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Worker and Firm Responses to Environmental Policies


This work examines responses to environmental policies. Treating workers and firms as optimizing agents, it derives theoretical predictions and evaluates them using data. In Chapter 1, exploiting the natural experiment created by an unanticipated court injunction, we evaluate driver responses to road pricing. We find evidence of intertemporal substitution toward unpriced times and spatial substitution toward unpriced roads. The effect on traffic varies with public transit availability. Net of these responses, Milan's pricing policy reduces air pollution substantially, generating large welfare gains. In addition, we use long-run policy changes to estimate price elasticities. Chapter 2 examines the unintended consequences of pollution regulations. By regulating air emissions in particular counties, the Clean Air Act (CAA) gives firms incentives to substitute : 1) toward polluting other media, like landfills and waterways; and 2) toward pollution from plants in other counties. Using EPA Toxic Release Inventory data, I examine the effect of CAA regulation on these types of substitution. Chapter 3 takes advantage of time zones, which influence worker sleep, to study the relationship between sleep and wages. Because sleep influences performance on memory and focus intensive tasks, it plausibly affects economic outcomes. We identify the effect of sleep on wages by exploiting the relationship between sunset time and sleep duration. Using a large, nationally representative set of time use diaries from the United States, we provide the first causal estimates of the impact of sleep on wages. A one-hour increase in seasonal weekly sleep increases a worker's wage by 1%. At the location level, a one-hour increase in long-run weekly mean sleep increases mean wage by 4.5%. Our results highlight the economic importance of sleep and pose potentially fruitful questions about the effects of time use on labor market outcomes. These findings illustrate the richness of human responses to the new incentives and constraints imposed by environmental policies. They suggest ways in which efficient policies might account for such responses

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