the biased and imperfect information prior to automation led to suboptimal investments in defensive measures, plausibly imposing meaningful welfare costs.
American Economic Review: Insights, March 2022, 4(1): 54-70.
It is my great pleasure to discuss this paper by Rennert and others that suggests a new approach for the US government to update the SCC. The authors’ approach emphasizes socioeconomic uncertainty and its correlation with damages. My goal in this comment is to situate their contribution in the broader context of a holistic approach to updating the US government’s SCC, underline drawbacks of the previous approach, and suggest criteria for the SCC calculation that makes it consistent with advances in the literature, economic theory, and policy objectives. Overall, my conclusion is that the authors have taken an important step in fixing what ails the SCC, but their improvements need to be digested and examined by the scientific community. Further, to this point, their solutions fail to exploit the advances in damage estimation, which many believe to be the area where the most progress has been made in the last ten to fifteen years. Overall, this is an important contribution but more is needed to return the US government’s SCC to the frontier of scientific understanding about climate damages.
Brookings Papers on Economic Activity, 2021, Fall: 276-294.
Estimates of global economic damage caused by carbon dioxide (CO2) emissions can inform climate policy. The social cost of carbon (SCC) quantifies these damages by characterizing how additional CO2 emissions today impact future economic outcomes through altering the climate. Previous estimates have suggested that large, warming-driven increases in energy expenditures could dominate the SCC, but they rely on models that are spatially coarse and not tightly linked to data. Here we show that the release of one ton of CO2 today is projected to reduce total future energy expenditures, with most estimates valued between −US$3 and −US$1, depending on discount rates. Our results are based on an architecture that integrates global data, econometrics and climate science to estimate local damages worldwide. Notably, we project that emerging economies in the tropics will dramatically increase electricity consumption owing to warming, which requires critical infrastructure planning. However, heating reductions in colder countries offset this increase globally. We estimate that 2099 annual global electricity consumption increases by about 4.5 exajoules (7 per cent of current global consumption) per one-degree-Celsius increase in global mean surface temperature (GMST), whereas direct consumption of other fuels declines by about 11.3 exajoules (7 per cent of current global consumption) per one-degree-Celsius increase in GMST. Our finding of net savings contradicts previous research, because global data indicate that many populations will remain too poor for most of the twenty-first century to substantially increase energy consumption in response to warming. Importantly, damage estimates would differ if poorer populations were given greater weight.
Nature, 2021, 598: 308–314.
The decade from 2010 to 2019 marked a significant turning point in China’s approach to environmental regulation and pollution. This article describes the recent trends in air and water quality, with a focus on the 5 years following the Chinese government’s announcement of its “war on pollution” in 2014. We review the emerging literature that has taken advantage of recent improvements in data availability and accuracy to understand the social, economic, and health impacts of environmental pollution in China.
Review of Environmental Economics and Policy, 2021, 15(2): 281-299.
Delhi faces some of the world’s highest concentrations of PM2.5, the most damaging form of air pollution. Although awareness of outdoor air pollution is rising across the world, there is limited information on indoor air pollution (IAP) levels, particularly in heavily polluted cities like Delhi. Even less evidence exists on how IAP varies by socio-economic status (SES), and whether or not addressing information gaps can change defensive investments against IAP. In this paper, we deploy Indoor Air Quality Monitors (IAQMs) in thousands of Delhi households across varying socio-economic strata in order to document IAP levels during the peak wintertime air pollution period. Across high and low SES households, we document indoor PM2.5 levels that are: (1) extraordinarily high — more than 20 times World Health Organization (WHO) standards; (2) only 10 percent lower in high (versus low) SES households; and (3) significantly higher than levels reported by the nearest, outdoor government monitors, the main source of public information on air pollution in this setting. We then report on a field experiment that randomly assigned IAQMs, as well as an opportunity to rent an air purifier at a subsidized price, across medium and high SES homes during the 2019-20 winter season.
American Economic Association Papers and Proceedings, May 2021, 111: 420-424.
In response to the historic 2011–2017 California drought, local governments enacted a raft of conservation policies and little is known about which ones explain the sharp decline in residential water consumption. To answer this question, we use a novel data set of hourly water consumption data for over 82,300 households in Fresno, California where water consumption declined by nearly a third and have three main findings. First, we estimate the price elasticity of demand for water to be 0.16 for marginal rates and 0.39 for average rates. Second, reducing the number of days where outdoor watering is allowable from 3 to 2 substantially decreases water use, despite the availability of opportunities to substitute between permitted and non-permitted hours, days, and seasons. Third, “bully pulpit” pronouncements about the water crisis increased public awareness of drought conditions but did not contribute to water savings. Overall, higher water prices explain 40-44% of the changes in residential water use observed during our sample period in Fresno and reductions in the number of days when outdoor watering is allowable explain 45-51% of these changes. However, the absence of experimental or quasi-experimental variation in these policies means that we interpret this associational evidence cautiously.
Environmental and Energy Policy and the Economy, 2021, 2(1): 190-225.
On March 24, 2020, the Prime Minister of India announced the world’s largest COVID-19 lockdown. We summarize the initial impacts of the lockdown for a representative sample of mostly poor and non-migrant workers in Delhi. Using Facebook mobility data, we show that intra-city movement dropped 80 percent following the announcement. Using microeconomic survey data, collected before and during the crisis, we highlight three patterns. First, the lockdown resulted in significant economic costs, with income and days worked falling by 57 and 73 percent, respectively. Second, the lockdown resulted in widespread compliance with public health directives: mask usage rose by 73 percentage points (pp); time spent indoors increased by 51 pp; smoking decreased by 13 pp; and handwashing rose by 10 pp. Third, the economic impacts of the lockdown were somewhat mitigated by government food assistance, which 36 percent of our sample accessed. Over the first seven weeks of the lockdown, we do not observe alarming levels of hunger, scarcity, access to medical care, or security. Yet in our data, concerns remain about mental health, supply chains, and personal savings, against the backdrop of a rising infection rate. Moreover, it remains to be seen whether public health compliance will persist, as the novelty, fear, and media coverage of COVID-19 subside.
COVID Economics, October 2020, 51: 134-158.
This paper develops and implements a method to monetize the impact of moderate social distancing on deaths from COVID-19. Using the Ferguson et al. (2020) simulation model of COVID-19’s spread and mortality impacts in the United States, we project that 3-4 months of moderate distancing beginning in late March 2020 would save 1.7 million lives by October 1. Of the lives saved, 630,000 are due to avoided overwhelming of hospital intensive care units. Using the projected age-specific reductions in death and age-varying estimates of the United States Government’s value of a statistical life, we find that the mortality benefits of social distancing are about $8 trillion or $60,000 per US household. Roughly 90% of the monetized benefits are projected to accrue to people age 50 or older. Overall, the analysis suggests that social distancing initiatives and policies in response to the COVID-19 epidemic have substantial economic benefits.
COVID Economics, April 2020, 7: 1-22.
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 2010 and 2012, these standards were significantly expanded in an effort to achieve steep reductions in oil demand and greenhouse gas (“GHG”) emissions through 2025. In 2018, following a review of the standards, the Environmental Protection Agency and National Highway Traffic Safety Administration proposed instead to freeze the standards at 2020 levels, citing high program costs (and potential safety issues).
The current debate over the future of U.S. fuel economy standards provides an opportunity to consider whether the existing approach could be improved to achieve environmental and other goals at a lower cost. The current policy prescribes standards that focus on fuel economy alone, as opposed to lifetime consumption, and treats vehicle categories differentially, meaning that it imposes unnecessarily high costs and does not deliver guaranteed GHG savings.
On the basis of a commitment to cost-benefit analysis, which has defined U.S. regulatory policy for more than thirty years, we propose novel reforms with three main features: (1) the direct regulation of expected fuel consumption and GHG emissions without consideration of the type or size of the vehicle; (2) use of existing data to assign lifetime fuel consumption and GHG emissions to each model; and (3) creation of a robust cap-and-trade market for automakers to reduce compliance costs. We show that these reforms would reduce fuel consumption and GHG emissions in transportation with greater certainty and do so at a far lower cost per ton of GHG emissions avoided. We also show that the Environmental Protection Agency and the Department of Transportation could implement such an approach within their existing statutory authority.
Harvard Environmental Law Review, 2020, 44(1): 1-42.
This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. We present evidence that these shortfalls are a consequence of electricity being treated as a right and that this sets off a vicious four-step circle. In step 1, because a social norm has developed that all deserve power independent of payment, subsidies, theft, and nonpayment are widely tolerated. In step 2, electricity distribution companies lose money with each unit of electricity sold and in total lose large sums of money. In step 3, government-owned distribution companies ration supply to limit losses by restricting access and hours of supply. In step 4, power supply is no longer governed by market forces and the link between payment and supply is severed, thus reducing customers’ incentives to pay. The equilibrium outcome is uneven and sporadic access that undermines growth.
Journal of Economic Perspectives, 2020 34(1): 145-169.
Using comprehensive data on bank lending and establishment-level outcomes from 1997–2010, this paper finds that small business lending is an unimportant determinant of small business and overall economic activity. A shift-share style research design is implemented to predict county-level lending shocks using variation in preexisting bank market shares and bank supply shifts. Counties with negative predicted lending shocks experienced declines in small business loan originations, indicating that it is costly to switch lenders. However, small business loan originations have an economically insignificant and generally statistically insignificant impact on both small firm and overall employment during the Great Recession and normal times.
American Economic Journal: Economic Policy, 2020, 12(1): 200-225.
Exploiting geological variation and timing in the initiation of hydraulic fracturing, we find that fracking leads to sharp increases in oil and gas recovery and improvements in a wide set of economic indicators. There is also evidence of deterioration in local amenities, which may include increases in crime, noise, and traffic and declines in health. Using a Rosen-Roback-style spatial equilibrium model to infer the net welfare impacts, we estimate that willingness-to-pay (WTP) for allowing fracking equals about $2,500 per household annually (4.9 percent of household income), although WTP is heterogeneous, ranging from more than $10,000 to roughly 0 across 10 shale regions.
American Economic Journal: Applied Economics, 2019, 11 (4): 105–155.
High pollution persists in many developing countries despite strict environmental rules. We use a field experiment and a structural model to study how plant emission standards are enforced. In collaboration with an Indian environmental regulator, we experimentally doubled the rate of inspection for treatment plants and required that the extra inspections be assigned randomly. We find that treatment plants only slightly increased compliance. We hypothesize that this weak effect is due to poor targeting, since the random inspections in the treatment found fewer extreme violators than the regulator’s own discretionary inspections. To unbundle the roles of extra inspections and the removal of discretion over what plants to target, we set out a model of environmental regulation where the regulator targets inspections, based on a signal of pollution, to maximize plant abatement. Using the experiment to identify key parameters of the model, we find that the regulator aggressively targets its discretionary inspections, to the degree that half of the plants receive fewer than one inspection per year, while plants expected to be the dirtiest may receive ten. Counterfactual simulations show that discretion in targeting helps enforcement: inspections that the regulator assigns cause three times more abatement than would the same number of randomly assigned inspections. Nonetheless, we find that the regulator’s information on plant pollution is poor, and improvements in monitoring would reduce emissions.
Econometrica, 2018, 86(6): 2123-2160.
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.
Quarterly Journal of Economics, 2018, 133(3): 1597-1644.
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.
Science Advances, 2017, 3(12): 1-9
Journal of Political Economy, 2017, 125(6): 1891-1902.
Science, 2017, 357(6352): 655.
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.
American Economic Review, 2017, 107(10): 2958-2989.
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.
Proceedings of the National Academy of Sciences, 2017, 114(39): 10384-10389.
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.
Science, December 2016, 354(6316): 1096-1098.
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.
Science, April 2016, Vol. 352(6283): 292-293.
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 gasses, relying on supply and/or demand forces to limit greenhouse gas emissions is relying heavily on hope.
Journal of Economic Perspectives. 2016, 30(1): 117-138.
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.
American Economic Journal: Economic Policy, 2016, 8(1): 80-114.
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).
Journal of Political Economy, 2016, 124(1): 105-109.
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.
American Economic Review, 2015, 105(2): 678-709.
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.
American Economic Review Papers and Proceedings, 2015, 105(5): 201-204.
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.
American Economic Review Papers and Proceedings, 2015, 105(5): 226-231.
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.
American Economic Review Papers and Proceedings, 2015, 105(5): 247-251.
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)
Journal of Economic Literature, 2015, 53(1): 5-42. Reprinted in Economics of the Environment: Selected Readings, Seventh Edition, editor Robert Stavins, Cheltenham, UK: Edward Elgar, 2019.
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.
American Economic Review, 2014, 104(10): 3038-3072.
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.
Science, 2014, Vol. 346(6214): 1189-1190.
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.
Science, 2014, 346(6211): 815-816.
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.
Science, 2014, 344(6181): 257-259.
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.
Quarterly Journal of Economics, 2013, 128(4):1499-1545.
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).
Proceedings of the National Academy of Sciences, 2013, 110(32): 12936-12941.
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.
American Economic Review Papers and Proceedings, 2013, 103(3): 314-319.
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
Review of Environmental Economics and Policy, 2013, 7(1): 23-46.
Fisher et al. (2012) (hereafter, FHRS) have uncovered coding and data errors in our paper, Deschênes and Greenstone (2007) (hereafter, DG). We acknowledge and are embarrassed by these mistakes. We are grateful to FHRS for uncovering them. We hope that this Reply will also contribute to advancing the literature on the vital question of the impact of climate change on the US agricultural sector.
American Economic Review, 2012, 102(7):3761-3773.
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.
Daedalus, 2012, 241(2): 10–30.
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.
Journal of Economic Perspectives, 2012, 26(1): 3-28.
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.
American Economic Journal: Applied Economics, 2011, 3(4): 152-185.
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.
American Economic Review Papers and Proceedings, 2011, 101(3): 435-441.
Using nationally representative data files from 1970s and 1990s college attendees, we find that in the 1970s matriculation at historically black colleges and universities (HBCUs) was associated with higher wages and an increased probability of graduation, relative to attending a traditionally white institution. By the 1990s, there is a wage penalty resulting in a 20 percent decline in the relative wages of HBCU graduates between the two decades. There is modest support for the possibility that the relative decline in wages associated with HBCU matriculation is partially due to improvements in TWIs’ effectiveness at educating blacks.
American Economic Journal: Applied Economics, 2010, 2(1): 116-148.
B.E. Journal of Economic Analysis & Policy, 2010, 10(2): 28-40 (Symposium); Reprinted in Mark Cohen, Don Fullerton and Robert Topel (eds.) Distributional Aspects of Energy and Climate Policies, Cheltenham, UK: Edward Elgar, 2013, 28-40
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.
Journal of Political Economy, 2010, 118(3): 536-598.
American Economic Review Papers and Proceedings, 2009, 99(2): 211-217.
American Economic Review Papers and Proceedings, 2009, 99(2): 184-190.
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.
Journal of Environmental Economics and Management, 2009, 57(1): 21-44.
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.
Quarterly Journal of Economics, 2008, 123(3): 951-1003.
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.
American Economic Review, 2007, 97(1): 354-385.
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.
Quarterly Journal of Economics, 2006, 121(2): 399-460.
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.
Journal of Political Economy, 2005, 113(2): 376-424.
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.
Journal of Environmental Economics and Management, 2004, 47(3): 585-611. Reprinted in Spatial Aspects of Environmental Policy, editors Jacqueline Geoghegan and Wayne Gray.
American Economic Review Papers and Proceedings, 2004, 94(2): 454-460.
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.
Journal of Political Economy, 2004, 112(1): 226-267.
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.
Journal of Risk and Uncertainty, 2003, 27(3): 279-300.
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.
Quarterly Journal of Economics, 2003, 118(3): 1121-1167.
American Economic Review Papers and Proceedings, 2003, 93(2): 442-448.
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.
Journal of Political Economy, 2002, 110(6): 1175-1219. Reprinted in The Economics of Pollution Control, editor Kathleen Segerson. Cheltenham, UK: Edward Elgar, 2011.
In a recent issue of Economic Inquiry (35[3]: 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.
Economic Inquiry, 2002, 40(2): 271-278.
American Economic Review Papers and Proceedings, 2000, 90(2): 326-332.
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.
Review of Quantitative Finance and Accounting, 2000, 15(1): 37-55.
It is well known that air pollution is harmful to human health. What is much less known is how it specifically affects people over the long term. China’s Huai River policy, which dispensed free coal to northern China for winter heating, has inadvertently revealed to us that air pollution literally shaves years off our lives. But China has made considerable progress in confronting this pollution.
Asia Global Online, July 2018
Pollution is the largest environmental cause of disease and premature death in the world today. Diseases caused by pollution were responsible for an estimated 9 million premature deaths in 2015—16% of all deaths worldwide—three times more deaths than from AIDS, tuberculosis, and malaria combined and 15 times more than from all wars and other forms of violence. In the most severely affected countries, pollution-related disease is responsible for more than one death in four.
Pollution disproportionately kills the poor and the vulnerable. Nearly 92% of pollution-related deaths occur in low-income and middle-income countries and, in countries at every income level, disease caused by pollution is most prevalent among minorities and the marginalised. Children are at high risk of pollution-related disease and even extremely low-dose exposures to pollutants during windows of vulnerability in utero and in early infancy can result in disease, disability, and death in childhood and across their lifespan.
The Lancet, 2018, Vol 391(10119), 462–512.
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.
Economic and Political Weekly , 2015, 50(8): 40-46.
Health and South Asia, Cambridge: Harvard South Asia Institute, 2013, pp. 61-65.
Issues in Science and Technology, 2011.
For most of 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.
Milken Institute Review, 2011, 13(3): 8-16.
This paper connects experience with emissions trading, from programs like the U.S. Rain program, to lessons for implementation of a Trading Pilot Scheme in India. This experience suggests that four areas are especially important for successful implementation of an emissions trading scheme.
Discussion Paper, Ministry of Environment and Forest, Government of India, August, 2010.
Edward Balleisen and David Moss (eds.) Government and Markets: Toward a New Theory of Regulation, Cambridge; New York: Cambridge University Press, 2010, 52-91.
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.
David Moss and John Cisternino (eds.) New Perspectives on Regulation, Cambridge, MA: The Tobin Project, 2009, pp. 111-126.
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.
Economic and Political Weekly, 2008, 43(32): 71-76.
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.
Surveys and Perspectives Integrating Environment and Society, 2008, 1(1).
We analyzed the last major imposition of mandatory disclosure requirements in U.S. equity markets. The 1964 Securities Acts Amendments extended several disclosure requirements to large firms traded over-the-counter that had applied to listed firms since 1934. We presented four pieces of evidence that investors valued the new disclosure requirements. The results are consistent with the hypothesis that mandatory disclosure laws can cause managers to focus more narrowly on the maximization of shareholder value.
Regulation, 2006, 29(2): 52-61.
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