Products: Research Papers
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Behind-the-counter, but Over-the-border? The Assessment of the Spillover Effect of Increased Availability of Emergency Contraception in Washington on Neighboring States
Emergency contraception (EC), that gained FDA’s approval in the late 1990s as a prescription medicine, may effectively prevent unwanted pregnancy if taken promptly after an unprotected sexual intercourse. Because EC efficacy is inversely related to the duration between intercourse and the time it is taken, the prescription requirements can make it less effective. Washington was the first state to loosen up the prescription requirements making EC available behind-the-counter at pharmacies to women of any age in 1998. I hypothesize that the increased availability of EC affects fertility rates beyond the borders of the state that allows it. Using the difference-in-difference methodology and 1991-2005 county level data, I find that increased access to EC is associated with a substantial and statistically significant 5-7% decrease in abortion rates and 2% decrease in pregnancy rates in Washington counties that had access to EC without a prescription within 10 miles. As expected, the effect becomes numerically smaller and statistically weaker with an increase in travel distance. I find some evidence in support of the spillover effects in Idaho, but not Oregon. After accounting for changes in the availability of abortion services, the decrease in fertility rates in “treated” Idaho counties is rather small and models lack sufficient power to detect it.
Forecasting with Mixed Frequency Samples: The Case of Common Trends
We analyze the forecasting performance of small mixed frequency factor models when the observed variables share stochastic trends. The indicators are observed at various frequencies and are tied together by cointegration so that valuable high frequency information is passed to low frequency series through the common factors. Differencing the data breaks the cointegrating link among the series and some of the signal leaks out to the idiosyncratic components, which do not contribute to the transfer of information among indicators. We find that allowing for common trends improves forecasting performance over a stationary factor model based on dierenced data. The common-trends factor model" outperforms the stationary factor model at all analyzed forecast horizons. Our results demonstrate that when mixed frequency variables are cointegrated, modeling common stochastic trends improves forecasts.
Sustainable Development and the Hawaii Clean Energy Initiative: An Economic Assessment
The connection between the emerging field of sustainability science and the economics of sustainable development has motivated a line of interdisciplinary research inspired by the notion of “positive sustainability.” This notion is founded on three principles or pillars: (1) adopting a complex systems approach to modeling and analysis, integrating natural resource systems, the environment, and the economy; (2) pursuing dynamic efficiency, that is, efficiency over both time and space in the management of the resource-environment-economy complex to maximize intertemporal well-being; and (3) enhancing stewardship for the future through intertemporal equity, which is increasingly represented as intergenerational neutrality or impartiality. This paper argues that the Hawaii Clean Energy Initiative (HCEI) fails to satisfy all three pillars of sustainability, and consequently fails to achieve the "sustainability criterion" put forward by Arrow, Dagupta, Daily et al: that total welfare of all future generations not be diminished. HCEI shrinks the economy, contributes negligibly to reduction of global carbon emissions, and sparks rent seeking activity (pursuit of special privilege and benefits) throughout the State of Hawaii.
Common correlated effects and international risk sharing
International risk sharing has been among the most actively researched areas of macroeconomic for the last two decades. Empirical contributions in this field make extensive use of so called "consumption insurance" tests evaluating the extent to which idiosyncratic shocks in income get transferred to consumption. A prerequisite of such a test is the isolation of country specific variation in the data. We show that the cross-sectional demeaning technique frequently used in the literature is in general inadequate to eliminate global factors from a panel data set, and can lead to misleading inference. We argue that international risk sharing tests should instead be based on a method that more reliably deals with global factors. We claim and illustrate in our empirical application that the fairly simple common correlated eects estimator for cross-sectionally dependent panels introduced by Pesaran (2006), and Kapetanios et al. (2010) is a tool that satisfies this requirement.
Estimating Demand Elasticities in Non-Stationary Panels: The Case of Hawai‘i’s Tourism Industry
Tourism demand elasticities are central to marketing, forecasting and policy work, but the wide array of occasionally counterintuitive estimates produced by existing empirical studies implies that some of those results may be inaccurate. To improve the precision of estimates, it is natural to turn to the richness of panel data. However, panel estimation using non-stationary data requires careful attention to the likely presence of common shocks shared across the underlying macroeconomic variables and across regions. Several recently developed econometric tools for panel data analysis attempt to deal with such cross-sectional dependence. Apply the estimator of Pesaran (2006) and Kapetinos, Pesaran and Tamagata (2010) to obtain tourism demand elasticities in non-stationary heterogeneous dynamic panels subject to common factors. We study the extent to which tourism arrivals from the US Mainland to Hawaii are driven by fundamentals such as real personal income and the cost of the trip, and we find that neglecting cross-sectional dependence in the data leads to spurious results.
The Impact of Same-Sex Marriage on Hawai‘i’s Economy and Government
This report provides quantitative and qualitative measures of the impact of same-sex marriage on Hawai`i’s economy and government. We find that marriage equality is likely to lead to substantial increases in visitor arrivals, visitor spending, and state and county general excise tax revenues. We estimate that fewer than 100 spouses will be added as beneficiaries to public and private employer-provided health insurance plans. The size of the gains from marriage equality depends critically on upcoming rulings by the U.S. Supreme Court on the constitutionality of California’s Proposition 8 and the Defense of Marriage Act.
A dynamic approach to PES pricing and finance for interlinked ecosystem services: Watershed conservation and groundwater management
A theory of payment for ecosystem services (PES) pricing consistent with dynamic efficiency and sustainable income requires optimized shadow prices. Since ecosystem services are generally interdependent, this requires joint optimization across multiple resource stocks. We develop such a theory in the context of watershed conservation and groundwater extraction. The optimal program can be implemented with a decentralized system of ecosystem payments to private watershed landowners, financed by efficiency prices of groundwater set by a public utility. The theory is extended to cases where land is publicly owned, conservation instruments exhibit non-convexities on private land, or the size of a conservation project is exogenous. In these cases, conservation investment can be financed from benefit taxation of groundwater consumers. While volumetric conservation surcharges induce inefficient water use, a dynamic lump-sum tax finances investment without distorting incentives. Since the optimal level of conservation is generated as long as payments are correct at the margin, any surplus can be returned to consumers through appropriate block pricing. The present value gain in consumer surplus generated by the conservation-induced reduction in groundwater scarcity serves as a lower bound to the benefits of conservation without explicit measurement of other benefits such as recreation, biodiversity, and cultural values.
Published: Roumasset, J., Wada, C.A., 2013. A dynamic approach to PES pricing and finance of interlinked ecosystem services: Watershed conservaiton and groundwater management. Ecological Economics 87, 24-33.
How China’s Approved Destination Status Policy Spurs and Hinders Chinese Travel Abroad
China’s “Approved Destination Status (ADS) policy allows citizens of mainland China to take pleasure trips abroad on group package tours to countries that have negotiated and implemented agreements with China. In this paper, we examine the reasons for this unique preferential and incremental travel liberalization system and how it affects mainland Chinese outbound pleasure travel.
What Should Be the Appropriate Tax Base for Online Travel Companies' Hotel Room Sales?
This essay examines the current dispute between state and local governments in the U.S. and online travel companies (OTCs) over the appropriate hotel occupancy tax base for online hotel bookings. It addresses the question of what should be the appropriate tax base in designing hotel occupancy tax statutes. It argues that the appropriate tax base should be the full rental prices of the hotel rooms paid by consumers inclusive of online travel company markups and service fees and not the discounted net rates paid by the OTCs to their hotel suppliers.
Statewide Economy and Electricity-Sector Models for Assessment of Hawai‘i Energy Policies
This paper uses both a "top-down" and "bottom-up" economic model to asses the cost and greenhouse implications of various energy and environmental alternatives. The Hawai‘i Computable Generable Equilibrium Model (H-CGE) is a “top-down,” economy-wide model that captures the interaction between both producers and consumers, including full price effects between sectors. The Hawai‘i Electricity Model (HELM) is a “bottom-up” representation of Hawai‘i’s electricity sector. The dynamic optimization model solves for the least-cost mix of generation subject to satisfying demand, regulatory requirements, and system constraints. The models are fully integrated in respect to the electricity sector, where overall economic conditions determine electricity demand and, subsequently, the type of electricity generation has economic impact.
The Economics of Groundwater
We provide synthesis of the economics of groundwater with a focus on optimal management and the Pearce equation for renewable resources. General management principles developed through the solution of a single aquifer optimization problem are extended to the management of multiple resources including additional groundwater aquifers, surface water, recycled wastewater, and upland watersheds. Given an abundant (albeit expensive) substitute, optimal management is sustainable in the long run. We also discuss the open-access equilibrium for groundwater and the conditions under which the Gisser-Sanchez effect (the result that the present value generated by competitive resource extraction and that generated by optimal control of groundwater are nearly identical) is valid. From the models and examples discussed, one can conclude that optimization across any number of dimensions (e.g. space, time, quality) is driven by a system shadow price, and augmenting groundwater with available alternatives lessens scarcity and increases welfare if timed appropriately. Other rules-of-thumb including historical cost recovery, independent management of separate aquifers, and maximum sustainable yield are inefficient and may involve large welfare losses.
How Big? The Impact of Approved Destination Status on Mainland Chinese Travel Abroad
China’s Approved Destination Status (ADS) policy governs foreign leisure travel by citizens to ADS-designated countries. To model the effects of ADS on Chinese visitor arrivals, we specify a model of demand for a representative Chinese consumer who values trips to n differentiated foreign destinations. Using panel data for Chinese visitor arrivals for 61 countries from 1985 to 2005, we estimate fixed effects models accounting for selection effects and a semiparametric matched difference-in-differences (DID) model. The semiparametric matched DID estimates indicate that ADS increased Chinese visitor arrivals annually by 10.5 to 15.7 percent in the three-year period following ADS designation.
Chinese Saving Dynamics: The Impact of GDP Growth and the Dependent Share
China’s national saving rate rose rapidly in the 2000s after declining through the late 1990s. These dynamics are not explained by precautionary motives, the institutional distribution of income, or reform related processes in general. Rather, we find a compelling explanation lies with GDP growth fluctuations and movement in the dependent share in population. We estimate a vector autoregressive model for the period 1978-2008, then generate in-sample simulations that successfully replicate the 2000s run-up in the saving rate. Our out of sample forecasts show the saving rate dropping in the 2010s as the dependency share falls and GDP growth moderates.
An Assessment Of Greenhouse Gas Emissions-Weighted Clean Energy Standards
Published in the journal Energy Policy, this paper quantifies the relative cost-savings of utilizing a greenhouse gas emissions-weighted Clean Energy Standard (CES) in comparison to a Renewable Portfolio Standard (RPS). Using a bottom-up electricity sector model for Hawaii, this paper demonstrates that a policy that gives “clean energy” credit to electricity technologies based on their cardinal ranking of lifecycle GHG emissions, normalizing the highest-emitting unit to zero credit, can reduce the costs of emissions abatement by up to 90% in comparison to a typical RPS. A GHG emissions-weighted CES provides incentive to not only pursue renewable sources of electricity, but also promotes fuel-switching among fossil fuels and improved generation efficiencies at fossil-fired units. CES is found to be particularly cost-effective when projected fossil fuel prices are relatively low.
UHERO has developed a two-page Policy Brief on this paper. This full publication can be found at http://www.sciencedirect.com/science/article/pii/S0301421512000961
The Effect of Minimum Legal Drinking Age Restrictions on Teenage Pregnancy and Pregnancy Outcomes
I estimate the effect of state minimum legal drinking ages (MLDA) on teen pregnancy, birth, and abortion rates using individual level data from the National Longitudinal Survey of Youth. Results from a discrete time hazard model indicate that a decrease in the MLDA below 21 years increases the probability of pregnancy among black teens and, surprisingly, decreases the probability of pregnancy among Hispanics. Yet, the effect on white women is statistically insignificant. I find evidence of a link between pregnancy outcome and changes in the individual alcohol consumption eligibility status at the time of pregnancy. A similar, yet statistically weaker, association is observed for changes in the MLDA at the time of pregnancy.