In the Summer before the second year of ARE's Graduate Program, students begin their second-year econometrics projects, also known as the second year paper. Students select an economic question that is of interest to them, and under close faculty supervision craft an empirical paper. A good empirical paper requires three components: a concise, sensible, and relevant research question or hypothesis to test; reasonably good data; and an experiment, event, or set of circumstances that give the data a chance to answer the question asked. Identifying a good question is a non-trivial exercise that takes time and effort. Over the course of the second year students work with a faculty advisor to meet specific deadlines, and the top second year paper wins the Sidney Hoos prize.
The 2020 Sidney Hoos award recipient Leila Safavi has won for her paper titled "Circuit Splits: Liability Reform and Likelihood of Environmental Risk in the Hazardous Waste Industry." Leila's faculty advisor ARE Professor Joe Shapiro offers this summary of Leila's paper:
This paper has an interesting and under-studied research question: to what extent do firms consider expected liability when entering contracts? The paper investigates this question in an important domain, the market for hazardous waste as regulated by federal law (Superfund, a.k.a., CERCLA). The paper outlines a simple model to learn about this question, which adapts and extends theoretical ideas from the law and economics literature. To test predictions from this theory, the paper uses a transparent and persuasive research design based on a legal decision that changed liability for a subset of firms involved in hazardous waste processing. The design is applied to a novel national dataset of several hundred thousand bilateral waste transactions, spanning many industries. Differences-in-differences regressions, triple-difference regressions, and event study graphs suggest that firms carefully consider liability when choosing contracts, and that potential liability affects an economically large share of contracting decisions in this market.