Essays on environmental and public economics

This dissertation is a collection of three essays in the fields of environmental and public economics. The first essay assesses the effect of government spending on charitable donations to environmental causes. Using a theoretical model, I solve for changes in private donations due to increased government spending and contrast this with changes due to direct grants to nonprofit organizations. Depending on the nonprofit’s fundraising response, government spending may result in the crowding out or in of private giving. I empirically investigate this topic using data from the tax returns of environmental charities as well as a panel survey data set on the philanthropic behavior of individuals. My results indicate that government expenditures on the environment actually crowd in private giving, partly due to the increased fundraising response by charities. The second essay examines the incidence of a pollution tax scheme in which tax revenue is returned to low-income workers. Using a general equilibrium model with both skilled and unskilled labor, a decomposition of the real net wage effects shows the effect of the tax rebate, the effect on the uses side of income (higher product prices), and the effect on the sources side of income (relative wage rates). Numerical examples show that returning the revenue to the low-skilled workers is still not enough to offset the effect of higher product prices; in almost all cases, the rebate does not prevent a reduction in the real net wage. The third essay studies the distributional effects of the SO2 allowance market. Even if low-income households do not have large budget shares for the polluting good, grandfathered permit systems may still be regressive since the permit rents accrue disproportionately to wealthy shareholders in the polluting industry. I estimate the burden imposed on different income groups under a grandfathered permit policy and compare this with the burden under an auctioned policy. Using Monte Carlo techniques, I calculate the 5th and 95th percentiles of the distribution of possible results. I find evidence of regressivity for grandfathered permits whereas an emissions tax/auctioned permit system can be progressive if the scarcity rents are distributed in lump sums.