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Atlanta Marriott Marquis, L505
Hosted By:
Econometric Society
Energy and Macroeconomics
Paper Session
Sunday, Jan. 6, 2019 10:15 AM - 12:15 PM
- Chair: David Lagakos, University of California-San Diego
Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation
Abstract
I build a quantitative model of economic growth that can be used to evaluate the impact of environmental policy interventions on final-use energy consumption, an important driver of carbon emissions. In the model, energy demand is driven by endogenous and directed technical change (DTC). Unlike existing DTC models, I consider the case where multiple technological characteristics are embodied in each capital good, rather than in different sectors. Energy supply is subject to increasing extraction costs. The model is consistent with aggregate evidence on energy use, efficiency, and prices in the United States. In my primary analysis, I examine the impact of new energy taxes and compare the results to the standard Cobb-Douglas approach used in the environmental macroeconomics literature, which is not consistent with data. When examining a realistic and identical path of energy taxes in both models, the directed technical change model predicts 24% greater cumulative energy use over the next century. I also use the model to study the macroeconomic consequences of energy efficiency mandates. I find large rebound effects that undermine the environmental effectiveness of such policies.Does Electrification Cause Industrial Development? Grid Expansion and Firm Turnover in Indonesia
Abstract
I ask whether electrification causes industrial development. I combine newly digitized data from the Indonesian state electricity company with rich manufacturing census data. To understand when and how electrification can cause industrial development, I shed light on an important economic mechanism - firm turnover. In particular, I study the effect of the extensive margin of electrification (grid expansion) on the extensive margin of industrial development (firm entry and exit). To deal with endogenous grid placement, I build a hypothetical electric transmission grid based on colonial incumbent infrastructure and geographic cost factors. I find that electrification causes industrial development, represented by an increase in the number of manufacturing firms, manufacturing workers, and manufacturing output. Electrification increases firm entry rates, but also exit rates. Higher turnover rates lead to higher average productivity and induce reallocation towards more productive firms in electrified areas. This is consistent with electrification lowering entry costs, increasing competition and forcing unproductive firms to exit more often. Without the possibility of entry or competitive effects of entry, the effects of electrification are likely to be smaller.The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada
Abstract
Shocks to the demand for housing that originate in one region may seem important only for that regional housing market. We provide evidence that such shocks can also affect housing markets in other regions. Our analysis focuses on the response of Canadian housing markets to oil price shocks. Oil price shocks constitute an important source of exogenous regional variation in income in Canada because oil production is highly geographically concentrated. We document that, at the national level, real oil price shocks account for 11% of the variability in real house price growth over time. At the regional level, we find that unexpected increases in the real price of oil raise housing demand and real house prices not only in oil-producing regions, but also in other regions. We develop a theoretical model of the propagation of real oil price shocks across regions that helps understand this finding. The model differentiates between oil-producing and non-oil-producing regions and incorporates multiple sectors, trade between provinces, government redistribution, and consumer spending on fuel. We empirically confirm the model prediction that oil price shocks are propagated to housing markets in non-oil-producing regions by the government redistribution of oil revenue and by increased interprovincial trade.JEL Classifications
- E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
- Q4 - Energy