Brian Copeland

In Chapter 1, I study how households respond to financial rewards offered for achieving electricity conservation targets. Using an event-study empirical approach, I estimate the short-run and long-run changes in electricity use. I find that electricity use declines as households join the program and attempt to achieve their conservation targets, but rebounds close to pre-program levels as households leave the program. This suggests that households do not make changes that result in persistent electricity conservation, and that the ongoing incentive of the financial rewards is necessary for causing long-run lower electricity use. In Chapter 2, I exploit a discontinuity in the probability that households re-enroll in the same energy conservation program. This provides direct evidence on what determines households’ re-enrollment decisions, and permits me to use a fuzzy regression discontinuity empirical strategy to estimate the treatment effect of re-enrolling. I find households’ decisions whether to re-enroll are sensitive to their success or failure in achieving their conservation target but, conditional on their success, are largely independent of the level of conservation they achieve or their pre-determined characteristics. As a result, households do not make re-enrollment decisions that are consistent with the incentive structure of the reward program. Importantly for many incentive programs, this suggests households are using simple heuristics in making decisions rather than responding to the detailed information provided to them. In Chapter 3, I show that trade models incorporating multiple transport modes have imposed strong—and potentially unrealistic—restrictions on substitution patterns across mode-specific trade flows. In particular, I show that different models have implicitly assumed bilateral trade by air and sea to be both complements and substitutes, and this assumption has significant quantitative and qualititive implications for counterfactual trade patterns. Using freight costs for U.S. imports I estimate that the elasticity of substitution between modes. I find no evidence that transport modes are substitutes and limited evidence they are complements.

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Environmental regulations targeting producers are in place around much of the world. Yet, there is limited evidence of how firms are affected by these policies. This thesis provides new empirical and theoretical evidence on the effects of environmental regulation on producers.The first two chapters of this thesis explore a trend underway in much of the industrialized world: pollution from manufacturing has been falling despite increased output. In the first chapter, we develop a theoretical model to show the channels through which regulation can contribute to an industry’s “clean-up”. This model highlights the role that fixed costs producers must pay to adopt cleaner production processes play in dictating these channels. We show that if these fixed costs are relatively low, the adoption of cleaner processes will be the primary regulatory channel of an industry’s clean-up. However, if these fixed costs are relatively high, then plant exit and reductions in output from regulated plants will be the primary channels.The second chapter provides the first estimates of the regulatory channels of the manufacturing clean-up. We estimate the share of the Canadian manufacturing clean-up explained by the adoption of cleaner production processes, the reallocation of output across producers, and producer entry and exit. To do this, we examine a major revision to Canadian environmental policy using a novel, confidential dataset containing information on the production decisions and pollution emissions of Canadian manufacturing plants. We find regulation explains, at most, 61% of the Canadian clean-up, but the underlying channels differ strikingly across pollutants.A concern in debates over environmental regulation is a potential loss of international competitiveness among domestic producers. Despite its pervasiveness in policy discussions, evidence of these losses remains scarce. The third chapter of this thesis provides the first plant-level estimates of the effect of air pollution regulation on exporting. We study the effects of the Canada-Wide Standards for Particulate Matter and Ozone on the decision to export and export volumes of Canadian manufacturing facilities. We find evidence that environmental regulation caused relatively low-productivity exporters to leave the export market, and reduced the amount surviving exporters sold abroad.

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The objective of this dissertation is to improve our understanding of environmental policies, particularly with respect to two emerging alternative approaches to regulation. They are alternatives to the command and control approach, which policymakers have relied on heavily since the early 1970s. One alternative is to introduce market-based policy instruments like emission taxes or tradable permits. Another alternative is to rely on voluntary approaches to environmental protection. This thesis will study these two alternatives. Our first essay will focus on voluntary programs (VPs) that aim to reduce emissions of pollutants. We try to explain theoretically why governments implement these programs and to examine the property of the VP which the regulator implements to maximize social welfare. We show that if setting an efficient mandatory standard is politically difficult, a regulator might implement the VP because it can generate higher social welfare than the mandatory standard. The abatement rate of the VP that generates the highest social welfare costs participating firms the same amount as the mandatory standard would. The second essay will empirically examine the determinants of environmental management system certifications, especially the ISO 14001 certification, which is a popular environmental practice, and their impacts on environmental performance. In particular, we focus on intra-industry spillovers of ISO 14001 adoption and environmental performance. We apply estimation methods of spatial econometrics to a Japanese facility’s dataset to deal with the spillovers. We find intra-industry spillovers of emissions reduction into the air between similarly sized facilities and of ISO 14001 adoption between similarly sized facilities that emit into water. The third essay will compare taxes and quotas, when an informed polluting industry influences them by political contributions to a government. We show that private information can improve social welfare under taxes but cannot improve it under quotas. Private information also reduces a comparative disadvantage of the taxes over the quotas when the government does not care about social welfare very much.

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This thesis is a collection of three empirical papers that made use of recent Canadian trade and production data.The first chapter “Productivity Performance of Canada" examines Canada's productivity and changes in terms of trade 1961-2007. These changes have been mostly favourable and have had the same effect on real income growth as Total Factor Productivity improvements of the business sector of the economy. The framework applied is developed by Diewert, Kohli and Morrison and is based on production theory. We utilised published and unpublished data from the Statistics Canada Multifactor Productivity program, which develops “bottom up" estimates of business sector productivity from industry estimates. However, we use in this chapter a “top down" approach which utilises (adjusted) final demand data to form a business sector output aggregate and thus leads to much higher estimates of TFP growth for Canada than the corresponding Statistics Canada estimates. Finally, the new export and import time series are used to determine the contributions to real income growth of changes in these disaggregated export and import prices over the 47 year period.The second chapter “Business Sector Data on Outputs and Inputs for Canada 1961-2007" details the business sector data used in the first chapter and explains the construction of estimates of Canadian final demand expenditures, business sector labour input, business sector capital stock, primary input tax rates, balancing real rates of return and user costs. We also make some recommendations for possible improvements that Statistics Canada could make to its productivity program.The third chapter “Does Lobbying Affect Antidumping Case Determinations in Canada?" examines whether the mandate of antidumping legislation in Canada was independent of influences other than those allowed. The relation between antidumping case determinations and various determinants is examined, in particular, whether lobbying activities can influence case determinations. Unlike previous studies that constructed political variable with data that have limited information on policy influence targets, this chapter constructs the variable using the Canadian Lobbyists Registration data with detailed information on lobbyists who had indicated they lobbied for administered protection. The current empirical evidence suggests that the antidumping mandate is not apolitical.

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This thesis investigates the determinants and political consequences of environmental enforcement policy. Three related issues are addressed using the U.S. manufacturing data at the industry level.In Chapter Two, I estimate the elasticity of the violation rate with respect to the inspection rate for the manufacturing industries. This elasticity reflects the power of monitoring to alter an industry's violation status. I conduct an estimation of the relationship between the violation rate and the inspection rate at the industry level, but the specification is based on an individual firm's dichotomous choice in a logit model. The inspection rate is instrumented with the average of the inspection rates across the other industries that belong to the same sector to deal with the endogeneity problem. I find a substantial variation in the elasticity of the violation rate across industries.Chapter Three addresses how the inspection rate is determined by the elasticity of the violation rate when the enforcement agency is constrained with a hard monitoring budget. Given the limited monitoring resources, an enforcement agency targets industries where inspections are more likely to be effective in reducing violations to reduce inefficiency, all else equal. Empirical results confirm the positive effect from the absolute elasticity on the inspection rate. But the magnitude of this effect is conditional on the pollutants' damage level to the environment.In Chapter Four, I focus on the political consequence of the enforcement policy. I employ the campaign contribution presented to the Congress exclusively for environmental issues (EPC) to measure the environmental political activity. The variation of EPC across industries is explained by the enforcement policy stringency. Although the EPC presented to the Congress is targeted directly on environmental regulation rather than the enforcement policy, a stricter enforcement policy increases the marginal benefit from contributing the congress for relaxing the regulation. Empirically, I use the elasticity of the violation rate to isolate the effect of the enforcement policy on EPC. An industry with a larger elasticity of the violation rate is more likely to face a higher inspection rate, it therefore is more likely to engage in the political activity.

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The broad objectives of a natural resources management program include economic efficiency, biological sustainability and socialequity. While the first is conceptually uncontentious, the last two often pose challenges by bringing in as implicit stakeholders the general public community and the futuregenerations. The 'commons' problem in renewable resource exploitation is often combined in real life with several types of additionalexternalities, such as cross-sectoral domestic spillover effects in a diversified economy, or transboundary effects due to overexploitation. Moreover, the distributional implications and local scarcity favoured by corrupt resource policies are prone to create social tensions, extensively documented in the literature. The main object of this thesis is the study of some of these effects in closed and open economy settings. The first chapter uses a political economy framework to analyze the link between natural resources and conflict, where an inefficient and corrupt natural resource management is skewed to favour certain groups in society to the detriment of others. The second chapter uses this theory to provide empirical evidence for the importance of resource depletion and corruption as determinants of civil conflicts. The third chapter deals with the transboundary effects posed by open-access exploitation and trade with a mobile resource which disperses between two jurisdictions. The fourth chapter focuses on the interaction between open-access resource harvesting and industrial pollution, as it considers the welfare effects of international trade.

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The first two chapters study the effect of foreign lobbies on trade policy of a country which is a member of a Free Trade Agreement (FTA). They rely on a monopolistically competitive political economy model in which the government determines external tariffs endogenously. In the first paper the effect of foreign lobbying under the FTA is examined empirically using Canadian industry-level trade data that allow differentiating of lobby groups by the country of origin. The analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy: the presence of an organized lobbying group in an FTA partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the FTA is associated with less protection. The second paper analyses political viability of FTAs and their effect on the world trading system in the presence of lobbying by organized foreign interest groups. I show that the FTA in the presence of an organized lobby group in a prospective partner country may cause an increase in the level of protection against imports from third countries and impede trade with non-member countries. I also find that foreign lobby may encourage the local government to enter a welfare-reducing trade-diverting FTA. Finally, I show that the FTA increases the lobbying power of the organized lobby groups of the member countries, which can potentially obstruct the viability of welfare-improving multilateral trade liberalization.The last paper shows that the reason for a higher capital-labor ratio observed for exporting firms is a higher capital intensity of their production technology. Exporters are more productive, more likely to survive and, hence, more likely to repay loans. A higher repayment probability causes creditors to charge lower interest rate and reduces the marginal cost of the firm when a more capital-intensive technology is used. Here, a reduction in international trade costs stimulates exporting firms to use more efficient capital-intensive technologies, while non-exporters switch to less capital-intensive ones. This within-industry change in the composition of technologies reinforces the productivity advantage of exporters and contributes further to industry-wide productivity improvement. The results of model simulations highlight that to 10% of welfare and productivity gains of trade liberalization come from the adoption of new technologies by existing firms in the industry, thus amplifying the effect of resource reallocation from firms' entry and exit.

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