Published papers

Youth smoking can biologically reduce learning productivity. It can also reduce youths' expected returns to education and lower their motivation to go to school, where smoking is forbidden. Using rich household survey data from rural China, this study investigates the effect of youth smoking on educational outcomes. Youth smoking is clearly an endogenous variable; to obtain consistent estimates of its impact, we use counts of registered alcohol vendors and a food price index as instrumental variables. Since the variable that measures smoking behavior is censored for non-smoking adolescents, we implement a two-step estimation strategy to account for the censored nature of this endogenous regressor. The estimates indicate that smoking one cigarette per day during adolescence can lower students' scores on mathematics tests by about 0.08 standard deviations. However, we find no significant effect of youth smoking on either Chinese test scores or total years of schooling.

We examine the role of information in understanding the differential effects of income on the demand for health. In the health capital framework of Grossman (JPE, 1972), we derive the testable hypotheses that individuals adjust their diet in a healthier direction upon receiving negative health information, and that the effect is greater for richer individuals. Based on unique Chinese longitudinal data and a regression discontinuity design that exploits the exogenous cutoff of systolic blood pressure in the diagnosis of hypertension, we find that, upon receiving hypertension diagnosis, individuals reduce fat intake significantly, and richer individuals reduce more. Our results also indicate that among the rich, hypertension diagnosis is more effective for individuals with lower education.

To quantify the economic impacts of Japan’s feebate policy, a random-coefficients logit model is estimated for quarterly automobile sales between 2007 and 2012 from the Japanese new car market. For identification of the structural parameters, we exploit the policy-induced variation in effective car prices and the location of product-specific vehicle taxes as instruments. The estimated demand system allows us to simulate counterfactual Bertrand-Nash equilibria in response to alternative policy scenarios. Our results indicate that Japan’s feebate policy induced a sizable increase in economic surplus, yet only a small improvement in sales-weighted average fuel efficiency, relative to the no-policy counterfactual. We also design an optimal feebate policy, which maximizes total economic surplus subject to a tax revenue constraint, by explicitly accounting for market power, product attributes, and carbon dioxide emissions rates. The policy is predicted to induce sizable improvements in both economic surplus and average fuel efficiency over Japan’s feebate policy without requiring any decrease in tax revenues.

Design of environmental regulation has substantial implications for size distribution and mass of firms within and across industries in the long run. In a general equilibrium model that accounts for endogenous entry and exit of heterogeneous firms, the welfare impacts of emissions trading are analytically decomposed into the effects on economy-wide income, mass of firms, firm size distribution, output price markups, and factor prices. Distortionary impacts on size distribution and permit price depend on the conditionality of permit distribution, interactions between changes in entry-exit conditions and in aggregate accounting conditions, the factor intensity of entry, and coverage of non-pollution-intensive sectors in emissions trading.

We estimate the causal effect of ride-hailing entry on transport-related air pollution, disentangling its mediating effect through changes in commuting modes in U.S. cities. To do so, we combine two sets of empirical approaches. First, for our main outcome regression, we leverage granular satellite-based NO2 concentration data and a newly constructed Google Trends-based measure of ride-hailing presence, with the staggered difference-in-differences design. Second, to explore its mediating mechanism, we use household-level commuting mode data to run two auxiliary regressions: commuting modes on ride-hailing entry and ambient NO2 concentration on commuting modes. For identification on the latter, we construct our instruments by combining geography-based instruments with leave-one-out regional average exposure to Uber’s official entry. We find robust evidence that (i) ride-hailing improves air quality in highly dense cities, but has no significant impact in cities with low to medium density and (ii) this air quality improvement is indeed mediated by the associated changes in commuting mode choices. Our findings provide strong empirical support for the hypothesis that the environmental impact of ride-hailing depends on its complementarity with public transit.

Environmental regulation often creates regulatory loopholes that are not ideal in first-best settings. Such loopholes affect the marginal costs of alternative compliance strategies, leading to distortion in firm's compliance choice. We quantify the unintended effect of such loopholes on technical change in the Japanese automobile industry, using variant-level data on new vehicle launches. We employ a triple difference strategy, exploiting the two-fold treatment-control structures within each product segment, due to regulation-induced variations in the Japanese fuel economy standards over time. Our results indicate that regulation-induced differences in technical trade-offs have induced a distortion not only in product attributes but also in technical progress in fuel economy technology.

We investigate efficiency properties of binary ecolabels in a homogeneous good market with heterogeneous consumers. Faced with the minimum technology standard, firms make endogenous entry, certification, and price/quantity decisions. We consider both perfect and imperfect competition with or without sunk fixed costs. Our findings are as follows. Ecolabeling alone does not achieve the first-best outcome and, to achieve the second best, may need to set the standard less strict than the efficient level. Without sunk fixed costs, ecolabeling can achieve the first-best outcome provided that both the technology standard and the complementary pollution tax are set at efficient levels. With sunk fixed costs, however, differential excise taxes that would restore allocative efficiency induce more entry than optimal, and thus, can be even welfare decreasing relative to no tax outcome. Tightening the technology standard may ameliorate such an adverse effect of the corrective tax system by reducing excessive entry and pollution per output by the certified firms. © 2011 Elsevier B.V.

© 2017 Elsevier B.V. This paper examines the causal effects of retirement on health investment behavior among Japanese permanent employees. We find that the Japanese employees participate less in unhealthy habits (smoking and drinking) after retiring from their permanent employment, and after completely ceasing to work, they further increase participation in healthy life habits (regular exercise). We also find gender differences in these responses.

© 2015. American Geophysical Union. All Rights Reserved. Water-quality trading requires inducing permit prices that account properly for spatially explicit damage relationships. We compare recent work by Hung and Shaw (2005) and Farrow et al. (2005) for river systems exhibiting branching and nonlinear damages. The Hung-Shaw scheme is robust to nonlinear damages, but not to hot spots occurring at the confluence of two branches. The Farrow et al. (2005) scheme is robust to branching, but not to nonlinear damages. We also compare the two schemes to each other. Neither dominates from a welfare perspective, but the comparison appears to tilt in favor of the Farrow et al. scheme.

This paper proposes a general empirical strategy to estimate willingness-to-pay (WTP) for exogenous risk mitigation when environmental risks are endogenous in protective actions and consumers are imperfectly informed about the ambient risk levels. The strategy consists of a set of survey techniques and the dummy endogenous variable model (Heckman, 1978) to control for correlation in unobserved errors that enter the WTP equation and the protection-decision equation. The method is applied to the non-market valuation survey data on arsenic contamination in drinking water. Our results indicate that the estimated WTPs are significantly higher for households without self-protective action. Our approach thus offers not only the correct welfare estimate for exogenous reduction of environmental risks, but also yields policy implications qualitatively much different from the conventional approach. We also estimate the welfare value of the policy to inform and educate the public about the arsenic risk simultaneously with public risk mitigation. The estimated welfare value is similar to, though slightly higher than, that of risk mitigation without information component. This occurs due to the competing effects of information dissemination and risk mitigation efforts. © 2010 Elsevier B.V.

We evaluate the welfare consequences of the new U.S. arsenic standard for drinking water, using contingent valuation survey and recent cost data for the small rural community water systems in Minnesota that have had arsenic levels above the new standard prior to its implementation. Using variation in actual arsenic levels and an elicitation method that recognizes the dependence of welfare values on both ambient arsenic concentrations and self-protection levels, the welfare values of the new arsenic rule are estimated at $6-$23 per household per year for communities with less than 10 μg/L of arsenic currently in their water and $31-$78 for communities with more than 10 μg/L of arsenic. Given cost estimates of $230-$2,006 and the fact that a substantial portion of the cost needs to be internally financed, the new rule may have substantially negative welfare consequences for a number of small communities. © 2010 by the American Geophysical Union.

Consumers are often uninformed, or unsure, about the ambient level of environmental risk. An optimal policy must jointly determine efficient levels of self-protection, information provision, and public risk mitigation efforts. Unfortunately, conventional welfare measures are not amenable to welfare analysis in the presence of imperfect information. We develop a theoretical welfare measure, called quasi-compensating variation, that is a natural extension of compensating variation (CV). We show that this welfare measure offers not only a money metric of the "value of information," but also a means to appropriately evaluate the welfare effects of various policies when consumers are imperfectly informed about ambient risk. This welfare measure allows us to obtain a number of results that the traditional CV measure fails to offer. In particular, we show that the consumer's willingness to pay for a (small) environmental risk reduction is higher for those who underestimate ambient risk than for those who overestimate or are perfectly informed if the marginal return to self-protection increases with ambient risk.