Essays on Empirical Microeconomics

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My dissertation consists of two chapters that empirically study policy-related questions in applied microeconomics by using structural econometric modeling developed in industrial organization. In the first chapter, I study the welfare effects of a cap-and-trade program. I develop an equilibrium framework that incorporates forward-looking behavior and transaction costs. In the presence of transaction costs in permit trading, investment patterns may depart from the first best outcome. Storable emissions permits allow firms to smooth costs over time, and abatement investment introduces dynamic incentives into compliance decisions. I apply the framework to study the first nine years (1995-2003) of the US Acid Rain Program. Using data on permit transactions and electricity production, I estimate the model and show that variable transaction costs are substantial. I use the estimated model to quantify the effect of a cap-and-trade program in comparison to a uniform standard, given a fixed level of aggregate emissions. I find that the total costs of reducing emissions under cap-and-trade are 16.6% lower. Although health and environmental damages from \\mathrm{SO_{2}} emissions increase due to the change in the geographic distribution of emissions, the net benefit of the cap-and-trade is positive. I also examine the potential gains from trade in the absence of transaction costs. I find more dispersed patterns of investment and less banking of permits, both of which result in cost savings.', 'In the second chapter, a joint work with Kei Kawai and Yasutora Watanabe, we study how voter turnout affects the aggregation of preferences in elections. Under voluntary voting, election outcomes disproportionately aggregate the preferences of voters with low voting cost and high preference intensity. We show identification of the correlation structure among preferences, costs, and perceptions of voting efficacy, and explore how the correlation affects preference aggregation. Using 2004 U.S. presidential election data, we find that young, low-income, less-educated, and minority voters are underrepresented. All of these groups tend to prefer Democrats, except for the less-educated. Democrats would have won the majority of the electoral votes if all eligible voters had turned out.

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  • 09/30/2019
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