Econometric Models to Evaluate Environmental and Spatial Effects of Long-Lasting Policies

Introduction

Policies often target one market: road taxes target commuting, agricultural subsidies target farming, and car taxes target the automobile market. Economists developed a rich toolbox to evaluate the effects of policy in the targeted market in a partial equilibrium analysis. However, policies are often long-lasting and massive in scale, affecting where economic activity occurs.

Importance of Spatial Distribution

The spatial distribution of activity matters in agriculture and transport because of the environmental externalities of land use, congestion, and pollution.

Methodology Overview

This proposal presents an econometric methodology to study the interaction between policy and the spatial distribution of economic activity. The proposal includes a collection of large-scale spatial data that combines individual choices with aggregate outcomes and proposes a methodology that connects partial equilibrium evaluation of policy with spatial general equilibrium models.

Project Illustrations

1. Congestion Model
   The first project illustrates how we can use a combination of data on individual travel choices and aggregate outcomes on traffic equilibria to estimate a structural econometric bottleneck model of congestion.

2. Agricultural Policy Impact
   The second project presents a methodology to investigate how the Common Agricultural Policy and Natura 2000 affect land use in the European Union. The Common Agricultural Policy has provided income support to almost 10 million European farmers since 1962. Natura 2000 protects 17% of Europe's terrestrial landmass. Subsidies in one region affect farmers in another through the open EU agricultural market.

3. Transport Mode Costs
   The third project evaluates policy that affects transport mode costs, such as company car taxation. Company cars receive an implicit subsidy of 50% and represent half of the new vehicle sales in several EU countries. Such subsidies to commuting by private vehicles impact the spatial distribution of workers and firms. The location choices and resulting commuting patterns drive the policy's carbon, congestion, and pollution externality effects.