Three essays on environmental and regulatory economics

This dissertation encompasses three chapters. The first chapter examines the effect of information disclosure policy on triggering peer effects among firms that influence their compliance decisions. The second chapter examines how environmental attitudes change with economic conditions and whether short-run changes in environmental attitudes translate into policy changes. The third chapter examines the impact of electoral votes on the distribution of ad hoc agricultural farm disaster payments in the US. There is growing policy-level interest in the use of information disclosure as a regulatory instrument to improve firms’ behavior. However, little has been done using micro-level data to investigate whether information provision may trigger peer influence among firms that that affects their compliance behavior. Using station-level inspection verification data from the Mexican gasoline market, the first chapter examines whether gas stations react to peers’ performance to adjust their own compliance decisions. The information disclosure policy assigned each inspected gas station with green, yellow, or red colors to indicate the status of compliance, minor violation, and severe violation, respectively. We find strong evidence of peer influence triggered by information spillover. The probability of being in compliance increases as the number of green peers increases. We use both municipalities and postal codes as geographic boundaries to define potential peers, and find similar results. Our findings also indicate that the magnitude of peer effects varies across municipalities: the effects appear to be greater in richer, more educated communities. A unique feature of the environment is that the consequences of its use are often difficult or impossible to reverse. This implies that short-run changes in environmental policies can result in long-run effects. In the second chapter, we estimate how environmental attitudes change with economic conditions and whether short-run changes in environmental attitudes translate into policy changes, as proxied by voting for Republicans and by changes in representatives’ voting behavior. We find that a 1% increase in a state’s unemployment rate decreases the probability of a respondent prioritizing environmental protection over economic growth by 0.21-0.67%. A 1% decrease in the mean county income decreases that probability by 0.11-0.12%. However, there is no relationship between changes in citizens’ ideology and changes in their voting patterns or the voting patterns of their congressional representatives. Overall, we show that even though respondents’ attitudes toward the environment are influenced by economic conditions, they do not immediately translate into changes in real outcomes. The third chapter examines the impact of electoral votes on the distribution of ad hoc agricultural farm disaster payments across counties from 1990 to 2008. We find evidence that parties play a significant role in determining the allocation of payments. Our results show that, when the Republican party controlled Congress, counties with a higher share of Republican votes received more payments. Similarly, the share of Democratic votes is positively related to the size of payments when the Democratic party controlled Congress. We find consistent results in our congressional district-level analysis: majority party members secured more payments to their constituents than minority party members. These results are consistent with the idea that political parties target distributive benefits to their loyal constituents, supporting the core voter hypothesis