With decades of behavioral economic research now achieving prominence, the last decade has seen the advent of behavioral policymaking. These efforts have been widely seen as successful in that they achieve policy goals without inducing backlash on the part of policy targets. Behavioral policies create a unique challenge to welfare analysis that has not been sufficiently addressed in the literature. The existence of behavioral effects creates a paradox, at once justifying the use of paternalistic policies and undermining the empirical foundations of welfare analysis. In this paper I explore the behavioral welfare paradox and its implications for economic policy prescription.

We illustrate how natural resource dependent and isolated communities manage their forest stock. Our model is based on field observations of the Eaglewood trade in Papua New Guinea. Using a dynamic model of household utility maximization and simulations, we analyze the impact of variations in the (monopsonistic) resource price on the households’ consumption choices and their allocation of effort across depletive and nondepletive activities. The stock of forest is embedded directly in the households’ utility function (existence value) and in their (nonseparable) production and consumption functions. We show that poverty (in production assets) does not inevitably lead to stock depletion.

Using patent statistics related to solar power on a panel of eleven countries from 1990 to 2008, we build a reduced-form model to analyze the role that public policies play in fostering innovation. We conclude that public expenditure on R&D and feed-in tariffs have a significant effect on the development of solar energy. We also find a significant effect of electricity price, attributable to rising energy prices. Using patent citations, we estimate the knowledge flows available to inventors in each country over time and we find that the marginal productivity of R&D has a positive and significant effect on innovation.

The U.S. brewing industry was at a low point in the 1980s. Since that time, more than 4,000 new breweries of varying scales and scopes have entered the market. Given the rapid expansion in this industry, which involves large capital costs, it is useful to consider the competitive nature of individual firms. Using a sample of New England breweries, this study identifies several firm and geographic attributes that are linked to firms’ product offerings. We find that the breadth of product lines and nature of competition varies by brewery type and by the economic environment of the market.

A difference-in-differences approach is used to measure the impact of new inner-city grocery store developments on residential housing values in Worcester, Massachusetts. Using geocoded housing sales from 1988–2011, we develop a hedonic model, exploiting temporal and spatial discontinuities, to identify the effect of 12 new grocery stores on neighborhood housing prices. Results suggest these new stores were associated with an increase in sale prices of nearby homes, and these results could help inform current policies related to urban food deserts, in that new grocery stores have the potential to improve neighborhood wealth as well as health.

As growers adopt and diffuse improved food crop cultivars, their investment decisions for producing new cultivars control product accessibility and directly affect the entire supply chain. In this study, we estimated growers’ willingness to invest (willingness to pay (WTP)) in cultivars with improved quality traits for five rosaceous fruit crops: apple, peach, strawberry, sweet cherry, and tart cherry. WTP values differed by crop, but fruit flavor was consistently rated one of the most important traits, with higher WTP. This information will help breeding programs focus resources to develop superior cultivars for long-term economic sustainability of the rosaceous fruit industry.

We empirically test separation of ownership and control (SOC) and the interaction of SOC with farmer effort on farm success using data from the U.S. Department of Agriculture's Agricultural Resource Management Survey. We use a two-stage least-squares approach with instrumental variables that proxy for participation constraints in binding incentive contracts. We find that the interaction has a significantly positive effect on success for grain farms and an insignificant effect for livestock farms. The results are consistent with hypotheses by Allen and Lueck (1998), but our model predicts that farms with SOC are likely to be more successful than farms without SOC despite exogenous uncertainty and agency costs.

This study analyses the value of a switching option in a flexible biorefinery plant that produces ethanol and sugar juice in a single plant using energy beets. A real-options approach is used to compute threshold prices and optimal switching decision rules for switching between sugar and ethanol production modes. The analysis shows that it is economically optimal to keep producing ethanol then switching to sugar juice, given the stochastic price parameters of the two products.