Positive Spillovers from Infrastructure Investment: How Pipeline Expansions Encourage Fuel Switching

This paper studies the role of the U.S. pipeline infrastructure in the country's transition from coal to natural gas energy. I leverage the EPA's Mercury and Air Toxics Standards as a plausibly exogenous intervention, which encouraged many coal plants to convert to natural gas. Combining this quasi-experimental variation with a plant's preexisting proximity to the pipeline network, I isolate implied pipeline connection costs within a dynamic discrete choice model of plant conversions. Key model results indicate that infrastructure-related costs prevent $9 billion in emissions reductions from taking place, suggesting a $2.4 million per mile external benefit of pipeline expansions.

Sovereign Debt Restructurings

Sovereign debt crises involve debt restructurings characterized by a mix of face value haircuts and maturity extensions. The prevalence of maturity extensions has been hard to reconcile with economic theory. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. While debt dilution pushes for negative maturity extensions, three factors are important in overcoming the effects of dilution and generating maturity extensions upon restructurings: income recovery after default, credit exclusion after restructuring, and regulatory costs of book value haircuts. We employ dynamic discrete choice methods that allow for smoother decision rules, rendering the problem tractable. (JEL E44, F34, F41, H63)

“It's Not You, It's Me”: Prices, Quality, and Switching in U.S.-China Trade Relationships

Costs from switching suppliers can affect prices by discouraging buyer movements from high- to low-cost sellers. This paper uses confidential data on U.S. importers and their Chinese exporters to investigate these costs. I find barriers to supplier adjustments: nearly half of importers keep their partner over time. Importers switch less if their supplier has higher quality or provides lower prices. I propose and structurally estimate a dynamic discrete choice model to compute switching costs. Cost estimates are large, heterogeneous across products, and matter for trade prices: halving switching costs reduces the U.S.-China Import Price Index by 7.6%.

Identification of counterfactuals in dynamic discrete choice models

Dynamic discrete choice (DDC) models are not identified nonparametrically, but the non‐identification of models does not necessarily imply the nonidentification of counterfactuals. We derive novel results for the identification of counterfactuals in DDC models, such as non‐additive changes in payoffs or changes to agents' choice sets. In doing so, we propose a general framework that allows the investigation of the identification of a broad class of counterfactuals (covering virtually any counterfactual encountered in applied work). To illustrate the results, we consider a firm entry/exit problem numerically, as well as an empirical model of agricultural land use. In each case, we provide examples of both identified and nonidentified counterfactuals of interest.

Efficient Forestation in the Brazilian Amazon: Evidence from a Dynamic Model

This paper estimates the Brazilian Amazon’s efficient forestation level. We propose a dynamic discrete choice model of land use and estimate it using a remote sensing panel with land use and stock of carbon of 5.7 billion pixels, at 30 meters resolution, between 2008 and 2017. We estimate that a business as usual scenario will generate an inefficient loss of 1,075,000 km2 of forest cover in the long run, an area almost two times the size of France, implying the release of 44 billion tons of CO2. We quantify the potential of carbon and cattle production taxes to mitigate inefficient deforestation. We find that relatively small carbon taxes can mitigate a substantial part of the inefficient forest loss and emissions, while only very large taxes on cattle production would achieve a similar effect.