Garth Heutel

Crowding out and Crowding in of Private Donations and Government Grants

A large literature examines the interaction of private and public funding of charities, much of it testing if public funding crowds out private funding. In this article, the author looks for two alternative phenomena using a large panel data set gathered from nonprofit organizations’ tax returns. First, the author looks for crowding out in the opposite direction: increased private funding may cause reduced public funding. Second, the author tests whether one type of funding acts as a signal of charity quality and thus crowds in other funding. The author finds evidence that government grants crowd in private donations. Crowding in is larger for younger charities. This is consistent with signaling, if donors know less about younger charities and the signal value is stronger. The author finds no evidence of an effect of private donations on government grants.

Analytical General Equilibrium Effects of Energy Policy on Output and Factor Prices

Abstract Using an analytical general equilibrium model, we find solutions for the effect of energy policy on factor prices as well as output prices. We calibrate the model to the U.S. economy, and we consider a tax on carbon dioxide. By looking at expenditure and income patterns across household groups, we quantify the uses-side and sources-side incidence of the tax. When households are categorized either by annual income or by total annual consumption as a proxy for permanent income, the uses-side incidence is regressive. This result is robust to sensitivity analysis over various parameter values. The sources-side incidence can be progressive, U-shaped, or regressive. Results on the sources side are sensitive to parameter values.

Who bears the burden of a tax on carbon emissions in Japan

We develop a simple general equilibrium model in the style of Harberger to analyze the distributional effects of the proposed “environment tax” on carbon in Japan. We derive closed-form equations that show how a change in the tax rate affects the economy-wide return to capital, wage, and output prices. The two main features of the economy that determine the sources-side incidence of the tax are the factor intensities of the polluting and nonpolluting industries and the elasticity of substitution in production between polluting inputs and labor or capital. The input that is a better substitute for pollution usually bears a lower burden of the tax than the other input, although we find conditions under which this is not true. If the polluting sector is relatively capital intensive, then capital can bear a higher burden of the tax. Calibrating this model to the Japanese economy, we find a trade-off between these two effects. Polluting industries are more capital intensive, but capital is likely to be a better substitute for pollution than is labor.

The Mortality and Medical Costs of Air Pollution: Evidence from Changes in Wind Direction

We estimate the causal effects of acute fine particulate matter exposure on mortality, health care use, and medical costs among the US elderly using Medicare data and a novel instrument for air pollution: changes in local wind direction. We develop a new approach that uses machine learning to estimate the life-years lost due to pollution exposure and show that our procedure reduces bias relative to previous methods. Finally, we characterize treatment effect heterogeneity using both life expectancy and generic machine learning inference. Both approaches find that mortality effects are concentrated in about 25 percent of the elderly population.

The investment Returns of Nonprofit Organizations, Part II: The Value of Focused Attention.

We continue our examination of the investment performance of nonprofit charities and foundations. This analysis tests hypotheses about what types of organizations do better. Our motivating intuition is that nonprofits with greater focus on investment performance will secure higher returns. Our hypotheses are tested by regressing the rate of return for each organization on various characteristics. As expected, nonprofits whose primary business is predominantly financial, such as insurance providers and pension or retirement funds, consistently earn higher returns. The data also support our hypotheses that larger nonprofits, older nonprofits, and private foundations will tend to outperform. The evidence is mixed as to whether nonprofits that pay higher executive salaries or spend more on management earn higher returns.

Incidence, Environmental, and Welfare Effects of Distortionary Subsidies

Government policies that are not intended to address environmental concerns can nonetheless distort prices and affect firms’ emissions. We present an analytical general equilibrium model to study the effect of distortionary subsidies on factor prices, pollution, and welfare. Based on real-world policies, we model an output subsidy, a capital subsidy, relief from environmental regulation, and a minimum level of labor employment that firms must agree to in exchange for the subsidies. Each policy creates both output effects and substitution effects on input prices and emissions. We calibrate the model to the Chinese economy. Variation in production substitution elasticities does not substantially affect input prices, but it does substantially affect emissions. Distortionary subsidies can both raise emissions and decrease output. Therefore, reducing distortionary subsidies can reduce emissions without a trade-off in lost output. Such opportunities arise when the subsidized sector is moderate in size.