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Do production subsidies have a wage incidence in wind power?

Author

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  • De Silva, Dakshina G.
  • McComb, Robert P.
  • Schiller, Anita R.

Abstract

Employment in electricity generation from renewable resources has expanded rapidly in the US and in Texas during the last decade. Availability of the Production Tax Credit has been an important driver of this growth. Using a fully-disclosed establishment-level employment and payroll data set for Texas at the NAICS-6 level, we analyze the differences in average wages between firms generating electricity from fossil fuels and those generating electricity from wind power. We compare relative average wages before and after the rapid expansion of wind power development that followed the ex ante renewal of the Production Tax Credit (PTC) in 2006. Using QCEW data, our main finding using both least squares and the nonparametric estimation technique proposed by Racine and Li (2004), is that average payrolls for wind power generators increased relative to fossil fuel-based electricity generators after 2006. As far as we know, this is the first paper that attempts to estimate the indirect impact of the PTC on wind energy industry wages.

Suggested Citation

  • De Silva, Dakshina G. & McComb, Robert P. & Schiller, Anita R., 2011. "Do production subsidies have a wage incidence in wind power?," MPRA Paper 33861, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:33861
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    References listed on IDEAS

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    1. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.
    2. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
    3. Arindrajit Dube & Suresh Naidu & Michael Reich, 2007. "The Economic Effects of a Citywide Minimum Wage," ILR Review, Cornell University, ILR School, vol. 60(4), pages 522-543, July.
    4. Racine, Jeff & Li, Qi, 2004. "Nonparametric estimation of regression functions with both categorical and continuous data," Journal of Econometrics, Elsevier, vol. 119(1), pages 99-130, March.
    5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    6. Dakshina G. De Silva & Robert P. McComb & Young-Kyu Moh & Anita R. Schiller & Andres J. Vargas, 2010. "The Effect of Migration on Wages: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 100(2), pages 321-326, May.
    7. Grund, B., 1993. "Kernel Estimators for Cell Probabilities," Journal of Multivariate Analysis, Elsevier, vol. 46(2), pages 283-308, August.
    8. Wiser, Ryan & Bolinger, Mark & Barbose, Galen, 2007. "Using the Federal Production Tax Credit to Build a Durable Market for Wind Power in the United States," The Electricity Journal, Elsevier, vol. 20(9), pages 77-88, November.
    9. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
    10. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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    Cited by:

    1. Roach, Travis, 2015. "The effect of the production tax credit on wind energy production in deregulated electricity markets," Economics Letters, Elsevier, vol. 127(C), pages 86-88.

    More about this item

    Keywords

    Wages; Production Tax Credits; Wind energy; Clean Energy;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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