Karl M. Aspelund
I am a PhD candidate in Economics at MIT. My fields are environmental economics and industrial organization. My work has been supported by the NSF Graduate Research Fellowship and the NOAA-Sea Grant Fellowship.
I am on the job market in 2024-2025.
| CV | |
| MIT Website | |
Research Papers
Redistribution in Environmental Permit Markets: Transfers and Efficiency Costs with Trade Restrictions
Regulators often impose trade restrictions in environmental permit markets to redistribute value to groups that do not directly benefit from permit trade, such as labor in regulated firms, at the expense of lowering gains from trade. I evaluate the efficiency and distributional impacts of two common trade restrictions in Iceland’s fisheries permit market: segmented trading by firm size and individual production requirements. Using detailed harvest and permit trading data linked to administrative records on worker employment and earnings, I conduct a difference-in-differences analysis showing that permit trade increases the harvest share of productive boats by 15 percentage points, shifts income from lower- to higher-income workers, and reduces aggregate labor intensity by 12%. I further demonstrate that the trade restrictions, designed to counteract these labor impacts, are binding and lower productivity. To quantify the distinct trade-offs from each restriction, I develop a model of fishery production and permit trading to simulate profits, labor demand, and worker earnings in equilibria without the restrictions. Per dollar of foregone profit, segmentation increases labor demand 20 times more than the production requirement, while the production requirement redistributes 14% more income to low-income workers than segmentation. Implementing both restrictions outperforms the production requirement alone and is preferable to segmentation alone if regulators aim to balance job creation with a compressed income distribution.
Additionality and Asymmetric Information in Environmental Markets: Evidence from Conservation Auctions
Market mechanisms aim to deliver environmental services at low cost. However, this objective is undermined by participants whose conservation actions are not marginal to the incentive — or “additional” — as the lowest cost providers of environmental services may not be the highest social value. We investigate this potential market failure in the world’s largest auction mechanism for ecosystem services, the Conservation Reserve Program, with a dataset linking bids in the program’s scoring auction to satellite-derived land use. We use a regression discontinuity design to show that three of four marginal winners of the auction are not additional. Moreover, we find that the heterogeneity in counterfactual land use introduces adverse selection in the market. We then develop and estimate a joint model of multi-dimensional bidding and land use to quantify the implications of this market failure for the performance of environmental procurement mechanisms and competitive offset markets. We design alternative auctions with scoring rules that incorporate the expected impact of the auction on bidders’ land use. These auctions increase efficiency by using bids and observed characteristics to select participants based on both costs and expected additionality.
Research in Progress
Spatially Managing the Commons
The closure of specific areas to economic activity is a common approach to preventing excessive depletion of renewable natural resources. However, displacement—or "leakage"—of extractive activity to unregulated areas can undermine the effectiveness of such policies by increasing depletion elsewhere. We outline a framework that decomposes the net value of spatial closures into the static costs of congestion and foregone harvests today, the dynamic benefits of resource regrowth in the closed area, and the dynamic costs of increased depletion in unregulated areas. We apply this framework to the spatial regulation of the US Northeast scallop fishery, one of the most valuable fisheries in the country, where regulators have implemented area closures over the last two decades. Using geospatial data on vessel-level harvesting decisions and scallop population estimates, we first document the displacement of activity across space and congestion effects from vessels concentrating in open areas. Next, we estimate profits under observed and counterfactual policies to quantify how closures improve aggregate value and how displacement undermines that improvement. Finally, we test whether "access areas" that allow limited harvesting in closed regions mitigate the negative impacts of displacement and explore how the displacement effects differ under landing fees rather than effort restrictions.