price distortions in agriculture and their effects an international comparison the central thesis of this paper is that agricultural pricing policies pursued by developing countries produce effects which are diametrically opposite to those produced by the pricing policies of many developed countries and that the policies of both are costly in terms of global welfare in general the agricultural sector in developing countries is heavily taxed while that in the developed countries receives substantial price protection the effects of agricultural price distortions on output consumption trade and rural employment are estimated for nine countries in addition the effects of price distortions on the distribution of income between producers and consumers on government revenue and foreign exchange and the net social losses of the policies are calculated the results indicate that there are large income transfers and impacts on migration from the rural to the urban sector in developing countries and from the urban to the rural sector in developed economies

fat tails exponents extreme uncertainty simulating catastrophe in dice abstract the problem of low probability catastrophic risk is increasingly central to discussion of climate science and policy but the integrated assessment models iams of climate economics rarely incorporate this possibility what modifications are needed to analyze catastrophic economic risks in an iam we explore this question using dice a well known iam we examine the implications of a fat tailed probability distribution for the climate sensitivity parameter a focus of recent work by martin weitzman and the shape of the damage function one of the issues raised by the stern review forecasts of disastrous economic outcomes in dice can result from the interaction of these two innovations but not from either one alone

active learning and optimal climate policy this paper develops a climate economy model with uncertainty irreversibility and active learning whereas previous papers assume learning from one observation per period or experiment with control variables to gain additional information this paper considers active learning from investment in monitoring specifically in improved observations of the global mean temperature we find that the decision maker invests a significant amount of money in climate research far more than the current level in order to increase the rate of learning about climate change this helps the decision maker make improved decisions the level of uncertainty decreases more rapidly in the active learning model than in the passive learning model with only temperature observations as the uncertainty about climate change is smaller active learning reduces the optimal carbon tax the greater the risk the larger is the effect of learning the method proposed here is applicable to any dynamic control problem where the quality of monitoring is a choice variable for instance the precision at which we observe gdp unemployment or the quality of education

environmental policy and the direction of technical change should governments direct r d from dirty into clean technologies how important is this compared to carbon pricing we inquire into this introducing two novelties compared to recent literature we introduce decreasing returns to r d and allow future carbon taxes to influence current r d decisions our results suggest that governments should prioritize clean r d dealing with major environmental problems requires r d to shift to clean technology however with most researchers working with clean technology both productivity spillovers and future risks of being replaced increase consequently the wedge between private and social value of an innovation is largest for clean technologies this article is protected by copyright all rights reserved

when starting with the most expensive option makes sense optimal timing cost and sectoral allocation of abatement investment this paper finds that it is optimal to start a long term emission reduction strategy with significant short term abatement investment even if the optimal carbon price starts low and grows progressively over time moreover optimal marginal abatement investment costs differ across sectors of the economy it may be preferable to spend 25 dollars to avoid the marginal ton of carbon in a sector where abatement capital is expensive such as public transportation or in a sector with large abatement potential such as the power sector than 15 dollars for the marginal ton in a sector with lower cost or lower abatement potential the reason distinct from learning spillovers is that reducing greenhouse gas emissions requires investment in long lived abatement capital such as clean power plants or public transport infrastructure the value of abatement investment comes from avoided emissions but also from the value of abatement capital in the future the optimal levelized cost of conserved carbon can thus be higher than the optimal carbon price it is higher in sectors with higher investment needs those where abatement capital is more expensive or sectors with larger abatement potential we compare our approach to the traditional abatement cost curve model and discuss implications for policy design

the social cost of carbon emissions seven propositions determining the social cost of carbon emissions scc is a crucial step in the economic analysis of climate change policy as the us government s recent decision to use a range of estimates of the scc centered at 77 tc or equivalently 21 tco2 in cost benefit analyses of proposed emission control legislation underlines this note reviews the welfare economics theory fundamental to the estimation of the scc in both static and intertemporal contexts examining the effects of assumptions about the typical agent s pure rate of time preference and elasticity of marginal felicity of consumption production and mitigation technology and the magnitude of climate change damage on estimates of the scc we high light three key conclusions i an estimate of the scc is conditional on a specific policy scenario the details of which must be made explicit for the estimate to be meaningful ii the social discount rate relevant to intertemporal allocation decisions also depends on the policy scenario and iii the scc is uniquely defined only for policy scenarios that lead to an efficient growth path because marginal costs and benefits of emission mitigation diverge on inefficient growth paths we illustrate these analytical conclusions with simulations of a growth model calibrated to the world economy authors abstract

error correction mechanisms the interface between economic theory and applied econometrics is often one of uneasy compromise with the pragmatic justification for many accepted procedures resting on a theoretical base this paper examines the surprisingly strong arguments that exist in terms of economic theory for the use of error correction mechanisms in the specification of short run dynamic adjustment a common heresy exists that while economic theory provides a detailed analysis of comparative static equilibria it can offer no guidance as to the appropriate specification of dynamic adjustment towards an equilibrium perhaps in consequence it is not uncommon to find examples where the necessary dynamic specification is achieved by tacking onto an existing equilibrium specification some relatively ad hoc short run adjustment scheme the intercession of stochastic arguments in this process is confused and critical implications are frequently ignored in practice but perhaps more importantly there will typically be no guarantee that the dynamic specification is consistent with the prescribed equilibrium consistency in this sense requires that the short run dynamic adjustment be directed by the perceived disequilibrium and that eventual convergence to the equilibrium position be ensured that two separate theoretical arguments co exist within the final specification is the root cause of many difficulties both theoretical and empirical this abstract was borrowed from another version of this item

nutritional functional classification study of panama abstract despite significant progress wide spread malnutrition persists in panama this article describes a study which found that over half the malnutrition in the country is clustered in functional groups economically connected to the agricultural sector and which indicates that food availability is a serious problem for 25 of the population food intake deficits were equally prevalent among the urban and rural populations dietary composition was not seen as the principal problem rather malnutrition problems are linked to low wages and poor access to public services a nutrition policy for panama must be centred first on employment and income generation and then on extending and maintaining public health and nutrition services particularly for the extremely poor in the central provinces food policy per se would not seem a priority area for public intervention

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

climate policy under fat tailed risk an application of dice uncertainty plays a significant role in evaluating climate policy and fat tailed uncertainty may dominate policy advice should we make our utmost effort to prevent the arbitrarily large impacts of climate change under deep uncertainty in order to answer to this question we propose a new way of investigating the impact of fat tailed uncertainty on optimal climate policy the curvature of the optimal carbon tax against the uncertainty we find that the optimal carbon tax increases as the uncertainty about climate sensitivity increases but it does not accelerate as implied by weitzman s dismal theorem we find the same result in a wide variety of sensitivity analyses these results emphasize the importance of balancing the costs of climate change against its benefits also under deep uncertainty 2013 springer science business media dordrecht

provision of a public good with multiple dynasties carbon emissions create externalities across countries and generations these externalities depend on the degree of contemporaneous cooperation and intergenerational altruism i study the relative importance of these features in determining equilibrium climate policy by imbedding an olg framework with intergenerational altruism into a differential game among dynasties each representing a coalition of nations there is an isomorphism between pure and paternalistic altruism i illustrate the multiplicity of equilibria using an analytic linear in state model equilibrium steady states are more sensitive to small changes in cooperation than altruism consideration of large changes in altruism and cooperation can reverse this ranking

determining the social cost of carbon under damage and climate sensitivity uncertainty this article quantifies the impact on optimal climate policy of both damage elasticity and equilibrium climate sensitivity uncertainty under separable preferences for risk and intergenerational inequality the primary findings are as follows 1 such preferences can depress the social cost of carbon scc when calibration aims at matching actual economic outcomes countering the prevailing view that the scc is greater with separable than with conventional entangled preferences 2 damage elasticity uncertainty has larger effects on climate policy than equilibrium climate sensitivity uncertainty even under high impact tail risk of the latter 3 risk aversion decisively strengthens optimal climate policy under joint damage and climate sensitivity uncertainty than with a single source of uncertainty alone indeed failing to account for the interaction between damage and climate sensitivity uncertainty underestimates the cost of climate change by more than us dollars 1 trillion

the economic crisis from a neoclassical perspective abstract this paper assesses the 2007 2009 recession using neoclassical business cycle theory i find that the 2007 2009 u s recession differs substantially from other postwar u s recessions and also from the 2008 recession in other countries in that lower labor input accounts for virtually all of the decline in income and output in the united states while lower productivity accounts for much of other u s recessions and the 2007 2009 recession in other countries i also find that existing classes of models including financial market imperfections models do not explain the u s recession this is because the 2007 2009 recession is almost exclusively related to what appear to be labor market distortions that drive a wedge between the marginal product of labor and the marginal rate of substitution between consumption and leisure a topic about which current classes of financial imperfection models are largely silent i discuss future avenues for developing this class of models and i consider alterna

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

fat tailed risk about climate change and climate policy this paper investigates the role of emissions control in welfare maximization under fat tailed risk about climate change we provide a classification of fat tails and discuss the effect of fat tailed risk on climate policy one of the main findings is that emissions control may prevent the strong tail effect from arising at least under some conditions such as bounded temperature increases low risk aversion low damage costs and bounded utility function more specifically the fat tailed risk with respect to a climate parameter does not necessarily lead to an unbounded carbon tax in this case the basic principle of cost benefit analysis maintains its applicability

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

robust permanent income and pricing i suppose there exists an extremely powerful and if i may so speak malignant being whose whole endeavours are directed toward deceiving me rene descartes meditations ii 1

a protectionist foodgrain price policy the case of rice in panama abstract panama has pursued a protectionist price policy for rice with domestic prices well above the world market level the government marketing authority purchases sufficient rice to support the established price level and stores or exports the surplus although producers benefit this policy imposes significant costs on consumers government expenditures and economic efficiency one policy recommendation is to bring domestic prices in line with the international level although free trade is one possibility a market stabilization programme could be retained at a minimum panama s rice price should reflect domestic demand and not production costs the unfavourable rice fertilizer price ratio also deserves attention