This dissertation consists of three applied econometrics essays. These essays focus on Environmentally Friendly Organic Food and Voluntary Environmental Programs. In Essay 1, the Almost Ideal Demand System (AIDS) is used to investigate empirically the purchasing patterns of suburban and inner-city residents for conventional and organic milk. Conventional milk products are disaggregated into four classes based on fat content: whole, 2%, 1%, and skim; organic milk is disaggregated into these same classes, but missing observations for some classes required the aggregation of classes for empirical estimation. Descriptive statistics show that suburban consumers, relative to inner-city consumers, purchase more organic and lower-fat conventional milk. These same consumers pay higher prices for conventional and organic milk, save for conventional 1% and skim. Econometric results indicate that suburban consumers are price insensitive toward the purchase of all conventional and organic classes of milk; inner-city consumers are price sensitive toward conventional whole and 2% milk –products that constitute 89% of their milk expenditure; these same consumers are price insensitive toward all other classes of conventional and organic milk.
Essays 2 and 3 explore empirically the nature of the relationship, if any, between voluntary pollution reduction programs (VPR) and environmental innovation. Several papers, both theoretical and empirical, have explored the causal effect of mandatory pollution reductions on environmental innovation. While mandatory regulations remain the central tenet of US environmental policy, the regulatory landscape has changed in recent years with federal and state agencies seeking to employ VPR programs. Two of the most popular VPR programs are 33/50 and Energy Star. Consequently, Essay 2 seeks to test the independent effects of both voluntary and mandatory pollution reductions on environmental research and development using an unbalanced panel of 105 US manufacturing firms over a 13-year period, 1992-2004. Empirical results indicate that the mandatory approach is far more effective at stimulating environmental research with an estimated impact at least ten times larger than the impact of identical pollutant reductions achieved on a voluntary basis. Essay 3 studies the casual effect between EPA-sponsored Pollution Prevention (P2) Practices and environmental innovation using a large sample of US manufacturing firms from year 1995 to 2000. The counts of successful environmental patent applications are treated as measures of firms’ innovations. Econometric results suggest that environmental research activities are spurred by the adoption of P2 practices, but the magnitude of effect is economically small; the adoption of an additional P2 practice only brings about 0.023 successful patents.