Simplified Marginal Effects in Discrete Choice Models

We show that after a simple normalization of explanatory variables so that they equal zero at some desired reference point, marginal effects for continuous variables in probit and logit models simplify dramatically, becoming a function of only the estimated constant term. We present similar simplifications for computation of the asymptotic variance of marginal effects, as well as for the effects of dummy variables on predicted probabilities. We provide a simple table, which in combination with raw probit or logit estimates, is all one needs to compute the desired effects.logit, probit, discrete choice, binary choice, marginal effect, data normalization

The Organization of Local Solid Waste and Recycling Markets: Public and Private Provision of Services

We study determinants of market organization of local public services by an empiricalexamination of one of the most visible municipal services, residential waste management. Usinga multinomial logit model and data for 1,000 U.S. communities, we explore the effect of politicalinfluence, voter ideology, environmental constraints, production costs (i.e., “economies ofdensity”), and contracting transaction costs on a community’s choice of market arrangement forwaste collection and recycling. We find that cost factors are a significant determinant of servicedelivery method. In contrast, few of the political variables are statistically significant. Theseresults hold for our models of both waste and recycling, lending further evidence to theconclusion that local governments emphasize costs when choosing between private and publicprovision.Market organization, solid waste management, state and local government

Diversify or focus: spending to combat infectious diseases when budgets are tight

We consider a health authority seeking to allocate annual budgets optimally over time to minimize the discounted social cost of infection(s) evolving in a finite set of R >= 2 groups. This optimization problem is challenging, since as is well known, the standard epidemiological model describing the spread of disease (SIS) contains a nonconvexity. Standard continuous-time optimal control is of little help, since a phase diagram is needed to address the nonconvexity and this diagram is 2R dimensional (a costate and state variable for each of the R groups). Standard discrete-time dynamic programming cannot be used either, since the minimized cost function is neither concave nor convex globally. We modify the standard dynamic programming algorithm and show how familiar, elementary arguments can be used to reach conclusions about the optimal policy with any finite number of groups. We show that under certain conditions it is optimal to focus the entire annual budget on one of the R groups at a time rather than divide it among several groups, as is often done in practice; faced with two identical groups whose only difference is their starting level of infection, it is optimal to focus on the group with fewer sick people. We also show that under certain conditions it remains optimal to focus on one group when faced with a wealth constraint instead of an annual budget.public health spending; nonconvexity; dynamic programming

The Demand for Ethanol as a Gasoline Substitute

This paper estimates household preferences for ethanol as a gasoline substitute. I develop a theoretical model linking the shape of the ethanol demand curve to the distribution of price ratios at which individual households switch fuels. I estimate the model using data from many retail fueling stations. Demand is price-sensitive with a mean elasticity of 2.5–3.5. I find that preferences are heterogeneous with many households willing to pay a premium for ethanol. This reduces the simulated cost of an ethanol content standard, since some households choose ethanol without large subsidies; simulated costs are still high relative to likely environmental benefits.

Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives

This paper discusses fuel economy regulations in the United States and other countries. We first describe how these programs affect fuel use and other dimensions of the vehicle fleet. We then review different methodologies for assessing the costs of fuel economy regulations and discuss the policy implications of the results. We also compare the welfare effects of fuel economy standards with those of fuel taxes and assess whether these two policies complement each other. Finally, we review arguments in favor of a “feebate” system, which imposes fees on inefficient vehicles and provides rebates for efficient vehicles.fuel economy regulations, costs, welfare effects, climate change, feebates

America's North Coast: A Benefit-Cost Analysis of a Program to Protect and Restore the Great Lakes

Examines the baseline ecological conditions of the Great Lakes and offers a plan for the area's environmental protection and restoration. Demonstrates how a restoration program can provide economic benefits that substantially exceed its costs

Emerging Markets for Biofuels.

Government policies increasingly promote ethanol and other biofuels for security, air quality, and climate benefits. One chapter of this dissertation develops a model that links the distribution of preferences for ethanol to aggregate price responses and then estimates the model using data from a large number of retail ethanol stations. Ethanol demand is sensitive to relative fuel prices with a mean elasticity 2.5--3.0. The estimates imply that preferences for ethanol are heterogeneous, rather than homogeneous, as previous literature assumes. Accounting for this heterogeneity cuts the estimated cost of a minimum market share standard for ethanol in half, because households with strong preferences do not require large subsidies to choose ethanol over gasoline. Similar intuition likely applies for policies designed to promote other "green" substitutes, such as electricity from renewable sources. Even so, the cost of the ethanol standard exceeds benefits by a wide margin, implying that the policy is harmful. Researchers should focus on marginal households when assessing the impact of policy, because assuming mean preferences can generate misleading results. Another chapter of this dissertation analyzes the market for flexible-fuel vehicles. Corporate Average Fuel Economy (CAFE) regulations feature a "loophole" that credits gasoline-ethanol flexible-fuel vehicles with far better mileage than they actually achieve. Empirical evidence shows that firms affected by CAFE standards produce flexible-fuel vehicles to exploit this loophole and that marginal consumers do not value flexible-fuel capacity. Under these and other conditions an automaker will equate the marginal cost of improving mileage using flexible-fuel vehicles with the marginal cost of improving mileage through other means. This insight implies that one can infer the marginal cost of complying with CAFE standards for automakers that produce flexible-fuel vehicles. Based on this approach, the estimated cost of tightening CAFE standards by one mile per gallon is at most $10--$20 in lost profit per vehicle for domestic automakers, assuming incremental production costs of $100--$200 for flexible-fuel vehicles. These are valuable estimates for economists and regulators, as automakers may overstate costs to avoid tighter standards.Ph.D.EconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/61609/1/sorenta_1.pd

The Intergenerational Transmission of Automobile Brand Preferences

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/116373/1/joie12092.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/116373/2/joie12092-sup-0001-si.pd

Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives

This paper discusses fuel economy regulations in the United States and other countries. We first describe how these programs affect the automobile market, including their impacts on fuel use and other dimensions of the vehicle fleet. We then review different methodologies for assessing the costs of fuel economy regulations and discuss what the results of these methodologies imply for policy. Following that, we compare the welfare effects of fuel economy regulations to those of fuel taxes and assess whether or not these two policies can be complements. Finally, we review arguments for transitioning away from fuel economy regulations towards a “feebate” system.