The Freakonomics blog has a great post on the behavioral economics behind minimum-payment requirements for credit cards. Citing some recent research by Neil Stewart, the post explains how providing a minimum threshold may induce people to actually make a smaller payment than they otherwise would have. This behavior comes about because of our susceptibility to anchoring: we tend to base our decisions on even arbitrary values we are given as starting points (see here for some examples).
This result is clearly of interest to behavioral economists: decades of research at the intersection of psychology and economics has led some observers to suggest that these tools be used in policy. That is, the irrational behavioral foibles of humans can be used to "nudge" them into making the right decisions (the term comes from a new book by Richard Thaler and Cass Sunstein).
Are there other avenues where nudges may be effective? And are there (other) examples where well-intentioned nudges may be counterproductive? A good illustration for both queries comes from Indian matrimonial websites. Like all social networking, a given user's experience on a martrimonial website depends on the activities of his or her peers. Inactive individuals do not contribute anything to the marketplace, while active ones generate all sorts of positive externalities. As such, it is in the best interest of the website company to get people active, either by introducing clarity to the user interface, making the website more fun, recruiting tons of singles, or by nudging existing users to make more contacts.
Regarding the latter, one particular website keeps track of whether a given user responds to an expression of interest from another user and the number of times that user accesses the website. Based on their activity patterns, slow or shy users are then sent an e-mail urging them to use the website by saying they are (1) missing out and (2) being rude to others by not responding. While perhaps not based in behavioral economics per se, the idea is to use some form of shame and opportunity cost argument to get people more involved.
But does this nudge work? I could easily see something like this being counterproductive. After all, nobody likes a nag, and I would bet there are plenty of people who would stop using the website just to avoid being made to feel guilty. Furthermore, messages (1) and (2) are conflicting: one is positive and the other negative. This might just confuse people.
I think this sort of thing is ripe for an experiment. However, this would require some alternate nudge option. Any ideas?
Thursday, December 18, 2008
Tuesday, December 16, 2008
Yale and the Financial Crisis
Check out the detailed consequences of Yale's 25% drop in the endowment value over the last six months or so here. The situation at other American universities also looks somewhat glum.
Be Careful With Natural Experiments
Those of you who visit this space regularly know a thing or two about my obsession with causal effects. Answering many questions in health economics requires a strategy to understand the causal effect of one variable on another, and recovering such effects demands clever strategies or tools that go beyond simple multivariate models of some X on some Y. The cleanest way to get the causal effect of X on Y is to randomize X. This strategy has been used widely in laboratory and clinical medicine, and is now being exploited in a growing number of influential papers in economics and political science.
In many cases, however, it may not possible to randomize X or the question of interest involves some program or event that occurred in the past. In these situations, researchers looks for other sources of variation in X that are effectively random - the natural experiment. A good (and now famous) example from health economics involves the impact of early life events on health and socioeconomic position later in life. A great deal of early work in epidemiology found links between the disease environment faced by an individual at birth and this individuals health later in life. This link could be causal: fetal health influences organogenesis and development that goes on to influence adult health. At the same time, alternate explanations are possible: children born to poor parents become poor themselves, which affects their health. To complete the story, poor parents may tend to reside in poor, diseased areas.
To get around this issue, Douglas Almond, in an influential 2006 paper, utilized the influenza pandemic of 1918, which struck without warning, over a short period of time, and had large, notable effects. Being exposed to influenza in utero can be thought of as a random shock (a natural experiment), and Almond took advantage of this property to derive the causal effects of health in utero on outcomes later in life.
However, while the "influenza strategy" is as close to a slam dunk as you could possibly get in observational research, other things that may seem like natural experiments a priori may not be as definitively good. In fact, such variation may even lead researchers astray.
A new NBER working paper explores this issue in detail. Kasey Buckles and Daniel Hungerman consider the case of season of birth, which has been shown to be associated with a variety of health and socioeconomic outcomes later in life. These associations have been attributed to fetal exposure to different weather conditions or differential exposure to arbitrary age-cutoffs (in sports or in schooling). At first glance, season of birth appears to be a great source of exogenous variation for a slew of different causal questions: after all, individuals don't have any control over when they are born and it seems like something that would be left to chance. However, Buckles and Hungerman convincingly argue that this is not the case:
In this paper we consider a new explanation: that children born at different times in the year are conceived by women with different socioeconomic characteristics. We document large seasonal changes in the characteristics of women giving birth throughout the year in the United States. Children born in the winter are disproportionally born to women who are more likely to be teenagers and less likely to be married or have a high school degree. We show that controls for family background characteristics can explain up to half of the relationship between season of birth and adult outcomes. We then discuss the implications of this result for using season of birth as an instrumental variable; our findings suggest that, though popular, season-of-birth instruments may produce inconsistent estimates. Finally, we find that some of the seasonality in maternal characteristics is due to summer weather differentially affecting fertility patterns across socioeconomic groups.
This is a neat paper and serves as a good warning to those interested in finding natural variation to identify causal effects. Another excellent paper on the same subject, by Mark Rosenzweig and Ken Wolpin, goes through a variety of other potentially fallacious natural experiment examples and is a must read for anyone doing empirical work.
In many cases, however, it may not possible to randomize X or the question of interest involves some program or event that occurred in the past. In these situations, researchers looks for other sources of variation in X that are effectively random - the natural experiment. A good (and now famous) example from health economics involves the impact of early life events on health and socioeconomic position later in life. A great deal of early work in epidemiology found links between the disease environment faced by an individual at birth and this individuals health later in life. This link could be causal: fetal health influences organogenesis and development that goes on to influence adult health. At the same time, alternate explanations are possible: children born to poor parents become poor themselves, which affects their health. To complete the story, poor parents may tend to reside in poor, diseased areas.
To get around this issue, Douglas Almond, in an influential 2006 paper, utilized the influenza pandemic of 1918, which struck without warning, over a short period of time, and had large, notable effects. Being exposed to influenza in utero can be thought of as a random shock (a natural experiment), and Almond took advantage of this property to derive the causal effects of health in utero on outcomes later in life.
However, while the "influenza strategy" is as close to a slam dunk as you could possibly get in observational research, other things that may seem like natural experiments a priori may not be as definitively good. In fact, such variation may even lead researchers astray.
A new NBER working paper explores this issue in detail. Kasey Buckles and Daniel Hungerman consider the case of season of birth, which has been shown to be associated with a variety of health and socioeconomic outcomes later in life. These associations have been attributed to fetal exposure to different weather conditions or differential exposure to arbitrary age-cutoffs (in sports or in schooling). At first glance, season of birth appears to be a great source of exogenous variation for a slew of different causal questions: after all, individuals don't have any control over when they are born and it seems like something that would be left to chance. However, Buckles and Hungerman convincingly argue that this is not the case:
In this paper we consider a new explanation: that children born at different times in the year are conceived by women with different socioeconomic characteristics. We document large seasonal changes in the characteristics of women giving birth throughout the year in the United States. Children born in the winter are disproportionally born to women who are more likely to be teenagers and less likely to be married or have a high school degree. We show that controls for family background characteristics can explain up to half of the relationship between season of birth and adult outcomes. We then discuss the implications of this result for using season of birth as an instrumental variable; our findings suggest that, though popular, season-of-birth instruments may produce inconsistent estimates. Finally, we find that some of the seasonality in maternal characteristics is due to summer weather differentially affecting fertility patterns across socioeconomic groups.
This is a neat paper and serves as a good warning to those interested in finding natural variation to identify causal effects. Another excellent paper on the same subject, by Mark Rosenzweig and Ken Wolpin, goes through a variety of other potentially fallacious natural experiment examples and is a must read for anyone doing empirical work.
Thursday, December 11, 2008
Bad News on the Other Side of the Birth Weight Distribution?
Two recent articles explore the long-run effects of maternal weight gain and/or high weight at birth on long-run outcomes. Much of the health economics literature has focused on understanding returns to birth weight at the lower tail of the distribution, and several studies have found notable effects of birth weight on wages, schooling and cognition later in life. The downsides to high birth weight have been explored in the medical literature, which has typically focused on obesity and diabetes risk among children born to diabetic mothers (who birth larger than average - or macrosomic - infants).
A recent study in Obstetrics and Gynecology illustrates that increased gestational weight gain among mothers is associated with higher risk of obesity among their offspring. Unlike past studies, the study sample here is not limited to mothers with diabetes. While causality is difficult to establish here - mothers that gain weight during pregnancy may have similar preferences/constraints regarding food, which can be passed on to the next generation via other means besides biology - the results are interesting and deserve further research attention.
In a recent NBER working paper, Resul Cesar and Inas Rashad look at the association between birth weight and cognitive outcomes among a sample of children and teens and young adults followed in two different panel studies. The main result is that birth weight is associated with lower cognitive test scores at both the low and high part of the distribution: heavy infants suffer deficits, too.
I'm guessing this literature will likely explode in the next few years, especially with the ever growing obesity "epidemic" and its obvious consequences for maternal weight during pregnancy (see here for an earlier piece on this). Hopefully, this literature will address two major areas:
(1) Causal effects - Spatial variation in food prices, dynamics from recessions, the introduction of public programs and other shocks can be used to identify maternal weight gain during gestation and child birth weight. Utilizing this variation can help eliminate from the picture alternative interpretations of the association between maternal weight gain, child birth weight and later child outcomes.
(2) Mechanisms - Even if you can recover causal effects, what is the pathway? A link between high birth weight and lower cognition could be biological in nature or may operate through reduced and less effective investments in childhood and adolescents due to diminishing social returns to body weight: kids may learn less effectively if they are being made fun of at school for their appearance. These explanations have vastly different policy implications and should be teased apart.
A recent study in Obstetrics and Gynecology illustrates that increased gestational weight gain among mothers is associated with higher risk of obesity among their offspring. Unlike past studies, the study sample here is not limited to mothers with diabetes. While causality is difficult to establish here - mothers that gain weight during pregnancy may have similar preferences/constraints regarding food, which can be passed on to the next generation via other means besides biology - the results are interesting and deserve further research attention.
In a recent NBER working paper, Resul Cesar and Inas Rashad look at the association between birth weight and cognitive outcomes among a sample of children and teens and young adults followed in two different panel studies. The main result is that birth weight is associated with lower cognitive test scores at both the low and high part of the distribution: heavy infants suffer deficits, too.
I'm guessing this literature will likely explode in the next few years, especially with the ever growing obesity "epidemic" and its obvious consequences for maternal weight during pregnancy (see here for an earlier piece on this). Hopefully, this literature will address two major areas:
(1) Causal effects - Spatial variation in food prices, dynamics from recessions, the introduction of public programs and other shocks can be used to identify maternal weight gain during gestation and child birth weight. Utilizing this variation can help eliminate from the picture alternative interpretations of the association between maternal weight gain, child birth weight and later child outcomes.
(2) Mechanisms - Even if you can recover causal effects, what is the pathway? A link between high birth weight and lower cognition could be biological in nature or may operate through reduced and less effective investments in childhood and adolescents due to diminishing social returns to body weight: kids may learn less effectively if they are being made fun of at school for their appearance. These explanations have vastly different policy implications and should be teased apart.
Tuesday, December 9, 2008
Returns to Medical Care Among High Risk Infants
A really interesting NBER paper this week looks at health returns to medical interventions among high-risk (here, low birth weight) newborns babies. The difficulty in assessing the casual effects of medical care in this population is that worse-off infants may get more of it because they require it. On the other hand, unhealthy babies may be more likely to come from poor families, who lack access to health care. Either process makes it difficult to recover causal effects.
Douglas Almond, Joseph Doyle, Amanda E. Kowalski and Heidi Williams adopt an interesting strategy to get around this issue. Essentially, they utilize existing birth weight thresholds (those below 1500 grams are classified very low birth weight) and provider obedience to these discontinuous (and perhaps arbitrary?) thresholds. By comparing those babies just below 1500 grams to those just above it, the authors contend that they get around the targetting of medical care to worse off babies - after all, the difference of a few grams around the cutoff is likely random and unrelated to innate biological hardiness. In a sense, the level of treatment given is essentially random for babies born around this narrow threshold. More on their methodology (which Almond and Doyle employ in another very interesting paper) and results:
We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.
Aside from the policy relevance of the results and the innovative research design used in the study, I find it really interesting that the provision of health care is so sensitive to seemingly arbitrary guidelines. Does anyone have a sense of where the 1500 and 2500 gram cutoffs came from, and whether they've outlived their clinical relevance?
Douglas Almond, Joseph Doyle, Amanda E. Kowalski and Heidi Williams adopt an interesting strategy to get around this issue. Essentially, they utilize existing birth weight thresholds (those below 1500 grams are classified very low birth weight) and provider obedience to these discontinuous (and perhaps arbitrary?) thresholds. By comparing those babies just below 1500 grams to those just above it, the authors contend that they get around the targetting of medical care to worse off babies - after all, the difference of a few grams around the cutoff is likely random and unrelated to innate biological hardiness. In a sense, the level of treatment given is essentially random for babies born around this narrow threshold. More on their methodology (which Almond and Doyle employ in another very interesting paper) and results:
We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.
Aside from the policy relevance of the results and the innovative research design used in the study, I find it really interesting that the provision of health care is so sensitive to seemingly arbitrary guidelines. Does anyone have a sense of where the 1500 and 2500 gram cutoffs came from, and whether they've outlived their clinical relevance?
Friday, November 14, 2008
Hiatus
Hi everyone,
I will be taking a break from blogging for at least a month. I'm really grateful to those of you who visit this space regularly: I've learned a great deal from your comments.
I hope to resume blogging by the end of the year. If for some reason you miss my writing, you can check out my working academic papers here.
Thanks for reading, and see you soon.
Atheen
I will be taking a break from blogging for at least a month. I'm really grateful to those of you who visit this space regularly: I've learned a great deal from your comments.
I hope to resume blogging by the end of the year. If for some reason you miss my writing, you can check out my working academic papers here.
Thanks for reading, and see you soon.
Atheen
Tuesday, November 11, 2008
Random Tuesdays
Some things of note:
1) Blogger and frequent commenter in this space James Hudspeth sent me this interesting article about how google searches can be used to track disease outbreaks, with information relays that are potentially faster than existing surveillance systems.
2) Elizabeth Pisani, author of The Wisdom of Whores (on my reading list for next month), has a fun and informative blog of the same name. Here is an interesting post from this blog looking at incentives and HIV/AIDS, with a special reference to disability grants in South Africa. Here is our paper on this subject.
3) Spotlight (with a thoughtful piece) on Obama.
4) People are addictive.
5) Be sure to check out the Yale University Insitute for Social and Policy Studies 40th Year Celebration and Conference. I think space is tight, but you can still get a sense of the bill through the papers and slides available via the link provided above. The conference focuses on using experiments to answer important questions in political science and economics, and the papers span a wide range of topics. All of them are super interesting.
1) Blogger and frequent commenter in this space James Hudspeth sent me this interesting article about how google searches can be used to track disease outbreaks, with information relays that are potentially faster than existing surveillance systems.
2) Elizabeth Pisani, author of The Wisdom of Whores (on my reading list for next month), has a fun and informative blog of the same name. Here is an interesting post from this blog looking at incentives and HIV/AIDS, with a special reference to disability grants in South Africa. Here is our paper on this subject.
3) Spotlight (with a thoughtful piece) on Obama.
4) People are addictive.
5) Be sure to check out the Yale University Insitute for Social and Policy Studies 40th Year Celebration and Conference. I think space is tight, but you can still get a sense of the bill through the papers and slides available via the link provided above. The conference focuses on using experiments to answer important questions in political science and economics, and the papers span a wide range of topics. All of them are super interesting.
Friday, November 7, 2008
Obama
Addressing my graduating class, the Dean of the Duke University Chapel gave a stirring speech about how we needed to resist being labeled the 9/11 generation. Though the horrific terrorist attacks happened during our senior year, the Dean urged us to think beyond 9/11 and become the generation that made its mark by decisively and proactively moving society away from that event and towards a better future. Rather than becoming pessimistic and jaded about our world, he wanted us to use our energies, skills and talents to refocus the collective gaze of society on the good and the promising.
Nearly seven years later, I witnessed a slew of my friends taking up the Dean's challenge, inspired the first black man gaining a major party nomination for President, who embodied progress, optimism and youth, speaking of hope and change. Several friends participated directly in the Obama campaign, working long hours in battleground states, making calls and coordinating rallies. Others chose to engage in vociferous discussion with their families and friends about their beliefs and about what they felt was the most important decision our country has had to make in a long time. Still others spent election day calling complete strangers encouraging them to get out to vote. Tuesday night, and for the rest of the week thereafter, these friends and many others across the country walked around with gleaming smiles, radiating a sense of optimism that seems to be a perfectly natural extension of the events of the last few months, but also completely remarkable given the aftermath of 9/11 and the recent financial crisis. As one of my professors gushed on the day after the election: "It is now morning in America."
I think the implicit Reagan comparison is entirely appropriate. If Reagan was the transformational figure of our parents' generation, Obama is most definitely ours. Before Tuesday, though, my views on President-Elect Obama had been more muted. To me, "Hope" and "Change" were empty campaign promises that I'd heard before, made by another inspirational candidate who turned out to be an underwhelming President. If anything, I chose to vote for Obama mainly because I liked his technocratic and pragmatic outlook (and also because the erstwhile Maverick Senator McCain had become much less of one).
Tuesday taught me that these concepts are not, and had never been, just vague and hazy campaign rhetoric. Indeed, the tangible effects of being inspired by a man who has become both a symbol and a (potential) instrument for optimism and progress are substantive and significant and should not be underestimated: millions of people appear ready to make sacrifices and continue to work at a grassroots level for change. Some of the optimism appears a bit unhealthy - after all, Obama does not hold a magic wand - but I think much it can be harnessed and put to use in a way never before seen, certainly not in my lifetime.
Prior to Nov 4, 2008, 9/11 was indeed the defining historical moment of our generation. It clearly changed our views about the world and about our own country. Much of this decade has been colored by this event, from the tangible policies and actions we have taken as well as to our national mood more generally. We now have another defining moment for our generation: the election of Barack Obama to the Presidency, with all its optimism and its possibilities. Now let's put this all our good-will, excitement and sense of purpose to good use and get down in the trenches with our new President.
It's time to get to work.
Nearly seven years later, I witnessed a slew of my friends taking up the Dean's challenge, inspired the first black man gaining a major party nomination for President, who embodied progress, optimism and youth, speaking of hope and change. Several friends participated directly in the Obama campaign, working long hours in battleground states, making calls and coordinating rallies. Others chose to engage in vociferous discussion with their families and friends about their beliefs and about what they felt was the most important decision our country has had to make in a long time. Still others spent election day calling complete strangers encouraging them to get out to vote. Tuesday night, and for the rest of the week thereafter, these friends and many others across the country walked around with gleaming smiles, radiating a sense of optimism that seems to be a perfectly natural extension of the events of the last few months, but also completely remarkable given the aftermath of 9/11 and the recent financial crisis. As one of my professors gushed on the day after the election: "It is now morning in America."
I think the implicit Reagan comparison is entirely appropriate. If Reagan was the transformational figure of our parents' generation, Obama is most definitely ours. Before Tuesday, though, my views on President-Elect Obama had been more muted. To me, "Hope" and "Change" were empty campaign promises that I'd heard before, made by another inspirational candidate who turned out to be an underwhelming President. If anything, I chose to vote for Obama mainly because I liked his technocratic and pragmatic outlook (and also because the erstwhile Maverick Senator McCain had become much less of one).
Tuesday taught me that these concepts are not, and had never been, just vague and hazy campaign rhetoric. Indeed, the tangible effects of being inspired by a man who has become both a symbol and a (potential) instrument for optimism and progress are substantive and significant and should not be underestimated: millions of people appear ready to make sacrifices and continue to work at a grassroots level for change. Some of the optimism appears a bit unhealthy - after all, Obama does not hold a magic wand - but I think much it can be harnessed and put to use in a way never before seen, certainly not in my lifetime.
Prior to Nov 4, 2008, 9/11 was indeed the defining historical moment of our generation. It clearly changed our views about the world and about our own country. Much of this decade has been colored by this event, from the tangible policies and actions we have taken as well as to our national mood more generally. We now have another defining moment for our generation: the election of Barack Obama to the Presidency, with all its optimism and its possibilities. Now let's put this all our good-will, excitement and sense of purpose to good use and get down in the trenches with our new President.
It's time to get to work.
Monday, November 3, 2008
Early Life and Obesity in Mexico: Talk Weds
This Wednesday I'll be giving a talk on my research on the early life influences on obesity and hypertension among adults in Mexico. I will also speak on the links between early life conditions and health and cognitive development among adolescents in Mexico, again with a special emphasis on obesity. My presentation will follow a talk by my colleague Ulrike Muench, who will be presenting her very interesting research on gender gaps in wages paid to nurses (I believe male nurses get paid more) and the extent to which various theories may explain these differentials.
As of now, I think my talk will be pretty low-key. I plan on going through the basics of the biology linking birth and early childhood events to later health and discuss and then talk why this knowledge could be useful in enriching our understanding when and how economic factors (technological change leading to decreases in activity levels and food price declines leading to increases in income) work to lead to increases in body weight and any associated disorders. I will also present some preliminary econometric models attempting to (1) recover causal impacts of early life factors on these outcomes and (2) illustrate how the manner in which body weight (as well as blood pressure and glucose tolerance) respond to the aforementioned economic factors depends highly on environmental conditions faced at the beginning of life. Most importantly, I will unveil my research agenda for the next several months on these and related topics.
The seminar will be this Weds, Nov 5th from 1:30 - 3 PM in Rm 105 at 60 College Street (LEPH). Ulrike will open and I'll follow on as the second act. Feel free to join us if you are interested!
As of now, I think my talk will be pretty low-key. I plan on going through the basics of the biology linking birth and early childhood events to later health and discuss and then talk why this knowledge could be useful in enriching our understanding when and how economic factors (technological change leading to decreases in activity levels and food price declines leading to increases in income) work to lead to increases in body weight and any associated disorders. I will also present some preliminary econometric models attempting to (1) recover causal impacts of early life factors on these outcomes and (2) illustrate how the manner in which body weight (as well as blood pressure and glucose tolerance) respond to the aforementioned economic factors depends highly on environmental conditions faced at the beginning of life. Most importantly, I will unveil my research agenda for the next several months on these and related topics.
The seminar will be this Weds, Nov 5th from 1:30 - 3 PM in Rm 105 at 60 College Street (LEPH). Ulrike will open and I'll follow on as the second act. Feel free to join us if you are interested!
Sunday, November 2, 2008
Daylight Savings Time and Energy Consumption
I'm not a big fan of Daylight Saving Time (DST) for several reasons. Mainly, I hate the fact that the sun goes down an hour earlier during an already short-winter day. I always figure that this undermined the justification of DST as an energy saving device. After all, I need to turn on my lights in the evening an hour earlier, and this is not counterbalanced by energy savings in the morning (I don't think I wake up early enough!).
A new working paper by Matthew Kotchen and Laura Grant attempts to generate some estimates surrounding DST and energy savings. Here is the abstract of their paper:
The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, consistent practice today, and recent extensions, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. Focusing on residential electricity demand, we conduct the first-ever study that uses micro-data on households to estimate an overall DST effect. The dataset consists of more than 7 million observations on monthly billing data for the vast majority of households in southern Indiana for three years. Our main finding is that -- contrary to the policy's intent -- DST increases residential electricity demand. Estimates of the overall increase are approximately 1 percent, but we find that the effect is not constant throughout the DST period. DST causes the greatest increase in electricity consumption in the fall, when estimates range between 2 and 4 percent. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. We estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social costs of increased pollution emissions that range from $1.7 to $5.5 million per year. Finally, we argue that the effect is likely to be even stronger in other regions of the United States.
Interesting stuff. Another justification I heard was that DST helps ensure the safety of schoolchildren catching the bus in the morning. It would be interesting to get some estimates on welfare gains on this margin, as well.
A new working paper by Matthew Kotchen and Laura Grant attempts to generate some estimates surrounding DST and energy savings. Here is the abstract of their paper:
The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, consistent practice today, and recent extensions, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. Focusing on residential electricity demand, we conduct the first-ever study that uses micro-data on households to estimate an overall DST effect. The dataset consists of more than 7 million observations on monthly billing data for the vast majority of households in southern Indiana for three years. Our main finding is that -- contrary to the policy's intent -- DST increases residential electricity demand. Estimates of the overall increase are approximately 1 percent, but we find that the effect is not constant throughout the DST period. DST causes the greatest increase in electricity consumption in the fall, when estimates range between 2 and 4 percent. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. We estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social costs of increased pollution emissions that range from $1.7 to $5.5 million per year. Finally, we argue that the effect is likely to be even stronger in other regions of the United States.
Interesting stuff. Another justification I heard was that DST helps ensure the safety of schoolchildren catching the bus in the morning. It would be interesting to get some estimates on welfare gains on this margin, as well.
Subscribe to:
Posts (Atom)