Monetary and Non-monetary Barriers to Accessing Environmental Public Benefit Programs: Experimental Evidence from California

• In Event: Environmental Justice and Distributional Equity

Abstract

State governments spend millions annually distributing subsidized air purifiers. A key concern for state government agencies is how to ensure these environmental goods reach the target population, typically people with low income and high pollution burden. Yet how to target these subsidized air purifiers to the target population is unclear. On the one hand, "ordeal" costs (time, required documents) can in theory improve targeting by screening out high-income households (who may be less incentivized to apply for a subsidized good). On the other hand, ordeal costs can worsen equity if people with low-income are deterred by these additional costs. This puzzle motivates our two primary research questions: (1) How do monetary (subsidy level) and non-monetary (ordeal) costs affect the application rate to a subsidized air-purifier program? (2) Do these effects vary by household income and by pollution exposure?

In a randomized controlled trial with 100,000 households in California, we mail nine versions of letters inviting residents to apply for a subsidized air purifier. We randomly vary the subsidy rate (0%, 50%, 75%, 95%, and 100%) and ordeal costs (e.g., a 10 minute longer application form, and an application form that requires proof of residence).

We report two sets of findings. First, we report findings on the application rate. We find that the letter with the easiest and shortest application process and the highest subsidy rate (a 100% subsidy) results in the highest application rate--approximately 2%. Compared to this benchmark, lowering the subsidy rate lowers application rates substantially. However, these effects are non-linear: we estimate the price elasticity of demand at the higher end of the subsidy range (75%-95% subsidy rates) to be -0.53 whereas at the lower range (50%-75% rates) it is over twice as elastic at -1.35. Additionally, administrative hassles substantially reduce application rate. A 10 minute longer form (hereafter 'time cost') reduces application rates by 20% (p<0.05), while requiring a document with proof of residence reduces application rates by 25% (p<0.01).

Second, we report findings on the heterogeneous effects of the letter treatments by income and particulate matter exposure. In the time cost treatment, applicants who are below the federal poverty line are 45% less likely to apply compared to those who are above it. Similarly, when faced with the proof of residence requirement, households with above median particulate matter exposure in the sample are 30% less likely (p<0.05) to apply than those with below median exposure.

In summary, this paper shows that the length of an application form and the documents it requires can significantly affect the characteristics of the applicant pool to a public benefit program. Higher subsidies raise application rates for everyone. However, time costs and proof of residence requirements deter people differentially, with the largest deterrent effects on low income and pollution burdened households, respectively. These findings imply that subsidy programs for air purifiers and other environmental goods should aim for a high subsidy rate, a quick application form, and refrain from requiring proof of residence documents.

Authors

• Matthew Spitzer Brooks, University of California, Davis
  Presenting Author

• Shotaro Nishimura Nakamura, Federal Trade Commission
  Non-Presenting Co-Author

• Collin Weigel, California Air Resources Board
  Non-Presenting Co-Author