Research

Work in Progress

Adjustment Frictions and the Cost of Environmental Regulatory Uncertainty

How do political transitions affect the efficacy of regulatory enforcement? When elected officials appoint regulators, political shifts create regulator turnover and fluctuate enforcement intensity. If adjusting pollution levels is costly, these regulatory swings impose economic burdens. This paper quantifies the welfare costs of regulatory fluctuations in California’s water quality enforcement. Using linked data on enforcement, compliance, and regulator composition, I document that facility violations adjust gradually following regulator turnover, suggesting substantial compliance adjustment costs. I estimate a structural model of facility abatement decisions and find that past pollution levels influence current abatement choices 3.5 times more than current fines. Counterfactual analysis shows that regulatory fluctuations generate welfare losses equal to nearly one-third of total fines, driven by adjustment costs (31%) and political inefficiency (69%). While adjustment costs partially stabilize pollution by dampening responses to regulatory swings, policy uncertainty weakens this effect. Finally, I show that institutional reforms can mitigate these losses: doubling regulator term lengths to eight years reduces welfare losses by 14%.

Measurement Errors in Weather Data —with Derek Lemoine, Wint Thu

Accurately estimating the economic impacts of weather is increasingly important, yet challenging due to inherent measurement error in weather data. Beyond the classic attenuation bias, endogenous entry and exit of weather stations can further distort these estimates. This concern is particularly salient as recent studies increasingly rely on panel fixed effects regressions, where the influence of measurement error can be amplified. To address this issue, we propose an instrumental variable approach that uses weather measures constructed to keep measurement errors constant over time and across space. We build such data and apply it to a set of canonical studies on the effects of weather. Our results show that correcting for this bias alters the estimated effects, often changing the magnitude and in some cases, even the sign of the effects.

Do Firms Avoid Pollution? Water Pollution and Beverage Manufacturers’ Location

I study a novel channel through which environmental pollution imposes a cost on firms: the quality of raw material inputs. Input water quality greatly determines the quality of beverages and thus, water pollution can affect beverage manufacturers’ profits and where they operate. Specifically, I investigate how water pollution impacts the entry decisions of beverage manufacturers. I use annual allotments of Clean Water State Revolving Fund to a state as an instrumental variable for water quality in downstream, adjacent counties. I find that past allotments increase downstream water quality and that a 10% increase in mean dissolved oxygen concentrations leads to an increase in the number of net entry of beverage manufacturers by 2.36 firms.