- Job Market Paper"A Policy by Any Other Name: Unconventional Industrial Policy in the US Residential Solar Industry"Bradt, J.T.Ongoing
Consumer subsidies are a common policy tool for supporting the adoption of clean, energy-efficient technologies. In addition to increasing take-up of new technologies, policymakers justify these programs as a means of stimulating infant industries, arguing that the presence of learning-by-doing and inter-firm knowledge spillovers incentivize entry. However, potential knowledge transfers reduce the incentives for firms to expand output and reduce costs by making cost reductions—in part—a public good. To evaluate this tradeoff, I estimate a dynamic structural model of the market for solar panel installations in California that endogenizes firms’ entry and exit decisions and allows for learning-by-doing with incomplete spillovers. I estimate that a 1% increase in a firm’s experience as measured by cumulative production leads to a 0.7% reduction in installation-specific costs and that learning spills over across firms. Counterfactual analysis reveals that existing consumer subsidy programs increased installer entry by 9%, indicating that industry cost reductions outweigh the decrease in firms’ incentives to reduce costs by expanding output. While consumer subsidies may be effective at increasing industry size, standard industrial policies such as entry subsidies likely provide greater welfare gains.
- Working Paper"Private Benefits from Public Investment in Climate Adaptation and Resilience"Bradt, J.T., and Aldy, J.E.Ongoing
Flood protection infrastructure investments, such as Army Corps of Engineer levees, can enhance resilience to flood risks amplified by climate change. We estimate the benefits from levees by exploiting repeat residential property transactions. In areas protected by levees, home values increase 3 percent. Levees impose adverse spillover flood risks to nearby areas that reduce affected home values by 1 percent. Capitalized benefits in protected areas are progressive, but adverse spillover impacts are regressive. While there is little variation across race in capitalized benefits at levee construction, racial sorting occurs post-construction. Capitalized residential property benefits do not exceed levee construction costs.
- In Progress"Spatial Sorting, Agglomeration Economies, and Travel Cost Endogeneity in Recreation Demand Models"Bradt, J.T.Ongoing
Conventional recreation demand models assume that travel cost is exogenously determined; however, the costs individuals face when choosing which recreation site to visit are the result of a spatial sorting equilibrium which may be affected by the location of recreation sites and their different observed or unobserved attributes. This paper provides a simple approach to account for the potential endogeneity problem in travel cost models and demonstrates the importance of addressing this source of bias.
- Publication"Voluntary Purchases and Adverse Selection in the Market for Flood Insurance"Bradt, J.T., Kousky, C., and Wing, O.E.J.Journal of Environmental Economics and Management, Oct 2021
Flood-related events are the most damaging natural hazard in the United States, yet many households at risk do not have flood insurance. Using detailed policy- and claims-level data from the National Flood Insurance Program (NFIP), we conduct a holistic analysis of the market for publicly provided flood insurance in the U.S., focusing on not only high-risk areas subject to an incomplete mandate requiring the purchase of insurance, but also lower risk areas where no such mandate exists. We are able to better understand determinants of demand for insurance in a setting with voluntary purchase and low take-up and therefore provide a more complete analysis of the market for flood insurance in the U.S. than previous work. In addition to exploring correlates of demand for flood insurance, this paper provides quasi-experimental estimates of households’ willingness-to-pay for flood insurance and finds strong evidence to suggest the NFIP failing to utilize full information on flood risk leads to adverse selection in the program.
- Publication"Analysis of Proposed 20-year Mineral Leasing Withdrawal in Superior National Forest"Stock, J.H., and Bradt, J.T.Ecological Economics, Aug 2020
The Rainy River Watershed on the Superior National Forest is home to the Boundary Waters Canoe Area Wilderness (BWCAW). It also contains deposits of copper, nickel, and trace metals, and copper-nickel mining has been proposed adjacent to and upstream of the BWCAW. In 2017, the US Department of Agriculture proposed withdrawing land in the Rainy River Watershed within the Superior National Forest from mineral leasing, a position it reversed in 2018. These developments highlight the potential tradeoff between economic benefits from mining and concerns about its negative economic consequences for the local recreational and amenity-based economy. Previous studies of mining in the Superior National Forest focus on static effects on a single industry (e.g., mining) at some unspecified point over a medium-run horizon. We draw on these studies and the economics literature to provide a unified analysis of the effect of the proposed mining development on income and employment over time. Our results suggest that the proposed mining would lead to a boom-bust cycle that is typical of resource extraction economies, exacerbated by the likely negative effect on the recreation industry.
- Publication"’Underwaterwriting:’ From Theory to Empiricism in Regional Mortgage Markets in the U.S."Keenan, J.M., and Bradt, J.T.Climatic Change, Aug 2020
This article provides the theoretical foundation for the concept of “Underwaterwriting,” which can be understood as various informational and institutional limitations related to environmental exposure and climate change impacts—specifically flooding and sea level rise inundation—shaping firm participation in mortgage markets. Underwaterwriting suggests that the unevenness of scientific knowledge and local soft information, as well as the institutional barriers for the utilization of that information, could result in determinations of risk that may not accurately reflect long-term asset performance or credit loss. These informational asymmetries may result in assignments of risk that reflect a degree of arbitrariness or inaccuracy that may operate to strand assets and shed or increase market share in ways that are inefficient and may otherwise lead to negative public externalities. Consistent with this theory, this article provides evidence that concentrated local lenders are transferring risk in high-risk coastal geographies in the Southeast Atlantic and Gulf Coasts (U.S.) through increased securitization of mortgages. These findings provide an impetus for supporting more robust analysis of climate-risk in light of forthcoming accounting rules that require an upfront accounting of forward-looking credit losses.
- Publication"Comparing the Effects of Behaviorally Informed Interventions on Flood Insurance Demand: An Experimental Analysis of ‘Boosts’ and ‘Nudges’"Bradt, J.T.Behavioural Public Policy, Aug 2019
This paper compares the effects of two types of behaviorally informed policy – nudges and boosts – that are designed to increase consumer demand for insurance against low-probability, high-consequence events. Using previous findings in the behavioral sciences literature, this paper constructs and implements two nudges (an ‘informational’ and an ‘affective’ nudge) and a statistical numeracy boost and then elicits individual risk beliefs and demand for flood insurance using a contingent valuation survey of 331 participants recruited from an online labor pool. Using a two-limit Tobit model to estimate willingness to pay (WTP) for flood insurance, this paper finds that the affective and informational nudges result in increases in WTP for flood insurance of roughly \21/month and \11/month relative to the boost, respectively. Taken together, the findings of this paper suggest that nudges are the more effective behaviorally informed policy in this setting, particularly when the nudge design targets the affect and availability heuristics; however, additional research is necessary to establish sufficient conditions for this conclusion.