Constant I. Tra

Vegetable Spirits and Energy Policy

This study investigates the extent to which the 2005 Energy Policy Act, specifically the ethanol mandate, contributed to the rise in farmland values. We use the location of new ethanol plants to identify the capitalization effect of the mandate by these spatially advantaged operations. We use a difference-in-difference propensity score matching estimator to control for the non-random selection of ethanol production facilities. The empirical strategy uses farmland parcel values from the 2001--7 June Agriculture Survey. We find that new ethanol facilities had no effect on nearby farmland values prior to the mandate but had statistically significant effects after the policy. Copyright 2013, Oxford University Press.

Have Renewable Portfolio Standards Raised Electricity Rates? Evidence from U.S. Electric Utilities

Renewable Portfolio Standards (RPS) have been a contentious issue amongst policymakers in recent years. Neoclassical theory would suggest that, in the short-run, RPS mandates will raise electricity rates if the cost of electricity generation via renewable energy technologies exceeds that of convention fossil fuel technologies. This study uses a quasi-experimental approach to investigate the effect of RPS policies on retail residential electricity rates. The study provides one of the first econometric investigations of the economic effect of RPS mandates. The empirical approach uses a panel dataset of 2,602 U.S. electric utilities from 1990 to 2006. The empirical findings provide several policy insights on the effect of RPS mandates. First, a state RPS mandate, on average, positively affects the average residential electricity rate. Second, no spillover effect exists for the RPS effect on electricity rates. In other words, utilities that operate in a RPS state, but are not subject to an RPS requirement, do not experience a significant increase in electric rates. Third, the RPS effect on residential electricity rates is significantly lower in states with a higher wind and solar energy potential. Finally, the magnitude of the RPS effect on residential electricity rates increases for utilities subject to higher requirements. The estimated elasticity of residential electricity rates with respect to an RPS requirement equals roughly 0.3.

Nonlinear income effects in random utility models: revisiting the accuracy of the representative consumer approximation

This article investigates the implications of nonlinear income effects in Random Utility Models (RUM) for measuring general equilibrium welfare impacts. A popular approach in applied welfare analysis is to approximate the expected compensating variation (cv) for an amenity change as the cv of a representative consumer whose indirect utility is given by the expected maximum utility. However, this approach can be misleading in the case of nonmarginal changes as it implies that changes in income do not affect the consumers choice. In this case the true expected cv can be obtained via simulation. Empirical applications to recreational demand find that the bias from the representative approach is small. This article re-evaluates the accuracy of the representative consumer approximation in the context of measuring the general equilibrium welfare impacts of large environmental changes. Our findings suggest that, though the representative consumer approximation could lead to biased point estimates of the expected cv, this bias is overwhelmed by the size of the confidence intervals that result from the empirical estimation of household preferences.

Measuring the General Equilibrium Benefits of Air Quality Regulation in Small Urban Areas

We propose a horizontal sorting model for evaluating the benefits of air quality regulation in small urban areas. Previous horizontal sorting models of air quality valuation, because they rely on Census public-use microdata, where the geographic unit of a house is defined by an area of 100,000 people, can be applied only to large urban centers such as Los Angeles. This study combines housing transactions data with household characteristics in order to estimate the benefits of meeting the daily national ambient air quality standard for ozone to Las Vegas area homeowners.

The implications of the US renewable fuel standard programme for farm structure

ABSTRACT We investigate the impact of the 2005 Renewable Fuel Standard (RFS) on farm structure, particularly farm size. We rely on the salience of a new ethanol plant in a farmers’ local neighbourhood to identify the impact of the RFS mandate on these spatially advantaged farms. To control for the nonrandom selection of ethanol production facilities, we utilize a propensity score matching estimator, and to remove impact of farm-level or market shifting unobservables resulting from shifts in commodity prices we employ a difference-in-difference (DD) matching approach. We estimate the treatment effect of an ethanol production facility on farm size prior to the RFS mandate and after the RFS programme. The effect of the RFS policy on farm size is obtained as the difference between these two DD matching estimators. Overall, our results suggest that the RFS programme raised the probability of farm size increase by roughly 12–18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the programme contributed to a net increase in farm size of 25–32%, on average, for those spatially advantaged farms.

EVALUATING THE WELFARE EFFECTS OF SCHOOL QUALITY IMPROVEMENTS: A RESIDENTIAL SORTING APPROACH: WELFARE EFFECTS OF SCHOOL QUALITY IMPROVEMENTS

Las Vegas experienced improvements in math and reading performance between 2006 and 2011. This study evaluates the benefits of these nonmarginal improvements to Las Vegas area homeowners, using a residential sorting model. We estimate households’ preferences for multiple characteristics including the proportion of proficient students in their assigned elementary school. The estimation accounts for the endogeneity of school quality using school boundary fixed effects. The welfare estimates suggest that the school quality improvements provided substantial benefits to the areas households. We find that benefit measures derived from a hedonic price model are substantially larger than our sorting model benefit measures.

The Implications of the U.S. Renewable Fuel Standard Program for Farm Structure

This study investigates the extent to which the 2005 Renewable Fuel Standard (RFS) has affected farm structure, in particular farm size. Our empirical strategy relies on the opening of an ethanol plant in a farmer’s local neighborhood. We identify the effect of the RFS on the size of farms located in the vicinity of new ethanol plants. Using a unique farm-level panel dataset from the June Agricultural Survey (JAS), the empirical estimation employs two difference-in-difference (DD) propensity score matching models, one prior to the RFS mandate and one incorporating the RFS program, to estimate an average treatment effect on farm size of an ethanol production facility. We then measure the effect of the RFS program on farmland structure as the difference between these two DD matching estimators. Overall, our results suggest that the RFS program raised the probability of farm size increase by roughly 12 to 18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the program contributed to a net increase in farm size of 25 to 32%, on average, for those spatially advantaged farms.