a globally flexible almost ideal demand system the almost ideal demand system is combined with the fourier expenditure system subject to the assumption that preferences are of the price independent generalized logarithmic class the resulting demand system has the desirable features of each of its components aggregate demand equations are consistent with preferences of a representative consumer and consistent estimates of elasticities are obtained for all observed prices application of the new demand system to u s consumption of meats and fish reveals that it fits the data well and that the restriction to the usual specification is rejected

monetary policy coordination under fixed and floating exchange rates this paper studies monetary policy coordination in a familiar fixed price perfect capital mobility multicountry model it is shown that under fixed exchange rates countries can coordinate their policies and reach pareto efficient outcomes with rules closely related to the nash based mechanisms that have been designed to overcome free riding in standard public good economies the coordination rules defined in this paper do not make countries lose the control of their own policies it is also shown that nash implementation of pareto efficient states with similar rules is in general not possible under floating exchange rates copyright 1990 by royal economic society

compensation and rewards for environmental services cres and efficient design of contracts in developing countries behavioral insights from a natural field experiment the use of economic incentives for biodiversity mostly compensation and reward for environmental services including payment for es has been widely supported in the past decades and became the main innovative policy tools for biodiversity conservation worldwide these policy tools are often based on the insight that rational actors perfectly weigh the costs and benefits of adopting certain behaviors and well crafted economic incentives and disincentives will lead to socially desirable development scenarios this rationalist mode of thought has provided interesting insights and results but it also misestimates the context by which real individuals come to decisions and the multitude of factors influencing development sequences in this study our goal is to examine how these policies can take advantage of some unintended behavioral reactions that might in return impact either positively or negatively general policy performances we test the effect of income s origin low effort based money vs high effort based money on spending decisions necessity vs superior goods and subsequent pro social preferences future pro environmental behavior within madagascar rural areas using a natural field experiment our results show that money obtained under low effort leads to different consumption patterns than money obtained under high efforts superior goods are more salient in the case of low effort money in parallel money obtained under low effort leads to subsequent higher pro social behavior compensation and rewards policies for ecosystem services may mobilize knowledge on behavioral biases to improve their design and foster positive spillovers on their development goals

negativity in an almost ideal import demand system estimates of demand systems consistent with the underlying theory of a utility maximizing consumer are necessary if accurate welfare predictions are to be made in this paper we concentrate upon the negativity constraint and assess its validity using the almost ideal demand system subject to adding up homogeneity and symmetry applied to detailed trade and production data in the context of an import allocation model given the overwhelming rejection of negativity we consider a number of increasingly restrictive conditions which can be applied to the price parameters to try and achieve negativity over the sample data in general it is found that very tight constraints on substitution effects have to be imposed which remove the flexible nature of the model

payments for pioneers revisiting the role of external rewards for sustainable innovation under heterogeneous motivations abstract acknowledging the diversity of preferences goals and motivations of individuals is key to promote the effectiveness of incentive based conservation interventions this paper analyses the heterogeneity of motivations to adopt silvopastoral practices a social ecological innovation for soil conservation and carbon emission reduction we use q methodology to identify smallholders views with regard to these practices in a community in the forest frontier in chiapas mexico the analysis uncovers three main perspectives self sufficient pioneers environmentally conscious followers and payment dependent conservatives we discuss these perspectives around three topics smallholders predisposition to adopt silvopastoral practices their views about needing external payments to sustain their livelihood and the diffusion of innovative sustainable practices we relate these perspectives with livelihood characteristics and with observed adoption levels under a pilot programme to promote silvopasture our findings suggest that incentives other than payments may be more appropriate for those more likely to adopt and that payments could encourage rent seeking strategies and not necessarily promote permanent behavioural change we suggest ways for designing more effective and adaptive environmental conservation programmes to foster adoption and continuation of social ecological innovations

the formation of risk sharing networks this paper examines the formation of risk sharing networks in the rural philippines we find that geographic proximity possibly correlated with kinship is a major determinant of mutual insurance links among villagers age and wealth differences also play an important role in contrast income correlation and differences in occupation are not determinants of network links reported network links have a strong effect on subsequent gifts and loans gifts between network partners are found to respond to shocks and to differences in health status from this we conclude that intra village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income risk the paper also makes a methodological contribution to the estimation of dyadic models

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

the simultaneous use of rival models in policy optimisation an important problem in macroeconomic policy design that has hitherto received little attention is the uncertainty of model structure by that we mean that more than one model fits the data reasonably well however each model is based on a different school of economic thought and thus has a different structure hence our analysis is based on non nested models when statistical inference cannot reject one model in favour of the other in this paper we discuss a way in which policy optimisation can be used to derive policies that are compatible with more than one model structure this is accomplished by extending an optimisation algorithm for a single nonlinear model of the economy to handle simultaneously more than one model and objective function the algorithm is designed to be efficient and relatively modest in its storage requirements a minimax extension is also considered for optimal policies robust to model choice when any one of the models turns out to represent the real economy two large scale nonlinear models of the uk economy are used simultaneously to obtain policies which are optimal with respect to a combined cost function this cost function is a combination of the cost functions associated with the individual models the models used are the h m treasury model and the model of the national institute of economic and social research

robust monetary policy with competing reference models abstract the existing literature on robust monetary policy rules has largely focused on the case in which the policymaker has a single reference model while the true economy lies within a specified neighborhood of the reference model in this paper we show that such rules may perform very poorly in the more general case in which non nested models represent competing perspectives about controversial issues such as expectations formation and inflation persistence using bayesian and minimax strategies we then consider whether any simple rule can provide robust performance across such divergent representations of the economy we find that a robust outcome is attainable only in cases where the objective function places substantial weight on stabilizing both output and inflation in contrast we are unable to find a robust policy rule when the sole policy objective is to stabilize inflation we analyze these results using a new diagnostic approach namely by quantifying the fault tolerance of each model economy with respect to deviations from optimal policy

economic experiments for collective action in the kyrgyz republic lessons for payments for ecosystem services pes abstract payments for ecosystem service pes schemes have become increasingly popular in attempting to promote ecological stewardship and conservation behaviour through provisioning of economic incentives often as market inspired transactions the scholarship and empirical application of pes schemes has tended to focus on contract design and conditionality of payments rather than more fundamentally examining whether incentives do indeed influence behaviour in desired ways in this paper a set of incentive framed treatments are introduced to existing collective action institutions promoting common pool resource management in order to explore the effects of incentive provision on the propensity to participate in the maintenance of collectively owned irrigation canals the experiments take place in the kyrgyz republic characterized by the historic transition of nomadic collective traditions subsequent soviet rule to advances towards democracy market integration and the first pes pilot in the country in the incentive treatments provided we reveal the close interplay between the framing of incentives the influence of village leaders mobilizing collective activity and social norms of reciprocity trust and enforcement in mobilizing collective work each framed case study exhibits a unique configuration of individual motivations group norms and other regarding rationalities providing critical insight into this new frontier of pes implementation

robust min max portfolio strategies for rival forecast and risk scenarios we consider an extension of the markowitz mean variance optimization framework to multiple return and risk scenarios it is well known that asset return forecasts and risk estimates are inherently inaccurate the method proposed provides a means for considering rival representations of the future the optimal portfolio is computed simultaneously with the worst case to take account of all rival scenarios this is a min max strategy which is essentially equivalent to a robust pooling of the scenarios robustness is ensured by the noninferiority of min max for example a basic worst case optimal return is guaranteed in view of multiple return scenarios if robustness happens to have too high a cost guided by the min max pooling it is also possible to explore other pooling alternatives a min max algorithm is used to solve the problem and illustrate the robust character of min max with return and risk scenarios we study the properties of the min max risk return frontier and compare with the potentially suboptimal worst case where the investment strategy and the worst case are computed separately 2000 elsevier science b v all rights reserved jel classixcation c44 c61 c63 g11

socio ecological explanations for crowding out effects from economic field experiments in southern africa abstract economic and psychological literature mentions three conditions under which the crowding out effect of pro social behaviour is likely to occur and to crowd out citizens moral obligations to behave co operatively i use a framed field experiment on joint extraction from a common pool resource cpr where the crowding out effect has already been reported before in combination with the trust game carried out in farming communities of namibia and south africa to replicate these conditions the research design and the cross cultural setting enable to explicitly control for these effects the results of the experiments support that the crowding out effect depends on the nature of the external intervention controlling vs supportive external intervention the degree of participants self determination high vs low self determination in the group a society s norms of trust and reciprocity high vs low trust within the society the results imply that outside regulations aiming to conserve natural resources risk worsening the situation when neglecting democratic legitimization as well as local community norms

price formation of fish an application of an inverse demand system inverse demand systems explain price variations as functions of quantity variations they have properties analogous to those of regular demand systems there are very few examples of their empirical application in part this is due to lack of data for which price is the decision variable and the quantity given the case of fish landed at belgian sea ports appears to suit an inverse demand system well a rotterdam variant of such a system in estimated allais interaction intensities have been derived and show a reasonable pattern

insurance policies for monetary policy in the euro area in this paper we aim to design a monetary policy for the euro area that is robust to the high degree of model uncertainty at the start of monetary union and allows for learning about model probabilities using the data that has become available since then to this end we compare and ultimately combine bayesian and worst case analysis using four reference models developed at the ecb and estimated with pre emu synthetic data we start by computing the cost of insurance against model uncertainty that is the relative performance of worst case or minimax policy versus bayesian policy we find that maximum insurance across this range of models can be obtained at moderate costs costs are measured in terms of lower expected performance relative to a bayesian policy with flat priors further scrutiny however highlights three shortcomings of this worst case insurance policy i prior beliefs that would rationalize the minimax policy from a bayesian perspective indicate that such insurance is strongly oriented towards the model with highest baseline losses ii the minimax policy is not as tolerant towards small perturbations of policy parameters as the bayesian policy and iii the minimax policy offers no avenue for incorporating posterior model probabilities derived from data available since monetary union thus we propose preferences for robust policy design that reflect a mixture of the bayesian and minimax approaches these preferences referred to as intermediate ambiguity aversion incorporate model probabilities while still giving extra weight to the worst uncertain outcomes we show how the incoming emu data may then be used to update model probabilities and investigate the implications for policy design

motivation crowding in environmental protection evidence from an artefactual field experiment abstract this paper examines how motivation crowding and social image affect environmental conservation decisions an artefactual field experiment conducted in bolivia is used to reproduce the trade off between individual and social benefits in natural resource use and test the effect of non monetary and non regulatory incentives on pro social behavior for environmental conservation the results show the presence of a social norm prescribing positive contribution towards environmental protection and that external incentives have heterogeneous effects on pro social behavior depending on how they influence reputation and self image the experimental results differ from those of analogous experiments conducted in the laboratory and are instead consistent with those from field experiments on common pool resource management this fact suggests caution in generalizing conclusions reached in the laboratory to different settings and populations

optimally derived fixed rules and indicators abstract monetary targets have come to be regarded as inadequate for the conduct of short term monetary policy both among theoreticians and practitioners of policy in this paper two approaches are put forward analysed and evaluated for improving the performance of monetary targets according to the first approach simple rules for monetary targets are derived within an optimisation framework these rules related to ultimate targets are simple so that they can be announced and are flexible so that they are subject to revision when the economy drifts away from its course due to unexpected shocks the second approach is based on indicators and complements monetary targets with exchange rate targets through a simple feedback law for determining interest rate policy the advantage of this feedback law is that it provides the mechanism through which policy is to be revised in response to shocks if such a feedback law is announced private economic agents have the means of distinguishing discretionary and arbitrary changes of policy from those which are needed to bring the economy back to the announced and committed course this approach is used to analyse and extend the suggestions in the house of commons report on international monetary arrangements the common ground between the two approaches is an optimisation framework with respect to the parameters of either the fixed simple rules or the simple feedback laws this is discussed in section 1 the approach of deriving simple fixed rules is illustrated in a monetarist model in which there is a link between private sector expectations and the credible announcement of monetary targets the model is explained in section 2 and simple fixed rules are discussed in section 3 the performance of simple rules for monetary targets is evaluated in terms of a minimax strategy with model uncertainty between the monetarist model and a keynesian model without the assumption of announcement effects this is discussed in section 4 optimal feedback laws are derived and analysed in section 5 the parameter sensitivity of these feedback laws with respect to the model and the objective function as well as their behaviour under shocks is also examined

the management of common property resources collective action as an alternative to privatisation or state regulation can locally based collective action be a viable way to manage common property resources many writers on collective action and common property are sweepingly pessimistic about the ability of the people who face problems of common property to organize sustainable patterns of use for themselves this paper shows with reference to prisoners dilemma garett hardin s tragedy of the commons and mancur olson s logic of collective action that the analytical basis for this pessimism is weak in many situations of village based common property resource use there can thus be no general presumption that the collective action route to common property resource management will fail any more than there can be a general presumption that it will work the paper suggests a number of general factors to do with the characteristics of the resources the user group and group state relations on which chances of success depend

spite and development in a wide variety of settings spiteful preferences would constitute an obstacle to cooperation trade and thus economic development this paper shows that spiteful preferences the desire to reduce another s material payoff for the mere purpose of increasing one s relative payoff are surprisingly widespread in experiments conducted in one of the least developed regions in india uttar pradesh in a one shot trust game the authors find that a large majority of subjects punish cooperative behavior although such punishment clearly increases inequality and decreases the payoffs of both subjects in experiments to study coordination and to measure social preferences the findings reveal empirical patterns suggesting that the willingness to reduce another s material payoff either for the sake of achieving more equality or for the sake of being ahead is stronger among individuals belonging to high castes than among those belonging to low castes because extreme social hierarchies are typically accompanied by a culture that stresses status seeking it is plausible that the observed social preference patterns are at least partly shaped by this culture thus an exciting question for future research is the extent to which different institutions and cultures produce preferences that are conducive or detrimental to economic development

estimating foreign trade functions a comment and a correction in this note a more flexible restricted error covariance matrix is applied than winters 1984 uses in order to estimate import demand functions we show that the alternative specification performs better in the sense of yielding a considerably larger value of the log likelihood function moreover some slight errors in winters tables 2 and 3 are corrected

the performance of forecast based monetary policy rules under model uncertainty we investigate the performance of forecast based monetary policy rules using five macroeconomic models that reflect a wide range of views on aggregate dynamics we identify the key characteristics of rules that are robust to model uncertainty such rules respond to the one year ahead inflation forecast and to the current output gap and incorporate a substantial degree of policy inertia in contrast rules with longer forecast horizons are less robust and are prone to generating indeterminacy in light of these results we identify a robust benchmark rule that performs very well in all five models over a wide range of policy preferences