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Energy Economics

Paper Session

Friday, Jan. 4, 2019 8:00 AM - 10:00 AM

Atlanta Marriott Marquis, International C
Hosted By: American Economic Association
  • Chair: Misak Avetisyan, Texas Tech University

Are Energy Executives Rewarded For Luck?

Catherine Hausman
,
University of Michigan
Lucas Davis
,
University of California-Berkeley

Abstract

In an influential paper, Bertrand and Mullainathan (2001) show that energy executives are rewarded for high oil prices, which they term pay-for-luck. Almost twenty years later, performance-based pay as a portion of executive compensation has nearly doubled; total executive compensation has also nearly doubled; and new disclosure laws and tax rules have changed the regulatory landscape. In this paper, we examine whether their results and their interpretation continue to hold in this changing environment. We find that executive compensation at U.S. oil and gas companies is still closely tied to oil prices, indicating that executives continue to be rewarded for luck despite the increased availability of more sophisticated compensation mechanisms. This finding is robust to including time-varying controls for the firms' scale of operations, and it holds not only for total executive compensation but also for several of the separate individuals components of compensation, including bonuses. Moreover, we show there is less pay-for-luck in better-governed companies, and that pay-for-luck is asymmetric -- rising with increasing oil prices more than it falls with decreasing oil prices. These patterns are more consistent with rent extraction by executives than with maximizing shareholder value.

Extreme Event and Households Sorting: The Anchoring Role of Local Amenities

Renaud Coulomb
,
University of Melbourne
Yanos Zylberberg
,
University of Bristol

Abstract

We study changes in the valuation of nuclear plants following the Fukushima
nuclear accident of March 2011. Using an exhaustive registry of individual
housing transactions in England and Wales between 2007 and 2014, we implement
a difference-in-difference strategy and compare housing prices in at-risk
areas to those further away from nuclear sites before and after the Fukushima
incident. We find a persistent price decrease of about 3.5% in response to
the accident for properties in the neighbourhood of nuclear plants. This price
decrease is sharper for the most expensive properties within a neighbourhood.
As nuclear policy adjustments were negligible in the post-Fukushima UK, the
price drop is primarily reflects a change in plant valuation. We explore how
the heterogeneity across at-risk areas relates to existing productive and consumptive
amenities and show that those with mobile productive amenities
undergo a more substantial price decrease.

Private and Social Costs of Misallocation in Indian Electricity Supply

Fiona Burlig
,
University of Chicago
Akshaya Jha
,
Carnegie Mellon University
Louis Preonas
,
University of California-Berkeley

Abstract

Economic growth in developing countries is associated with rapid increases in electricity consumption, but electricity supply in these countries is characterized by a lack of market forces and an abundance of highly-polluting coal-fired power plants. In this paper, we seek to quantify the extent of private and social inefficiency in the Indian power sector. We assemble novel data on daily production and marginal costs at each utility scale power plant in India, and use these data to quantify the total private short run costs of factual electricity generation in India, and compare these costs to a ``least-cost'' counterfactual where we dispatch power plants according to marginal cost. Even after accounting for transmission constraints, we find a large wedge between observed and least-cost dispatch. We find suggestive evidence that market design and political economy factors drive a large wedge between observed and least-cost dispatch. Next, we estimate marginal damages associated with local air pollution from each power plant using satellite data and a pollution transport model, which we use to construct least-cost dispatch inclusive of social costs. This will allow us to estimate the damages associated with failing to properly price emissions in India's power sector.

The Effect of Auto Emission Reductions on Student Health and Achievement: Evidence from Georgia’s Diesel Bus Retrofit Program

Garret Wes Austin
,
Georgia State University
Garth A. Heutel
,
Georgia State University
Daniel Kreisman
,
Georgia State University

Abstract

Diesel school bus emissions contribute disproportionately to youth air pollution exposure. Retrofitting bus engines with soot collectors or other modifications can reduce bus emissions by 90 percent or more. For this reason, federal grant programs have awarded millions of dollars to school districts to retrofit their bus fleets. The proposed study uses a first-difference research model exploiting temporal and dosage variation in bus fleet retrofits across Georgia school districts, finding that school bus retrofits had significant effects on student aerobic capacity but not on other (placebo) physical fitness outcomes such as BMI. The paper also finds small but significant effects on both English Language Arts and Math test scores in the region of .02-.06 standard deviations.
JEL Classifications
  • Q4 - Energy