research design meets market design using centralized assignment for impact evaluation a growing number of school districts use centralized assignment mechanisms to allocate school seats in a manner that reflects student preferences and school priorities many of these assignment schemes use lotteries to ration seats when schools are oversubscribed the resulting random assignment opens the door to credible quasi experimental research designs for the evaluation of school effectiveness yet the question of how best to separate the lottery generated randomization integral to such designs from non random preferences and priorities remains open this paper develops easily implemented empirical strategies that fully exploit the random assignment embedded in a wide class of mechanisms while also revealing why seats are randomized at one school but not another we use these methods to evaluate charter schools in denver one of a growing number of districts that combine charter and traditional public schools in a unified assignment system the resulting estimates show large achievement gains from charter school attendance our approach generates efficiency gains over ad hoc methods such as those that focus on schools ranked first while also identifying a more representative average causal effect we also show how to use centralized assignment mechanisms to identify causal effects in models with multiple school sectors

on two competing mechanisms for priority based allocation problems we consider the priority based allocation problem there is a set of indivisible objects with multiple supplies e g schools with seats and a set of agents e g students with priorities over objects e g proximity of residence area we study two well known and competing mechanisms the agentoptimal stable mechanism aosm allots objects via the deferred acceptance algorithm the top trading cycles mechanism ttcm allots objects via gale s top trading cycles algorithm we show that the two mechanisms are equivalent or ttcm is fair i e respects agents priorities or resource monotonic o rpopulation monotonic if and only if the priority structure is acyclic furthermore if aosm fails to be efficient consistent for a problem ttcm also fails to be fair consistent for it however the converse is not necessarily true

the costs of electricity interruptions in spain are we sending the right signals one of the objectives of energy security is the uninterrupted physical availability of energy however there is limited information about how much is the cost of energy supply interruptions this information is essential to optimize investment and operating decisions to prevent energy shortages or alternatively to determine the strength of the signals to be sent to the agents so that they may invest accordingly in this paper we estimate the economic impact of an electricity interruption in different sectors and regions of spain although there are several caveats in our analysis we find that in 2008 the cost for the spanish economy of one kwh of electricity not supplied was above 4 even in a conservative scenario which is higher than the signals currently being sent as incentives to avoid these interruptions this might result in an underinvestment in short term energy security particularly when we add the usual risk aversion of most consumers

competitive equilibria in school assignment abstract top trading cycles was originally developed as an elegant method for finding a competitive equilibrium of shapley and scarf s housing market we extend the definition of a competitive equilibrium to the school assignment problem and show that there remains a profound relationship between top trading cycles and a competitive equilibrium specifically in every competitive equilibrium with weakly decreasing prices the equilibrium assignment is unique and exactly corresponds to the top trading cycles assignment this provides a new way of interpreting the worth of a student s priority at a given school it also provides a new way of explaining top trading cycles to students and a school board

a dynamic analysis of a demand curve based capacity market proposal the pjm reliability pricing model because of high generation adequacy standards in the power industry some peaking capacity operates for a limited time during the year and may not receive sufficient energy revenues to meet its fixed costs this is particularly true when energy prices are capped in order to mitigate market power the northeastern u s independent system operators isos have responded to this issue by establishing capacity obligations for loads and markets for installed capacity thus providing a capacity revenue stream to generators the installed capacity icap markets in the northeastern u s markets are a response to this need for additional incentives to construct generation the federal energy regulatory commission ferc has accepted the pjm interconnection s pjm proposal to replace the present fixed icap requirement that is placed upon load serving entities lses with a demand curve based system in which the iso would be responsible for acquiring residual capacity on behalf of lses the demand curve approach pays more when reserve margins are smaller and provides a reduced incentive for investment when installed reserves are above the target another goal is to make revenues more predictable for generators making investment less costly and ultimately lowering prices for consumers a dynamic representative agent model is presented for projecting effects upon reserve margins generator profitability and consumer costs and is applied to alternative demand curves proposed for the pjm market the consumer costs resulting from a sloped demand curve are robustly lower compared to the present fixed requirement under a wide range of assumptions concerning behavior of generation owners including risk attitudes bidding behavior and willingness to build capacity as a function of forecast profit the cost savings arise from lower capital costs to generators due to reduced risk and risk premiums also average installed capacity is less for the same level of reliability because of reduced fluctuations in installed reserves

winds of change how high wind penetrations will affect investment incentives in the gb electricity sector abstract wind power is widely expected to expand rapidly in britain over the next decade large amounts of variable wind power on the system will increase market risks with prices more volatile and load factors for conventional thermal plant lower and more uncertain this extra market risk may discourage investment in generation capacity financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind increased price risk will also make investment in other forms of low carbon generation e g nuclear power more challenging a number of policies can reduce the extent to which generators are exposed to market risks and encourage investment however market risks play a fundamental role in shaping efficient investment and dispatch patterns in a liberalised market therefore measures to improve price signals and market functioning such as a stronger carbon price and developing more responsive demand are desirable however the scale of the investment challenge and increased risk mean targeted measures to reduce although not eliminate risk exposure such as capacity mechanisms and fixed price schemes may have increasing merit the challenge for policy is to strike the right balance between market and planned approaches

the equitable top trading cycles mechanism for school choice the equitable top trading cycles mechanism a particular adaptation of gale s top trading cycles ttc procedure applied to school choice the so called ttc mechanism has attracted much attention both in theory and practice due to its superior efficiency and incentive features we discuss and introduce alternative adaptations of gale s original procedure that can offer improvements over ttc in terms of equity along with various other distributional considerations instead of giving all the trading power to those students with the highest priority for a school we argue for the distribution of the trading rights of all slots of each school this allows them to trade in a thick market where additional constraints can be accommodated by choosing an appropriate pointing rule we propose a particular mechanism of this kind the equitable top trading cycle ettc mechanism which is also pareto efficient and group strategy proof just like ttc and eliminates avoidable justified envy situations ettc generates significantly fewer justified envy situations than ttc both in simulations and the lab

dynamic modeling of thermal generation capacity investment application to markets with high wind penetration modeling the dynamics of merchant generation investment in market environments can inform the making of policies whose goals are to promote investment in renewable generation while maintaining security of supply such models need to calculate expected output costs and revenue of thermal generation subject to varying load and random generator outages in a power system with high penetrations of wind this paper presents a dynamic investment simulation model where the short term energy market is simulated using probabilistic production costing using the mix of normals distribution mond technique to represent residual load load net of wind output price mark ups due to market power are accounted for an energy only market setting is used to estimate the economic profitability of investments and forecast the evolution of security of supply simulated results for a great britain gb market case study show a pattern of increased relative security of supply risk during the 2020s in addition many new investments can recover their fixed costs only during years in which more frequent supply shortages push energy prices higher

the effects of school spending on educational and economic outcomes evidence from school finance reforms since the coleman report many have questioned whether public school spending affects student outcomes the school finance reforms that began in the early 1970s and accelerated in the 1980s caused dramatic changes to the structure of k 12 education spending in the united states to study the effect of these school finance reform induced changes in public school spending on long run adult outcomes we link school spending and school finance reform data to detailed nationally representative data on children born between 1955 and 1985 and followed through 2011 we use the timing of the passage of court mandated reforms and their associated type of funding formula change as exogenous shifters of school spending and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms depending on place and year of birth event study and instrumental variable models reveal that a 10 increase in per pupil spending each year for all 12 years of public school leads to 0 31 more completed years of education about 7 higher wages and a 3 2 percentage point reduction in the annual incidence of adult poverty effects are much more pronounced for children from low income families exogenous spending increases were associated with notable improvements in measured school inputs including reductions in student to teacher ratios increases in teacher salaries and longer school years jel codes j10 i20 h7

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

environmental expenditure spillovers evidence from an estimated multi area dsge model abstract this article constructs and estimates a multi area dynamic stochastic general equilibrium model with a spatial simultaneous equation taking beijing tianjin hebei region in china as an example we explain the dynamic effect of environmental expenditure shock and its spillover effects environmental expenditure has an obvious crowding out effect on consumption and investment in local area but has some positive influences on the economy of external regions over the business cycle environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters however environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area one interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area

the welfare effects of coordinated assignment evidence from the new york city high school match abstract coordinated single offer school assignment systems are a popular education reform we show that uncoordinated offers in nyc s school assignment mechanism generated mismatches one third of

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

strategyproof assignment by hierarchical exchange we give a characterization of the set of group strategyproof pareto optimal and reallocation proof allocation rules for the assignment problem where individuals are assigned at most one indivisible object without any medium of exchange although there are no property rights in the model the rules satisfying the above criteria imitate a trading procedure with individual endowments in which individuals exchange objects from their hierarchically determined endowment sets in an iterative manner in particular these assignment rules generalize gale s top trading cycle procedure the classical rule for the model in which each individual owns an indivisible good

experimental estimates of education production functions this paper analyzes data on 11 600 students and their teachers who were randomly assigned to different size classes from kindergarten through third grade statistical methods are used to adjust for nonrandom attrition and transitions between classes the main conclusions are 1 on average performance on standardized tests increases by four percentile points the first year students attend small classes 2 the test score advantage of students in small classes expands by about one percentile point per year in subsequent years 3 teacher aides and measured teacher characteristics have little effect 4 class size has a larger effect for minority students and those on free lunch 5 hawthorne effects were unlikely

generation capacity expansion in a risky environment a stochastic equilibrium analysis we cast models of the generation capacity expansion type formally developed for the monopoly regime into equilibrium models better adapted for a competitive environment we focus on some of the risks faced today by investors in generation capacity and thus pose the problem as a stochastic equilibrium model we illustrate the approach on the problem of the incentive to invest agents can be risk neutral or risk averse we model risk aversion through the cvar of plants profit the cvar induces risk adjusted probabilities according to which investors value their plants the model is formulated as a complementarity problem including the cvar valuation of investments an illustration is provided on a small problem that captures several features of today s electricity world a choice often restricted to coal and gas units a peaky load curve because of wind penetration uncertain fuel prices and an evolving carbon market we assess the potential of the approach by comparing energy only and capacity market organizations in this risky environment our results can be summarized as follows a deterministic analysis overlooks some changes of capacity structure induced by risk whether in the capacity market or energy only organizations the risk neutral analysis also misses a shift towards less capital intensive technologies that may result from risk aversion last risk aversion also increases the shortage of capacity compared to the risk neutral view in the energy only market when the price cap is low this may have a dramatic impact on the bill to the final consumer the approach relies on mathematical programming techniques and can be extended to full size problems the results are illustrative and may deserve more investigation

an estimate of the value of lost load for ireland this paper estimates the value of short term lost load in the all island electricity market which includes the republic of ireland and northern ireland the value of lost load voll is the average willingness of electricity consumers to pay to avoid an additional period without power voll is also known as the value of security of electricity supply and is inferred using a production function approach detailed electricity use data for the republic of ireland allows us to estimate the value of lost load by time of day time of week and type of user we find that the value of lost load is highest in the residential sector in both the republic of ireland and northern ireland our results can be used to advise policy decisions in the case of supply outages and to encourage optimum supply security in the context of this study short term is taken to be a matter of hours rather than days or weeks

how does your kindergarten classroom affect your earnings evidence from project star in project star 11 571 students in tennessee and their teachers were randomly assigned to classrooms within their schools from kindergarten to third grade this article evaluates the long term impacts of star by linking the experimental data to administrative records we first demonstrate that kindergarten test scores are highly correlated with outcomes such as earnings at age 27 college attendance home ownership and retirement savings we then document four sets of experimental impacts first students in small classes are significantly more likely to attend college and exhibit improvements on other outcomes class size does not have a significant effect on earnings at age 27 but this effect is imprecisely estimated second students who had a more experienced teacher in kindergarten have higher earnings third an analysis of variance reveals significant classroom effects on earnings students who were randomly assigned to higher quality classrooms in grades k 3 as measured by classmates end of class test scores have higher earnings college attendance rates and other outcomes finally the effects of class quality fade out on test scores in later grades but gains in noncognitive measures persist

exchange of indivisible goods and indifferences the top trading absorbing sets mechanisms there is a wide range of economic problems that involve the exchange of indivisible goods with no monetary transfers starting from the housing market model of the seminal paper by shapley and scarf 1974 to problems such as the kidney exchange or the school choice problem the classical solution to many of these models is to apply a mechanism called top trading cycles attributed to david gale which satisfies good properties for the case of strict preferences in this paper we propose a family of mechanisms called top trading absorbing sets mechanisms which generalize the top trading cycles to the general case in which individuals are allowed to report indifferences while preserving a maximal possible set of its desirable properties

renewable energy investments under different support schemes a real options approach abstract this paper adopts a real options approach to analyze investment timing and capacity choice for renewable energy projects under different support schemes the main purpose is to examine investment behavior under the most extensively employed support schemes namely feed in tariffs and renewable energy certificate trading we consider both multiple sources of uncertainty under each support scheme and uncertainty with respect to any change of support scheme and we obtain both analytical when possible and numerical solutions in a nordic case study based on wind power we find that the feed in tariff encourages earlier investment nevertheless as investment has been undertaken renewable energy certificate trading creates incentives for larger projects in our baseline scenario and taking the fixed feed in tariff as a base the revenue required to trigger investments is 61 higher with renewable certificates at the same time investment capacity is 61 higher

cross border electricity market effects due to price caps in an emission trading system an agent based approach the recent low co2 prices in the european union emission trading scheme eu ets have triggered a discussion whether the eu ets needs to be adjusted we study the effects of co2 price floors and a price ceiling on the dynamic investment pathway of two interlinked electricity markets loosely based on great britain which already has introduced a price floor and on central western europe using an agent based electricity market simulation with endogenous investment and a co2 market including banking we analyse the cross border effects of national policies as well as system wide policy options a common moderate co2 auction reserve price results in a more continuous decarbonisation pathway this reduces co2 price volatility and the occurrence of carbon shortage price periods as well as the average cost to consumers a price ceiling can shield consumers from extreme price shocks these price restrictions do not cause a large risk of an overall emissions overshoot in the long run a national price floor lowers the cost to consumers in the other zone the larger the zone with the price floor the stronger the effect price floors that are too high lead to inefficiencies in investment choices and to higher consumer costs

optimal allocation without money an engineering approach we study the allocation of heterogeneous services to agents with incomplete information and without monetary transfers agents have private multidimensional utilities over services drawn from commonly known priors the social planner s goal is to maximize a potentially complex public objective for tractability we take an engineering approach in which we solve a large market approximation and convert the solution into a feasible finite market mechanism that still yields good results we apply this framework to real data from boston to design a mechanism that assigns students to public schools in order to maximize a linear combination of utilitarian and max min welfare subject to capacity and transportation constraints we show how to optimally solve a large market formulation with more than 868 types of students and 77 schools and we translate the solution into a finite market mechanism that significantly outperforms the baseline plan chosen by the city in terms of efficiency equity and predic

rationality in psychology and economics the task i shall undertake here is to compare and contrast the concepts of rationality that are prevalent in psychology and economics respectively economics has almost uniformly treated human behavior as rational psychology on the other hand has always been concerned with both the irrational and the rational aspects of behavior in this paper irrationality will be mentioned only obliquely my concern is with rationality economics sometimes uses the term irrationality rather broadly e g becker 1962 and the term rationality correspondingly narrowly so as to exclude from the domain of the rational many phenomena that psychology would include in it for my purposes of comparison i will have to use the broader conception of psychology one point should be set immediately outside dispute everyone agrees that people have reasons for what they do they have motivations and they use reason well or badly to respond to these motivations and reach their goals even much or most of the behavior that is called abnormal involves the exercise of thought and reason freud was most insistent that there is method in madness that neuroses and psychoses were patients solutions not very satisfactory solutions in the long run for the problems that troubled them the assumption that actors maximize subjective expected utility economic rationality supplies only a small part of the premises in economic reasoning and that often not the essential part the remainder of the premises are auxiliary empirical assumptions about actors utilities beliefs expectations and the like making these assumptions correctly requires an empirically founded theory of choice that specifies what information decision makers use and how they actually process it this behavioral empirical base is largely lacking in contemporary economic analysis and supplying it is essential for enhancing the explanatory and predictive power of economics

assessing energy supply security outage costs in private households abstract the objective of this paper is to contribute to the topic of energy supply security by proposing a monte carlo based and a survey based model to analyze the costs of power interruptions outage cost estimations are particularly important when deciding on investments to improve supply security e g additional transmission lines in order to compare costs to benefits but also other policy decisions on measures that have direct or indirect consequences for the supply security e g a phasing out of nuclear energy need to be based on results from outage cost estimations the main focus of this paper lies with residential consumers but the model is applied to commercial industrial and governmental consumers as well there are limited studies that have approached the problem of evaluating outage cost when comparing the results of these studies they often display a high degree of diversification as consumers have different needs and dependencies towards the supply of electricity because of varying circumstances and preferences a great diversity in outage cost is a logical consequence to take the high degree of uncertainties into account a monte carlo simulation was conducted in this study for the case of private households in germany

structural estimation of a model of school choices the boston mechanism vs its alternatives we model household choice of schools under the boston mechanism bm and develop a new method applicable to a broad class of mechanisms to fully solve the choice problem even if it is infeasible

top trading with fixed tie breaking in markets with indivisible goods abstract we study markets with indivisible goods where monetary compensations are not possible each individual is endowed with an object and a preference relation over all objects when preferences are strict gale s top trading cycles algorithm finds the unique core allocation when preferences are not necessarily strict we use an exogenous profile of tie breakers to resolve any ties in individuals preferences and apply gale s top trading cycles algorithm for the resulting profile of strict preferences we provide a foundation of these simple extensions of gale s top trading cycles algorithm from strict preferences to weak preferences we show that gale s top trading cycles algorithm with fixed tie breaking is characterized by individual rationality strategy proofness weak efficiency non bossiness and consistency our result supports the common practice in applications to break ties in weak preferences using some fixed exogenous criteria and then to use a good and simple rule for the resulting strict preferences

an analysis of a forward capacity market with long term contracts we analyze the effectiveness of a forward capacity market fcm with long term contracts in an electricity market in the presence of a growing share of renewable energy an agent based model is used for this analysis capacity markets can compensate for the deteriorating incentive to invest in controllable power plants when the share of variable renewable energy sources grows but may create volatile prices themselves capacity markets with long term contracts have been developed e g in the uk to stabilize capacity prices in our analysis a fcm is effective in providing the required adequacy level and leads to lower cost to consumers and more stable capacity prices as compared to a yearly capacity market in case of a demand shock a fcm may develop an investment cycle but it still maintains security of supply its main effect on the power plant portfolio is more investment in peak plant

how to correct for long term externalities of large scale wind power development by a capacity mechanism this paper deals with the practical problems related to long term security of supply in electricity markets in the presence of large scale wind power development the success of recent renewable promotion schemes adds a new dimension to ensuring long term security of supply it necessitates designing second best policies to prevent large scale wind power development from distorting long run equilibrium prices and investments in conventional generation and in particular in peaking units we rely upon a long term simulation model which simulates electricity market players investment decisions in a market regime and incorporates large scale wind power development in the presence of either subsidized or market driven development scenarios we test the use of capacity mechanisms to compensate for long term effects of large scale wind power development on prices and reliability of supply the first finding is that capacity mechanisms can help to reduce the social cost of large scale wind power development in terms of decrease of loss of load probability the second finding is that in a market based wind power deployment without subsidy wind generators are penalised for insufficient contribution to the long term system s reliability

demand analysis using strategic reports an application to a school choice mechanism several school districts use assignment systems that give students an incentive to misrepresent their preferences we find evidence consistent with strategic behavior in cambridge such strategizing can complicate preference analysis this paper develops empirical methods for studying random utility models in a new and large class of school choice mechanisms we show that preferences are non parametrically identified under either sufficient variation in choice environments or a preference shifter we then develop a tractable estimation procedure and apply it to cambridge estimates suggest that while 82 of students are assigned to their stated first choice only 72 are assigned to their true first choice because students avoid ranking competitive schools assuming that students behave optimally the immediate acceptance mechanism is preferred by the average student to the deferred acceptance mechanism by an equivalent of 0 08 miles the estimated difference is smaller if beliefs are biased and reversed if students report truthfully

all school finance equalizations are not created equal school finance equalization has probably affected american schools more than any other reform of the last 30 years understanding it is a prerequisite for making optimal social investments in human capital yet it is poorly understood in this paper i explain why it differs from conventional redistribution because it is based on property values which are endogenous to schools productivity taste for education and the school finance system itself i characterize equalization schemes and show why some level down and others level up schemes that strongly level down have unintended consequences even poor districts can end up worse off i also show how school finance equalization affects property prices private school attendance and student achievement