Job Market Paper
Regulators often impose trade restrictions in environmental permit markets to redistribute value to groups that do not directly benefit from permit trade, such as labor in regulated firms, at the expense of lowering gains from trade. I evaluate the efficiency and distributional impacts of two common trade restrictions in Iceland’s fisheries permit market: segmented trading by firm size and individual production requirements. Using detailed harvest and permit trading data linked to administrative records on worker employment and earnings, I conduct a difference-in-differences analysis showing that permit trade increases the harvest share of productive boats by 15 percentage points, shifts income from lower- to higher-income workers, and reduces aggregate labor intensity by 12%. I further demonstrate that the trade restrictions, designed to counteract these labor impacts, are binding and lower productivity. To quantify the distinct trade-offs from each restriction, I develop a model of fishery production and permit trading to simulate profits, labor demand, and worker earnings in equilibria without the restrictions. Per dollar of foregone profit, segmentation increases labor demand 20 times more than the production requirement, while the production requirement redistributes 14% more income to low-income workers than segmentation. Implementing both restrictions outperforms the production requirement alone and is preferable to segmentation alone if regulators aim to balance job creation with a compressed income distribution.
Research Papers
Additionality and Asymmetric Information in Environmental Markets: Evidence from Conservation Auctions with Anna Russo.
Market mechanisms aim to deliver environmental services at low cost. However, this objective is undermined by participants whose conservation actions are not marginal to the incentive — or “additional” — as the lowest cost providers of environmental services may not be the highest social value. We investigate this potential market failure in the world’s largest auction mechanism for ecosystem services, the Conservation Reserve Program, with a dataset linking bids in the program’s scoring auction to satellite-derived land use. We use a regression discontinuity design to show that three of four marginal winners of the auction are not additional. Moreover, we find that the heterogeneity in counterfactual land use introduces adverse selection in the market. We then develop and estimate a joint model of multi-dimensional bidding and land use to quantify the implications of this market failure for the performance of environmental procurement mechanisms and competitive offset markets. We design alternative auctions with scoring rules that incorporate the expected impact of the auction on bidders’ land use. These auctions increase efficiency by using bids and observed characteristics to select participants based on both costs and expected additionality.
Coverage: VoxDev
Research in Progress
Spatially Managing the Commons with Aaron Berman.