Three essays in environmental and natural resource economics
Abstract
Environmental regulations that grandfather existing plants by not holding them to
the same standards as new plants may have the unintended consequence of retarding new
investment. In my first essay, I develop a dynamic model of a plant's optimal scrapping
decision, which depends on environmental policy. Using data from electric power plants,
I estimate the parameters of the model and assess the impact of the Clean Air Act on
emissions and plant productivity. Over the 1990s, grandfathering provisions increased
emissions by about 78% and decreased productivity by about 3%. Furthermore, I show
that under certain reasonable parameters, given grandfathering, total discounted
environmental damages can be reduced by weakening environmental regulations.
Regulations that restrict pollution by firms also affect decisions about use of labor
and capital. They thus affect relative factor prices and output prices. My second essay
studies the general equilibrium impacts of environmental mandates on the wage, the
return to capital, and relative output prices. It looks at four types of mandates and for
each determines conditions that place more of the burden on labor or on capital. Stricter
regulation does not always place less burden on the factor that is a better substitute for
pollution. Also, a relative restriction on the amount of pollution per unit output creates an
"output-subsidy effect" that affects factor prices in a different way than the traditional
output and substitution effects.
Public goods are provided by both governments and individuals. In response to
an increase in government spending on a public good, individuals may reduce their
contributions. This "crowding-out" effect can occur in the opposite direction. If a
government sees that private donations to a charity have risen, then it may reduce its
public funds to that charity. While the literature focuses on how government spending
crowds out individual giving, the purpose of my third essay is to examine crowding out in
the opposite direction? I test for crowding out using data on private and public
contributions to environmental charities. I find evidence that government grants crowd
out private donations, but evidence is mixed on crowding out in the opposite direction.
Department
Description
text