Essays on Applied Microeconomics DISSERTATION zur Erlangung des akademischen Grades doctor rerum politicarum (Doktor der Wirtschaftswissenschaft) eingereicht an der Wirtschaftswissenschaftlichen Fakult¨at der Humboldt-Universit¨atzu Berlin von M.Sc. Marica Valente Pr¨asidentin der Humboldt-Universit¨atzu Berlin: Prof. Dr.-Ing. habil. Dr. Sabine Kunst Dekan der Wirtschaftswissenschaftlichen Fakult¨at: Prof. Dr. Daniel Klapper Gutachter: 1. Prof. Ph.D. Bernd Fitzenberger 2. Prof. Ph.D. Jeffrey M. Wooldridge Tag des Kolloquiums: 19.November 2020 To Giovanna Acknowledgements I gratefully acknowledge that I was a Ph.D. student of the DIW Berlin, chosen by Helmut L¨utkepohl, a great mentor and friend, and further supported by Georg Weizs¨acker, who improved our Graduate Center significantly. I thank my first supervisor Bernd Fitzenberger, who always pushed me to be and do better. I thank my second supervisor Jeff Wooldridge, who believed in me since the beginning. I thank Lorenzo Trapani, with whom I share the unique passion for etymons, drinks and metrics. I thank my department and Claudia Kemfert for supporting my endless travels. I thank Stefan Seifert, for our paper and the beautiful years together. I thank my friends, you know why. I thank my office mate, Fabian St¨ockl, the king of the Alps. I thank my flatmates, Martin Harding and Max Sch¨afer,for being there, always. I thank love, for being there always too. I thank my biggest passions, football and cycling, sources of energy and inspiration. I dedicate this thesis to my mum, Giovanna, for supporting me and to my dad, Angelo, for supporting her in supporting me. Summary In economics, researchers use a wide variety of strategies for attempting to draw causal inference from observational data. New developments in the causal in- ference literature focus on the combination of predictive methods and causal questions. These methods allow researchers to answer new research questions as well as provide new opportunities to address older research question in the literature. This dissertation entails empirical work in the fields of (i) environ- mental economics: I evaluate waste pricing policies using synthetic controls and machine learning methods; (ii) labor and migration economics: I identify and quantify unreported farm labor induced by a sudden migrant inflow; (iii) conflict economics: I evaluate the economic costs of an hybrid war, namely, the Donbass war in Ukraine. The contribution of this dissertation is threefold. First, I combine novel data sources and provide unique datasets. Second, I ap- ply and tailor modern evaluation methods to the estimation of policy-relevant causal parameters in various fields of economics. Third, I compare recent ver- sus traditional econometric approaches previously employed by the literature. My dissertation shows that modern econometric techniques hold great promise for improving the accuracy and credibility of causal inference and policy eval- uation. Deutsche Zusammenfassung In der ¨okonomischen Forschung wird eine Vielzahl von Strategien verwen- det, um zu versuchen kausale Schlussfolgerungen aus Beobachtungsdaten zu ziehen. Neue Str¨omungen in der Literatur zu kausaler Inferenz konzentri- eren sich auf die Kombination von Methoden zur Vorhersage und kausalen Fragestellungen. Diese neuen Methoden erm¨oglichen es neue Forschungsfra- gen zu beantworten und bieten die M¨oglichkeit bestehende Forschungsfragen in der Literatur neu zu adressieren. Diese Dissertation umfasst empirische Arbeiten in den Bereichen (i) Umwelt¨okonomie: Ich evaluiere die Preispoli- tik f¨urAbf¨allemithilfe der \synthetic control" Methode und Methoden des maschinellen Lernens; (ii) Arbeits- und Migrations¨okonomie: Ich identifiziere und quantifiziere nicht gemeldete landwirtschaftliche Arbeitsleistung, die durch einen pl¨otzlichen Migrationszustrom verursacht wird; (iii) Konflikt¨okonomie: Ich analysiere die wirtschaftlichen Kosten eines hybriden Krieges, des Donbass- Krieges in der Ukraine. Der Beitrag dieser Dissertation zur bestehenden Lit- eratur ist dreifach. Erstens kombiniere ich neuartige Datenquellen und stelle neue Datens¨atzebereit. Zweitens verwende ich moderne Evaluierungsmetho- den und passe sie an, um politisch relevante kausale Parameter in verschiedenen Bereichen der ¨okonomischen Forschung abzusch¨atzen. Drittens vergleiche ich neuere mit traditionellen ¨okonometrischen Ans¨atzen,die zuvor in der Literatur verwendet wurden. Meine Dissertation zeigt, dass moderne ¨okonometrische Techniken vielversprechend sind, um die Genauigkeit und Glaubw¨urdigkeit von kausalen Schlussfolgerungen und die Evaluierung von Politikmassnahmen zu verbessern. Table of contents General Introduction Page 7 Chapter 1. The effects of pricing waste generation: A synthetic control approach DOI: https://doi.org/10.1016/j.jeem.2019.06.004 Page 9 Chapter 2. Heterogeneous effects of waste pricing policies Page 37 Chapter 3. The Arab Spring migrant wave and illegal labor on vineyards: Counting the uncountable Page 91 Chapter 4. The economic costs of hybrid wars: The case of Ukraine DOI: https://doi.org/10.1080/10242694.2020.1791616 Page 128 General Introduction This thesis addresses various economic problems in the field of environmental economics, conflict economics, labor economics, and migration. It applies state- of-the-art econometrics and machine learning algorithms, and it shows how these techniques could improve over traditional methods of causal inference. Chapter 1.{\The effects of price wasting generation: a synthetic control approach" is coauthored with Matheus Bueno, Ph.D. student of the Toulouse School of Economics, and published in the Journal of Environmental Economics and Management. We evaluate the causal effects of unit pricing policies on mu- nicipal solid waste. Using a unique panel dataset of Italian municipalities and the case study of Trento, we show that the policy was effective, decreasing total waste and promoting recycling. Importantly, we show how using the syn- thetic control method could improve over traditional difference-in-differences approaches when unobservables (such as environmental awareness) have time- varying effects on waste generation. Chapter 2.{\Heterogeneous effects of waste pricing policies" builds on the first paper and studies the heterogeneous effects of unit prices on waste de- mands and social welfare. The topic is highly non-trivial, especially because of the large dimensionality of the characteristics which are bound to affect the effects of waste policies, the consequent heterogeneity, and the data collection and preparation. I employ machine learning techniques on a unique panel of Italian municipalities with large variation in prices and observables. I show that prices as well as socio-economic attributes matter, and trigger different policy responses. Despite the large effect heterogeneity, I estimate overall wel- fare benefits after three years of adoption, when waste prices cause significant waste avoidance. This implies that even low prices can change waste behaviors and improve welfare. Chapter 3.{\The Arab Spring migrant wave and illegal labor on vineyards: Counting the uncountable" is written with Stefan Seifert, Post-doc of the Uni- versity of Bonn, and published in the DIW Discussion Papers. We provide a framework to detect illegal labor from official statistics. We exploit an exoge- 7 nous shock on vineyards, in particular, the 2011 Arab Spring migration wave. We show that illegal labor can be identified and quantified using observed farm data and a dynamic panel model. This article is one of the few academic study of labor practices that are pervasive not just in winemaking, but in all of agriculture. Chapter 4.{\The economic costs of hybrid wars: The case of Ukraine" is co-authored with Julia Bluszcz, Master student at the Humboldt University of Berlin, and published in Defense and Peace Economics. We analyze the economic costs of the Ukrainian conflict in the Donbass region, using again the synthetic control method. Between 2013 and 2017, we estimate an average GDP loss of 15% due to the war. However, starting from 2016, the Ukrainian economy showed signs of recovery, a growth that slowly continues driven by external and internal factors, such as world raw material prices, the implemen- tation of macroeconomic and structural reforms, and the improved political situation. 8 The effects of pricing waste generation: A synthetic control approach with Matheus Bueno∗ Published in the Journal of Environmental Economics and Management here. Abstract To internalize pollution externalities into household waste genera- tion, Unit Pricing Systems (UPS) have been adopted worldwide. This paper evaluates the causal effects of a UPS on the disposal of municipal solid waste in Trento, Italy. Using a unique panel dataset of monthly waste generation in Italian municipalities, we employ the synthetic control method, which allows us to account for possible time-varying effects of unobservables. Our results show that the policy was effective, with a significant decrease of the priced waste stream, unsorted waste, by 37.5%. This effect seems to be largely driven by behavioral changes towards waste avoidance (−8:6%) and possibly by a smaller increase in recycling (+6:1%). By comparing these results to those obtained by a difference-in-differences approach, we show that failing to account for time-varying effects of unobservables may lead to a mismeasurement of policy effects. Keywords: Waste generation, Unit pricing, Synthetic controls, Policy endogene- ity, Selection on unobservables