Environmental concerns are increasingly becoming one of the most difficult challenges society faces during this century. From an economics perspective, this imposes the need to incorporate the environment as a relevant factor in the decision-making pro- cess in order to achieve the necessary efficiency that supports a sustainable future. This dissertation encompasses two essays that tackle environmental economic prob- lems using two different approaches, which ultimately complement each other in their outcomes. First, using a fully theoretical approach, I study how environmental cam- paigns from firms can impact their environmental reputation measured by the belief that consumers have about how clean their production technology is. I found that environmental campaigns can work as effective signals, fully revealing the firm’s type and allowing for novel reputation dynamics. Second, I take an empirical/quantitative approach to study how different types of water rights generate differences in the de- mand for water rights in Colorado. Using the most comprehensive data on water rights transactions in the US West, I can leverage a property of water rights to use the seller’s characteristics as instrumental variables to estimate the demand for water rights differentiated by type of water right. I provide, to the best of my knowledge, the first comparison of different water rights regimes within one overarching water market. I found that, as hypothesized in previous literature, more flexible water rights have higher demand thus moving more water at a given price. Taken together, these two essays show how relevant environmental topics are in a wide range of situations, providing new evidence on the incentives to build reputation once environmental ac- tions are taken into account, and also on how the demand for a natural resource is impacted by the rules that governs its usage and tradability.

This dissertation analyzes and quantifies a subset of the benefits and costs associated with residential location decisions in the housing market, and how these benefits and costs can be altered through public policy. Chapter 1 motivates and previews how I, through three essays, empirically explore this topic. Chapter 2 focuses on the benefits that neighborhoods can provide to children. I investigate whether neighborhood exposures during childhood affect academic outcomes observed at the end of high school, and whether the effects can be explained by neighborhood schools. I find that neighborhood exposures during childhood affect high-stakes standardized exam scores, 12th grade GPA, the probability of intending to attend college and the probability of dropping out of high school. By leveraging variation in the age at which students move, I estimate exposure effects that encompass the effect of neighborhood schools and other amenities. I demonstrate that these effects cannot be fully explained by conventional school quality measures based on test scores or graduation rates, which points to the potential importance of peer effects and other neighborhood amenities as complementary mechanisms. In two interrelated essays, Chapters 3 and 4 quantify the costs of housing, and how these costs are impacted by changes to federal policy. Homeownership in the US has been supported via the mortgage-interest-deduction provision of the tax code. However, US tax policy was substantially changed with the Tax Cuts and Jobs Act (TCJA) of 2017, which, by doubling the standard deduction and capping state and local tax deductions, effectively made housing more expensive relative to other types of consumption. I estimate time-varying user-costs of housing and subsidies at a fine level of geography and show that the TCJA reduced the federal housing subsidy by over 80%. I document important heterogeneity in the impacts of the policy across racial and political lines. Finally, I show that increasing the current limit on deductions of state and local taxes would have small overall impacts on subsidies, with strongly heterogeneous effects.