Primary Research Focuses: Environmental Economics and Finance

Secondary Research Focus: Public Finance

References: 

• Lars Peter Hansen (Committee Co-chair)
• Lubos Pastor (Committee Co-chair)
• Luigi Zingales
• Eric Zwick

Job Market Paper: "Valuing Local Climate Policy: Evidence from Firm Behavior and Financial Markets"

[Abstract] This paper examines the efficacy of state-level emissions regulations and their local economic effects. Using newly collected data and a difference-in-difference design, I find that regulation reduces employment, output, profitability and equity returns in affected industries, but also lowers emissions and emissions intensity, while increasing R&D and capital investment. To interpret these mixed effects, I develop a spatial equilibrium model in which firms choose location and emissions based on local regulatory stringency. I use observed stock returns of affected firms to quantify the intensity of individual regulations and use these values to recover the structural parameters of the model. I then use the model to assess how the costs of regulation are distributed across firms and workers, and how the magnitude of those costs compare to the social benefits of reduced emissions. I document substantial variation in net benefits across policy types and industries. On average, policies targeting utilities and waste management are beneficial, whereas those focused on fossil fuel extraction and manufacturing are not. The costs are borne approximately equally by workers and firm owners.