Quasi-Experimental Methods in Environmental Economics: Opportunities and Challenges

44 Pages Posted: 17 Sep 2018

See all articles by Olivier Deschenes

Olivier Deschenes

University of California, Santa Barbara - College of Letters & Science - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management

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Abstract

This paper examines the application of quasi-experimental methods in environmental economics. We begin with two observations: i) standard quasi-experimental methods, first applied in other microeconomic fields, typically assume unit-level treatments that do not spill over across units; (ii) because public goods, such as environmental attributes, exhibit externalities, treatment of one unit often affects other units. To explore the implications of applying standard quasi-experimental methods to public good problems, we extend the potential outcomes framework to explicitly distinguish between unit-level source and the resulting group-level exposure of a public good.This new framework serves as a foundation for reviewing and interpreting key papers from the recent empirical literature. We formally demonstrate that two common quasi-experimental estimators of the marginal social benefit of a public good can be biased due to externality spillovers, even when the source of the public good itself is quasi-randomly assigned. We propose an unbiased estimator for the valuation of local public goods and discuss how it can be implemented in future studies. Finally, we consider how to preserve the advantages of the quasi-experimental approach when valuing global public goods, such as climate change mitigation, for which no control units are available.

Keywords: quasi-experimental methods, environmental economics, externalities

JEL Classification: C21, H23, H41, Q50, Q51, Q52, Q53, Q54

Suggested Citation

Deschenes, Olivier and Meng, Kyle, Quasi-Experimental Methods in Environmental Economics: Opportunities and Challenges. IZA Discussion Paper No. 11797. Available at SSRN: https://ssrn.com/abstract=3249911

Olivier Deschenes (Contact Author)

University of California, Santa Barbara - College of Letters & Science - Department of Economics ( email )

UC Santa Barbara
Santa Barbara, CA 93106
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States

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