assessing the performance of renewable electricity support instruments abstract the performance of feed in tariffs and tradable certificates is assessed on criteria of efficacy efficiency equity and institutional feasibility in the early stage of transition to an energy system based entirely on renewable energy supplies renewable electricity can only thrive if support takes into account the specific technical economic and political problems which result from embedding this electricity in conventional power systems whose technology organizational structure environmental responsibility and general mission differ profoundly from the emerging renewable based system support schemes need to capture the diversity of power supplies the variable nature of some renewable supplies and their different attributes for the purposes of public policy they must take into account the variety of generators including small decentralized generation emerging in a renewable based system and the new relationships between generators and customers renewable energy policies need a clear point of reference because the incumbent power systems are not sustainable they must adapt to the requirements of the renewable ones not the other way round incumbent systems carry the responsibility of paying the transition something that corresponds best with the polluter pays principle

the social loss from imperfect competition the case of the swedish pulpwood market in this econometric analysis the swedish roundwood market is divided into two submarkets the sawtimber market which consists of many buyers and sellers and the pulpwood markets which consists of few buyers who collaborate in purchasing cartels the two markets are interrelated through cross price effects the main issue is to quantify the effects on social welfare if the pulpwood market were competitive the results show that a competitive pulpwood market should bring about a shift in the market structure in the sense that the pulp industry would expand its capacity at the expense of the sawmill industry copyright 1989 by the editors of the scandinavian journal of economics

equilibrium uniqueness in oligopoly games with strategic complements i show the uniqueness of equilibrium for a class of oligopoly models with strategic complements product differentiation models are considered in which the contraction mapping theorem cannot necessarily be applied

the short term impact of a domestic cap and trade climate policy on local agriculture a policy simulation with producer behavior this study is intended to develop understanding of possible impact of a domestic cap and trade climate policy on local agriculture we focus the study on the transition period after the policy has raised input prices for production but before establishment of new equilibrium in agricultural commodity markets we construct a policy simulation model based on production economics that explicitly considers producer behavior in the focal period we apply the model to a production region in the us to quantify the impact of different levels of carbon price on production cost production value and farm income our case study shows that 1 producers have ability to alleviate the cost impact 2 producers may benefit by selling carbon credits in the carbon market but the revenue is likely to be limited 3 the economic return of farm production is critical to the impact assessment 4 the impact may vary across producers and 5 regulation on the fertilizer industry is an important policy element that can influence the assessment of the impact this study has important implications for climate policy design

auction approaches of long term contracts to ensure generation investment in electricity markets lessons from the brazilian and chilean experiences the implementation of auctions of long term electricity contracts is arising as an alternative to ensure generation investment and therefore achieve a reliable electricity supply the aim is to reconcile generation adequacy with efficient energy purchase correct risk allocation among investors and consumers and the politico economic environment of the country in this paper a generic proposal for a long term electricity contracts approach is made including practical design concepts for implementation this proposal is empirically derived from the auctions implemented in brazil and chile during the last 6 years the study is focused on practices and lessons which are especially useful for regulators and policy makers that want to facilitate the financing of new desirable power plants in risky environments and also efficiently allocate supply contracts among investors at competitive prices although this mechanism is generally seen as a significant improvement in market regulation there are questions and concerns on auction performance that require careful design and which are identified in this paper in addition the experiences and proposal described can serve to derive further mechanisms in order to promote the entrance of particular generation technologies e g renewables in the developed world and therefore achieve a clean electricity supply

when prices hardly matter incomplete insurance contracts and markets for repair goods abstract this paper looks at markets characterized by the fact that the demand side is insured in these markets a consumer purchases a good to compensate consequences of unfavorable events such as an accident or an illness insurance policies in most lines of insurance base indemnity on the insured s actual expenses i e the insured would be partially or completely reimbursed when purchasing certain goods in this setting we discuss the interaction between insurance and repair markets by focusing on one hand upon the development of prices and the structure of markets with insured consumers and on the other hand the resulting backlash on optimal insurance contracting we show that even in the absence of ex post moral hazard the extension of insurance coverage will lead to an increase in prices as well as to a socially undesirable increase in the number of repair service suppliers if repair markets are imperfect

technology adoption under uncertainty take up and subsequent investment in zambia technology adoption often requires multiple stages of investment as new information emerges agents may abandon a technology that was profitable in expectation we use a field experiment to vary t

sophisticated entry in a model of spatial competition we analyze free entry equilibrium in a model of spatial competition in which locations of established firms are fixed and entrants profit expectations are rational our most interesting results concern large economies economies in which the number of firms is arbitrarily large when the average cost function is u shaped free entry equilibrium is unique socially optimal and characterized by zero profit in contract when there are no diseconomies of scale even large economies are stubbornly imperfect firms can earn substantial pure profit and free entry equilibrium is neither unique nor socially optimal

appropriate design of auctions for renewable energy support prequalifications and penalties abstract auctions are a promising tool to accomplish renewable energy support res however they involve diverse risks for the auctioneer and the bidders the major risk for the auctioneer with respect to the expansion target and the acceptance of auctions for res in general is the risk of non realization awarded bidders do not realize their projects the main reasons are bidders uncertainties concerning their project costs the auctioneer can reduce the non realization risk by taking various measures the most discussed and implemented measures are financial and physical prequalifications and penalties an evaluation of these measures has relevant implications for an appropriate auctions design for res the non realization option induces lower bids a suitable combination of financial and physical prequalifications can reduce the non realization risk significantly however involves sunk costs counterintuitively first price auction and second price auction lead to different expected award prices and different realization probabilities penalties bear a high risk of inefficient auction outcomes the appropriate parametrization and combination of the measures is challenging under consideration of all implications we recommend high financial and adjusted physical prequalifications to achieve a sufficiently high realization rate while maintaining efficiency

back to the future rethinking auctions for renewable electricity support abstract the effectiveness and cost effectiveness of two main types of instruments feed in tariffs and quotas with tradable green certificates have usually been compared in the literature on renewable electricity promotion due to negative past experiences with a third instrument auctions this instrument has been broadly dismissed in academics and until recently also in policy practice however and based on an in depth review of experiences with auction schemes for renewable electricity around the world this paper argues that some of the problems with auctions in the past can be mitigated with the appropriate design elements and that indeed auctions can play an important role in the future implementation of renewable electricity support instruments around the world the paper provides a proposal for the coherent integration of several design elements

regulatory design for res e support mechanisms learning curves market structure and burden sharing drawing from relevant experiences in power systems around the world this paper offers a review of existing policy support mechanisms for res e with a detailed analysis of their regulatory implications while recent studies provide an account of current res e support systems in this paper we focus on some of the impacts these mechanisms have on the overall energy market structure and its performance given the rising importance of res e in systems everywhere these impacts should no longer be overlooked

a competitive analysis of fail fast shakeout and uncertainty about consumer tastes abstract contemporary business strategy advocates fail fast the practice of launching a product early before the resolution of uncertainty about how product characteristics matter to consumers we consider how uncertainty about consumer preferences can contribute to shakeout when moving from the infant stage of an industry when this uncertainty is large to the mature stage of an industry when this uncertainty is small we find that consistent with the empirical literature due to firms uncertainty about consumers preferences there is excessive entry initially and on average positive shakeout in the number of firms in the market in the mature phase of the industry the paper also presents a new way to model uncertain preferences in product differentiation models that may prove useful in other applications

desirability of compatibility in the absence of network externalities i compare the incentives firms have to produce individual components compatible with components of other manufacturers instead of systems composed of components that are incompatible with components of competing manufacturers i show that even in the absence of positive consumption externalities network externalities prices and profits will be higher in the regime of compatibility equilibrium total surplus could be higher in either regime both regimes overprovide variety compared to the surplus maximizing solution in today s environment many products are complex specified by a long array of characteristics part of the decision of the firm is to choose if it should break this long array of features into two or more smaller parts and produce the products corresponding to the smaller arrays instead of the product that embodies the full array we will call the products that correspond to these smaller arrays components and the product that corresponds to the full array a system note that components are by their definition complements components produced by different manufacturers are compatible if it is feasible for the consumers to combine them costlessly into a working system in this paper we will assume that there are two components which make up a system we will discuss competition under full compatibility when components produced by all firms are compatible with each other and under incompatibility when no components produced by different firms are compatible and no hybrid systems can exist 2 assuming availability of the same

supply response and the dispersion of price expectations nomic an0lysis is the implication of aggregation when doing market studies the conditions for exact aggregation under a variety of definitions and settings have been studied paris and rausser theil the focus of this paper is on supply response in agriculture several authors have studied the effects of and tests for differential supply response coefficients across individuals or areas when aggregating firms e g theil p 567 here these coefficients are assumed to be identical for every firm but another problem is examined when uncertainty is present it is well documented that farmers have diverse price expectations e g bessler the question occurs as to the effects of such different expectations on aggregate supply response it is found that the curvature of the supply function is a crucial component of the analysis for example if the supply function is strictly concave an increase in the dispersion of expectations will reduce supply in aggregate

land use change with spatially explicit data a dynamic approach most of the economic literature that uses spatially explicit data to estimate the determinants of land use change is limited to static models and cross sectional data sets recent attempts to move to a more dynamic analysis include using panel data sets and survival analysis in this study we use a discrete choice dynamic model of land use where the agent s choices are regarded as the solution to a dynamic optimization problem the irreversibility of some decisions expectations about future prices and forward looking behavior of the land operator can all be accounted for our results show that a model specification that incorporates some of the complexities of the decision process improves upon results found in the existing literature first prediction accuracy of land use change is superior to any of the existing models second we demonstrate that models that do not account for transactions costs tend to overestimate the effects of changes in transportation costs

do property rights promote investment but cause deforestation quasi experimental evidence from nicaragua abstract many policymakers argue that property rights decrease deforestation some theoretical papers also make this prediction arguing that property rights decrease discount rates applied to a long term investment in forestry however the effect is theoretically ambiguous the paper takes a novel instrumental variables approach based on nicaragua s agrarian reform to test for the effect using a new dataset nicaragua s 2001 agricultural census it finds that property rights significantly increase deforestation the model supported by the data suggests a likely mechanism for this relationship property rights increase investment increasing agricultural productivity and therefore the returns to deforestation

industrial loans and market structure abstract based on the observation that financing is one of the main obstacles to create new firms this paper deals with the interactions between the market structure of both the banking sector and the borrowing industries we consider that firms installation costs are financed by means of industrial loans from specialized banks with endogenous entry in banking activity as well as in the borrowing industry we find that a natural oligopoly emerges in both sectors if the entry cost in the industrial sector is small enough relative to the banks entry cost

price competition under mixed multinomial logit demand functions in this paper we postulate a general class of price competition models with mixed multinomial logit demand functions under affine cost functions in these models the market is partitioned into a finite set of market segments we characterize the equilibrium behavior of this class of models in the case where each product in the market is sold by a separate independent firm we identify a simple and very broadly satisfied condition under which a pure nash equilibrium exists and the set of nash equilibria coincides with the solutions of the system of first order condition equations a property of essential importance to empirical studies this condition specifies that in every market segment each firm captures less than 50 of the potential customer population when pricing at a specific level that under the condition is an upper bound for a rational price choice for the firm irrespective of the competitors prices we show that under a somewhat stronger but still broadly satisfied version of the abov

how feasible is carbon sequestration in korea a study on the costs of sequestering carbon in forest in recent years carbon sequestration has become a more attractive policy in korea due to the increasing trend of marginal cropland and enhanced public awareness on adverse climate change phenomena this study aims to calculate the unit costs of carbon sequestration programs through afforestation in korea and examine the cost effectiveness of programs the basis of our simulation is an econometric land use share model and province level of aggregated panel data are used for model estimation four scenarios are considered depending on whether the program includes the harvest and which tree species are planted the approach of sequestration program is to pay the landowners to convert their lands to forest for a period of time in exchange of fixed annual payment in addition to tree establishment cost our results show that the unit cost varies from 122 to 486 per ton of carbon stored depending on the scenarios and payment levels we found that the carbon sequestration can be a cost effective mitigation policy in korea although it is not the least cost option

oligopsony vertical integration and output substitution welfare effects in u s pulpwood markets oligopsonistic commodity markets can induce upstream vertical integration by the input demanders the associated price distortion can also induce output substitution by the commod ity s suppliers these phenomena are considered in the context of pulpwood markets in the u s the estimated welfare effects of an oligopsony distortion indicate relatively small deadweight losses but con siderable wealth transfers from open market pro ducers to integrated pulpwood processing firms correcting the distortion would have little effect on aggregate output levels from the forest sector but would alter the composition of output between in dustry and nonindustry sources jel q23 l13

sequential location games we study location games where market entry is costly and occurs sequentially and where consumers are nonuniformly distributed over the unit interval we show that for certain classes of densities including monotone and under some additional restrictions hump shaped and u shaped ones equilibrium locations can be determined independently of when they are occupied our analysis reveals a number of peculiarities of the uniform distribution extensions of the model allow for price competition and advertisement in media markets winner take all competition trade offs between profits in the short and the long run and firms operating multiple outlets

consistent estimation of general equilibrium welfare effects a general equilibrium demand curve is appropriate for measuring the surplus changes in several markets induced by a policy intervention in one market guidelines for the identification and consistent estimation of such a demand curve are discussed specifically conditions are stated under which the dropping of prices of related goods yields a consistent estimate of the slope of the general equilibrium demand curve also a method similar to leamer s is proposed to provide consistent bounds for the general equilibrium demand slope when the slope is underidentified

electricity auctions in south america towards convergence of system adequacy and res e support regulatory reforms of the electricity industry in south america have always been prompted by the need of attracting enough investment to cover the fast paced demand growth in order to achieve this goal the countries in the region which in the eighties and early nineties opted for market oriented schemes have rebuilt in the last decade their regulatory frameworks around long term auctioning these new mechanisms initially implemented to attract investment in any sort of conventional generation technology so as to ensure the system adequacy are increasingly being also used to bring in non conventional renewable energy resources these schemes have been until now run in parallel but the steep learning curve of renewable energy sources for electricity res e technologies is apparently opening the door to the implementation of new tendering procedures open to all kinds of generation technologies in this article we review the auction mechanisms for new generation implemented in south america we argue that although the first impression might lead to the conclusion that conventional and res e technologies are in some cases close and even ostensibly competing in the same auctions the fact is that the full convergence is still far to happen as the rules and products applied to the different technologies differ significantly

enduring impacts of land retirement policies evidence from the conservation reserve program we examine the persistence of cropland retirements induced by the conservation reserve program crp the largest u s conservation program we analyze micro data on observed land use choices following crp contract expiration over 1995 1997 and predict that 42 of crp acres would not have been returned to crops within a year if the program had expired in 1997 these results indicate that temporary cropland retirement payments under crp generate land use changes that often extend beyond contract periods the analysis suggests that targeted signing bonuses for first time enrollees would increase the longer term impacts of crp and perhaps other incentive based land use programs

cost effectiveness as energy policy mechanisms the paradox of technology neutral and technology specific policies in the short and long term when choosing policy mechanisms to design and deploy energy policies policymakers typically seek cost effective ones linking cost effectiveness to the lowest cost of support for res e generation and or consumer costs the objectives of this paper are to analyze the cost effectiveness of renewable portfolio standards rps feed in tariffs fit and auctions in the short and long term considering both technology neutral and technology specific approaches results show that rps and auctions are more cost effective than feed in tariffs fit in the short term if cost effectiveness is defined as minimizing consumer costs also if one or more emerging technologies with higher levelized life cycle costs lcc low cumulative production and high experience elasticity are considered in the pool of res e policy design a technology neutral approach in the short term could lock out these emerging technologies avoiding a long term lcc reduction in this case a technology specific policy used in the short term would reflect lower total generation policy costs in the long term if compared with a technology neutral policy in both short and long term this paper calls this phenomenon the paradox of technology neutral and technology specific policies in the long term considering the results this paper suggests a mix of technology neutral and technology specific policies using rps or auction mechanisms to promote res e

on the limits and possibilities of the principle of minimum differentiation abstract introducing a finite reservation price in hotelling s spatial duopoly with linear transportation costs shows that i there does not exist a pure strategy symmetric location equilibrium if the reservation price is high ii there is a continuum of monopolistic equilibria if the reservation price is low and iii there exists a unique pure strategy symmetric location equilibrium in which the two firms compete with each other and cover the entire market if the reservation price is intermediate the equilibrium distance between the two firms in the latter case is at least a quarter and at most half the length of the market

the additionality problem with offsets optimal contracts for carbon sequestration in forests abstract carbon offsets are a frequently discussed tool for reducing the costs of an emissions reduction policy however offsets have a basic problem stemming from asymmetric information sellers of offsets have private information about their opportunity costs leading to concerns about whether offsets are additional non additional offsets can undermine a cap and trade program or if the government purchases them directly result in enormous government expenditures we analyze contracts for carbon sequestration in forests that mitigate the asymmetric information problem landowners are offered a menu of two part contracts that induces them to reveal their type under this scheme the government is able to identify ex post how much additional forest each landowner contributes and minimize ex ante its expenditures on carbon sequestration to explore the performance of the contracting scheme we conduct a national scale simulation using an econometric model of land use change the results indicate that for an increase in forest area of 61 million acres government expenditures are 5 3 billion lower under the contracting approach compared to a uniform subsidy offered to all landowners this compares to an increase in private opportunity costs of just 110 million dollars under the contracts thus the contracting scheme is preferable from society s perspective

the principle of minimum differentiation revisited abstract hotelling s model of differentiated products is examined and modified so that consumers have relatively low reservation prices for the differentiated products the problem of existence of a nash equilibrium in prices in a duopoly with given products is analysed when the reservation price is relatively low a nash equilibrium in prices exists for a larger range of products than when the reservation price is infinite next i examine product competition with instantaneous adjustment to the nash equilibrium prices of the previous game firms competing in a nash fashion have tendencies to move away from each other and try to achieve local monopolistic positions this is in sharp contrast with the acclaimed principle of minimum differentiation of the original model of hotelling of high reservation price where firms clustered in the product space

measuring oligopsony power with shadow prices u s markets for pulpwood and sawlogs empirical estimation of input market power hindered by problems in measuring an input s value of marginal product vmp by estimating a variable profit function system however one can infer a factor s vmp through its shadow price this technique is used here to specify a structural equation system which is estimated using time series data for the u s sawmilling and paper industries to empirically measure the degree of oligopsony power for sawlog and pulpwood inputs respectively results evaluated at sample means indicate that pulpwood markets are more oligopsonistic than sawlog markets though both perform closer to perfect competition than monopsony time trends for market power differ for each product and perfect competition cannot be rejected for sawlogs in later years copyright 1995 by mit press

the great industry gamble market structure dynamics as a survival contest industry dynamics are studied as an endogenous tournament with infinite horizon and stochastic entry in each period firms investments determine their probability of surviving into the next period this generates a survival contest which fuels market structure dynamics while the evolution of market structure constantly redefines the contest more concentrated markets endogenously generate less profit rivals that are more difficult to outlive and more entry the unique steady state distribution exhibits ongoing turbulence correlated exit and entry rates and shakeouts the model s predictions fit empirical findings in markets where firms trade off profits for smaller risk of failure e g banking

cadillac desert revisited property rights public policy and water resource depletion to alleviate arizona s dependence on groundwater the federal government subsidized construction of the central arizona project cap to import water from the colorado river in exchange for the subsidy arizona reformed its groundwater law to eliminate common property pumping and to ban groundwater mining after the year 2025 we build a model of water resource development in which imported water is a capacity constrained backstop the model is applied to quantify the welfare effects of alternative cap construction dates and arizona groundwater laws we reach two general conclusions first cap was completed 86 years too early in 1987 at a deadweight loss of 2 612 billion ironically construction in 1987 yielded lower surplus than never constructing cap second the political exchange of reform for subsidy introduced a greater loss 2 612 billion than it corrected 0 810 billion the exchange was worse than doing nothing at all

quantity leadership and social inefficiency a game of simultaneous free entry and sequential output choices is analyzed firms enter simultaneously in stage 1 by paying a fixed cost and they choose output levels sequentially in subsequent stages at the subgame perfect equilibrium of the game the production level of a firm is decreasing with the order of the firm in the decision making the firm that is the last to choose output produces the same amount as a typical firm in the standard symmetric simultaneous moves cournot game moreover industry output and market price are identical in the sequential and the symmetric cournot games it follows that in the sequential game there are fewer active firms and higher total surplus than in the standard symmetric cournot game strategic asymmetry results in higher concentration and higher total surplus without an increase in price

minimum cost strategies for sequestering carbon in forests this paper examines the costs of meeting explicit targets for increments of carbon sequestered in forests when both forest management decisions and the area of forests can be varied costs are estimated as welfare losses in markets for forest and agricultural products results show greatest change in management actions when targets require large near term flux increments while land area change is largest when long term increments are needed marginal costs per tonne of carbon flux do not vary greatly with the form of the target and are similar to findings of earlier studies for comparable size of average carbon flux increment

uneven spacing in free entry equilibrium for spatial product differentiation abstract this paper shows that the spacing of firms can be very uneven in free entry equilibrium in a familiar model of spatial competition in which potential entrants have sophisticated expectations about post entry prices

options uncertainty and sunk costs an empirical analysis of land use change abstract in a real option model of land conversion incorporating return uncertainty and sunk costs optimal conversion thresholds are significantly higher than those from expected net present value models not accounting for these factors empirical tests of conversion from agriculture to forest suggest that landowners value the option to convert when making conversion decisions higher uncertainty in returns to all potential uses and lower correlation between shocks to agricultural and forest returns decreases the likelihood of conversion estimates indicate a significant impact on conversion decisions with approximations of option values ranging from 7 to 81 of the expected value of the land asset

reserve price lessons learned from brazilian electricity procurement auctions abstract auctions have been used in several formats in the electric energy industry in general regulators may be uncomfortable initiating a reverse auction at a higher than expected final price fearing that participants may sell their energy at an excess profitability nevertheless evidence from electricity procurement auctions conducted in brazil supports the findings that these types of auctions have the opposite effect by attracting a larger number of agents these auctions can trigger stronger competition and lead to lower settlement pricing accordingly the brazilian cases examined in this article present significant evidence to support this directional theory in fact there are some cases of electricity procurement auctions that show that inadequate auction reserve pricing leads to inefficient outcomes and may also cause the auction to fail on the other hand auctions with adequate price caps have led to lower final clearing prices thus contributing to reasonable final energy pricing

wage competition with heterogeneous workers and firms we study imperfect competition in the labor market when both workers and firms are heterogeneous when firms cannot observe workers skill firms pay workers equal wages but workers absorb training costs when firms can identify worker types firms pay different net wages to different workers voters select the level of general education that is financed by a lump sum tax workers are on average better off when firms can observe workers skill for a given level of general human capital but the median voter prefers a higher level of general human capital when firms cannot observe worker types

a theory of quality related differences in retail margins why there is a premium on premium gasoline this paper develops a theory of vertical and horizontal product differentiation to explain observed price cost margin differentials for goods that differ in quality the difference in price cost margins between the high and low quality goods is shown to depend positively on consumers average valuation for incremental increases in quality and positively on the distance to each competitor s closest rival these predictions are largely supported using an extensive station level data set of premium and regular unleaded gasoline prices from the los angeles basin area from 1992 1995

mix and match compatibility with vertical product dimensions this article considers a duopoly in which each firm produces two components of a system if the components are compatible consumers may mix and match the firms components the system components and consumer tastes are assumed to differ with regard to vertical characteristics in the model one firm may be the quality leader in one or both characteristics moreover a consumer s taste for the quality of one component may be perfectly correlated with or independent of his taste for the quality of the other component it is shown that in all cases the sum of each producer s component prices is weakly higher if the components are compatible the same is true of producer profits

successive oligopolies with differentiated firms and endogeneous entry we develop a model of successive oligopolies with endogenous entry allowing for varying degrees of product differentiation and entry costs in both markets we show that downstream conditions dominate the overall profitability of the two tier structure while upstream conditions mainly affect the distribution of profits we analyze how two part tariffs and resale price maintenance shape the endogenous market structure and study their welfare effects in contrast to previous literature we find that welfare under linear prices can be larger than under twopart tariffs although the latter avoids double marginalization this is because linear prices induce more downstream market entry

the effect of agricultural policies on land use and environmental quality in this paper i consider the environmental quality gains that may be achieved by reducing agricultural income supports a new methodology is developed to estimate land use shares in an application to wisconsin milk price support reductions result in shifts of marginal agricultural land to forest reducing soil erosion and providing off site water quality improvements the environmental benefits are estimated to be at least as large as the decreased welfare burden on consumers and taxpayers indicating a central role for environmental quality considerations in motivating policy reforms and a more efficient means of achieving the environmental quality goals of land retirement programs

did the debt crisis cause the investment crisis there is now a large literature that attributes the investment decline in heavily indebted countries to the effects of the international debt crisis which began in 1982 however these countries also faced falling export prices and high world real interest rates in the early 1980s and these shocks could have directly caused investment to decline one way to test for debt effects is to see whether equations without any debt related information can nevertheless forecast the investment declines that these countries experienced this paper shows that such equations can forecast investment in many indebted countries and thus casts doubt on many debt related explanations for the investment declines

contagious development neighbor interactions in deforestation article i nfo we estimate neighbor interactions in deforestation in costa rica to address simultaneity and the presence of spatially correlated unobservables we measure for neighbors deforestation using the slopes of neighbors and neighbors neighbors parcels we find that neighboring deforestation significantly raises the probability of deforestation policies for agricultural development or forest conservation in one area will affect deforestation rates in non targeted neighboring areas correct estimation of the interaction reverses the naive estimate s prediction of multiple equilibria

the costs of carbon sequestration a revealed preference approach increased concem by policy makers with the threat of global climate change has brought with it considerable attention to the possibility of encouraging the growth of forests as a means of sequestering carbon dioxide national academy of sciences nas 1992 james p bruce et al 1996 1 the kyoto protocol to the united nations framework convention on climate change 1997 which establishes emission reduction targets for the united states and other industrialized nations states that carbon sequestration can be used by participating nations to achieve their targets moreover even before the kyoto agreement this approach had become an explicit element of both u s and intemational climate policies u s department of energy 1991 united nations general assembly 1992 william j clinton and albert gore 1993 this high level of interest has been due in part to suggestions that sufficient lands are available to use the approach to mitigate a substantial share of annual carbon dioxide c02 emissions greg marland 1988 daniel a lashof and dennis a tirpak 1989 mark c trexler 1991 and claims that growing trees to sequester carbon is a relatively inexpensive means of combating climate change roger a sedjo and allen m solomon 1989 daniel j dudek and alice leblanc 1990 nas 1992 in other words the serious attention given by policy makers to carbon sequestration can partly be explained by implicit assertions about respective marginal cost functions i develop and demonstrate a method by which the costs of carbon sequestration can be estimated on the basis of evidence from landowners behavior when confronted with the opportunity costs of alternative land uses the simplest of previous economic analyses derived single point estimates of average costs associated with particular sequestration levels marland 1988 sedjo and solomon 1989 dudek and leblanc 1990 edwin s rubin et al 1992 omar masera et al 1995 often it has been assumed that land opportunity costs are zero g van kooten et al 1992 j k winjum et al 1992 new york state energy office 1993 robert k dixon et al 1994 another set of studies essentially engineering costing models has constructed marginal cost schedules by using information on revenues and costs of production for altemative uses on representative types or locations of land and then sorting these in ascending order of cost robert j moulton and kenneth r richards 1990 richards et al 1993 simulation models include a model of the lost profits due to removing land from agricultural production peter j parks and ian w hardie 1995 a mathematical programming model of the agricultural sector and the timber market richard m adams et al 1993 a related model incorporating the effects of agricultural price support programs j m callaway and bruce mccarl 1996 and a dynamic simulation model of forestry susan swinehart 1996 lastly an analysis by andrew j plantinga 1995 adopts land use elasticities from an econometric study to estimate sequestration costs we draw on some of the best features of the previous studies including the carbon levelization method of moulton and richards john f kennedy school of government harvard university 79 john f kennedy street cambridge ma 02138 and resources for the future richard newell supplied excellent research assistance and valuable comments on a previous version were provided by lawrence goulder william nordhaus andrew plantinga kenneth richards two anonymous referees participants in seminars at the universities of california at los angeles and santa barbara the university of maryland the university of michigan the university of texas harvard university stanford university yale university resources for the future and the national bureau of economic research the author alone is resdonsible for any errors 1 after fossil fuel combustion deforestation is the second largest source of carbon dioxide emissions estimates of annual global emissions from deforestation range from 0 6 to 2 8 billion tons compared with slightly less than 6 0 billion tons annually from fossil fuel combustion cement manufacturing and natural gas flaring combined r a houghton 1991 t m smith et al 1993

symmetric equilibrium existence and optimality in differentiated product markets abstract equilibrium existence and optimality are analysed in a market for products differentiated by their variety a game of three stages is analysed firms enter in the first stage choose varieties in the second stage and choose prices in the third stage the existence of subgame perfect equilibria is established at equilibrium products are symmetrically located in the space of characteristics and are offered at equal prices the surplus maximizing solution is characterized and it is shown that surplus maximizing product diversity is lower than the equilibrium one

did the debt crisis cause the investment crisis further evidence the purpose of this paper is to show empirically that the debt crisis of 1982 and its still lingering effects played a major role in the dramatic downturn of domestic investment in most lesser developed countries ldcs the hypothesis of a nested model incorporating variables reflecting indebtedness could not be rejected for ten of thirteen latin american countries sampled in addition significant structural shifts were found in the investment equations during and after 1982 suggesting that the debt crisis also changed the sensitivity of investment to external and internal economic factors besides lowering its average level

property tax policy and land use change in this study we analyze the effect of property taxes on changes between agricultural forestry conservation reserve program and developed land uses in louisiana we estimate a random parameters logit model of land use conversion from the national resources inventory plot data our results indicate that land use changes are inelastic with respect to property taxes simulation shows that current use valuation policy while slowing down development of rural lands also affects changes between rural land uses

quality choice trade policy and firm incentives quality choice is examined in a duopoly with one foreign and one domestic firm where consumers have similar preferences for quality but different preferences for brands firms make quality commitments prior to choosing price and policy intervention assumes several forms the policy conclusions depend on whether firms face set up costs in raising product quality in the absence of set up costs both domestic and foreign firms make socially optimal quality choices in the presence of set up costs the foreign firm and often the domestic firm sets quality below the socially optimal level incomplete information alters these conclusions however copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

demand uncertainty mismatch and un employment we consider a finite number of firms which compete imperfectly for heterogeneous workers firms produce a homogeneous good sold on a competitive market and face demand induced price fluctuations it is then shown that unemployment may arise in equilibrium because of both uncertainty of product demand and job mismatch unemployment does not arise however when the variance of the demand shock is small enough and or the cost of mismatch is sufficiently low full employment always prevails when there is free entry hence unemployment may persist as long as the incumbent firms choose their skill requirements to protect their supernormal profits

deforestation in the amazon a unified framework for estimation and policy analysis deforestation is a matter of pressing global concern yet surprisingly little is known about the relative efficacy of various policies designed to combat it this article sets out a framework for measuring the cost effectiveness of alternative policies both command and control and incentive based in the brazilian amazon first i estimate the demand for deforestation on private properties exploiting regional variation in transportation costs as a means to recover farmers responses to permanent policies here rescaling transportation costs using local yields allows me to express changes in farmers valuations in dollars per hectare i then use the estimated demand to infer farmers willingness to deforest under different counterfactual policies such as payments to avoid deforestation and taxes on land use along with the corresponding potential farmers lost surpluses the results indicate that payment programmes and land use taxes on agricultural land can be highly effective in preserving the rainforest and also be substantially less expensive than command and control policies approximately 8 times less costly a carbon tax equal to the social cost of carbon could virtually eliminate all agricultural land in the amazon given the low agricultural returns there

targeting incentives to reduce habitat fragmentation the fragmentation of wildlife habitat has long been recognized as a principal threat to terrestrial biodiversity in this paper we develop a theoretical model to analyze the spatial targeting of incentives for the restoration of forested landscapes when land quality is spatially heterogeneous and wildlife habitat can be enhanced by reducing fragmentation we consider a regulator who uses subsidies to encourage the conversion of private agricultural land to forest on a pre defined set of landscapes the regulator can observe land use choices but not the opportunity costs on individual land parcels the important insight to emerge from the theoretical analysis is that solutions at or near corners are a strong possibility on each landscape either none or all of the agricultural land should be converted to forest corner solutions are directly linked to the spatial process determining habitat benefits to verify the theoretical insight we present a simulation of the effects of incentive based policies on the spatial distribution of forests in south carolina the empirical methodology integrates an econometric model of land use change with gis based landscape simulations the empirical findings strongly support our conjecture regarding corner solutions and the optimal targeting policy is shown to produce substantial welfare gains over a spatially uniform incentive

permanent and temporary policy incentives for conservation under stochastic returns from competing land uses rapid conversion of private land for agricultural and urban use has raised concern worldwide over the loss of ecological services to inform conservation policy we model privately optimal land use decisions using a real options framework that assumes both the ecological and commercial values of land are stochastic and that land conversion is irreversible we analyze permanent and temporary land conservation policy incentives using this dynamic framework to guide policy makers interested in designing efficient payment mechanisms to achieve ecological preservation goals we find that while the financial cost of temporary policy incentives is generally much lower than permanent policy incentives this difference is very small in scenarios with high discount rates and lower uncertainties in conversion returns and lower expected trend in conservation returns alternately the financial cost of temporary conservation is substantially lower than that of permanent conservation when the expected trend in conservation returns and uncertainties in conservation and conversion returns is high and the discount rate is low comparison with net present value and single source uncertainty models indicates that the presence of a second uncertainty increases the option value of delaying conversion and shows that permanent and temporary policy incentives based on either of the two simpler models can be seriously misguided if multiple uncertainties are present we illustrate the analytical results with a case study of tropical deforestation in indonesia where private landowners can either conserve forests and earn carbon credits or convert to palm oil agriculture and earn profits from the sale of palm oil

skill mismatch and unemployment we consider a finite number of heterogeneous firms which compete imperfectly for heterogeneous workers we show that unemployment may arise in equilibrium because of job mismatch and firms market power

heterogeneity intrafamily distribution and child health data were collected in candelaria colombia from 1968 to 1974 to evaluate the impact of child health services in all households in which there were any children under 6 years old to estimate the birth outcome equation and post birth health equation a subsample of 109 households was selected in which at least 2 children were born during the 7 year program the sample size was 238 children estimates of the parameters of the normalized weight equations were obtained using seemingly unrelated regression sur the family fixed effects procedure ffe and the lagged instrumental fixed effects technique life an illustrative dynamic model of intra family allocative behavior incorporating variations in individual child characteristics was formulated to show how both the timing of childbearing and child specific allocations vary with both family and child specific health endowments the information restrictions were used in the model associated with the sequencing of births to develop an estimation procedure which takes into account both intrafamily and interfamily heterogeneity longitudinal data on children and households compared estimates of the effects of birth order birth spacing and timing per capita food consumption inoculations and the incidence of breast feeding on the age standardized weight of children at 2 life cycle points at birth and within 6 months after birth the estimates indicated that healthier families for given income had more children and more closely spaced children but consumed no more food per capita than did less well endowed families these results imply that families behave so as to reduce inherent interfamily inequalities in child health however while the estimates suggest that the healthier the prior surviving child the more quickly parents are likely to have a subsequent child parents are also more likely to breastfeed an inherently healthier child

the effects of agricultural and tax policy reform on the economic return to wetland drainage in the mississippi delta region the conversion of wetlands to cropland has been a common land use activity in many parts of the united states two major policy reforms occurred in the 1980s to reduce federal incentives to drain and clear wetlands the denial of farm program benefits to those who cleared wetlands the swampbuster provision of the food security act of 1985 and the elimination of income tax deductions for drainage expenses enacted in the tax reform act of 1986 a stochastic simulation analysis of three representative counties in louisiana arkansas and mississippi shows that both reforms reduced the economic feasibility of wetlands conversion

optimal bundling under imperfect competition abstract this paper examines the profitability of bundling for a two product seller of differentiated products facing competition from a one product rival in the presence of imperfect competition pure bundling emerges as the optimal pricing strategy other than ensuring the monopoly product can only be purchased in a bundle pure bundling s additional advantages stand in its ability to i prevent consumers from forming their own bundle using the single product seller s product ii reduce aggressiveness in pricing and iii smooth over the variation in valuations consumers have for the two types of products however the profit maximizing strategy is not welfare maximizing consumers are best off when all products are available a la carte only the competitor maximizes profits under mixed bundling and total welfare would be highest if the two product supplier were to offer only the monopoly product a la carte

does poverty constrain deforestation econometric evidence from peru this paper examines the relationship between income and land clearing for households living in tropical forest regions a simple model of the agricultural household that clears land for agriculture is developed to investigate the relationship between lagged income and cleared land holdings analysis of panel data from peru suggests that lagged income is positively correlated with clearing though at a decreasing rate and because of labor market constraints clearing is positively correlated with household labor availability this work suggests that small increases in the incomes of the poorest are unlikely to reduce deforestation in this context

is the answer blowin in the wind auctions an assessment of the italian support scheme abstract this article proposes a quantitative data based assessment of the onshore wind auctions conducted in italy from 2012 to 2016 our objective is to provide new insights in the ongoing debate on policy measures to promote renewable energy sources italian wind auction design is examined by firstly investigating its overall outcomes in terms of cost efficiency and policy effectiveness determinants affecting awarded tariffs are then empirically analysed further to explore the role of project related and firm specific factors as well as different auction design elements the extreme simplicity of the auction design undoubtedly has promoted competition encouraging many project developers to bid and reducing support both in static and dynamic terms results provide evidence that localisation factors did not constitute a competitive constraint from a policy perspective the administratively setting of ceiling prices is a major issue when wind resources are widely available and auctioned capacity is not sufficiently high while not limiting competition the effects of pre qualification criteria on the realisation rate deserve further analysis however doubts emerge on the policy effectiveness of the current support scheme which makes difficult to control the total amount of support provided thus likely causing stop and go cycles of financing and potentially favouring distorted bidding behaviour

restoring wetlands through wetlands mitigation banks this paper offers the first economic analysis of wetlands mitigation banks the banks are a new alternative for restoration of wetlands by developers before receiving regulatory approval for future development of wetlands in the same watershed a stochastic optimal control model is developed which incorporates ecological uncertainty of wetlands restoration the model helps in examining the decisions of how much to invest in a wetlands mitigation bank the model is calibrated with data from california bioeconomic parameters numerical simulation of the model provides a sensitivity analysis of how model parameters of restoration costs stochastic biological growth interest rate and the market value of credits affect the trajectory of investment and the optimal stopping state of wetlands quality when the investment ends the analysis reveals that restoration of the whole site will occur when there is a reduction in restoration costs an increase in biological uncertainty or an increase in the value of wetlands credits continued restoration is harder to justify with a higher interest rate

the patchy spread of renewables a socio territorial perspective on the energy transition process abstract in the energy transition process the district heating networks and the wind power facilities play a key role these two technologies can contribute to establish models of co provision involving new social actors in the energy field despite that the socio organizational change appears patchy in italy these options are dominated by large utilities and the few forms of energy co production are to be found in specific contexts the influence of socio territorial features on the energy transition seem relevant this paper aims analysing energy transition while focusing on the institutional relational and territorial dimensions to unfold how energy innovations take place within territorial contexts in this respect energy transition is investigated considering both the district heating and the wind power in italy the analysis suggests that the transition is influenced by the way in which territorial context is destabilized by the perturbations of energy landscape

rural land use traditional agriculture or forestry the signing of the kyoto protocol and the official recognition of forestry s capacity to sequester carbon has prompted considerable interest within the european union in forestry as a competing land use application however despite large increases in grants to forestry afforestation rates in certain eu countries are below national targets in this paper we employ a real options model to theoretically explain why farmers may be slow to switch land from traditional agriculture to forestry the theoretical model is then used to motivate an empirical dynamic panel data model and both models are applied to irish data

competitive positioning in markets with nonuniform preferences we investigate the nature of competitive equilibrium for brands competing in a multi attribute product space when consumer preferences for product attributes follow nonuniform distributions we establish subgame perfect equilibria in a two stage game where firms choose positions in the first stage and prices in the second stage two types of entry scenarios are investigated in the first the number of brands is given exogenously and all of them choose positions simultaneously in the second scenario firms enter in sequence and the early entrants can choose strategies to deter the entry of later entrants we find the equilibria for two three and four brands for consumer preferences that follow a beta distribution nonuniform distributions result in equilibrium configurations that are substantially different from those obtained for uniform consumer distributions in the two brands case for sufficiently concentrated distributions we find asymmetric position equilibria with one firm at the corner of the market and one firm at an interior position in the case of three brands for sufficiently concentrated preferences we find symmetric equilibria that do not yield maximal differentiation we also establish an equilibrium for the case of four competing brands in addition we characterize entry deterring positioning strategies and examine how they vary with the distribution of consumer preferences

patents as options some estimates of the value of holding european patent stocks in many countries holders of patents must pay an annual renewal fee in order to keep their patents in force this paper uses data on the proportion of patents renewed and the renewal fees faced by post world war ii cohorts of patents in france the united kingdom and germany in conjunction with a model of patent holders renewal decisions to estimate the returns earned from holding patents in these countries since patents are often applied for at a nearly stage in the innovation process the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce formally then the paper presents and solves a discrete choice optimal stochastic control model derives the implications of the model on aggregate behaviour and then estimates the parameters of the model from aggregate data the estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans and calculations of both the annual returns earned from holding the patents still in force or the patent stocks in the alternative countries and the distribution of the discounted value of returns earned from holding the patents in a cohort this abstract was borrowed from another version of this item

local labor markets job matching and urban location we present a new way of modeling local labor markets by linking the space of workers skills and the physical space of cities the key lesson of our analysis is that firms exploit workers in these two spaces by setting wages that are below the competitive level the degree of monopsony power depends on the elasticity of the firm s labor pool which is inversely related to the costs workers incur in commuting and acquiring skills our analysis thus shows how socioeconomic ghettos emerge as workers with poor skill matches are also those who incur the highest commuting costs

the political economy of branching restrictions and deposit insurance a model of monopolistic competition among small and large banks this article suggests that the introduction of bank branching restrictions and federal deposit insurance in the united states likely was motivated by political considerations specifically we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large multiunit banks we analyze this political hypothesis in two steps first we use a model of monopolistic competition between small and large banks to examine gains to the former group from the introduction of branching restrictions and governmentsponsored deposit insurance we then find strong evidence for the political hypothesis by examining the voting record of congress

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

fostering a renewable energy technology industry an international comparison of wind industry policy support mechanisms this article examines the importance of national and sub national policies in supporting the development of successful global wind turbine manufacturing companies we explore the motivations behind establishing a local wind power industry and the paths that different countries have taken to develop indigenous large wind turbine manufacturing industries within their borders this is done through a cross country comparison of the policy support mechanisms that have been employed to directly and indirectly promote wind technology manufacturing in 12 countries we find that in many instances there is a clear relationship between a manufacturer s success in its home country market and its eventual success in the global wind power market whether new wind turbine manufacturing entrants are able to succeed will likely depend in part on the utilization of their turbines in their own domestic market which in turn will be influenced by the annual size and stability of that market consequently policies that support a sizable stable market for wind power in conjunction with policies that specifically provide incentives for wind power technology to be manufactured locally are most likely to result in the establishment of an internationally competitive wind industry

temporal spillovers in land conservation abstract temporal spillovers occur when a conservation program changes what happens to land outside the temporal window of the conservation contract this may happen when conservation improves land so that returns to non conservation uses are increased or when landowners preferences become more pro conservation as they see land flourish under conservation for example these post contract changes may occur on the extensive margin acres of land conserved or intensive margin intensity of land in a given use if temporal spillovers exist benefits from conservation programs estimated by focusing solely on the effects that occur during the conservation contract will overstate or understate the true benefits of the program i lay out a simple model of temporal spillovers i test this model in the context of the united states conservation reserve program crp i use a pre analysis sample specification step to choose counterfactual land most like the crp land on the extensive margin i find that crp causes some land to be 20 25 more likely to be farmed potentially offsetting some environmental benefits however farmed ex crp land is slightly more likely to use a conservation practice this is a mitigating factor on the intensive margin

savings rates and income distribution further evidence from ldcs a cross country test for the existence of kaldor effects in less developed countries is developed earlier attempts have been inconclusive and have led to a perception that the effect is unimportant it is argued that previous tests may have ben misspecified within a standard life cycle framework a savings rate function that also incorporates two distribution variables one involving measures of income inequalities across income classes and the other a broad measure of inequalities among sectors was specified and estimated the results indicate that regardless of the inequality measure employed some sort of kaldor effect may be at work this suggests that the traditional conflect between growth and equity warrants continued investigation

political choice public policy and distributional outcomes i address the functioning of the u s governing system by analyzing distributional outcomes from 1947 to 2000 the key question is whether public policy influences distributional outcomes the macropolitics model and power resource theory suggest that left policies should equalize the distribution of income i utilize single equation error correction models to assess the impact of policy on income inequality through two mechanisms market conditioning and redistribution since nearly every government action influences markets in some way i examine policy in the aggregate rather than focusing only on policies explicitly designed to redistribute income the analysis indicates that policy influences inequality through both mechanisms with left policy producing more equality the results are consistent with power resource theory and strongly support the macropolitics model furthermore i find that market conditioning is as important as and works in tandem with explicit redistribution

competing across technology differentiated channels the impact of network externalities and switching costs technology driven commerce channels such as the web possess several unique features that differentiate them from traditional channels the interaction between firms operating across these differentiated channels involves interesting competitive dynamics that cannot be captured by isolated models of electronic markets this paper develops a stylized spatial differentiation model to examine the impact of differences in channel flexibility network externalities and switching costs on competition between online traditional and hybrid firms a basic model highlighting the moderating influence of the hybrid firm on both channels is extended to account for differential network externalities and switching costs across the two channels our analysis indicates that while network effects as well as switching costs lead to the tipping of markets such tipping occurs primarily due to the moderating effects of the competing channel more importantly with network effects an increased market share does not translate into higher profits contradictory to conventional wisdom our results indicate that in a static market consumers rather than firms benefit from increasing network externalities with competitive effects outweighing the surplus extraction abilities of firms our results also highlight the importance of alternative revenue streams and provide insights for firms grappling with issues of channel choice as well as integration and divestiture

unintended impacts of public investments on private decisions the depletion of forested wetlands by affecting relative economic returns infrastructure investments can induce major changes in private land use the authors find that 30 percent of forested wetland depletion in the mississippi valley has resulted from private decisions induced by federal flood control projects despite explicit federal policy to preserve wetlands the model aggregates individual land use decisions using a parametric distribution of unobserved land quality dynamic simulations are used to quantify the impacts on wetlands of federal projects and other factors copyright 1990 by american economic association