Cleaning Up

Kevin Lewis

September 15, 2021

Voters and Donors: The Unequal Political Consequences of Fracking
Michael Sances & Hye Young You
Journal of Politics, forthcoming

Over the last 15 years, the shale gas boom has transformed the US energy industry and numerous local communities. Political representatives from fracking areas have become more conservative, yet whether this elite shift reflects mass preferences is unclear. We examine the effects of fracking on the political participation of voters and donors in boom areas. While voters benefit from higher wages and employment, other fracking-induced community changes may dampen their participation. In contrast, donors experience more of the economic gains without the negative externalities. Combining zip code-level data on shale gas wells with individual-data on political participation, we find fracking lowers voter participation and increases donations. Both of these effects vary in ways that benefit conservatives and Republicans. These findings help explain why Republican candidates win more elections and become more conservative in fracking areas. Our results show broadly positive economic changes can have unequal political impacts. 

The Effect of Peer Comparisons on Polluters: A Randomized Field Experiment among Wastewater Dischargers
Dietrich Earnhart & Paul Ferraro
Environmental and Resource Economics, August 2021, Pages 627–652

Peer comparisons combine descriptive and injunctive messages about social norms. In experiments, these comparisons have encouraged pro-environmental behaviors among consumers. Consumers, however, are not the only sources of environmental externalities. Firms and other organizations also damage the environment. Yet organizations may not respond to peer comparisons in the same way that consumers respond because organizations have different objectives, constraints, and decision-making processes. In a pre-registered field experiment with 328 municipal wastewater treatment facilities in Kansas, we randomly sent some facilities a certified letter that contrasted, using text and a graphic, each facility’s discharge behavior to the behaviors of other facilities in the state. We estimate the effect of these peer comparisons on the degree to which the recipient facilities complied with discharge limits under the U.S. Clean Water Act. On average, letter recipients reported discharge ratios 8% lower than non-recipients in the eighteen-month period after letters were sent (95% CI [-15%, -1%]), although we cannot detect an effect in all post-treatment quarters. We believe that the results warrant further experimental replications and extensions to examine the cost-effectiveness of reducing pollution through peer comparisons. 

The Role of Government in the Market for Electric Vehicles: Evidence from China
Shanjun Li et al.
Cornell University Working Paper, August 2021

Governments in many countries have offered various incentives to promote the diffusion of electric vehicles (EVs).This study examines the effectiveness of various policy measures that underlie the rapid development of the EV market in China, by far the world's largest such market. The analysis is based on detailed data on EV sales, local and central government incentive programs, and charging stations in 150 cities from 2015 to 2018. The empirical framework addresses the potential endogeneity of key variables, such as local policies and charging infrastructure, by using a city-border-regression design and instrumental variable approach. We find that consumer subsidies for vehicle purchases accounted for more than half of EV sales in China. Nevertheless, investments in charging infrastructure were much more cost-effective than consumer subsidies. An inexpensive policy that merely provided EVs with a distinctive, green license plate was strikingly effective. These findings demonstrate the varying efficacy of different policy instruments and highlight the critical role of the government in promoting clean technologies.

Closing the Loop in a Circular Economy: Saving Resources or Suffocating Innovations?
Sophie Zhou & Sjak Smulders
European Economic Review, forthcoming

Policymakers around the world are increasingly embracing the idea of a “circular economy” (CE), an economy built on the principle of reuse of materials and produced goods through recycling, refurbishing, and extended product life. By using less new materials per unit of value added, a CE is considered good for both the environment and the economy. Yet closing the material loop also changes the structure of the economy and the incentives for labor- and resource-productivity enhancing innovations. The overall economic impact is thus not so clear. This paper develops a two-sector endogenous growth model with Schumpeterian innovation, in which the primary sector continuously develops new products and uses primary resources in production, while the secondary sector refurbishes retired products for reuse. We show that increased refurbishing increases short-run consumption, but reduces resource prices (relative to wages) and crowds out the incentives for developing new, possibly less resource-intensive products. If innovations are strongly resource-saving, raising the refurbishing rate leads to a net economic loss. 

Fine Particulate Matter and Dementia Incidence in the Adult Changes in Thought Study
Rachel Shaffer et al.
Environmental Health Perspectives, August 2021

Using the Adult Changes in Thought (ACT) population-based prospective cohort study in Seattle, we linked spatiotemporal model-based PM2.5 exposures to participant addresses from 1978 to 2018. Dementia diagnoses were made using high-quality, standardized, consensus-based protocols at biennial follow-ups. We conducted multivariable Cox proportional hazards regression to evaluate the association between time-varying, 10-y average PM2.5 exposure and time to event in a model with age as the time axis, stratified by apolipoprotein E (APOE) genotype, and adjusted for sex, education, race, neighborhood median household income, and calendar time. Alternative models used calendar time as the time axis.

We report 1,136 cases of incident dementia among 4,166 individuals with nonmissing APOE status. Mean [mean ± standard deviation (SD)] 10-y average PM2.5 was 10.1 (±2.9) μg/m3. Each 1-μg/m3 increase in the moving average of 10-y PM2.5 was associated with a 16% greater hazard of all-cause dementia [1.16 (95% confidence interval: 1.03, 1.31)]. Results using calendar time as the time axis were similar.

When Cryptomining Comes to Town: High Electricity-Use Spillovers to the Local Economy
Matteo Benetton, Giovanni Compiani & Adair Morse
University of California Working Paper, May 2021

Cryptomining, the clearing of cryptocurrency transactions, uses large quantities of electricity. We document that cryptominers' use of local electricity implies higher prices for existing small businesses and households. Studying the electricity market in Upstate NY and using the Bitcoin price as an exogenous shifter of the supply curve faced by the community, we estimate that small businesses and households have a negative elasticity to the instrumented price of electricity, with elasticities of -0.17 and -0.07 respectively. Using our estimations, we calculate counterfactual electricity bills, finding that small businesses and households paid $79 million and $165 million extra annually in Upstate NY (or $1B nationally) because of cryptomining demand-for-electricity effects. Using data on China, where prices are fixed, we find that rationing of electricity in cities with cryptomining entrants deteriorate wages and investments, consistent with an electricity crowding out of the local economy. Local governments in both Upstate NY and China, however, realize more business taxes, but only offsetting a small portion of the higher community electricity bill costs. Our results point to a yet-unstudied negative spillover from technology processing to local communities, which would need to be considered against welfare benefits. 

Comparison information in energy efficiency labeling: Real estate listings
Reuven Sussman et al.
Journal of Environmental Psychology, forthcoming

Research on heuristics and energy labels shows that the decision context and the meaningfulness of energy information can affect decision-making. In this experiment, we test whether home energy labels that differ in how they present context information about energy savings, and whether those labels include energy cost information that matters to consumers, differ in their ability to influence home buying decisions. A simulated real estate website used by a national sample of U.S. home buyers (N = 1538) shows that energy efficiency labels with more salient context information can more effectively encourage selection of efficient homes. The mock website experimentally tested energy labels with varying levels of context information and employed a disguised discrete choice task as the dependent variable. Using home buyers’ clicking behavior on the mock website, we calculated the likelihood of clicking on efficient listings and willingness to increase purchase price for efficiency. Presenting efficiency as a score along a line provided the most salient context information of all labels. It was also the most effective method of encouraging home buyers to select efficient listings and place a high monetary value on efficiency. Presenting efficiency information for only the most efficient homes (voluntary labelling) reduced the amount of context information available to consumers and was least effective at encouraging selection of efficient homes. Energy cost information in energy labels was only moderately effective in this experiment, possibly because of unintended context effects. Results demonstrate the importance of context information in labels as well as the importance of heuristics such as the anchoring heuristic. 

Racial Disparities in the Health Effects from Air Pollution: Evidence from Ports
Kenneth Gillingham & Pei Huang
NBER Working Paper, July 2021

This study examines the uneven effects of air pollution from maritime ports on physical and mental health across racial groups. We exploit quasi-random variation in vessels in port from weather events far out in the ocean to estimate how port traffic influences air pollution and human health. We find that one additional vessel in a port over a year leads to 3.0 hospital visits per thousand Black residents within 25 miles of the port and only 1.0 per thousand for whites. We assess a port-related environmental regulation and show that the policy can help alleviate racial inequalities in health outcomes.

North-South Displacement Effects of Environmental Regulation: The Case of Battery Recycling
Shinsuke Tanaka, Kensuke Teshima & Eric Verhoogen
NBER Working Paper, August 2021

This study examines the effect of a tightening of the U.S. air-quality standard for lead in 2009 on the relocation of battery recycling to Mexico and on infant health in Mexico. In the U.S., airborne lead dropped sharply near affected plants, most of which were battery-recycling plants. Exports of used batteries to Mexico rose markedly. In Mexico, production increased at battery-recycling plants, relative to comparable industries, and birth outcomes deteriorated within two miles of those plants, relative to areas slightly farther away. The case provides a salient example of a pollution-haven effect between a developed and a developing country. 

Where the Rubber Meets the Road: Pavement Damage Reduces Traffic Safety and Speed
Margaret Bock, Alexander Cardazzi & Brad Humphreys
NBER Working Paper, August 2021

Road maintenance constitutes a significant component of public transportation spending at all levels of government. Formulation of efficient transportation infrastructure policy requires information about factors affecting road and traffic conditions. We generate the first causal evidence that decreasing pavement quality impacts vehicle crash rates and decreases average speed. Results from Instrumental Variable models using spatially and temporally disaggregated data from Federal-Aid Highway System (FAHS) roads in California show statistically and economically significant increases in vehicle crash rates and decreases in average vehicle speed caused by road damage. These impacts imply significant increases in social costs attributable to road damage. 

The “Butterfly Effect” in Strategic Human Capital: Mitigating the Endogeneity Concern About the Relationship Between Turnover and Performance
Ithai Stern et al.
Strategic Management Journal, forthcoming

Prior literature on the relationship between the departure of strategic human capital (SHC) and firm performance is equivocal. One source of this ambiguity is the potential endogeneity: is it the SHC departure that leads to poor firm performance, or is it poor firm performance leading to the SHC departure? We respond to repeated calls to address this issue by using the Fukushima nuclear accident in Japan as an exogenous event which triggered a “butterfly effect” that influenced the departure decisions of individuals working for firms near a nuclear plant in the U.S. but not the firms’ performance. Our results provide strong evidence that the departure of strategic human capital undermines firm performance, and that the effect is amplified by the strength of employee-firm relationships.


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