crisis or opportunity economic degrowth for social equity and ecological sustainability introduction to this special issue abstract this article reviews the burgeoning emerging literature on sustainable degrowth this is defined as an equitable downscaling of production and consumption that increases human well being and enhances ecological conditions at the local and global level in the short and long term the paradigmatic propositions of degrowth are that economic growth is not sustainable and that human progress without economic growth is possible degrowth proponents come from diverse origins some are critics of market globalization new technologies or the imposition of western models of development in the rest of the world all criticize gdp accounting though they propose often different social and ecological indicators degrowth theorists and practitioners support an extension of human relations instead of market relations demand a deepening of democracy defend ecosystems and propose a more equal distribution of wealth we distinguish between depression i e unplanned degrowth within a growth regime and sustainable degrowth a voluntary smooth and equitable transition to a regime of lower production and consumption the question we ask is how positive would degrowth be if instead of being imposed by an economic crisis it would actually be a democratic collective decision a project with the ambition of getting closer to ecological sustainability and socio environmental justice worldwide most articles in this issue were originally presented at the april 2008 conference in paris on economic degrowth for ecological sustainability and social equity this conference brought the word degrowth and the concepts around it into an international academic setting articles of this special issue are summarized in this introductory article hueting d alessandro and colleagues van den bergh kerschner spangenberg and alcott discuss whether current growth patterns are un sustainable and offer different perspectives on what degrowth might mean and whether and under what conditions it might be desirable matthey and hamilton focus on social dynamics and the obstacles and opportunities for voluntary social action towards degrowth lietaert and cattaneo with gavalda offer a down to earth empirical discussion of two practical living experiments cohousing and squats highlighting the obstacles for scaling up such alternatives finally van griethuysen explains why growth is an imperative in modern market economies raising also the question whether degrowth is possible without radical institutional changes

progressive taxation and the social marginal cost of public funds abstract this paper describes the calculation of the social marginal cost of public funds smcf for a progressive tax system which distorts individuals labour supply decisions a formula for the smcf indicates that the income and substitution effects of the labour supply response are weighted by the changes in individuals average and marginal tax rates respectively other well known formulas for the smcf are shown to be special cases of this formula the difference between this formula and the mayshar 1991 formula is shown to be due to different but equally valid ways of computing the change in the average tax rate the condition under which a marginal tax rate increase may lead to a reduction in revenues is derived

a quantitative analysis of the used car market we quantitatively investigate the allocative and welfare effects of secondary markets for cars an important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher quality newer goods but transaction costs are an impediment to instantaneous trade calibration of the model successfully matches several aggregate features of the u s and french used car markets counterfactual analyses show that transaction costs have a large effect on volume of trade allocations and the primary market aggregate effects on consumer surplus and welfare are relatively small but the effect on lower valuation households can be large

an economic analysis of scrappage this article examines the impact of policies aimed at encouraging the retirement of older high polluting vehicles such as the cash for clunkers policy endorsed by president george bush in 1992 the analysis assesses the likely benefits and costs of vehicle scrappage programs i also address the interaction of a scrappage program with other ongoing policies such as improved inspection and maintenance finally the simulation for los angeles suggests plausible design values for a scrappage program

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

public debt overhangs advanced economy episodes since 1800 exceeds 90 percent of nominal gdp on a sustained basis such public debt overhang episodes are associated with lower growth than during other periods even more episodes are associated with lower growth than during other periods even more striking among the 26 episodes we identify 20 lasted more than a decade the long striking among the 26 episodes we identify 20 lasted more than a decade the long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions the long duration also implies that the cumulative shortfall business cycle recessions the long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive these growth reducing effects of in output from debt overhang is potentially massive these growth reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates in that in eleven of the episodes interest rates are not materially higher rates in that in eleven of the episodes interest rates are not materially higher

is the relationship between financial development and economic growth monotonic evidence from a sample of middle income countries summary we revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980 2008 period using pooled mean group estimations in a dynamic heterogeneous panel setting we show that there is an inverted u shaped relationship between finance and growth in the long run in the short run the relationship is insignificant this suggests that too much finance can exert a negative influence on growth in middle income countries the finding of a non monotonic effect of financial development on growth is confirmed by estimating a threshold model

financial development and economic growth the case of taiwan this paper examines the relationship between financial development and economic growth in taiwan from 1962 to 1998 using a four variable var model the competing hypotheses of demand following versus supply leading are empirically tested the results from granger causality tests based on vector error correction models vecm suggest unidirectional causality running from financial development measured as the ratio of m2 to gdp to economic growth this result supports the supply leading hypothesis for taiwan this finding highlights the importance of financial development in taiwan s recent growth

does financial development lead economic growth a vector auto regression appraisal using a vector autoregression var approach several hypotheses are re examined suggested by the literature concerning the relationship between financial development and economic growth investment and productivity the models use quarterly time series data from ten oecd countries and china innovation accounting or variance decomposition and impulse response function analysis is applied to examine interrelationships between variables in the var system and therefore differs from the more usual granger causality approach in particular it examines the relationship between financial development proxied by total credit at best weak support is found for the hypothesis that financial development leads economic growth

asymmetric and nonlinear pass through of crude oil prices to gasoline and natural gas prices in this article we use the recently developed nonlinear autoregressive distributedlags nardl model to examine the pass through of crude oil prices into gasoline and natural gas prices our approach allowsus to simultaneously test the short and long run nonlinearities through positive and negative partial sum decompositions of the predetermined explanatory variables it also offers the possibility to quantify the respective responses of gasoline and natural gas prices to positive and negative oil price shocks from the asymmetric dynamic multipliers the obtained results indicate that oil prices affect gasoline prices and natural gas prices in an asymmetric and nonlinear manner but the price transmission mechanism is not the same important policy implications can be learned from the empirical findings

the cost of reducing gasoline consumption high nominal gas prices new awareness of threats to national security and growing concern about global warming have reignited discussion of ways to reduce gasoline consumption in the united states debate centers on changing two policies already in place the federal gas tax and corporate average fuel economy cafe standards two influential recent reports find that increasing the gas tax would attain a given reduction in gas consumption at lower cost than would tightening cafe standards national research council 2002 congressional budget office 2003 the gas tax has this advantage because it encourages not just increases in fuel efficiency but also reductions in miles driven in contrast cafe standards actually encourage more driving because increases in fuel efficiency reduce the cost of gas per mile driven we also compare the costs of the gas tax and cafe standard but take into account interactions with preexisting tax distortions many papers examine the effects of these tax interactions in other contexts but to our knowledge none of them considers the cafe standard see e g lars bovenberg and ruud de mooij 1994 ian parry 1995 lawrence goulder 1995 bovenberg and goulder 1996 parry et al 1999 don fullerton and gilbert metcalf 2001 these interactions reduce the cost of the gas tax but increase the cost of cafe thus expanding the cost advantage enjoyed by the gas tax this difference does not arise because the gas tax raises revenue while the cafe standard does not rather this result is similar to that in west and williams 2004a which showed that since gasoline and leisure are relative complements raising the gas tax will increase labor supply generating additional efficiency gains in this paper we estimate a consumer demand system using data from the consumer expenditure survey and the california air resources board and find that miles driven and leisure are relative complements thus the gas tax encourages labor supply by raising the cost per mile driven producing an additional efficiency gain conversely because cafe reduces the cost per mile it discourages labor supply and yields an additional efficiency loss while the induced changes in labor supply are tiny relative to the labor market they are still substantial relative to the gas market and thus have a dramatic effect on the relative costs of the two policies our point estimates imply that they reduce the social marginal cost of the gas tax starting from the status quo gas tax rate and ignoring the benefits of reduced gas consumption by almost 30 percent while increasing the marginal cost of cafe by nearly 60 percent this result implies that the case for raising the gas tax rather than tightening the cafe standard is far stronger than previous studies suggest indeed it strongly suggests that any tightening at all of the cafe standard would lower welfare unless the benefits of reduced gas consumption have been seriously underestimated

car ownership and use in britain a comparison of the empirical results of alternative cointegration estimation methods and forecasts this paper addresses two problems faced by many forecasters in the transport sector namely how to use a relatively small sample to forecast car ownership over a long period of time and avoid the difficulties caused by spurious or nonsense regressions five alternative estimation methods are used to test for cointegrating relationships between per capita car ownership and use and real per capita personable disposable income real motoring costs and real bus fares these are the engle granger two stage the phillips hansen fully modified the wickens breusch one stage the autoregressive distributed lag and the johansen maximum likelihood methods the corresponding error correction models are estimated and a comparison made between the derived short and long run demand elasticities for car ownership and use the ex post forecasting performance of the error correction models together with an arima model specification is evaluated using a number of performance criteria the long range time series fore

inflation uncertainty and labour market conditions in the us recent inflation dynamics in the united states us questioned the role of driving forces of inflation in the long run although the us recorded one of the longest economic recovery periods and the

turnover of used durables in a stationary equilibrium are older goods traded more this paper develops a dynamic model with transaction costs to determine the equilibrium resale pattern in a market for a durable good the key result is that the probability of resale is nonmonotonic in the age of the good trade volume is relatively low in the very beginning and in the middle of a good s life this result helps explain observed variations of resale rates across vintages for the u s market of used cars

asymmetric impacts of insurance premiums on the non oil gdp some new empirical evidence abstractin this paper we study the influence of insurance premium on the non oil gross domestic product in saudi arabia we implement the nonlinear autoregressive distributed lags the results sho

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

balladurette and juppette a discrete analysis of scrapping subsidies this paper studies the effects of subsidies on durable goods markets in particular we focus on a recent policy in france in which the governments of balladur and juppe subsidized the replacement of old cars with new ones to study this policy we construct a dynamic stochastic discrete choice model of car ownership at the household level the resulting decision rules and equilibrium conditions are used to estimate the underlying parameters of the model using aggregate data these policy functions are used to evaluate the short and long run effects of the french policies we find that these policies do stimulate the automobile sector in the short run but through the induced changes in the cross sectional distribution of car ages create the basis for subsequent low activity further while these policies increase government revenues in the short run revenues in the long run are lower relative to a baseline without intervention

potentials for prosperity without growth ecological sustainability social inclusion and the quality of life in 38 countries recent contributions to ecological economics and related social sciences indicate that issues such as climate change resource depletion and environmental degradation cannot be effectively addressed under conditions of continued economic growth this paper aims at empirically identifying structural potentials and policy challenges for prosperity at scales where economic development remains within ecological carrying capacities building on the growing literature that interprets prosperity beyond economic growth the paper presents a three dimensional concept to operationalise prosperity in terms of ecological sustainability social inclusion and the quality of life these dimensions are measured using data from sources such as the world bank the global footprint network and the oecd the results of cluster and correspondence analyses indicate the existence of five prosperity regimes and demonstrate that all aspects of prosperity including unsatisfactory ecological performance are linked to economic development however our findings also indicate that in order to achieve a decent minimum of prosperity moderate levels of the material living standard are sufficient further increases in the material living standard do not lead to significant additional prosperity instead they cause greater environmental harms the paper concludes by highlighting potentials for prosperity for each of the prosperity regimes and corresponding policy challenges

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

environmentalism stimulus and inequality reduction through industrial policy did cash for clunkers achieve the trifecta the 2009 american cash for clunkers program which subsidized consumers who scrapped old vehicles and purchased new vehicles was promoted by appealing to multiple constituencies we evaluate the policy and alternatives according to its stated goals emissions reductions economic stimulus and reducing inequality we calibrate a dynamic partial equilibrium portfolio model to match consumer expenditure data from 1998 to 2011 focusing on heterogeneity across cars and trucks we find the program generated 0 17 in environmental benefits 0 28 in consumer surplus and 0 31 in net discounted additional spending per subsidy dollar since subsidies largely went to middle income infra marginal consumers the program exacerbated consumption inequality we evaluate alternative policy designs and find no policy which simultaneously improves all outcomes jel h23 l52 l92 d63

the effects of fiscal stimulus evidence from the 2009 cash for clunkers program we evaluate the impact of the 2009 cash for clunkers program on short and medium run auto purchases our empirical strategy exploits variation across u s cities in ex ante exposure to the program as measured by the number of clunkers in the city as of summer 2008 we find that the program induced the purchase of an additional 370 000 cars in july and august 2009 however we find strong evidence of reversal high clunker counties bought fewer autos in the 10 months after the program expired which offset most of the initial purchases we find no evidence of an effect on employment house prices or household default rates in cities with higher exposure to the program jel codes h20 e62 copyright 2012 oxford university press

dynamics of consumer demand for new durable goods most new consumer durable goods experience rapid prices declines and quality improvements suggesting the importance of modeling dynamics this paper specifies a dynamic model of consumer preferences for new durable goods with persistently heterogeneous consumer tastes rational expectations and repeat purchases over time we estimate the model on the digital camcorder industry using panel data on prices sales and characteristics we find that the 1 year elasticity in response to a transitory industrywide price shock is about 25 percent less than the 1 month elasticity standard cost of living indices overstate welfare gain in later periods due to a changing composition of buyers

policy watch the economics of fuel economy standards one of the most hotly contested of all energy policy issues involves corporate average fuel economy or cafe standards for new cars and light duty trucks tighter standards would reduce gasoline consumption and hence both greenhouse gas emissions as well as this country s vulnerability to oil price shocks but they would also increase the price of new vehicles worsen traffic congestion and depending on how they are phased in possibly even reduce occupant safety these effects are amenable to economic analysis and we review the evidence to date bearing on this interesting and important question

bank stock returns and economic growth previous research has established i that a country s financial sector influence future economic growth and ii that stock market index returns affect future economic growth we extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth using dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets we find a positive and significant relationship between bank stock returns and future gdp growth that is independent of the previously documented relationship between market index returns and economic growth we also find that much of the informational content of bank stock returns is captured by country specific and institutional characteristics such as bank accounting disclosure standards banking crises enforcement of insider trading law and government ownership of banks

a literature survey on energy growth nexus abstract this paper provides a survey of the recent progress in the literature of energy consumption economic growth and electricity consumption economic growth causality nexus the survey highlights that most empirical studies focus on either testing the role of energy electricity in stimulating economic growth or examining the direction of causality between these two variables although the positive role of energy on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies a general observation from these studies is that the literature produced conflicting results and there is no consensus neither on the existence nor on the direction of causality between energy consumption electricity consumption and economic growth as a policy implication to avoid from conflicting and unreliable results the authors may use the autoregressive distributed lags bounds test two regime threshold co integration models panel data approach and multivariate models including new variables such as real gross fixed capital formation labor force carbon dioxide emissions population exchange rates interest rates etc thus the authors should focus more on the new approaches and perspectives rather than by employing usual methods based on a set of common variables for different countries and different intervals of time

economic policy and special interest politics a great deal of research has been done on the boundary between economics and political science in the last five to ten years this research in political economics spans many subfields such as macroeconomics trade public finance regulation rational choice politics and game theory a common denominator has been to study structural models of the political process agents behave rationally within well specified economic and political institutions where the policymaking process is formulated as an extensive form game methodologically much progress has been made relative to traditional approaches which were often based on inconsistent or irrational political and economic behaviour relying on non derived influence functions political support functions or vote functions yet the modem work has largely developed separately in each subfield without much contact with other subfields and each of the resulting literatures tends to focus on a distinct but partial aspect of the political process in this lecture i shall argue that even though the progress to date has been substantial we can gain a better understanding of policymaking in democracies by combining the insights from different strands of thinking on some economic policy issues the conflicting views both among citizens and politicians basically reduce to a single left to right dimension examples may include the politics of inflation vs unemployment capital taxation or the size of government we can think about policy issues within this domain of general interest politics as being resolved via traditional downsian electoral competition at least to a first approximation but the economic policy process also allows narrow interest groups ample opportunities to concentrate benefits to their own group at the expense of the population as a whole the resulting policy conflict is generically multi dimensional resolving it by voting alone would thus result in condorcet cycles we therefore need to go beyond the simplest electoral models to understand policy determination within this domain of special interest politics this lecture deals with special interest politics to make my point about fruitful analytical arbitrage i will stick to the same underlying policy example throughout this will be a simple model of a society where the government uses