nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

joint confidence intervals for income shares and lorenz curves in a recent paper beach and davidson 1983 extended the principles of statistical inference to lorenz curves and income shares by establishing the asymptotic distribution and covariance structure of a vector of lorenz curve ordinates corresponding to a set of quantile abscissae one can thus use the lorenz curve and income shares no longer just as descriptive devices for summarizing distribution information but now also as analytical tools for comparing alternative distributions and carrying out conventional statistical inference on them it would clearly be desirable however to extend and complement this work by providing a method for computing a set of joint confidence intervals about these income shares and for illustrating graphically a joint confidence band about a set of estimated lorenz curve ordinates the present paper provides a new and simple technique for doing this when analyzing differences between sets of income shares or lorenz curves one typically wants to elicit more detailed information than is provided by a standard joint chi square test on the overall set of shares that is when the hypothesis of two sets of shares being the same is rejected we generally want to know further which particular differences in shares are different from zero and of these nonzero differences which are positive and which negative savin 1980 a natural way of providing such information is through multiple comparison procedures developed in this paper in a recent work richmond 1982 has developed a general method of finding multiple comparison intervals that is particularly suited to the present problem and in this situation appears to dominate other conventional alternatives in contrast for example to scheff s s projection method richmond s approach focuses on a set of primary points of interest income shares among a more general set of points including the lorenz curve ordinates and optimizes the joint confidence interval lengths on this primary set of points since estimated lorenz curve ordinates are built up from underlying income shares these shares perhaps further supplemented are natural choices for the primary set the method however also provides a joint confidence band that geometrically bounds the set of lorenz curve ordinates and interpolated segments between them the present

opec market failure or power failure abstract the actions of opec and saudi arabia are discussed in terms of their objectives and their technical and social constraints it is concluded 1 that opec does not act as a cartel and 2 that hotelling s rule is not an important feature of pricing or production opec s more specifically saudi arabia s ideal policy is to keep price moderate to try to assure a market for their high reserves over the long run such an action would require heavy investments in capacity including in excess capacity for times of interruption of supply from other countries as in the 1990s and for times of high demand as in the 2000s the action may be inconsistent with other objectives and in any case may be too difficult to achieve

dynamic pricing of electricity as both a regulator and an academic fred kahn argued that end use electricity consumers should face prices that reflect the time varying marginal costs of generating electricity this has been very slow to happen in the us even in light of recent technological advances that have lowered costs and improved functionality for meters and automated demand response technologies we describe these recent developments and discuss the remaining barriers to the proliferation of time varying electricity pricing

input demand under yield and revenue insurance previous studies disagree on the effects of insurance on fertilizer application rates the effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements we estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates our results indicate no support for this hypothesis at all nitrogen fertilizer rates and reasonable levels of risk aversion nitrogen fertilizer and insurance are substitutes suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications

the elephant in hotelling s room this paper questions the assumption commonly used in theoretical and policy research that scarcity rents make up a large proportion of market prices for oil and coal we show that the empirical literature simple calculations of historical and future scarcity rent shares and possible theoretical explanations all imply the same overall conclusions that scarcity rents seem to have been marginal or non existent historically that they almost certainly do not dominate fossil resource prices today and that there will be other factors shaping the prices in the upcoming decades we therefore argue that using the scarcity rent as the main or only basis for policy or for explaining empirical outcomes is ill advised

producer surplus and risk this paper examines the welfare economics of producer behavior under risk aversion hicksian marshallian and money equivalent measures are explored it is found that under decreasing absolute risk aversion compensating variation is less than the ordinary marshallian surplus which is less than the money equivalent measure under constant absolute risk aversion all measures coincide finally bounds on compensating and equivalent variations using ordinary producer surplus in a manner analogous to willige approach in consumer theory under certainty are studied similar results hold mutatis mutandis for input demands

an estimation of the swiss hydropower rent the electricity generation in switzerland is mostly based on hydropower 58 and nuclear power 38 the exploitation of water in the hydropower sector can generate significant economic rent one possibility to capture this rent is through royalties or fees this system has been used in switzerland since many decades however the actual water fee system is not flexible and does not take into consideration different production costs between the type and location of hydropower plants furthermore storage plants can sell electricity to a higher price than run of river plants a flexible system is needed in a liberalized electricity market to take into account these different production situations and the fact that prices may vary considerably over time the main goal of this paper is to calculate the potential economic rent that could be generated in the swiss hydropower sector under a future liberalized market based on the results of the paper it can be concluded that the introduction of a flexible fee system could improve the competitiveness of the hydropower sector and promote an energy system based on renewable energy sources

testing the assumptions and predictions of the hotelling model in this paper we empirically examine whether the assumptions and predictions of the hotelling model are consistent with patterns observed in data we consider nonlinear functional forms for the extraction cost and resource demand to develop an empirical hotelling model with technological progress and stock dependent extraction costs using panel data on fourteen nonrenewable natural resources to estimate this empirical hotelling model we get qualitatively different results as compared to the related literature we find evidence of stock dependent extraction costs for most resources there is no evidence against the linearity of the optimal extraction rate in the resource stock for almost all resources studied furthermore the hotelling model may sustain a zero long run growth rate in resource prices these results depend on whether firms use different extractive technologies or whether the structural break observed on resource prices is taken into account

the creation and capture of rents wages and innovation in a panel of u k companies this paper examines the impact of technological innovation on wages using a panel of british firms a head count measure of major innovations between 1945 and 1983 is combined with share price and accounting information innovating firms are found to have higher average wages but rival innovation tends to depress own wages this appears consistent with a model where wages are partly determined by a sharing in the rents generated by innovation in other words innovation may be a good instrument for proxies for rents such as profitability quasi rents or tobin s average q instrumental variable estimates of the elasticity between wages and quasi rents are about 0 29

testing for the monotone likelihood ratio assumption although monotonicity of the likelihood ratio for conditioned densities is a common technical assumption in economic models empirical tests for its plausibility do not appear to have been conducted this article develops such a test based on the theory of order restricted inference that is robust with respect to the correlation structure of the distributions being compared the test is applied to study the technology revealed by agricultural production experiments for the data under scrutiny the results support the monotone likelihood ratio assumption in a second application we find some support for the assumption of affiliation among bids cast in a multiple round vickrey auction for a consumption good

price information and bidding behavior in repeated second price auctions examining panel data on bidding behavior in over forty second price auction markets with repeated trials we observe that i posted prices influence the behavior of the median naive bidder ii posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods and iii anticipated strategic behavior wanes after two trials the results suggest that while affiliation might exist in auctions for new goods the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism

the incidence of a tax on pure rent the old reason for the old answer the purpose of this note is to clarify the formal identities linking the problems analyzed by barro 1974 feldstein 1977 and calvo kotlikoff and rodriguez 1979 henceforth ckr and to reaffirm the traditional proposition that in both the short run and the long run a tax on pure rent is never shifted provided one adopts the traditional procedure in tax theory of analyzing the incidence of a compensated tax any uncompensated tax is equivalent to a compensated tax together with a lump sum redistribution of income and there is really nothing surprising about the fact that lump sum redistributions of income may alter relative prices as the literature on the transfer problem in international trade theory demonstrates actually situations can be found e g gorman 1953 barro 1974 calvo et al 1979 p 874 n 7 in which lump sum redistributions of income do not affect relative prices even when they do the incidence effect is often small relative to the size of the redistribution the analyses of ckr and feldstein give the impression that the classical proposition on the incidence of a tax on pure rent does not apply in a dynamic economy as feldstein points out the classical proposition that a tax on pure rent is unshifted requires that the supplies of nonland factors of production are unaltered by the introduction of the tax on land rents this static assumption of fixed factor supplies is inappropriate to the analysis of tax incidence in a dynamic economy in which the supply of capital reflects the economic choice between consumption and saving calvo et al 1979 p 869

beauty vs brains early labor market outcomes of high school graduates this paper examines the wage returns to attractiveness for young high school graduates findings show that wage returns to attractiveness are large relative to ability and beauty and ability are complements at high attractiveness ratings but substitutes at low ratings

why finance ministers favor carbon taxes even if they do not take climate change into account fiscal considerations may shift governmental priorities away from environmental concerns finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition we develop a multi region model of tax competition and resource extraction to assess the fiscal incentive of imposing a tax on carbon rather than on capital we explicitly model international capital and resource markets as well as intertemporal capital accumulation and resource extraction while fossil resources give rise to scarcity rents capital does not with carbon taxes the rents can be captured and invested in infrastructure which leads to higher welfare than under capital taxation this result holds even without modeling environmental damages it is robust under a variation of the behavioral assumptions of resource importers to coordinate their actions and a resource exporter s ability to counteract carbon policies further no green paradox occurs instead the carbon tax constitutes a viable green policy since it postpones extraction and reduces cumulative emissions

steady state growth in a hotelling model of resource extraction this paper re examines the hotelling model of optimal nonrenewable resource extraction in light of stock effects and technological progress we assume functional forms for cost and demand so that the solution to the hotelling problem is a steady state consistent with the empirical observation that the growth rates of market prices have remained zero over a long period of time we use data on 14 minerals from 1970 to 2004 to estimate the supply and demand functions using sur and 3sls and to test the model we validate the model for 8 of 14 minerals c 2007 elsevier inc all rights reserved

taxation of economic rents economic rents have long been identified as an efficient tax base in addition the recent literature documents that rent income is highly concentrated and that rents are quickly increasing rent taxation thus seems attractive for reasons of both efficiency and equity nevertheless rent taxation remains a marginal topic in research and policy making in a systematic review of the neoclassical literature on different rent types we find that some types of rents reflect inefficiencies and should thus be minimized while others reward investments and should be supported in line with social welfare what remains for taxation are land rents one of the few true scarcity rents land rents have significant potential to improve the efficiency of the tax system we then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects the interaction of many of these effects remains unexplored which might explain policymakers hesitation in using land taxes to date

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

estimation of market power in a nonrenewable resource industry in nonrenewable resource industries the existence of a markup of price over marginal market cost may reflect the existence of an implicit user cost for the resource rather than market power we show that valid estimates of market power can be obtained by the joint estimation of a restricted cost function and an inverse supply relation estimation of the model with data for the largest firm in the international nickel industry indicates that output price substantially exceeded marginal market cost with most of the difference due to the exercise of market power rather than the user cost of the resource

height skills and labor market outcomes in mexico abstract taller workers are paid higher wages a prominent explanation for this pattern is that physical growth and cognitive development share childhood inputs inducing a correlation between adult height and two productive skills strength and intelligence this paper explores the relative roles of strength and intelligence in explaining the labor market height premium among mexican men while cognitive test scores account for a limited share of the height premium roughly half of the premium can be attributed to the educational and occupational choices of taller workers taller workers obtain more education and sort into occupations with greater intelligence requirements and lower strength requirements suggesting a possible role for cognitive skill

the market power of opec 1973 2001 we apply a multi equation dynamic econometric model on monthly data to test if the behaviour of opec as a whole or different sub groups of the cartel is consistent with the characteristics of dominant producers on the world crude oil market in the period 1973 2001 our results indicate that the producers outside opec can be described as competitive producers taking the oil price as given and maximizing profits the opec members do not fit the behaviour of price taking producers our findings of low residual demand price elasticities for opec underpin the potential market power of the producer group and are in line with the results in some recent energy studies on the other hand our findings indicate that neither opec nor different sub groups of the cartel can be characterized as a dominant producer in the period 1973 1994 however we find that the characteristics of a dominant producer to some extent fit opec core as from 1994 thus although opec clearly has affected the market price the producer g

land tenure differences and investment in land improvement measures theoretical and empirical analyses this article develops a theoretical framework to examine the relationship between land tenure arrangements and households investment in soil improving and conservation measures it then analyzes this relationship with a multivariate probit model based on detailed plot level data from villages in the brong ahafo region of ghana a major hypothesis tested is that investment in productivity enhancing and conservation techniques are influenced by land tenure arrangements the theoretical analysis and empirical results generally reveal that land tenure differences significantly influence farmers decisions to invest in land improving and conservation measures the findings also show that tenure security does affect farm productivity

demand for risky financial assets a portfolio analysis abstract demand for risky financial assets takes place in portfolio settings the common stochastic orders applied in economics fail to rank demand for assets in such situations even for risk averse investors therefore the evaluation of the relative desirability of risky financial assets requires the establishment of new orders we prove that if returns on risky assets are ordered by the monotone likelihood ratio order then dominating assets will be more desired by all investors with nondecreasing utility functions

markets and rent dissipation in regulated open access fisheries abstract using a model of regulated open access resource use with markets we illustrate the potential complexity of interactions between markets product quality excess effort and regulatory behavior in fisheries our model assumes two product types one of which is processed and storable the model describes the equilibrium that results when effort responds to open access incentives and when regulators respond to effort growth by mitigating its potential harmful effects on biomass safety we use numerical simulations to demonstrate a mechanism by which market growth leads to the diversion of raw inputs into the inherently inferior market the result is a scenario in which rents are dissipated not only because excessive inputs raise costs but also because inferior product types reduce revenues we conclude with an illustrative decomposition of rent gains into revenue and cost savings gains from rationalizing a hypothetical fishery demonstrating the potential significance of market side rents

financial contracting under risk neutrality limited liability and ex ante asymmetric information this paper derives equilibrium financial contract forms in a risk neutral capital market with asymmetrically informed borrowers entrepeneurs and investors in doing so the analysis generalizes the work of demeza and webb 1987 by allowing for arbitrary profit distributions arbitrary contract forms and variable investment choices the main result of this inquiry is as follows when higher quality entrepreneurs have better ex post profit distributions in the sense of the monotone likelihood ratio property equilibrium contracts take a standard debt form so long as admissible investor payoff functions are monotone non decreasing in firm profit without the monotonicity constraint contracts often take a different live or die form

the price of biodiesel rins and economic fundamentals the d4 rin is the tradable compliance certificate for the biomass based diesel bbd mandate in the renewable fuel standard rfs understanding the price dynamics of the d4 rin is important for understanding the rfs because its price sets a ceiling on the ethanol rin d6 and because some observers have suggested that rin price fluctuations are too large to be explained by economic theory we use option pricing theory to develop a model of the d4 rin in terms of its economic fundamentals the spread between the price of biodiesel and petroleum diesel and the status of the biodiesel blenders tax credit the resulting d4 fundamental price closely tracks actual d4 prices we conclude that rin price volatility arises because of the design of the rfs and intrinsic features of the u s fuel supply system

the fundamentals of land prices and urban growth abstract in a very simple model in which capital is durable and landowners have perfect foresight the price of urban land has four additive components the value of agricultural land rent the cost of conversion the value of accessibility and the value of expected future rent increases a growth premium in rapidly growing cities the growth premium may easily account for half of the average price of land and may create a large gap between the price of land at the boundary minus conversion cost and the value of agricultural land rent

the political economy of the us mortgage default crisis we examine the effects of constituents special interests and ideology on congressional voting on two of the most significant pieces of legislation in us economic history representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the foreclosure prevention act especially in competitive districts interestingly representatives are more sensitive to defaults of their own party constituents special interests in the form ofhigher campaign contributions from the financial industry increase the likelihood of supporting the emergency economic stabilization act however ideologically conservative representatives are less responsive to both constituent and special interests jel d72 g21 g28

when to drop a bombshell sender who is either good or bad wishes to look good at an exogenous deadline sender privately observes if and when she can release a public flow of information about her private type releasing information earlier exposes to greater scrutiny but signals credibility in equilibrium bad sender releases information later than good sender we find empirical support for the dynamic predictions of our model using data on the timing of u s presidential scandals and u s initial public offerings in the context of elections our results suggest that october surprises are driven by the strategic behaviour of bad sender

monotone comparative statics under uncertainty this paper analyzes monotone comparative statics predictions in several classes of stochastic optimization problems the main results characterize necessary and sufficient conditions for comparative statics predictions to hold based on properties of primitive functions that is utility functions and probability distributions the results apply when the primitives satisfy one of the following two properties i a single crossing property which arises in applications such as portfolio investment problems and auctions or ii log supermodularity which arises in the analysis of demand functions affiliated random variables stochastic orders and orders over risk aversion

insurability and moral hazard in agricultural insurance markets pareto optimal and constrained pareto optimal all risk insurance contracts are studied conditions required for emergence of competitive insurance markets are isolated and discussed full insurance contracts are shown to be dominated by contracts involving coinsurance and deductibles if insurers are pseudo risk averse the effect of moral hazard on all risk agricultural insurance indemnity schedules is examined results for indemnity schedules under moral hazard and constant absolute risk aversion show that providing farmers with the incentives to take appropriate actions may imply lower deductibles in the presence of moral hazard than in the absence of moral hazard

democracy rent seeking public spending and growth abstract does democratization imply faster growth less corruption and less inefficiency past studies yield ambiguous results on the effects of democracy on economic performance and growth we develop a simple two sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization producing a u effect this effect results from the pattern of rent seeking as it diverts from the provision of public goods rent seekers act as monopolistic competitors initially more democracy increases their number raising aggregate rents however rents per rent seeker fall with the number of rent seekers due to this crowding effect and the increased competition among rent seekers aggregate rents fall in mature democracies thus rents show an inverted u effect in relation to democracy we find fairly robust supportive evidence for the latter