Firm Behavior, Environmental Externalities and Public Policy

This dissertation consists of three essays which examine environmental policy, employer mandates and energy consumption. The essays explore how firms respond to government policies such as environmental regulation and employer mandates. Understanding how firms adjust to government policies is crucial to law makers attempting to design optimal policies that maximize net benefits to society. The first essay, titled Who Loses under Power Plant Cap-and-Trade Programs tests how a major cap-and-trade program, known as the NOx Budget Trading Program (NBP), affected labor markets in the region where it was implemented. The cap-and-trade program dramatically decreased levels of NOx emissions and added substantial costs to energy producers. Using a triple-differences approach that takes advantage of the geographic and time variation of the program as well as variation in industry energy-intensity levels, I examine how employment dynamics changed in manufacturing industries whose production process requires high levels of energy. After accounting for a variety of flexible state, county and industry trends, I find that employment in the manufacturing sector dropped by 1.7% as a result of the NBP. Young workers experienced the largest employment declines and earnings of newly hired workers fell after the regulation began. Employment declines are shown to have occurred primarily through decreased hiring rates rather than increased separation rates, thus mitigating the impact on incumbent workers. The second essay, titled Evaluating Workplace Mandates with Flows versus Stocks: An Application to California Paid Family Leave uses an underexploited data set to examine the impact of the California Paid Family Leave program on employment outcomes for young women. Most papers on mandated benefits examine labor outcomes by looking at earnings and employment levels of all workers. Examining these levels will be imprecise if the impacts of the program develop over time and firms are wary to immediately adjust employment and wages for existing workers. Using Quarterly Workforce Indicator data, we are able to measure the impact on hires, new hire earnings, separations and extended leaves among young women. Earnings for young female new hires fell in California relative to other workers, but changed little relative to country-wide comparison groups. We find strong evidence that separations (of at least three months) among young women and the number and shares of young female new hires increased. Many young women that separate (leave the payroll) eventually return to the same firm. Increased separation and hiring rates among young women in the labor market (“churning”) may reflect both increased time spent with children and greater job mobility (i.e., reduced job lock) as the result of mandated paid family leave across the labor market. The third essay, Evidence of an Energy Management Gap in U.S. Manufacturing: Spillovers from Firm Management Practices to Energy Efficiency, merge a well-cited survey of firm management practices into confidential plant level U.S. Census manufacturing data to examine whether generic, i.e. non-energy specific, firm management practices, ”spillover” to enhance energy efficiency in the United States. For U.S. manufacturing plants we find this relationship to be more nuanced than prior research on UK plants. Most management techniques are shown to have beneficial spillovers to energy efficiency, but an emphasis on generic targets, conditional on other management practices, results in spillovers that increase energy intensity. Our specification controls for industry specific effects at a detailed 6-digit NAICS level and finds the relationship between management and energy use to be strongest for firms in energy intensive industries. We interpret the empirical result that generic management practices do not necessarily spillover to improved energy performance as evidence of an “energy management gap.