large scale deployment of renewables for electricity generation comparisons of resource assessments suggest that sufficient renewable energy resources are available to allow for large scale deployment of renewable energy technologies economic analysis identifies barriers to the adoption of renewable energy sources resulting from i market structure ii competition in an uneven playing field and iii various non marketplace barriers however even if these barriers are removed the problem of technology lock out remains the key policy response is strategic deployment coupled with increased r d support to accelerate the pace of improvement through market experience this paper suggests significant contributions from various technologies are possible but does not assess their optimal or maximal market share copyright 2005 oxford university press

sequential labor decisions under uncertainty an estimable household model of west african farmers this paper reports estimates of the structural parameters of a stochastic control model that describcs the labor decisions of small farmers in burkina faso west africa the focus of the estimation is on measuring flexibility in production and intertemporal substitutability in consumption full information maximum likelihood estimates of the primitive parameters of the model are computed even though optimal labor decision rules cannot be derived analytically vuong s non nested model specification test shows that this method yields parameter estimates that are superior to those derived by assuming that farmers solve a deterministic control problem the low levels of agricultural labor effort commonly observed in the survey area are shown to be a consequence both of the low productivity of labor in archaic rainfed agriculture and of farmers awareness that in the absence of a labor market overly ambitious production plans lead to seasonal manpower constraints to meet rainfed farmers concerns agricultural research institutes and extension services should factor flexibility into their research agendas

are household production decisions cooperative evidence on pastoral migration and milk sales from northern kenya market based development efforts frequently create opportunities to generate income from goods previously produced and consumed within the household production within the household is often characterized by a gender and age division of labor market development efforts to improve wellbeing may lead to unanticipated outcomes if household production decisions are noncooperative we develop and test models of household decision making to investigate intrahousehold decision making in a nomadic pastoral setting from kenya our results suggest that household decisions are contested with husbands using migration decisions to resist wives ability to market milk

a cost benefit analysis of a condom social marketing programme in tanzania this article uses the revealed preference willingness to pay approach to estimate the benefits in a cost benefit analysis of a condom social marketing csm programme in tanzania the demand curve used to derive the consumer surplus had unit elasticity and it was estimated from a cross sectional sample of 1272 persons people were willing to pay different prices for the condoms because perceived quality varied net benefits were close to zero for the minimum estimate that ignored external benefits with external benefits included the csm programme was judged socially worthwhile with our best estimate producing a benefit cost ratio ranging from 1 31 to 1 72

marriage market divorce legislation and household labor supply this paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply in our approach the sex ratio in the marriage market and the rules governing divorce are examples of distribution factors these factors are defined as variables that affect the household members bargaining position but not preferences or the joint budget set we extend the collective labor supply model developed by chiappori to allow for distribution factors we show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process the model is estimated using psid data for the year 1988 our results do not reject the restrictions imposed by the model also the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects

simultaneous attainment of energy goals by means of green certificates and emission permits abstract we discuss the analytical effects of introducing emission permits and green certificates and the corresponding quotas as regulatory mechanisms to respectively reduce emissions from electricity production and ensure a certain deployment of renewable energy the different case studies in this paper show that both instruments can be used in order to reach an emission goal or a goal of renewable energy however the combination of these instruments and the way they are used is shown to be important for the price faced by consumers it is shown that the effect on the consumer price is not an unambiguous increase with the introduction of a green quota there is a choice between quotas leading to a lower consumer price and quotas leading to a higher consumer price as a result of this it is shown that it is always optimal to reach a renewable energy deployment goal by the use of green certificates however to reach an emission goal it is sometimes most favourable with respect to consumer prices to use green certificates and sometimes to use emission permits

an analysis of feed in tariff remuneration models implications for renewable energy investment recent experience from around the world suggests that feed in tariffs fits are the most effective policy to encourage the rapid and sustained deployment of renewable energy there are several different ways to structure a fit policy each with its own strengths and weaknesses this paper presents an overview of seven different ways to structure the remuneration of a fit policy divided into two broad categories those in which remuneration is dependent on the electricity price and those that remain independent from it this paper examines the advantages and disadvantages of these different fit models and concludes with an analysis of these design options with a focus on their implications both for investors and for society

the ellsberg paradox and risk aversion an anticipated utility approach the paper describes a decision process under which it is rational to prefer a lottery with known probabilities to a similar ambiguous lottery where the decision maker does not know the exact values of the probabilities the ellsberg paradox this is done by modeling ambiguous lotteries as two stage lotteries by assuming the independence axiom without the reduction of compound lotteries axiom and by using the anticipated utility functional this paper also gives conditions under which less ambiguity is preferred and presents some comparative statics analysis as well as some inter personal comparisons finally it proves that within the anticipated utility framework risk and ambiguity are almost identical copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

global risk investment and emotions we investigate a novel dynamic choice problem in an experiment where emotions are measured through self reports the choice problem concerns the investment of an amount of money in a safe option and a risky option when there is a global risk of losing all earnings from both options including any return from the risky option our key finding is that global risk can reduce the amount invested in the risky option this result cannot be explained by expected utility or by its main contenders rank dependent utility and cumulative prospect theory an explanation is offered by taking account of emotions using the emotion data from the experiment and recent psychological findings

using a policy mix for pollution control a review of economic literature this article provides a review of economic studies analyzing the use of multiple policies a socalled policy mix to cope with single pollution problems to guide and structure the review an analytical framework is developed and applied the framework integrates transaction costs into the analysis of pollution problems and policies to overcome them moreover it understands a pollution externality not only as a market failure but more generally as the failure of private governance structures based on this insight two rationales for using a policy mix are identified first a policy mix may help to correct for multiple reinforcing failures of private governance structures such as pollution externalities and technological spillovers second a policy mix can be employed if the implementation of single first best policies brings about high transaction costs e g when marginal pollution damages are heterogeneous or polluters are unlikely to comply with the policy for each rationale the relevant literature is presented based on the review avenues for future research are identified

if we knew ability how would we tax individuals abstract the suggestion to tax people on earnings capacity instead of earnings has been around for a long time and is attractive in terms of economic efficiency in this paper we reflect on the feasibility of such a system and give an exploratory empirical implementation we apply the leyden welfare function of income a survey based measure of an individual s welfare associated with income to derive implications for ability taxation under the assumption that iq and schooling reflect earnings capacity we derive the tax functions using different criteria to distribute the utility loss due to taxation

carbon tax or emissions trading an analysis of economic and political feasibility of policy mechanisms for greenhouse gas emissions reduction in the mexican power sector this study provides a comparative assessment of carbon pricing instruments for the mexican electricity sector contrasting a carbon tax with an emissions trading scheme ets the assessment is per

germany s solar cell promotion dark clouds on the horizon abstract this article demonstrates that the large feed in tariffs currently guaranteed for solar electricity in germany constitute a subsidization regime that threatens to reach a level comparable to that of german hard coal production a notoriously outstanding example of misguided political intervention yet as a consequence of the coexistence of the german renewable energy sources act eeg and the eu emissions trading scheme ets the increased use of renewable energy technologies does not imply any additional emission reductions beyond those already achieved by ets alone similarly disappointing is the net employment balance which is likely to be negative if one takes into account the opportunity cost of this form of solar photovoltaic pv support along the lines of the international energy agency iea 2007 energy policies of iea countries germany 2007 review international energy agency oecd paris p 77 we recommend the immediate and drastic reduction of the magnitude of the feed in tariffs granted for solar based electricity ultimately producing electricity on this basis is among the most expensive greenhouse gas abatement options

can technology specific deployment policies be cost effective the case of renewable energy support schemes can technology specific deployment policies be cost effective the case of renewable energy support schemes

gender social norms and household production in burkina faso abstractempirical studies of intrahousehold allocation have revealed that in many instances gender is an important determinant in the allocation of resources within the household yet within the theoretical literature why gender matters within the household remains an open question in this article we propose a simple model of intrahousehold allocation based on a particular social institution for the organization of agricultural production practiced among certain ethnic groups in west africa we highlight how this institution while resolving certain problems of commitment and informational asymmetry can also lead to a gendered pattern in the allocation of productive resources and consumption within the household using a survey of agricultural households in burkina faso we show consistent with this theory that plots owned by the head of the household are farmed more intensively and achieve higher yields than plots with similar characteristics owned by other household members male and female fam

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

reduction of compound lotteries with objective probabilities theory and evidence abstract the reduction of compound lotteries axiom rocl has assumed a central role in the evaluation of behavior toward risk and uncertainty we present experimental evidence on its validity in the domain of objective probabilities our battery of lottery pairs includes simple one stage lotteries two stages compound lotteries and their actuarially equivalent one stage lotteries we find violations of rocl and that behavior is better characterized by a source dependent version of the rank dependent utility model rather than expected utility theory since we use the popular 1 in k random lottery incentive mechanism payment procedure in our main test our experiment explicitly recognizes the impact that this payment procedure may have on preferences thus we also collect data using the 1 in 1 payment procedure we do not infer any violations of rocl when subjects are only given one decision to make these results are supported by both structural estimation of latent preferences as well as non parametric analysis of choice patterns the random lottery incentive mechanism used as payment protocol itself induces an additional layer of compounding by design that might create confounds in tests of rocl therefore we provide a word of caution for experimenters interested in studying rocl for other purposes such as the relationship between ambiguity attitudes and attitudes toward compound lotteries to carefully think about the design to study rocl payment protocols and their interaction with the preferences being elicited

altruism in the family and selfishness in the market place adam smith argued in a famous passage that people are selfish in their market transactions it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard to their own interest we address ourselves not to their humanity but to their self love and never talk to them of our own necessities but of their advantages 1937 p 14 in an earlier study he said with irony we are not ready to suspect any person of being defective in selfishness 1853 p 446 selfishness in market transactions has been assumed in practically all subsequent discussions of the economic system objections were dismissed with vague allusions to human nature or with an assertion that altruism loses out to selfishness in the struggle to survive in the market sector yet altruism is generally recognized to be important within a family again adam smith said

testing for the presence of some features of increasing returns to adoption factors in energy system dynamics an analysis via the learning curve approach the purpose of this paper is to explain the sources of energy system lock in it presents a comparative analysis of the respective contributions of some features of increasing returns to adoption factors i e learning by doing learning by searching and returns to scale effects in explaining the technological change dynamics in the energy system the paper is technically based on a critical analysis of the learning curve approach econometric estimation of learning and scale effects inherent to seven energy technologies were performed by the use of several learning curve specifications these specifications permit to deal with some crucial issues related to the learning curve estimation which are associated with the problem of omitted variable bias the endogeneity effects and the choice of learning indicators results show that dynamic economies from learning effects coupled with static economies from scale effects are responsible for the lock in phenomena of the energy system they also show that the magnitude of such effects is correlated with the technology life cycle maturity in particular results point out that 1 the emerging technologies exhibit low learning rates associated with diseconomies of scale which are argued to be symptomatic of the outset of the deployment of new technologies characterized by diffusion barriers and high level of uncertainty 2 the evolving technologies present rather high learning rates meaning that they respond quickly to capacity expansion and r d activities development 3 conventional mature technologies display low learning rates but increasing returns to scale implying that they are characterized by a limited additional diffusion prospects

supplementing an emissions tax by a feed in tariff for renewable electricity to address learning spillovers abstract in the presence of learning spillovers related to renewable energy technologies an optimal strategy to mitigate climate change should complement an emissions tax by a subsidy for renewables this article addresses the question how such subsidy should be designed it is shown that the widely used approach of a revenue neutral fixed feed in tariff can yield an optimal outcome under restrictive conditions only it has to be adapted continuously as the electricity price changes moreover funding the tariff by a surcharge on the electricity price has important implications for the design of the emission tax the optimal tax rate has to be below the pigovian level differentiated across fossil fuels and adapted over time as the patterns of technological development change these requirements may pose a formidable challenge for practical decision making however it is important to point out that the eventual choices made with respect to the design and funding of a feed in tariff have to be based on a careful and more comprehensive policy assessment including inter alia economic effects beyond the electricity sector and existing institutional constraints

renegotiation and symmetry in repeated games abstract the paper derives a theory of renegotiation proofness in symmetric repeated games based on a notion of equal bargaining power according to consistent bargaining equilibrium a player can mount a credible objection to a continuation equilibrium in which he receives a particular expected present discounted value if there are other self enforcing agreements that never give any player such a low continuation value after any history the definition does not imply strongly symmetric solutions but under modest assumptions consistent bargaining equilibria of infinitely repeated games with perfect monitoring are strongly symmetric such solutions have an unusually elementary characterization journal of economic literature classification numbers c7 c72

a dynamic ellsberg urn experiment two rationality arguments are used to justify the link between conditional and unconditional preferences in decision theory dynamic consistency and consequentialism dynamic consistency requires that ex ante contingent choices are respected by updated preferences consequentialism states that only those outcomes which are still possible can matter for updated preferences we test the descriptive validity of these rationality arguments with a dynamic version of ellsberg s three color experiment and find that subjects act more often in line with consequentialism than with dynamic consistency

tax effects versus budget effects on labor supply this paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types a number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of budget effects rather than isolated tax effects this comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets moreover the income effects of tax changes are often mitigated or possibly even removed by the income effects of the accompanying expenditure changes

do deployment policies pick technologies by not picking applications a simulation of investment decisions in technologies with multiple applications abstract the role of deployment policies that aim to foster technological change has grown considerably especially in the fields of energy and climate however recent research has shown that the adoption of deployment policies carries the potential of locking in the technology that is most cost effective at the point of policy introduction but may be inefficient in the long term the present paper contributes to the emerging literature on the role of deployment policies in creating path dependency and eventually technology lock in while previous studies focused on the relationship between lock in and the technology specificity of deployment policies this paper introduces a new factor the existence of multiple applications for a technology we argue that this factor is highly relevant for technological lock in and should be considered by policy makers to support our argument we simulate the competition among four stationary battery technologies across energy system applications in an investment simulation model this simulation shows that the degree of competition among technologies differs strongly across applications which corresponds with a highly varying lock in probability hence selecting applications in deployment policies very likely corresponds to selecting technologies we discuss the implications of these results for both policy makers and for the academic debate on deployment policies and technological lock in as well as on technology assessment and governance more generally based on the notion that policies can have different technology specificity levels we develop the idea of the application specificity of policies and provide examples of currently enacted deployment policies that vary in terms of their technology and application specificity

technology adoption and agricultural price policy market interventions such as price supports or fertilizer subsidies can lead to gains from speeding up adoption of new technologies but the policies distort resource allocation a framework is developed for optimizing policies in light of the adoption allocation trade off based on adoption coefficients and production parameters from third world agriculture levels and duration of policies are estimated sensitivity analyses are performed gains are small at best and may be zero or negative in view of farmer costs of adjustment and deadweight losses from taxes profit technology adoption if new technologies are desirable why not use price supports or input subsidies to encourage faster technology adoption while frequently raised in policy deliberations this question has received little serious analysis particularly neglected has been the conflict or trade off between a gains in output as producers switch from old to new technologies and b the losses from resource use distortions brought about by price policies when output prices are raised or prices of inputs such as fertilizer are lowered the

altruism within the family reconsidered do nice guys finish last this paper criticizes the view that altruism either increases the benefits of group interactions or improves the allocation of resources within families the authors identify a variety of circumstances in which members of a group would prefer to interact with less altruistic individuals and in which the efficiency of resource allocation is inversely related to the prevailing degree of altruism reasons that altruism might be a counter productive social force include 1 it can alter the social utility possibility frontier in surprising and sometimes unfortunate ways 2 it can entail exploitability causing family members to behave in ways that leave all parties worse off 3 altruists may take inefficient actions to preempt exploitation and 4 family members may establish efficient resource allocation by punishing selfish behavior a rise in the level of altruism may lead to the exclusion of certain punishment strategies on the grounds of credibility 1 general positive result is that sufficiently high levels of altruism almost always lead to efficient resource allocation one should not necessarily expect to find strong altruistic linkages between spouses nor should altruism necessarily contributed to marital stability in addition to the connections between this work and the literature on family behavior this analysis has broader implications concerning the role of altruism in society and the evolution of social conscience

the impact of technological change on climate protection and welfare insights from the model mind abstract avoiding dangerous climate change is likely to require policies to mitigate co2 emissions that are substantially more ambitious than those currently being considered for such policies the issue of endogenous technological change becomes important both to estimate the overall costs and to identify the intertemporally cost effective combination of mitigation options in this paper we first discuss the recent literature that evaluates the potential for endogenous technological change to reduce mitigation costs and the efforts to incorporate endogenous technological change into pre existing integrated assessment models then we formulate our own integrated assessment model the model of investment and technological development mind which allows analysis of the relationship between specific mitigation options and the costs of ambitious climate protection objectives our model reveals two important results first the incorporation of technological change in a portfolio of mitigation options can reduce the costs of climate policies substantially achieving the ambitious policy goals necessary to avoid dangerous climate change becomes feasible without significant welfare losses second the different mitigation options are of different importance in achieving climate protection goals improving energy efficiency becomes too costly as a major mitigation option in the long run in the long run fossil fuels have to be substituted by renewable energy sources because a backstop technology with the potential of learning by doing has the strongest impact on reducing the welfare losses due to climate protection furthermore carbon capturing and sequestration can allow for further reduction in the costs of climate protection and can postpone the need to transform the energy system from a fossil fuel based one to a renewables one

bargaining and boldness abstract we study a multiperson bargaining problem with general risk preferences through the use of shaked s game of cycling offers with exogenous breakdown if preferences are smooth then as the risk of breakdown vanishes the limiting outcome is one in which bargainers are equally marginally bold where a bargainer s marginal boldness measures his willingness to risk disagreement in return for a marginal improvement in his position under smoothness any ordinal nash solution is an equally marginally bold outcome however unlike the concept of the ordinal nash solution a unique equally marginally bold outcome exists in natural cases in particular if all bargainers have risk averse preferences of the rank dependent expected utility type for these preferences the equally marginally bold outcome maximizes a bargaining power adjusted asymmetric nash product where the degree of asymmetry is determined by the disparity in the marginal valuation of certainty among bargainers journal of economic literature classification numbers c72 c78 d81

intra household resource allocation and familial ties abstract in this paper we investigate the link between intra household resource allocation and familial ties between household members we show that within the same geographic economic and social environments households where members have stronger familial ties nuclear family households achieve near pareto efficient allocation of productive resources and pareto efficient allocation of consumption while households with weaker familial ties extended family households do not we propose a theoretical model of the household based on the idea that altruism between household members vary with familial ties which generates predictions consistent with the observed empirical patterns

understanding carbon lock in abstract this paper narrative argues that industrial economies have been locked into fossil fuel based energy systems through a process of technological and institutional co evolution driven by path dependent increasing returns to scale it is asserted that this condition termed carbon lock in creates persistent market and policy failures that can inhibit the diffusion of carbon saving technologies despite their apparent environmental and economic advantages the notion of a techno institutional complex is introduced to capture the idea that lock in occurs through combined interactions among technological systems and governing institutions while carbon lock in provides a conceptual basis for understanding macro level barriers to the diffusion of carbon saving technologies it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration the question of escaping carbon lock in is left for a future paper

male female differences in agricultural productivity methodological issues and empirical evidence abstract most estimates of male female differences in technical efficiency from production function studies show that male and female farmers are equally efficient farm managers controlling for levels of inputs and human capital there is some evidence however of allocative inefficiency within households marginal products of labor depend on the relative scarcities of labor and the gender division of labor in specific farming systems many of these studies however are methodologically flawed greater attention needs to be given to appropriate estimation methods endogenous input choice the use of headship as a stratifying variable and the implications of intrahousehold resource allocation

the danish green certificate system some simple analytical results we formulate a simple static equilibrium model for the electricity market taking account of both green certificates and co2 emission permits the objective is to investigate the relationship between these markets under the existence of upper and lower price bounds on the green certificates both in the short and in the long run we perform various comparative static changes of the parameters of the model and study how these affect the endogenous variables of the model as well as producers and consumers surplus we also investigate the effects of imports and exports of electricity several comparative static results are derived and in particular it is shown that harsher co2 emission constraints and increased import wholesale price both may lead to reduced capacity of green electricity

political economy constraints on carbon pricing policies what are the implications for economic efficiency environmental efficacy and climate policy design abstract economists traditionally view a pigouvian fee on carbon dioxide and other greenhouse gas emissions either via carbon taxes or emissions caps and permit trading cap and trade as the economically optimal or first best policy to address climate change related externalities yet several political economy factors can severely constrain the implementation of these carbon pricing policies including opposition of industrial sectors with a concentration of assets that would lose considerable value under such policies the collective action nature of climate mitigation efforts principal agent failures and a low willingness to pay for climate mitigation by citizens real world implementations of carbon pricing policies can thus fall short of the economically optimal outcomes envisioned in theory consistent with the general theory of the second best the presence of binding political economy constraints opens a significant opportunity space for the design of creative climate policy instruments with superior political feasibility economic efficiency and environmental efficacy relative to the constrained implementation of carbon pricing policies this paper presents theoretical political economy frameworks relevant to climate policy design and provides corroborating evidence from the united states context it concludes with a series of implications for climate policy making and argues for the creative pursuit of a mix of second best policy instruments

induced preferences dynamic consistency and dutch books we assume that a decision maker has expected utility preferences over a large space which includes some variables not observable by the theorist these will induce preferences over observable variables which typically will not have the expected utility form this paper focuses on implications for multi period decisions we show that such preferences are not vulnerable to dutch books in particular we consider preferences arising from non additive subjective probabilities and show how they can arise as induced preferences

the social efficiency of instruments of promotion of renewable energies a transaction cost perspective this paper compares the social efficiency of the regulatory instruments used to promote renewable energy sources in electricity generation taking into consideration their role in promoting the preservation of collective goods they are based on a purchase obligation and act either by price feed in tariffs or by quantity bidding for new res e capacities res e quotas from the public economics perspective the two instruments are distinct in terms of cost efficacy and market incentives in a world of imperfect information exchangeable quotas of green certificates are preferred because this instrument allows better control over consumer costs and whilst retaining market incentives transaction cost economics tce contributes to the assessment of these instruments by introducing res e investment safeguard as a major determinant of social efficiency and the instruments conformity to its institutional environment as a determinant of its viability in light of this additional consideration the arrangements between res e producers and obligated buyers inherent in each instrument are in fact quite similar either long term contracting or vertical integration we compare and assess res e price and quantity instruments on several dimensions from both the public economics and tce perspectives control of the cost for consumers safeguards of res e investments adaptability of the instrument in order to preserve its stability in the long run market incentive intensity and conformity with the new market regime of electricity industry it shows neither instruments offer an optimal solution in each of these dimensions the government will thus select an instrument in accordance with the relative importance of its objectives c 2006 elsevier b v all rights reserved

a marginal cost of funds approach to multi period public project evaluation implications for the social discount rate abstract although the use of marginal cost of funds mcf has been widely appreciated in public finance literature discussions of mcf have been confined to a static setting this paper develops a multi period project evaluation rule that is based on mcf unlike previous approaches the parameters required for implementing the mcf rule are independent of projects under consideration a lesson from this paper is that the government discount rate policies that are largely based on the concepts of social discount rate and shadow price of capital should be rewritten with the use of parameters representing mcf

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

is the allocation of resources within the household efficient new evidence from a randomized experiment i study whether households make pareto efficient intrahousehold resource allocation decisions combining randomized variation in women s income generated by the evaluation of the mexican progresa program with variation attributable to localized rainfall shocks as distribution factors in the collective model i find evidence favoring pareto optimality more specifically female specific income changes have positive effects on children s goods expenditures whereas changes due to rainfall shocks have a smaller influence on household public goods expenditures the evidence is consistent with female partners having greater sensitivity to own income changes and norms that oblige women to devote their earnings to meet collective consumption needs

technical change dynamics evidence from the emerging renewable energy technologies abstract this paper explores the respective contributions of the effects of learning and returns to scale in the capital costs reduction pattern experienced by renewables causality analysis and econometric estimation of learning curves are performed on two emerging renewable energy technologies namely pv and wind learning effects appear as an essential driving force a result which concurs with the widely acknowledged importance of experience in technical progress inherent to economic growth the existence of non constant and flexible returns to scale are further highlighted their effect on diffusion dynamics is shown to be potentially considerable particularly at the outset of innovation deployment however returns to scale are suggested to be constant in the long term institutional commitment in supporting innovation therefore seems justified both on the basis of the occurrence of learning effects and diseconomies of scale these findings appear to be essential to the dynamics of innovation diffusion and market structure

the profits of power land rights and agricultural investment in ghana we examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in akwapim ghana we show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output the intensity of investments on different plots cultivated by a given individual corresponds to that individual s security of tenure over those specific plots and in turn to the individual s position in the political hierarchy relevant to those specific plots

emissions pricing spillovers and public investment in environmentally friendly technologies in a second best world of below optimal pollution pricing the public return to r d may be greater than under pigouvian pricing due to excess benefits of increasing abatement or it may be lower since private actors lack the incentives to take full advantage of the new cleaner technologies this paper uses a simple model to demonstrate the interaction between environmental policies r d externalities and the social return to innovation the results indicate that strong public support for innovation in abatement technologies is only justified if at least a moderate emissions policy is in place and spillover effects are significant if emissions policy can adjust to cost changes the public role may be enhanced since private actors will prefer to avoid ratcheting social gains from innovation increase only if innovation can allow emissions to be more fully priced technology policy is more effective with fuller emissions pricing and is better viewed as a complement to than a substitute for mitigation policy

strategic choices in polygamous households theory and evidence from senegal this paper proposes a strategic framework to account for fertility choices in polygamous households a theoretical model specifies the main drivers of fertility in the african context and describes how the fertility of one wife might impact the behavior of her co wives it generates predictions to test for strategic interactions exploiting original data from a household survey and the demographic and health surveys in senegal empirical tests show that children are strategic complements one wife raises her fertility in response to an increase by the other wife because children are the best claim to resources controlled by the husband this result is the first quantitative evidence of a reproductive rivalry between co wives it suggests that the sustained high level of fertility in africa does not merely reect women s lack of control over births as is often argued but also their incentives to have many children this paper also contributes to the literature on household behavior as one of the few attempts to open the black box of non nuclear families

carbon taxes a drop in the ocean or a drop that erodes the stone the effect of carbon taxes on technological change abstract we develop an economic partial equilibrium model for energy supply and demand with capital and labor as production factors and endogenous technological change through learning by research and learning by doing our model can reproduce the learning curve typical for bottom up energy system models the model also produces an endogenous s curved transition from fossil fuel energy sources to carbon free energy sources over the coming two centuries we use the model to study carbon taxes effects on fossil fuel and carbon free energy use and carbon dioxide emissions it is shown that without induced technological change carbon taxes have a modest effect on emissions while with induced technological change they accelerate the substitution of carbon free energy for fossil fuels substantially

impacts of a common green certificate market on electricity and co2 emission markets in the nordic countries abstract the purpose of this study is to analyze the effects of introducing a common nordic system for tradable green certificates tgcs on the electricity market and a future market for tradable co 2 emission permits teps in the analysis the energy system model generator markal was used to model the electricity and district heating supply systems in the four nordic countries sweden norway finland and denmark it is shown that the introduction of tgc quotas reduces wholesale electricity and tep prices the impact on the latter is very pronounced retail electricity prices may become lower or higher depending on the tgc quota than if obligations to fulfill tgc quotas were absent the tgc scheme s efficiency in reducing a specific amount of co 2 emissions is also compared to the corresponding efficiency of a tep scheme involving a broader range of technologies furthermore obligations to fulfill tgc quotas affect investment incentives for new non renewable electricity supply this seems especially true for gas fired power plants finally it is indicated that electricity supply based on biomass combustion dominates the tgc scheme at least in the short run

incorporating a stochastic element into decision theories abstract recent papers by harless and camerer 1994 and hey and orme 1994 have employed two rather different models of errors in decision making under uncertainty the present paper develops a third approach and shows how different stochastic specifications of the same deterministic core theory may generate very different and sometimes surprising hypotheses

the impact of r d on innovation for wind energy in denmark germany and the united kingdom this paper examines the impact of public research and development r d support on cost reducing innovation for wind turbine farms in denmark germany and the united kingdom uk first we survey the literature in this field the literature indicates that in denmark r d policy has been more successful than in germany or the uk in promoting innovation of wind turbines furthermore such studies point out that subsidy induced capacity expansions were more effective in the uk and denmark in promoting cost reducing innovation than in germany the second part of the paper describes the quantitative analysis of the impact of r d and capacity expansion on innovation this is calculated using the two factor learning curve 2flc model in which investment cost reductions are explained by cumulative capacity and the r d based knowledge stock time series data were collected for the three countries and organized as a panel data set the parameters of the 2flc model were estimated focusing on the homogeneity and heterogeneity of the parameters across countries we arrived at robust estimations of a learning by doing rate of 5 4 and a learning by searching rate of 12 6 the analysis underlines the homogeneity of the learning parameters enhancing the validity of the 2flc formulation

maize and the free trade agreement between mexico and the united states setting the price of maize in rural mexico above the world price is inefficient and likely to have negative distributional effects because many subsistence producers and all landless workers are net buyers in fact it screens out the relatively poor rather than the relatively rich the policy objective therefore should be to move toward free trade this would yield large gains in efficiency the free trade agreement provides an ideal opportunity to pursue this objective it will provide freer entrance into the united states for other agricultural products as well as a broad range of manufactured products ensuring secure and sustained access for labor intensive agricultural and manufactured products can help ease the impact on the labor market of a transition away from subsistence maize cultivation

gender agricultural production and the theory of the household virtually all models of the household assume that the allocation of resources is pareto efficient within many african households agricultural production occurs on many plots controlled by different members of the household pareto efficiency implies that factors should be allocated efficiently across these plots i find in contrast that plots controlled by women are farmed much less intensively than similar plots within the household controlled by men the estimates imply that about 6 percent of output is lost because of inefficient factor allocation within the household the paper suggests a new approach to modeling intrahousehold allocation consistent with the empirical results

efficient intra household allocations a general characterization and empirical tests the neoclassical theory of demand applies to individuals yet in empirical work it is usually taken as valid for households with many members this paper explores what the theory of individuals implies for households that have more than one member we make minimal assumptions about how the individual members of the household resolve conflicts all we assume is that however decisions are made outcomes are efficient we refer to this as the collective setting we show that in the collective setting household demands must satisfy a symmetry and rank condition on the slutsky matrix we also present some further results on the effects on demands of variables that do not modify preferences but that do affect how decisions are made we apply our theory to a series of surveys of household expenditures from canada the tests of the usual symmetry conditions are rejected for two person households but not for one person households we also show that income pooling is rejected for two person households we then test for our collective setting conditions on the couples data none of the collective setting restrictions are rejected we conclude that the collective setting is a plausible and tractable next step to take in the analysis of household behavior

labor supply taxes and government spending a microeconometric analysis the effect of government spending on labor supply behavior is critical to predicting the balanced budget effect of income taxes and to estimating the marginal social cost of public funds yet its very existence not to mention direction and magnitude has not been empirically investigated this research estimates a labor supply function that incorporates income taxation and government spending using microeconomic data for men and women the empirical results suggest that public sector spending may have a significant effect on labor supply thereby leading to estimates of the marginal social cost of public funds that differ from those typically calculated

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

sustainability guided promotion of renewable electricity generation in recent years the threat of global climate change high fuel import dependence and rapidly rising electricity demand levels have intensified the quest for more sustainable energy systems this in turn has increased the need for policy makers to promote electricity generation from renewable energy sources guaranteed prices coupled with a buy back obligation for electricity fed into the grid is a popular renewables promotion instrument especially in europe more recently driven mainly by electricity market liberalisation efforts quota targets for the share of renewables in combination with tradable green certificates tgc have received considerable attention tgc offer a greater theoretical potential for economic efficiency gains due to price competition and the greater flexibility assigned to the obliged parties while guaranteed prices and tgc schemes support the operation of renewable energy technology systems bidding schemes for renewable energy generation capacity are used to raise economic efficiency on the plant construction side all of these policy instruments suffer from the shortcoming that they do not explicitly account for the often widely varying environmental social and economic impacts of the technologies concerned in this paper we propose a methodology for the design of renewable energy policy instruments that is based on integrated assessment in particular we argue that using participatory multicriteria evaluation as part of the design of renewable energy promotion policies would make it possible 1 to differentiate the level of promotion in a systematic and transparent manner according to their socio ecological economic impact and 2 to explicitly account for the preferences of stakeholders a further problem of existing tgc and bidding schemes is that diversity of supply could be severely diminished if few low cost technologies were allowed to dominate the renewable energy market to ensure a certain diversity of technologies our scheme suggests the use of different technology bands for technologies that are relatively homogeneous with respect to their maturity

a generalized approach to multigeneration project evaluation 1 introductionit is well known that the choice of discount rate plays a significant role in the ranking of projects with varying time paths of costs and benefits for public projects the choice of the appropriate social discount rate sdr is not clear cut even in the context of short lived projects in which costs and benefits occur within a single generation in particular when capital taxes produce a wedge between gross and net rates of return should one discount at the economy s rate of return the before tax rate or the individual s rate of return the after tax rate in the single generation context the literature falls in two camps 1 one camp argues that the appropriate sdr is a weighted average of the gross and net rates of return with weights typically determined by the fractions of resources drawn from consumption and private investment respectively 2 a second camp argues that future benefits should be discounted at the net rate of return but that the initial investment should be multiplied by a scale factor so that the direct costs of the project can be expressed in terms of consumption units 3both approaches suffer from severe implementation problems for the first approach there is no general formula for the weights needed to calculate the sdr as a weighted average of two market rates of return dreze 1974 indeed the appropriate sdr to use is project specific stiglitz 1982 without a systematic methodology to derive project specific sdrs the weighted average approach is hard to implement for the second approach which equalizes the sdr to the net rate of return the scale factor the opportunity cost of public investment must be quantified the opportunity cost of public investment depends on whether resources come from private investment or consumption and on the calculation of the present value of the future consumption yielded by a unit of capital discounted at the net rate of return that is the shadow price of capital as lind 1997 points out however there is no general agreement on a specific procedure for calculating the shadow price of capital indeed the concept of the opportunity cost of public investment suffers the same project dependence problem as the first view of the sdr diamond 1968 multigeneration projects such as nuclear waste disposal natural resource conservation or even social security reform further complicate discount rate choice specifically intergenerational equity in addition to intertemporal efficiency plays a role in determining the appropriate social discount rate for multigeneration public project evaluation 4 as in the single generation context there are two competing views on the appropriate discount rate when evaluating multigeneration projects the descriptive and the prescriptive approaches 5the descriptive approach to discounting is a market based approach it does not rely on an explicit social welfare function swf or the pure time preference rate embedded in the swf however the descriptive approach works under the assumption that intergenerational compensation through changes in the tax debt policy is available 6 it is argued that under appropriate intergenerational compensation the market rates of return are still relevant for calculating the sdr for multigeneration project evaluation and in general the sdr should be a weighted average of the gross and net rates of return this descriptive view of setting the sdr equal to the market return appears to underlie the office of management and budget s omb adoption of 7 as the appropriate discount rate for federal programs 7the intent of the prescriptive approach is to use the social discount rate as an expression of ethical judgment on how consumption of future generations should be compared to consumption of current generations

interactions of a tradable green certificate market with a tradable permits market abstract the reduction of greenhouse gas ghg emissions is an important goal in the energy and environmental policies of the european union eu and its member states according to a recent directive proposal from the eu commission the inclusion of renewable technologies is one of the important ways to achieve this emission reduction more policy instruments are on hand to pursue this objective frequently discussed currently is the establishing of a market for tradable permits for co2 emissions to achieve emission reductions in the power industry in parallel with this is the introduction of a green certificate market to promote the development of renewables if these two instruments are brought into play at the same time two separate markets with two individual targets will co exist in a number of countries with a focus on the green certificate market this paper discusses how these two markets may interact with each other in international trade three different cases are analysed 1 a green certificate market without any tradable permits scheme 2 a green certificate market in combination with a tradable permits scheme based on grandfathering and finally 3 a green certificate market in combination with a tradable permits bidding scheme emphasis is placed on analysing the pricing mechanisms in international trade at the green certificate and tradable permits market in relation to the value of the reductions in ghg emissions actually achieved the influence of the permits scheme on the spot market price of electricity is shown and the benefits of trading green certificates compared to a domestic implementation of renewable technologies are discussed the main conclusion is that only if a green certificate market is combined with a tradable permit scheme based on a bidding procedure will trade in certificates be equivalent to the domestic development of renewables using the bidding system no other country will have to pay for co2 reductions in the home country of the renewable development as would otherwise be the case if a tradable permit system based on grandfathering were introduced or even worse if no tradable permits were introduced at all finally it must be stated that even if the green certificate market were introduced alongside with a tradable permit bidding system there still would be no incentives for international certificate trade on account of the need for ghg reductions in the version of the green certificate market discussed in this paper no ghg credits are attached to certificates this means that the development of renewables will add to ghg reductions only in those countries where the plants are established no matter what kind of tradable permit scheme is adopted

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

do support systems for res e reduce eu ets driven electricity prices abstract support systems for electricity from renewable energy sources res e can reduce electricity prices which have also been influenced by a co2 emission trading scheme ets additional res e substitutes electricity from fossil fuels and thus co2 emissions are reduced the demand for emission reductions is lowered as a result the co2 price is also reduced consequently the wholesale price for electricity decreases however most res e support systems are financed via the electricity market which increases the retail electricity price an assessment for germany shows that retail electricity prices in the first trading period of the eu ets 2005 2007 are lowered by 2 6 euro mwh due to additional res e considering the complete eu the effect is substantially higher this paper describes the effect and the influence of different policy designs it develops an approach for assessing the effect and applies it for the case of germany and roughly estimates the effect for the eu

normal randomness expected utility time preference and emotional distortions abstract a simple non expected utility model normal randomness expected utility nreu is formulated in addition to permanent wealth effects captured by expected utility individuals anticipate temporary emotional reactions to the resolution of uncertainty in the form of elation and disappointment therefore time preference plays an important part in determining risk attitudes a higher rate of time preference and emotional sensitivity induces distortions similar but not identical to rank dependent expected utility rdeu a specific reaction pattern is postulated by the nreu model in which individuals react more heavily to events falling outside of expected normal deviations this pattern induces s shaped transformation of probability weights

agricultural policies in the presence of distorting taxes this article analyzes how distortionary factor taxes affect the welfare impacts of production subsidies production quotas acreage controls subsidies for acreage reductions and cash transfers to farmers pre existing taxes substantially raise the costs of all these policies these additional costs reflect the welfare losses from financing certain policies by distortionary taxes they also reflect interactions with factor markets caused by changes in the costs of producing agricultural output previous studies ignore the latter types of effect consequently they significantly overstate the costs of production subsidies and understate the costs of production quotas acreage controls and subsidies for acreage reductions

the economics of polygyny in sub saharan africa female productivity and the demand for wives in cote d ivoire polygyny is still practiced throughout much of sub saharan africa with important social consequences this paper makes the first attempt to link african polygyny directly to the productivity of women in agriculture using micro data i develop a structural model of the demand for wives that disentangles wealth and substitution effects using a large household survey from cote d ivoire i find that marked geographic diversity in cropping patterns leads to regional variation in female labor productivity i also find that conditional on wealth men do have more wives when women are more productive that is cheaper this substitution effect may explain why polygyny declined in rural areas of cote d ivoire during agricultural development

on the construction of marginal federal personal and social security tax rates in the u s abstract in this article i correct and extend my earlier series on marginal federal personal income tax rates i also construct a measure of the marginal social security tax rate and add this to the income tax rate to obtain a measure of the effective marginal tax rate on income due to federal taxes finally i compare my series on marginal income tax rates and its method of construction with those of barro and sahasakul

the main support mechanisms to finance renewable energy development considering that the major part of greenhouse gases is carbon dioxide there is a global concern aimed at reducing carbon emissions additionally major consumer countries are looking for alternati

feed in subsidies taxation and inefficient entry we study energy markets with dirty production and lumpy entry costs of clean production renewables for intermediate entry costs markets yield inefficient production and inefficient entry a mix of three popular regulatory instruments polluter taxation feed in subsidies for renewables and consumption taxation cannot correct these market failures for larger entry costs the instruments are imperfect because they affect marginal incentives whereas entry is a lumpy fixed cost problem whenever the first best is implementable feed in subsidies and consumption taxes are redundant the second best requires feed in subsidies or consumption taxes in addition to a pollution tax and overshoots first best levels given production levels the instruments do not affect the regulator s budget

separate spheres bargaining and the marriage market this paper introduces the separate spheres bargaining model a new model of distribution within marriage it differs from divorce threat bargaining models e g manser brown mcelroy horney in that the threat point is not divorce but a noncooperative equilibrium within marriage this noncooperative equilibrium reflects traditional gender roles the predictions of our model thus differ from those of divorce threat bargaining models in the separate spheres model cash transfer payments to the mother and payments to the father can but need not imply different equilibrium distributions in existing marriages in the long run the distributional effects of transfer policies may be substantially altered by changes in the marriage market equilibrium

a tale of two market failures technology and environmental policy abstract market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies these combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives and can be cost effectively harnessed through the use of economic incentive based policy in the presence of weak or nonexistent environmental policies investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable positive knowledge and adoption spillovers and information problems can further weaken innovation incentives while environmental technology policy is fraught with difficulties a long term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success

altruism cooperation and efficiency agricultural production in polygynous households abstractaltruism toward others can inhibit cooperation by increasing the utility players expect to receive in a noncooperative equilibrium to test this we examine agricultural productivity in west african polygynous households we find cooperation as evidenced by more efficient production is greater among co wives than among husbands and wives using a game theoretic model we show that this outcome can arise because co wives are less altruistic toward each other than toward their husbands we present a variety of robustness checks which suggest results are not driven by selection into polygyny greater propensity for cooperation among women or household heads enforcing others cooperative agreements

polygyny fertility and savings sub saharan africa has a high incidence of polygyny it is also the poorest region of the world in this paper i ask whether banning polygyny could play any role for development using a quantitative model of polygyny i find that enforcing monogamy lowers fertility shrinks the spousal age gap and reverses the direction of marriage payments polygyny leads to high bride prices to ration women which makes buying wives and selling daughters a good investment thus crowding out investment in physical assets for reasonable parameter values i find that banning polygyny decreases fertility by 40 percent increases savings by 70 percent and increases output per capita by 170 percent

dynamic choice and the common ratio effect an experimental investigation the common ratio effect is a well attested violation of expected utility theory this paper uses four principles of dynamic choice to characterise alternative theoretical strategies for explaining the effect it reports an experiment which tests these principles and by implication several well known accounts of the common ratio effect unlike previous work the experimental design uses real financial incentives without presupposing any dynamic choice principles we find violation of a principle of timing independence which is part of most existing theories of dynamic choice we examine the implications of this finding for decision theory and economics

distortionary taxation and optimal public spending on productive activities mutsumi matsumoto using a general equilibrium model with endogenous factor supplies this article investigates the provision of factor augmenting public inputs such inputs are intermediate goods that affect production functions in a collective manner and give rise to increasing returns unlike with collective consumption goods deviation from the first best condition for a public input is inappropriate if taxes are set optimally when taxes are not optimal a second best rule must include a feedback effect on revenue as well as the deadweight cost of taxes implications for benefit cost analysis and for interpretation of estimates of the social returns to public capital are explored jel h21 h54 o4 i introduction government spending on public infrastructure and on human capital formation are often cited as important contributing forces to economic growth with reference to less developed economies isham and kaufmann 1999 show that the returns from public infrastructure investments are very high where the overall policy regime is basically sound turning to human capital psacharopolous and woodhall 1985 point out the sizable excess of social over private returns from education temple 1999 indicates that the importance of these public investments and others like them for example research and development is not limited to less developed countries appropriate levels are important across all economies the key characteristic of these sorts of commodities is that they exhibit positive externalities across productive entities in short they may be categorized as public intermediate goods or public inputs although such commodities are beneficial they are also costly spending on them takes a large portion of p ublic budgets moreover government financing of these costs typically involves the use of distortionary taxes those taxes create excess burden the magnitudes of which may be substantial for instance in an influential contribution browning 1987 21 suggests the marginal excess burden of taxes on labor income ranges from 31 8 to 46 9 the crux of this article is the relevance of distortionary taxes to decisions about public input expenditure bruce 1998 457 and musgrave et al 1987 288 89 suggest the incorporation of the deadweight cost of taxation as a cost when evaluating public projects boardman et al 1996 62 64 in their authoritative benefit cost text recommend the inclusion of deadweight loss in the assessment of net benefits of tax funded public projects these recommendations are intuitively appealing they are also consistent with the second best expenditure condition for spending on public consumption goods atkinson and stern 1974 show that marginal cost of a public consumption good must include the excess burden of the tax system indeed some of the most important recent empirical work on the returns from public capital have assessed those returns after netting out the deadweight loss of the tax system see morrison and schwartz 1996 and nadiri and mamuneas 1994 this article investigates the theoretical basis for deviating from the first best rule for public input provision when taxes are distortionary 1 one finding is that despite the deadweight losses a second best rule for public inputs should not be followed when taxes are set optimally the first best condition remains appropriate in effect the production efficiency theorem of diamond and mirrlees 1971 extends to a public input economy however and importantly for actual policy when taxes are not optimal then not only the excess burden but the impact of the public input on the government s budgetary position must be taken into account these qualifications need to be incorporated into empirical studies and benefit cost analysis ii the model the analysis makes use of a general equilibrium model of a competitive economy in which factor supplies are variable and there is a public input

imperfect commitment altruism and the family evidence from transfer behavior in low income rural areas in this paper we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments in particular we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers the tests are carried out using three panel data sets from two countries of rural south asia that provide detailed information on transfers and enable the measurement of income shocks the estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements whether kin based or not but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling