Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

welfare analysis

Measuring the Welfare Effects of Residential Energy Efficiency Programs

Hunt Allcott, Michael Greenstone

This paper sets out a framework to evaluate the welfare impacts of residential energy efficiency programs in the presence of imperfect information, behavioral biases, and externalities, and then estimates key parameters using a 100,000-household field experiment. Several results run counter to conventional wisdom: we find no evidence of informational or behavioral failures thought to reduce program participation; there are large unobserved benefits and costs that traditional evaluations miss; and realized energy savings are only 58 percent of predictions.

The Facts About Taxes: The Empirical Foundations of Supply-Side Economics


The appropriate levels of taxes and government spending are hotly debated around the world. At the core of the debate is the responsiveness of economic activity to taxation. How badly do taxes distort the economy? How large are the benefits of reduced taxation?

Disagreements over tax policy are rooted in beliefs about the size of these benefits and distortions. This conference summarized the evidence on how taxation impacts the economy, providing a factual grounding essential for progress in economic policy.

Efficiency and Stability of a Financial Architecture with Too Interconnected to Fail Institutions

Michael Gofman

I estimate a network-based model of OTC markets developed in Gofman (2011) by using federal funds market data to study the trade-off between efficiency and stability of different financial architectures. The estimated financial architecture with a small number of large interconnected banks is 11 times more efficient than a regulated financial architecture of the same size and density but without these institutions. The estimated architecture is more efficient because it requires fewer intermediaries to allocate the same liquidity shocks.