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Abstract

An increasing number of governments implement market-based environmental policies because, in theory, such policies can incentivize economic agents to undertake socially desirable activities for their own good ("harnessing market power"). Whether this claim is true or not, however, critically hinges on the design of the policy: specifically, whether it aligns private benefit to socially desirable outcomes. To that respect, understanding economic agents' responses to market-based environmental policies is important to evaluate a welfare impact. This dissertation studies how the household responds to various incentive-based climate change mitigation and adaptation policies and investigate such responses implication for social welfare. The first chapter studies if easing information friction in the housing market regarding flood risk could reduce the population in high-risk areas and thus flood damage. By exploiting the staggered adoption of the Home Seller Disclosure Requirement across 27 states, I first show this policy reduces the average price of properties and population by 6\% and 9\% while increases the number of flood insurance policy counts by 40\% in high-risk areas. Further, I construct a novel and objective measure of flood size using a method from hydrology and estimate the effect of the disclosure policy on flood damage conditional on flood size. I find the policy reduces damage from small-to-moderate-sized floods by an average of 9.8\% in the treated communities. In the second chapter, I study household response to a unit based food waste tax scheme (UPS) in South Korea and its welfare implications. By exploiting plausibly exogenous variation in the UPS status of each municipality due to a central government's initiative, I first show that the UPS reduces food waste by 27\% on average where 1/3 of the observed reduction in food waste is attributable to higher illegal dumping. Then, using consumer panel data on grocery shopping, I find that households reduce their grocery purchase by 3.5\% after the UPS, which explains another 1/3 of the food waste reduction. Further, I calculate the lower bound of the welfare effect focusing on reduction in GHGs emissions and show that the policy creates a substantial welfare gain because benefits from the environmentally advantageous changes in consumption patterns dominate losses from illegal dumping. In the last chapter, I investigate the importance of pricing on the conservation effort. Many public service usages are measured and thus are charged at a group level. Such a pricing scheme sets a private marginal cost lower than a group marginal cost which leads to free-riding and overuse of the services. Using apartment-level panel data, I find that switching from the group pricing to individual pricing leads to a 20\% reduction in per unit food waste quantity. Further, the policy effect exhibits substantial heterogeneity along with group size, apartment price, and pre-treatment food waste quantity. Finally, I estimate the social cost of free-riding with an emphasis on government finance and greenhouse gas emission implications.

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