Do State Laws Affect the Age of Marriage? A Cautionary Tale About Avoidance Behavior

This paper investigates the response of young people in the United States to state laws dictating the minimum age at which individuals could marry, with and without parental consent. We use variation across states and over time to document behavioral responses to laws governing the age of marriage using both administrative records from the Vital Statistics and retrospective reports from the U.S. Census. We find evidence that state laws delayed the marriages of some young people, but the effects are much smaller in Census data than in Vital Statistics records. This discrepancy appears to be driven by systematic avoidance behavior of two kinds. First, some young people marry outside their state of residence, in states with less restrictive laws. Second, many young people appear to have evaded minimum age of marriage laws by misrepresenting age on their marriage certificate. This avoidance was especially pronounced in earlier years, when few states required documented proof of age and when there was greater gain to marrying out of state because of wider variation in laws. Our results have important implications about the quality of administrative data when it is poorly monitored; about the effect of laws when agents can avoid them; and about the validly of estimates using cross-state variation in laws as an instrumental variable. By contrasting two data sources, we achieve a more complete picture of behavioral response than would be possible with either one alone.

A Unifying Model of How the Tax System and Generally Accepted Accounting Principles Affect Corporate Behavior

This paper models the impact of the tax system and GAAP on the real and financial reporting decisions of corporations. It provides a first step toward joint evaluation of taxation and financial reporting in the standard economic analyses of corporate behavior. The key finding is that value arises from real decisions that provide firms with discretion in their tax and financial reporting. This desire for flexibility modifies the optimal decisions of firms, in theory, and we provide examples that illustrate this behavior in the real world.

Who benefits when firms game corrective policies?

Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming

Who benefits when firms game corrective policies?

Firms sometimes comply with externality-correcting policies by gaming the measure that determines policy. We show theoretically that such gaming can benefit consumers, even when it induces them to make mistakes, because gaming leads to lower prices by reducing costs. We use our insights to quantify the welfare effect of gaming in fuel-consumption ratings for automobiles, which we show increased sharply following aggressive policy reforms. We estimate a structural model of the car market and derive empirical analogs of the price effects and choice distortions identified by theory. We find that price effects outweigh distortions; on net, consumers benefit from gaming

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

The Value of Honesty: Empirical Estimates from the Case of the Missing Children

How much are people willing to forego to be honest, to follow the rules? When people do break the rules, what can standard data sources tell us about their behavior? Standard economic models of crime typically assume that individuals are indifferent to dishonesty, so that they will cheat or lie as long as the expected pecuniary benefits exceed the expected costs of being caught and punished. We investigate this presumption by studying the response to a change in tax reporting rules that made it much more difficult for taxpayers to evade taxes by inappropriately claiming additional dependents. The policy reform induced a substantial reduction in the number of dependents claimed, which indicates that many filers had been cheating before the reform. Yet, the number of filers who availed themselves of this evasion opportunity is dwarfed by the number of filers who passed up substantial tax savings by not claiming extra dependents. By declining the opportunity to cheat, these taxpayers reveal information about their willingness to pay to be honest. We present a novel method for inferring the characteristics of taxpayers in the absence of audit data. Our analysis suggests both that this willingness to pay to be honest is large on average and that it varies significantly across the population of taxpayers.

Car Notches: Strategic Automaker Responses to Fuel Economy Policy

Notches --- where small changes in behavior lead to large changes in a tax or subsidy --- figure prominently in many policies, but have been rarely examined by economists. In this paper, we analyze a class of notches associated with policies aimed at improving vehicle fuel economy. We provide several pieces of evidence showing that automakers respond to notches in fuel economy policy by precisely manipulating fuel economy ratings so as to just qualify for more favorable treatment. We then describe the welfare consequences of this behavior and derive a welfare summary statistic applicable to many contexts.

Three Essays in Public Economics.

The first chapter of this dissertation examines the incidence of tax credits for hybrid vehicles in the United States. A variety of state and federal tax incentives have been used to subsidize gas-electric hybrid vehicles. I estimate the incidence of these tax incentives using microdata on sales of the Toyota Prius. In order to account for heterogeneity in strategic timing of sales around tax changes, I develop a partial identification methodology which provides sharp bounds on the effect of tax changes. I find that consumers capture nearly all of the benefits. This finding is difficult to explain in a standard rational choice model. I propose an alternative framework based on the possibility that current prices shift future demand in a particular way, which rationalizes the empirical findings. The second chapter, written with Rebecca Blank and Kerwin Charles, investigates the response of young people in the United States to state laws dictating the minimum age at which individuals could marry. Our analysis focuses on how individuals avoided binding laws, which is revealed by broad discrepancies between marriages reported in survey and administrative data. We provide evidence that individuals both traveled across state boundaries and lied about their age in order to avoid binding laws. Our results have important implications about the quality of administrative data when it is poorly monitored; about the effect of laws when agents can avoid them; and about the validity of estimates using cross-state variation in laws as an instrumental variable. The third chapter, written with Alexandra Resch and Paul Courant, studies how a social planner should allocate students and resources throughout a higher education system. We posit a distribution of student ability and a limited pool of resources and demonstrate the optimal rules for establishing, populating and funding universities. If student ability and school resources are complements, and if there is a fixed cost to establishing a school, then the optimal allocation will involve a tiered system of higher education that sorts students by ability. In contrast to previous research, we show this tiered system is optimal even in the absence of peer effects.Ph.D.EconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/60678/1/jsallee_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.