Essays on the equilibrium effects of public policies
Keywords: Economics.

This dissertation combines three essays on the equilibrium effects of public policies. In it, we study the (unintended) consequences that arise from large-scale policy implementations due to equilibrium responses. We combine reduced-form evidence that exploits quasi-experimental variation induced by policy interventions with structural models that help to connect the data to a theoretical framework. The first chapter studies a national food labeling policy implemented in Chile. The second chapter looks at vintage-specific driving restrictions that impose limits on car use for older vehicles implemented in Chile. The third chapter estimates the gains and benefits of a large-scale affirmative action program implemented in Brazil. In Chapter 1, "Equilibrium Effects of Food Labeling Policies, " joint with Cristobal Otero, Sebastian Otero, and Joshua Kim, we study the effects of a front-of-package labeling regulation implemented in Chile that mandates the use of warning labels on products whose sugar or calorie concentration exceeds certain thresholds. We combine reduced-form analysis with a structural model of supply and demand for food and nutrients to quantify the impact of the policy on nutritional intake and consumer welfare. In the first part of the paper, we document an overall decrease in sugar and calorie intake of 9% and 7% after the implementation of the policy. On the demand-side, we show that consumers substitute from labeled to unlabeled products. This effect is mostly driven by products which consumers mistakenly believed to be healthy before the policy. On the supply-side, we find substantial reformulation of products and bunching at the regulatory thresholds. We then develop and estimate a model. In our model, consumers care about the price, taste, and healthiness of food products, but may have poorly calibrated beliefs about products' nutritional content. Food labels help consumers to make better-informed purchasing decisions by providing information. Firms choose products' prices and nutritional content to maximize profits. Food labels induce firms to reformulate their products to avoid receiving a label. However, reducing the concentration of critical nutrients is costly, and may cause firms to raise prices that get passed on to consumers. We find that food labels increase consumer surplus by 3.8\% of total expenditure. We also show that firms' responses enhance the effects of food labels on nutritional intake by 142\% and increase gains in consumer surplus by 18\%. We then use the model to study alternative policy designs. Under optimal policy thresholds, food labels cause gains in average consumer surplus similar to those of optimal sugar taxes but benefit the poor relatively more. In Chapter 2 "Vintage-specific Driving Restriction, " joint with Francisco Gallego and Juan-Pablo Montero, and published in the Review of Economic Studies in July 2020, we study the effects of vintage-specific driving restrictions on pollution and consumer welfare. Authorities in many cities around the world have imposed limits on car use through driving restrictions, that ban the use of cars one day a week according to the last digit of the license plate. By placing uniform restrictions on all cars, many of these programs have created incentives for drivers to buy additional, more polluting cars. We study vintage-specific restrictions, which place heavy limits on older, polluting vehicles and no limits on newer, cleaner ones. We use a novel model of the car market and data from Santiago's 1992 program, the earliest program to use vintage-specific restrictions, and show that such restrictions should be designed to work exclusively through the extensive margin (the type of car driven), never through the intensive margin (number of miles driven). If so, vintage restrictions can yield important welfare gains by moving the fleet composition toward cleaner cars, comparing well to alternative instruments such as scrappage subsidies and pollution-based registration fees. In Chapter 3 "Affirmative Action in Centralized College Admission Systems, " joint with Sebastian Otero and Caue Dobbin, we study the distributional consequences of affirmative action in selective college education in the context of a centralized admission system. We examine the effects of a law passed in Brazil in 2012, mandating all federal public universities to increase the number of seats reserved for public high-school students to half of the total. We find that after the policy was put in place, the student body composition of public institutions became more similar to that of the applicant pool. We show that the proportion of admits to public institutions from private high schools dropped from 55% in 2011 to 35% in 2016. This is closer to the 20% share of overall high-school graduates that private school graduates represent. To study the overall distributional consequences of the policy, we leverage the rules from the centralized admission system and simulate a counterfactual allocation of spots in a regime without affirmative action. Our research design exploits admission cutoffs for heavily over-subscribed degrees to estimate the policy effects on the marginally benefited and marginally displaced student. We find that benefited individuals gain around 50% in expected future earnings, while displaced lose only 5%