Job Market Paper
Do We Need Speed Limits on Freeways? (Job Market Paper)
When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). This paper uses large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. Privately, a value of a statistical life (VSL) of $6.0 million or less justifies driving faster, but the social planner's VSL would have to be below $0.9 million to justify higher speed limits. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits. Although speed limits are blunt instruments that differ from an ideal Pigovian tax on speed, it is highly unlikely that any hidden administrative costs or unforeseen behavioral adjustments could make eliminating speed limits an efficiency-improving proposition.
Publications
Unintended Consequences from Nested State & Federal Regulations: The Case of the Pavley Greenhouse-Gas-per-Mile Limits (2011), Journal of Environmental Economics and Management, forthcoming (with Lawrence Goulder and Mark Jacobsen)
Investment Treaties and Hydrocarbon Taxation in Developing Countries (2011), CESifo Conference Volume Taxation in Developing Countries, The MIT Press, forthcoming (with Johannes Stroebel)
Fuelling Growth: What Drives Energy Demand in Developing Countries? (2009), The Energy Journal 30(3): 91-114 (with Mattia Romani)
Learning-by-Doing and the Optimal Solar Policy in California (2008), The Energy Journal 29(3): 131-151 (with Kenneth Gillingham and James Sweeney)
An Options Approach to Investment in a Hydrogen Infrastructure (2006), Energy Policy 34(17): 2949-2963 (with Gert Jan Kramer and Roald Ramer)
Research Papers
Resource Extraction Contracts Under Threat of Expropriation: Theory and Evidence (with Johannes Stroebel)
Revised and Resubmitted at The Review of Economics and Statistics
We use fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resource-rich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. With asymmetric information about a country's expropriation cost even optimal contracts feature expropriations. Near-linearity in the oil price of real-world hydrocarbon contracts also helps to explain expropriations. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation, and decreasing in its production expertise. The timing of actual expropriations is consistent with our model.
Winner of the USAEE/IAEE Best Working Paper Award, from the United States Association for Energy Economics.
Has Energy Leapfrogging Occurred on a Large Scale?
USAEE-IAEE Working Paper 10-047, October 2010
Today�s less-developed countries (LDCs) have access to energy technologies that did not exist when today�s richer countries were at similar stages of development. Do LDCs therefore consume less energy per capita than rich countries in the past? And is their economic growth associated with a lower growth in energy consumption? This paper aims to answer these two questions. I use data on energy consumption, prices and GDP for 76 countries to estimate the income elasticity of energy demand for both current LDCs and industrialized countries in the past. I find that LDCs neither consume less energy than rich countries in the past nor have a lower income elasticity. I conclude that any energy savings from access to more efficient technologies have been offset by other trends, such as a shift towards a more energy-intensive consumption bundle or industrial outsourcing. This conclusion has important implications for projections of future energy consumption and carbon emissions.
The Power of the Church - The Role of Roman Catholic Teaching in the Transmission of HIV (with Johannes Stroebel)
We use the appointment of a Kenyan Roman Catholic archbishop as a natural experiment to analyze the impact of church authorities' teaching on sexual behavior. Using a triple-difference approach, we find that following the archbishop's counter-doctrinal assertion that condom use within a marriage can be acceptable to reduce HIV infections, Catholic married couples within the archdiocese who had access to condoms were 7.0 percentage points more likely to use condoms than unmarried Catholics in the diocese, non-Catholics within the diocese, or Catholics in other dioceses. These results are quantitatively large and robust to a number of econometric specifications. The evidence for whether advocating condom use leads to an increase in infidelity or a decrease in respect for women is not conclusive. Our results suggest an important role for the Catholic church in the fight against HIV. This is especially relevant in light of Pope Benedict XVI's recent reconciliatory statement about condom use.
Do property rights lead to sustainable catch increases? (with Josh Sladek Nowlis)
Conditionally Accepted at Marine Resource Economics
Individual transferable quotas (ITQs) assign property rights in fisheries by granting individual fishers a tradable share of the total allowable catch. ITQs were originally proposed to enhance profitability and safety, but may also provide incentives for more conservation-minded fishing practices. Recent empirical evidence shows a reduction in the likelihood of stock collapse and a threefold increase in catches two decades after ITQ implementation. Yet these spectacular catch increases follow modest 20% reductions in reported catches. We used standard fisheries models to analyze whether these catch trends are consistent with the theory underlying conservation benefits from property rights. We find that it appears unlikely that catch increases are attributable to ITQs alone. Improved catch reporting systems, enacted concurrent with ITQs, may more plausibly explain sustained catch increases. This warrants caution about claims that property rights are the cause of sustainable catch gains.
Other Research In Progress
Bigger is Better: Avoided Deforestation Offsets in the Face of Adverse Selection, Stanford PESD Working Paper #102 (with Suzi Kerr)
Voluntary opt-in programs to reduce emissions in unregulated sectors or countries have spurred considerable discussion. Since any regulator will make errors in predicting baselines and participants will self-select into the program, adverse selection will reduce efficiency and possibly environmental integrity. In contrast, pure subsidies lead to full participation but require large financial transfers. We show that increasing the scale of offset programs so that entire political jurisdictions (e.g. regions or nations) must choose whether to opt in as one entity improves efficiency significantly and reduces infra-marginal transfers dramatically. Discounting (paying less than full value for offsets) is inefficient, but reduces the cost to the offsets buyer. If offset buyers are individually rational, any feasible policy will involve some discounting. This paper frames the issues in terms of avoiding deforestation but the results are applicable to any voluntary offset program.
The Efficiency of Renewable Portfolio Standards in the Presence of Cap-and-Trade (with Kenneth Gillingham)
Many existing and proposed climate policies in the U.S. and the E.U. feature a cap-and-trade alongside a renewable portfolio standard (RPS), a requirement that a certain percentage of all electricity be generated from renewable sources. However, if we already have a cap-and-trade, what would we have to believe for an RPS to be economic efficiency-improving? And what is the loss from introducing an RPS rather than other innovation policies? We show that an RPS can improve economic efficiency if there are innovation market failures such as non-appropriable knowledge spillovers from learning-by-doing or research and development. In the theoretical part of this paper, we elucidate the conditions under which an RPS would be economic efficiency-improving (but not first-best). In the empirical part, we use a partial equilibrium simulation model to quantify the impact of a potential future combination of RPS & cap-and-trade in the United States.
Elasticity in the Supply of Used Cars: Estimating the Scrap Decision (with Mark Jacobsen)
We examine the relationship between used vehicle prices, their scrap rates, and the gasoline price. The sensitivity of used car scrap decisions to changes in used car values � a �scrap elasticity� � underlies the fleet composition effect of gasoline taxes. The scrap elasticity also influences the effectiveness of fuel economy standards, as changes in new car markets influence prices on the used market. Our results demonstrate substantial elasticity in scrap decisions for cars older than 9 years, where a gasoline price change of $1 alters the number of efficient vs. inefficient vehicles scrapped by 18%. In contrast, among used cars less than 9 years old we find large vehicle price effects with almost no elasticity on the scrap margin.
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