Environmental & Resource Economics, Industrial Organization, Applied Econometrics

Current topics: market-based instruments, environmental justice, climate change, productivity, production function


Why Is Trading So Important in Cap and Trade? The Role of Economies of Scale and Productivity
[Latest Full Paper] [Online Appendix] [Presented at the NBER Summer Institute IO 2022]

Economists have long established the cost effectiveness of cap and trade (CAT) owing to cost heterogeneity between firms. I offer a new value of CAT: cost reduction within firms owing to productivity improvement and economies of scale. Overcoming the unobserved-cost challenge, I extend the literature on production functions and introduce a method to estimate economies of scale using data on output and input quantity. I combine this method with a difference-in-difference strategy that exploits the policy transition from non-tradable caps to cap and trade in the Norwegian cod fishery to identify the causal impacts of trading fishing quotas. I find trading increased vessels' productivity and facilitated the realization of existing economies of scale. Vessels acquired quotas, realized economies of scale, and moved toward the minimum average cost levels by upgrading their sizes and going fishing more often. I decompose the output-based value of traded quotas and find economies of scale played a main role in the first few years after a big vessel acquired quotas. These results highlight that (i) flexibility through tradability in environmental regulations can benefit firms through reducing production costs, (ii) firms reduce costs by boosting existing production factors and advancements beyond scale economies, and (iii) consolidation can be a sign of cost efficiency owing to economies of scale rather than market power abuse.


[3] The Costs and Environmental Justice Concerns of NIMBY in Solid Waste Disposal
Journal of the Association of Environmental and Resource Economists, accepted in September 2022, forthcoming in May 2023.
[Ungated Version] [Online Appendix]
Previously chapter 2 in my PhD dissertation. Previous job market paper
IAERE 10th Anniversary Young Scholar's Award for Best PhD Dissertation Chapter
Previously circulated as: When Does "Not in My Backyard" Make Matters Worse? Environmental Justice Concerns in Solid Waste Disposal
Second place for the Graduate Award in "Community, Culture, and Society," at The 27th Student Showcase, February 2019, University of Arizona

[+] Abstract

Many recent US Congresses have proposed bills that allow state and local governments to restrict interjurisdictional waste shipments. Using data on intercounty waste flows in California and a random utility model of haulers’ decisions about where to deposit waste from each county, this paper studies the economic costs of import bans and import taxes and the implications on the distribution of waste disposal by race (and ethnicity). I find NIMBY-motivated laws would reduce intercounty waste transport at substantial economic costs. Furthermore, a NIMBY law enacted in a county, despite reducing the county’s imports, could increase total intercounty waste in the whole state, generating additional external costs of transportation. A universal import ban in all counties would reduce transboundary waste but it would lead to substitution of waste away from facilities near white residents and toward facilities near Hispanic residents, exacerbating distributional concerns.

[2] Nonlinear Pricing, Biased Consumers, and Regulatory Policy, Journal of Economics (Zeitschrift fur Nationalokonomie) (2022)
First version: Nonlinear Pricing, Biased Consumers, and Regulatory Policy (May 13, 2017), cited in Martimort and Stole (AER: Insights, 2020)
Previously chapter 1 in my PhD dissertation

[+] Abstract

Recent empirical analyses show consumers in electricity and water markets respond to average price rather than marginal price, calling for information provision policies that help correct the consumers' bias. This paper characterizes the regulated tariff if the regulator is informed about the average-price response of consumers. I find the regulated tariff for biased consumers promotes equity gains by featuring quantity premia and providing access to utility consumption for a larger population than in the world of rational consumers. The world of biased consumers may also yield higher total welfare. These results bring up the opportunity costs of the information provision programs that help consumers correct the bias.

[1] Auctioning the Digital Dividend: A Model for Spectrum Auctions, with Toby Daglish and Yigit Saglam.
International Journal of Industrial Organization, 53: 63-98, July 2017.

[+] Abstract

We model a spectrum auction where firms purchase units to participate in a constrained, multi-product, downstream market. We use dynamic programming techniques to numerically solve for the optimal bidding strategy in a clock auction. Firms value constraining competitor market power, so incumbents often bid aggressively to shut out entrants. We find that high cost firms may hold up the market, so the auction may be inefficient and generate zero revenue. An auction may be optimal for a regulator maximising total surplus. A regulator maximising auction revenue sets reserve prices high enough to restrict spectra sold, effectively behaving as a monopolist.


Living near Trash: Testing Residential Mobility in the Context of Solid Waste Disposal
[Latest Version (2019)]
Chapter 3 in my PhD dissertation

[+] Abstract

Forming sound environmental justice policy involves understanding whether the correlation between race and environmental bads results from the disproportionate siting of locally unwanted land uses or nuisance-driven residential mobility. This paper presents evidence of residential sorting in the context of municipal solid waste disposal facilities, using a difference-in-difference strategy. Specifically, I compare changes in population after an opening (and closing) of a trash site between blocks within one mile to faraway blocks. Results show a 11% decrease in white population and a 44% increase in Hispanic population in a block after a trash site opened within one mile. Closing the site does not change white population immediately while inducing a 11% fall in Hispanic population, relative to the period during which the site was operating.

The Term Structure of Freight Rates with Roar Adland and Vit Prochazka

Climate Change and Market Structures with Shanjun Li and Ivan Rudik


Journal of Environmental Economics and Management, Journal of the Association of Environmental and Resource Economists, International Journal of Industrial Organization, Journal of Economics (Zeitschrift fur Nationalokonomie)