Behavioral responses and policy evaluation: Revisiting water and fuel policies

In my dissertation, I examine how policies regulating agricultural production and clean technology impact the environment. I focus on policies affecting water depletion, water pollution, and fuel consumption. I assess their cost-effectiveness by modeling and quantifying the behavioral responses of farmers and households.;My first essay focuses on decreasing groundwater depletion through increasing irrigation efficiency in Mexico. I quantify the impacts of different sources of inefficiency on groundwater extraction, and I evaluate the effectiveness of alternative policies that aim to reduce the over-extraction of groundwater. I find that mechanisms of electricity cost-sharing implemented in many wells have a sizable impact on the inefficiency of irrigation applications; thus, policies eliminating electricity cost-sharing mechanisms have a substantial effect on decreasing groundwater depletion. In contrast, price-based policies are less effective, and policies targeting well-sharing do not have significant effect on reducing irrigation application and groundwater depletion.;In my second essay, I assess policies which attempt to reduce water pollution by reducing fertilizer application. Input- and output-based economic policies designed to reduce water pollution from fertilizer runoff by adjusting management practices are theoretically justified and well-understood. Yet, in practice, adjustment in fertilizer application or land allocation may be sluggish. I incorporate time cost as a new dimension in the assessment of these policies and simultaneously quantify the magnitude of the policy effectiveness and the speed at which the policies take effect. I find that while both input- and output-based policies are able to induce a significant reduction in fertilizer application, input-based policies are more cost-effective than their output-based counterparts. Further, input- and output-based policies yield adjustment in fertilizer application at the same speed, and most of the adjustment takes place in the short-term. Due to the rapid adjustment in land allocation between corn and soybeans, the long-term effects of the policies can also be rapidly achieved. Though the time cost does not constitute a major concern in my research area, the time dimension may be important in research areas in which there are different crops that may not be easily substituted between.;In my third essay, I explore household adoption of gasoline-electric hybrid vehicles and the impact of hybrid ownership on annual miles traveled in order to understand how hybrid ownership impacts fuel savings. I focus on issues of identification in light of several behavioral factors that are believed to influence both hybrid adoption and miles traveled. I measure two types of rebound effects associated with hybrid adoption. The first one is a traditional rebound effect in which a hybrid owner drives more due to the lower travel cost from higher fuel efficiency; the second one is a social status driven rebound effect in which a hybrid owner drives more to signal his environmental friendliness through driving a hybrid. I find a statistically significant traditional rebound effect on miles traveled. However, this rebound effect is only 3% of the average annual miles traveled and only slightly offsets the fuel savings from the higher fuel efficiency of the hybrid. I do not find evidence of a status-driven rebound effect. I estimate that hybrid adoption induces substantial fuel savings that amount to about half of the average fuel consumption of regular vehicles.