anticipated international environmental agreements abstract consider a situation in which countries anticipate an international environmental agreement iea to be in effect sometime in the future what is the impact of the future iea on current emissions after its announcement we show that the answer to this question is ambiguous we examine four types of ieas that aim to reduce pollution stock in the environment iea type 1 sets a level of emissions iea type 2 and iea type 3 set a percentage and a uniform cut vis a vis the business as usual policy respectively iea type 4 sets the policy that maximizes future joint benefits of the signatories we show that all of these agreements reach their goal in the long run but the intended benefits of these ieas can potentially be offset by the anticipatory non cooperative response of the signatories leading to an environmental degradation in the short run which iea is preferable depends on the targeted level emissions during the phase of cooperation when this target is above a certain threshold welfare under iea type 1 is larger than under iea type 2 which is larger than under iea type 3 moreover the highest level of welfare that can be attained under iea type 1 is above the highest level of welfare achieved by any one of the other three ieas

renegotiations in the greenhouse international climate policies are being shaped in a process of ongoing negotiations this paper develops a sequential game framework to explore the stability of international climate agreements allowing for multiple renegotiations we analyse how the incentives to reach an international climate agreement in the first period will be impacted by the prospect of further negotiations in later periods and by the punishment options related to renegotiations for this purpose we introduce a dynamic model of coalition formation with twelve world regions that captures the key features of the climate economy impacts of greenhouse gas emissions for a model with one round of renegotiations we find that a coalition of china and the united states is the unique renegotiation proof equilibrium in a game with more frequent renegotiations we find that the possibility to punish defecting players helps to stabilise larger coalitions in early stages of the game consequently several renegotiation proof equilibria emerge that outperform the coalition of china and usa in terms of abatement levels and global payoff the grand coalition however is unstable

transfers to sustain dynamic core theoretic cooperation in international stock pollutant control international environmental agreements aiming at correcting negative externalities generated by transboundary pollution are difficult to achieve for many reasons important obstacles arise from asymmetry in costs and benefits and instability may occur due to the fact that coalitions of countries may attempt to do better for themselves outside of any proposed agreement in a static context it has already been shown that it is possible to achieve stability in the sense of the core of a co operative game by means of appropriately defined transfers between the countries involved however the transboundary pollution problems that are most important are caused by accumulated pollutants so that a dynamic analysis is required this paper provides a transfer scheme that yields a core property in a dynamic context the possibility of computing such transfers numerically is discussed

buying cooperation in an asymmetric environmental differential game abstract we consider a two player asymmetric differential game of pollution control one player is non vulnerable to pollution or unwilling to consider damages when choosing her production policy in a non cooperative game we characterize the feedback nash equilibrium and the cooperative solution we establish conditions under which the vulnerable player can buy the cooperation of the non vulnerable player to control her emissions we further use the nash bargaining solution to allocate the total cooperative dividend between the two players and propose a time consistent decomposition overtime of the total payoff

international environmental agreements for river sharing problems we study partial coalition formation and the strategic timing of membership of an iea for environmental issues in the coalitional bargaining game cbg of gomes econometrica 73 1329 1350 2005 we apply the cbg to a specific river sharing problem with two symmetric upstream agents each at a tributary and one downstream agent located at the junction of tributaries we identify five regions in the parameter space of a discount factor and a productivity parameter for water in one region the grand coalition always forms immediately in two other regions immediate formation of the grand coalition and gradual coalition formation both occur with positive probability in another two regions only gradual coalition formation occurs in one of these latter regions a region with discount factors close to one both upstream agents form a monopoly with positive probability formation of the monopoly persists in the limit as the discount factor goes to one

permit trading merely an efficiency neutral redistribution away from climate change victims in this paper we present a climate policy game with international emissions trading where governments first select their amounts of emissions permits these permits are transferred to firms and then traded competitively on an international market compared with a game without trading we find that the potential efficiency gains from permit trading which have been identified in other studies are totally undone if governments also employ a tax or subsidy on domestic emissions the only effect of permit trading in this case is a redistribution of income away from those most affected by climate change

fiscal policy in the new open economy macroeconomics and prospects for fiscal policy coordination ceps working documents are published to give an indication of the work within ceps various research programmes and to stimulate reactions from other experts in the field unless otherwise indicated the views expressed are attributable only to the author in a personal capacity and not to any institution with which she is associated

climate change heterogeneities and stability of international fiscal harmonization this paper analyzes the instability introduced into multilateral agreements by two types of heterogeneity heterogeneity of countries size and number of producing members and heterogeneity of lobbies asymmetric influence at the national versus the international level the work extends theoretical prospective analyses on environmental taxation as illustrated by the harmonization of fuel taxes we show that the acceptability of the tax set at the multilateral level depends on the type of coalitions that participate in the multilateral negotiation size and number of producing countries and the asymmetry in the local state level power of lobbies during negotiations

environmental policy and stable collusion the case of a dynamic polluting oligopoly we show that the imposition of a markovian tax on emissions that is a tax rate which depends on the pollution stock can induce stable cartelization in an oligopolistic polluting industry this does not hold for a uniform tax thus accounting for the feedback effect that exists within a dynamic framework where pollution is allowed to accumulate into a stock over time changes the result obtained within a static framework moreover the cartel formation can diminish the welfare gain from environmental regulation such that welfare under environmental regulation and collusion of firms lies below that under a laissez faire policy

environmental quality competition and eco labeling abstract a three stage game of investment environmental quality provision and price competition is developed to study the impact of green technology investment eco labeling in a duopoly model of vertical product differentiation the firms incentives to invest in green technologies depend on their relative cost structure when firms are identical with respect to fixed costs both firms will always invest but if one firm is more efficient in investing then the other firm may or may not invest depending on the level of unit cost of investment quality competition will be tighter when the low quality firm is more efficient and looser when the high quality firm is more efficient in investing socially optimal investment for both firms is always positive but lower than in the duopoly solution in the absence of environmental externalities the quality dispersion chosen by profit maximizing firms may be too high or too low while environmental externalities increase the possibility low quality dispersion that is too low within the market solution finally and importantly ecolabeling can be used as a means of reducing excessive investment and increasing environmental quality that is too low

eco labeling and horizontal product differentiation this paper investigates the impact of eco labels on the abatement of emissions in a market with horizontal product differentiation a distinction is made between an end of pipe abatement method and a clean technology approach in the former case underinvestment is likely to occur even if the marginal willingness to pay for abatement of consumers is equal to the social marginal benefit of abatement the level of abatement depends on the number of firms and on the number of consumers for a large market with few firms overinvestment in abatement is also possible clean technology abatement achieves a first best level regardless of market size if all consumers have a marginal willingness to pay for abatement equal to its social benefit

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

management of a transboundary wildlife population a self enforcing cooperative agreement with renegotiation and variable transfer payments abstract this paper characterizes a dynamic contract that allows renegotiation and variable transfer payments vtp between owners of two independently harvested ecologically dependent mammal populations the decision environment is modeled as a two person differential game we develop a recursive efficiency criterion that forms the basis for determining the size of the vtp which makes the bargaining contract renegotiation proof and self enforcing we further show that the vtp is just as pareto efficient as a lump sum or fixed annual transfer payment a nuisance wildlife species management forms a basis for numerical illustration

announcing climate policy can a green paradox arise without scarcity unintended consequences of a pre announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources we show that early announcement of a carbon tax gives rise to a green paradox in that it increases emissions in the interim period between announcement and actual implementation irrespective of the scarcity of fossil fuels the paradoxical outcome is driven by consumption saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the political will or capability of the government to implement the policy as announced

spurious welfare reversals in international business cycle models several papers have documented spurious welfare reversals incompletemarkets economy produces a higher level of welfare than the completemarkets economy this paper first demonstrates how conventional linearization can generate approximation errors that can result in welfare reversals using a two country production economy we argue that spurious welfare reversals are not only possible but also plausible under reasonable values for model parameters this paper then proposes an approximation method that modifies the conventional linearization by a bias correction this method can be easily implemented and approximates welfare as accurately as a second order perturbation method

subgame perfect cooperative agreements in a dynamic game of climate change abstract we model climate change as a dynamic game and prove existence of a unique subgame perfect nash equilibrium spne that is also markov perfect we interpret this unique spne as the business as usual bau equilibrium and show that if the countries are not sufficiently symmetric then the familiar trigger strategy equilibria may not be pareto improvements over the bau equilibrium and may even lack efficiency properties we then motivate and introduce a subgame perfect cooperative agreement as an improvement over the bau equilibrium in the sense that every country or coalition of countries is better off in every subgame irrespective of the extent of heterogeneity of the countries we characterize subgame perfect cooperative agreements and identify sufficient conditions for their existence we show that direct or indirect transfers between countries to balance the costs and benefits of controlling climate change are a necessity and not a matter of approach

the role of consumption substitutability in the international transmission of monetary shocks abstract this paper develops a general framework to analyze the impact of monetary shocks in an open economy focusing on the role of the degree of substitutability between goods produced in different countries we extend the contributions by obstfeld and rogoff obstfeld m rogoff k 1995 exchange rate dynamics redux journal of political economy 103 624 659 and corsetti and pesenti corsetti g pesenti p 1997 welfare and macroeconomic interdependence nber working paper 6307 to show that the welfare impact differs across countries when the degree of substitutability between goods produced in different countries is different from the degree of substitutability between goods produced in the same country a shock that would be beneficial in a closed economy can have an adverse beggar thyself effect in the country where it takes place or an adverse beggar thy neighbor effect on its neighbor

cross sectoral variation in the volatility of plant level idiosyncratic shocks we estimate the volatility of plant level idiosyncratic shocks in u s manufacturing we measure the variation in revenue total factor productivity not explained by either industry or economy wide factors or by establishments characteristics we find that idiosyncratic shocks are much larger than aggregate shocks accounting for about 80 of the overall uncertainty faced by plants plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile we provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

is there really a green paradox abstract in the absence of a co2 tax the anticipation of a cheaper renewable backstop increases current emissions of co2 since the date at which renewables are phased in is brought forward and more generally future emissions of co2 will decrease the effect on global warming is unclear green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit co2 emissions we establish these results by analyzing depletion of non renewable fossil fuels followed by a switch to a clean renewable backstop paying attention to timing of the switch and the amount of fossil fuels remaining unexploited we also discuss the potential for limit pricing when the non renewable resource is owned by a monopolist finally we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ thus boosting green welfare however if a market economy does not internalize global warming externalities and renewables have not kicked in yet full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare

the new open economy macroeconomics of government debt in this paper we introduce an overlapping generations structure of the blanchard type in a new open economy macroeconomics model this allows us to study a wider range ofscal shocks compared to the traditional mundell fleming and to the baseline redux models one important policy implication of our model is that the tax cut imple mented in the us in 2001 might have contributed to the appreciation of the dollar vis a vis the euro in contrast the imposition ofscal constraint such as the golden rule proposed by the uk government can have opposite exchange rate e ects

valuation methods and policy making in environmental economics 1 valuation methods and policy making in environmental economics relevance and scope h folmer e van ierland part i the valuation of public goods 2 non market asset prices a comparison of three valuation approaches r c d arge j f shogren 3 valuing public goods in a risky world an experiment p o johansson 4 recreational values pareto optimality and timber supply p o johansson k g lofgren k g maler 5 estimating social benefits of environmental improvements from reduced acid rain deposition a contingent valuation survey s navrud part ii the valuation of health and life 6 benefits of reduced morbidity from air pollution control a survey m dickie s gerking 7 valuing a public good direct and indirect valuation approaches to the measurement of the benefits from air pollution abatement m shechter m kim l golan 8 environmental regulation and the valuation of life interindustry mobility and the market price of safety h w herzog jr a m schlottmann part iii cost benefit analysis 9 disequilibrium cost benefit rules an exposition and extension p o johansson k g lofgren 10 macroeconomic cost benefit analysis of environmental programmes a nentjes part iv aspects of policy making 11 benefit estimation for complex policies a randall j hoehn 12 the acid rain game k g maler index

global implications of self oriented national monetary rules author s obstfeld maurice rogoff kenneth abstract it is well known that if international linkages are relatively small the potential gains to international monetary policy coordination are typically quite limited but what if goods and financial markets are tightly linked is it then problematic if countries unilaterally design their institutions for monetary stabilization are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination we argue that under plausible assumptions the answer is no unless risk aversion is very high lack of coordination in rule setting is a second order problem compared to the overall gains from monetary policy stabilization

when international policy coordination matters an empirical analysis the interdependence of national economies implies externalities in policy making and these externalities lead to inefficient outcomes when policy makers are decentralized and independent these externalities have been well documented from a theoretical point of view this paper reports our attempts to discover when and if policy coordination matters using the liverpool world model which exhibits strong spillover effects for monetary policy and would therefore we thought yield very different results from those of earlier researchers however strong spillover effects do not guarantee that cooperative policies will differ much from the uncooperative other aspects of the game s structure can be equally important indeed we found many plausible game situations in which the uncooperative and cooperative solutions are so close together as to be operationally indistinguishable given the precision with which central banks seem to be able to control their money supplies we also found situations in which c

cooperation and subgame perfect equilibria in global pollution problems with critical threshold the paper examines the issue of international pollution control under a dynamic framework involving heterogeneous countries and a critical threshold we propose an appealing specification for this type of problem and its novelty is illustrated by the fact that countries use linear strategies in equilibrium although their utility and damage functions are highly convex the stock of pollution under cooperation is always lower surprisingly emissions are always higher in distant periods under the cooperative scenario and we show through examples that this is a significant finding rather than some marginal effect it is also shown that the efficient allocation of pollution abatement is driven only by the respective technologies of the countries finally a dynamic transfer scheme allowing to implement the cooperative solution is proposed

dynamic effects on the stability of international environmental agreements abstract in terms of the number of signatories one observes both large and small international environmental agreements the theoretical literature based on game theory discusses different concepts and mechanisms regarding stability of coalitions the conclusion has been reached that in all circumstances under farsightedness both large and small stable coalitions can occur this theory is based on behavioural reaction patterns but does not take account of the interaction with the dynamics of emission adjustments this paper shows that when these two dynamical processes are integrated large and small stable coalitions can still occur but only if the costs of emissions are relatively unimportant as compared with the costs of abatement

useful government spending direct crowding out and fiscal policy interdependence this paper introduces perfect substitutability between private and public consumption in a dynamic open economy with imperfect competition and nominal rigidities this implies a direct crowding out effect that generalising to the two country case some well known properties of a closed economy tends to reduce consumption following both domestic and foreign expansions a less expected result is that sub stitutability has a positive effect on the short run output spillover we also show that if we modify the model to allow for home bias in government spending temporary fiscal expansions display a quasi neutrality property

a theory of dynamic oligopoly iii cournot competition abstract we study the markov perfect equilibrium mpe of an alternating move infinite horizon duopoly model where the strategic variable is quantity we exhibit a pair of difference differential equations that when they exist differentiable mpe strategies satisfy for quadratic payoff functions we solve these equations in closed form and demonstrate that the mpe corresponding to the solution is the limit of the finite horizon equilibrium as the horizon tends to infinity we conclude with a discussion of adjustment costs and endogenization of the timing

cross country heterogeneity in intertemporal substitution abstract we collect 2735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods the estimates vary substantially from country to country even after controlling for 30 aspects of study design our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns micro level studies that focus on sub samples of rich households or asset holders also find systematically larger values of the elasticity

the environmental kuznets curve semi parametrically revisited this paper re examines the existence of an environmental kuznets curve ekc across countries using a semi parametric regression estimator which places no restrictions on the functional form our results using cross country panel data on sulfur and carbon dioxide strongly suggest that the relationship between wealth and environmental degradation is not bell shaped as suggested by an ekc rather that there is a positive link for the very poorest countries and no clear relationship for richer countries

the production of eco labels eco labeling is a market based technique for conveying information about consumers demands for environmental protection most criticisms of eco labeling have concentrated on demand side issues the potential for firms or countries to use eco labels to manipulate market power and the difficulty of creating credible labels in this paper we argue that fundamental problems also arise on the production side specifically we argue that both increasing returns to scale and complexities in production imply that it will be possible to market only a small percentage of environmental attributes through the use of eco labels we present evidence for our hypotheses from a detailed survey of 100 randomly selected consumer products

the effects of environmental quality misperception on investments and regulation abstract this paper analyzes whether consumers misperception on the quality of the product influences firms investment choices we examine a setup with horizontal and vertical green differentiation where consumers are heterogeneous in the exogenous perception of environmental quality demands true qualities and profits are increasing in the perception of higher quality while the investment in green quality is high for high and low degrees of product substitutability we further consider the introduction of either an emission tax or an environmental standard both interventions increase the investment in green quality we show that for low marginal damages the environmental standard increases quality while taxation is more effective when the environmental damage is large

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

fiscal consolidation under fixed exchange rates abstract we present the fixed exchange rate version of the obstfeld and rogoff model and analyze the international transmission of fiscal policy shocks the welfare effects of an unanticipated contraction in government expenditure in the home country are shown to depend crucially on the way in which world money stock is set if home authorities alone are responsible for pegging the exchange rate a fiscal adjustment leads to a decrease in the real interest rate stimulates private consumption and limits the contraction in world output compared with a situation in which a cooperative scheme is implemented the model is then used to propose a new interpretation of recent events in the eu countries that have enacted restrictive fiscal policies while pegging their currencies to the dm

examining green consumerism motivational drivers does premium price and demographics matter to green purchasing environmental deterioration caused by consumers non sustainable consumption pattern is putting a strain on the environment and is hindering sustainable development in order to impede this effect and promote a more sustainable economy one solution is to reduce or shift consumption from conventional products to green products the unfortunate reality indicates that inadequate information on how to promote consumers green behavioral intention is slowing the growth of green markets such inadequacy appears as a prevailing obstacle facing firms while developing segments and communicating strategies for effectively promoting green products the mentioned impact is more prevailing and most experienced in countries like malaysia hence consumers behavioral intentions must be better understood in order to strengthen knowledge about fostering green purchases this study aims to determine the motivational factors that influence green purchasing intention and simultaneously assess the moderator roles of the premium price and demographic characteristics given that consumers degree of greenness varies a survey was administered and a total of 405 usable questionnaires were obtained structural equation modeling sem was applied to test the hypotheses results indicate that environmental attitude eco label and cultural value man nature orientation significantly influence the green purchase intention the result also indicates that the premium price has no moderating effect denying its role as one of the main barriers for consumers to walk their talk as it has previously been reported by studies and opinion polls in addition the findings revealed that education level and gender have a significant positive moderation effect this suggests that green purchase intentions motivational factors are greater among highly educated individuals especially with female consumers in particular this study contributes to the understanding of the main factors that motivate consumers intention to purchase green products in malaysia it also offers insights and discusses implementations for manufacturers marketers and policy makers concerned with the drivers that motivate consumers green purchasing intentions which require different marketing plan and strategy than conventional products

can international environmental cooperation be bought in this paper a two stage game of international environmental agreement formation with asymmetric countries is analytically solved the equilibrium of the game makes it possible to determine the size and composition of a stable agreement two cases are studied in the first case countries differ only in abatement costs while in the second case they differ in environmental damages in both cases two different institutional settings one without transfers and another with transfers are considered the results establish that the asymmetry assumption has no important effects on the scope of cooperation in comparison with the symmetric case if transfers are not used or abatement costs represent the only difference among countries however when the only difference is in environmental damages the level of cooperation that can be bought through a self financed transfer scheme increases with the degree of asymmetry

cooperation on climate change mitigation abstract we analyze conditions under which it is possible to achieve efficient mitigation of greenhouse gas emissions with a self enforcing international agreement in which all countries find it in their self interest to abide by the agreement we model the choice of emissions by countries as a dynamic game we use a two part punishment scheme for deviations from an agreement that is renegotiation proof and show when this scheme supports the efficient outcome as a subgame perfect equilibrium using numerical examples we show that an efficient subgame perfect equilibrium exists for a range of reasonable parameter values the existence of such equilibrium may be non monotonic in the discount rate and the ratio of slope of marginal abatement cost and marginal damages

eco labels trade and protectionism eco labels are suspected to serve protectionist purposes we analyze the choice between an environmental standard and a voluntary eco label scheme in a partial trade model with one domestic firm and one foreign firm the environmental standard will only apply to the domestic firm while both firms can adopt the eco label pollution is production related and domestic consumers demand products that are produced in an environmentally friendly way our results show that it may be optimal for the domestic government to introduce an eco label and get both firms to adopt the label instead of setting an environmental standard however to what extent this policy serves protectionist purposes is ambiguous in particular if the willingness to pay for green products is sufficient to cover the pollution abatement costs of the foreign firm foreign firm profit will increase while domestic firm profit will decrease compared to the outcome with a domestic environmental standard on the other hand if the willingness to pay for green products is insufficient the foreign firm would be better off with a domestic environmental standard

why environmental management may yield no regret pollution abatement options empirical evidence supports the existence of pollution abatement possibilities at negative costs the so called no regret options we provide a microeconomic rationale for the existence of such potential at the firm level an econometric application confirms that pollution abatement cost curves with no regret options are compatible with a standard production function as stated in our theoretical model c 2008 elsevier b v all rights reserved

climate contracts a game of emissions investments negotiations and renegotiations the paper presents a dynamic game where players can contribute to a public bad invest in technologies and write incomplete contracts despite the n 1 stocks in the model the analysis is tractable and the symmetric markov perfect equilibrium unique the framework helps to analyze emissions investments and international environmental agreements if only the emission levels are contractible then investments are suboptimally small if the contract is short term or close to its expiration date to encourage investments the optimal contract is more ambitious if it is short term and it is tougher to satisfy close to its expiration date and for countries with small investment costs if renegotiation is possible such an incomplete contract implements the rst best the results have important lessons for how to design a climate treaty

end of pipe or cleaner production how to go green in presence of income inequality and pro environmental behavior in this paper we consider a vertically differentiated duopoly model in which a green producer competes with a brown rival in a market in which consumers are environmentally concerned in particular consumers are assumed to value not only the intrinsic quality of a certain product but also its environmental impact this environmental valuation has a positional content consumers attach a positive attribute to the green product while penalizing the brown one in this context we consider the choice of the green firm between cleaner and end of pipe abatement efforts we find that the interplay between the intensity of market competition consumers income disparity and environmental concern can play a crucial role in directing the green producer towards one or the other technological choice more precisely the adoption of cleaner production technologies can be discouraged by low average income and by tough competition while it can be spurred by the moral social incentive towards pro environmental behavior

the closed loop motive for voluntary export restraints this paper examines the effects of voluntary export restraints in a dynamic game model of duopolistic competition it is shown that the imposition of a voluntary export restraint at the free trade level of imports increases the market price and the profits of all firms in the industry if free trade is identified as the closed loop subgame perfect cournot equilibrium of the game hence the authors conclude that the predictions of static cournot competition do not carry over to the dynamic case

time consistent shapley value allocation of pollution cost reduction we study the problem of allocation over time of total cost incurred by countries in a cooperative game of pollution reduction we compute the characteristic function for all possible coalitions and apply the shapley value to determine a fair distribution of the total cooperative cost among players we design a mechanism for allocation over time of total individual cost so that the initial agreement remains valid for the whole duration of the game

the need for international policy coordination what s old what s new what s yet to come the first generation of policy coordination models was introduced some 25 years ago it provided a rationale for policy coordination but the gains from coordination were generally thought to be small now a new generation of policy coordination models is emerging incorporating monopolistic competition and nominal inertia here we examine macroeconomic interdependence and the scope for policy coordination in a tractable second generation model with two countries and multiple sectors initial calibration of the model suggests that second generation models may have more scope for policy coordination than did the first d 2004 elsevier b v all rights reserved

the pareto principle of optimal inequality the pareto principle is often viewed as a mild requirement compatible with a variety of value judgements in particular it is generally thought that it can accommodate different views on the desirable degree of equality we show that this is generally not true in intertemporal models where some uncertainty prevails to do so we formalize the concept of inequality aversion we show that different degrees of inequality aversion are not possible in typical models of time consistent dynamic decision under uncertainty

subgame perfect cooperation in an extensive game abstract we propose a new solution concept for games in extensive form that incorporates both cooperation and subgame perfection from its definition and properties the new solution concept named the subgame perfect core is a refinement of the core of an extensive game in the same sense as the set of subgame perfect nash equilibria is a refinement of the set of nash equilibria to further characterize the subgame perfect core we show that each subgame perfect core payoff vector can be implemented as a non cooperative solution as it is a subgame perfect nash equilibrium payoff vector of an extensive form game that is closely related to the original game we also motivate and introduce a related concept of subgame perfect strong nash equilibrium of an extensive game that is coalition proof

carbon leakage the green paradox and perfect future markets policies of lowering carbon demand may aggravate instead of alleviate climate change green paradox in a two period three country general equilibrium model with finite endowment of fossil fuel one country enforces an emissions cap in the first or second periods when that cap is tightened the extent of carbon leakage depends on the interaction of various parameters and elasticities conditions for the green paradox are specified all determinants of carbon leakage resulting from tightening the first period cap work in the opposite direction when the second period cap is tightened tightening the second period cap does not necessarily lead to the green paradox

a note on clean technology adoption and its influence on tradeable emission permits prices in this paper we give an example in which the price of tradable emission permits increases despite firms adoption of less polluting technology a result that is in contrast with montero j environ econ 44 23 44 2002 and parry j regul econ 14 229 254 1998 among others if two cournot players switch to a cleaner technology the price for permits may increase due to an increase in the net demand for permits and a decrease in the net supply of permits after the clean technology is adopted this is only the case when output demand is quite elastic

substitution between biofuels and fossil fuels is there a green paradox we show that i subsidies for renewable energy policies with the intention of encouraging substitution away from fossil fuels may accentuate climate change damages by hastening fossil fuel extraction and that ii the opposite result holds under some specified conditions we focus on the case of subsidies for renewable resources produced under increasing marginal costs and assume that both the renewable resources and the fossil fuels are currently in use such subsidies have a direct effect and an indirect effect working in opposite directions the direct effect is the reduction in demand for fossil fuels at any given price the indirect effect is the reduction in the current equilibrium price for fossil fuels which tends to increase the amount of fossil fuels demanded whether the sum of the two effects will actually result in an earlier or later date of exhaustion of the stock of fossil fuels depends on the curvature of the demand curve for energy and of the supply curve for the renewable substitute

constraining equitable allocations of tradable co2 emission quotas by acceptability since the signing of the kyoto protocol future commitments are likely to be framed in terms of tradable quotas the discussions on the allocation of the quotas among countries will be based at least partly on rules corresponding to a certain conception of equity for instance allocating quotas in direct proportion to population in relation to gdp or according to past emissions has been advocated taking a long term perspective we compute such allocations of tradable quotas with a dynamic closed loop model the total amount of quotas to be distributed at each period corresponds to the world optimal amount of emissions to be realized at each period we observe that most equitable allocation rules do not make the agreement individually rational for every country along the entire time path we then propose a mechanism which determines allocations of quotas that are as close as possible to any equitable allocation while satisfying individual rationality

tariffs and quotas under dynamic duopolistic competition abstract this paper analyzes tariffs and quotas in a differential game model of duopolistic competition for a homogeneous good equal import tariffs and quotas are compared with respect to resulting domestic prices the open loop and closed loop subgame perfect equilibria are derived the open loop game leads to domestic price equivalence however the closed loop game does not unless firms are myopic or the number of domestic firms becomes large thus we prove that the equivalence for static cournot competition does not carry over to the dynamic case

global refunding and climate change abstract we design a global refunding scheme as a new international approach to address climate change participating in the global refunding system requires an initial payment it allows each country to set its carbon emission tax while aggregate tax revenues are partially refunded to member countries in proportion to the relative emission reductions they achieve within a given period the refunding scheme reduces the intertemporal climate change problem into a static public goods problem in a simple model we show that a suitably designed global refunding scheme achieves the social global optimum provided that all countries participate we discuss several procedures to achieve initial participation

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

transitional restricted linkage between emissions trading schemes linkages between emissions trading systems are deemed an important element of the future climate policy landscape they are however difficult to agree and remain few and far between temporary restrictions on permit trading have potential to facilitate and gradually approach unrestricted full linkage we compare the relative merits of several link restrictions in this respect namely quantitative transfer limits border taxes on transfers exchange and discount rates and unilateral linkage to this end we develop a simple model to have a unifying framework which in conjunction with lessons we draw from real world experiences serves as a basis for a broader policy oriented discussion while quantitative restrictions seem to be the natural route to full linkage they can lead to uncertain distributional effects and weaken price signals these aspects are mitigated under a border permit tax but this policy seems harder to implement exchange rates have potential to adjust for programmes stringencies and raise ambition over time but can be challenging to select as experience corroborates unilateral linkage can be a convenient approach

justifying social discounting the rank discounted utilitarian approach the popular discounted utilitarian criterion for infinite horizon social choice has been criticized on the ground that it treats successive generations unfairly i propose to evaluate intergenerational welfare with a rank discounted utilitarian rdu criterion instead the criterion amounts to discounted utilitarianism on non decreasing paths but it treats all generations impartially discounting becomes the mere expression of intergenerational inequality aversion i show that more inequality averse rdu societies have higher social discount rates when future generations are better off i apply the rdu approach in two benchmark economic growth models and i prove that it promotes sustainable policies maximizing discounted utility

on the equivalence of tariffs and quotas under duopoly abstract the purpose of this paper is to use a conjectural variation approach to examine the equivalence of tariffs and quotas set so as to result in the same equilibrium quantity of imports we have demonstrated that whether tariffs and quotas are equivalent depends crucially upon the particular value of the conjectural variations specifically in the case of equal import tariffs and quotas the equivalence holds only in the cournot case otherwise the domestic price is lower or higher under quotas depending upon whether competition is less or more competitive than cournot

green business and blue angels this paper presents a model of a monopolist svoluntary overcompliance with legal environmentalstandards under asymmetric information about thefirm s environmental impacts the key assumptions are the existence of quality premia for environmentalsoundness a positive but imperfect degree ofmonitoring and adaptive consumer expectations conditions necessary for overcompliance to arise in aprofit maximizing equilibrium are derived the effectsof a third party eco labeling system are analyzed itis shown that the existence of an independent labelingauthority increases the likelihood of overcomplianceto be profit maximizing moreover firms might have anincentive to lobby for the introduction of such asystem the effect of consumers risk preferences andan instrument for preventing greenwash companieslying about their environmental performance is alsodiscussed

indeterminacy and fiscal policies in a growing economy this paper studies the dynamic properties of a standard one sector model of endogenous growth with inelastic labor supply in which capital taxes are used to nance public production and consumption services the government is benevolent and chooses its tax policy by taking into account the decentralized competitive equilibrium within this second best setup we establish conditions for multiple balanced growth paths in conjunction with indeterminacy of transitional dynamics the mechanism for global and local indeterminacy is a simple combination of public production services that provide production externalities to private rms and hence cause a wedge between private and social returns public consumption services that provide direct utility to households and endogenously chosen distorting taxes

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

recursive nash bargaining over a productive asset abstract we propose an equilibrium concept the recursive nash bargaining solution that describes the outcome of repeated negotiations between two rational agents under the assumptions that the state of the economic system under consideration changes according to the actions of the players and that neither party can make binding commitments to future behavior this equilibrium is dynamically consistent but typically not pareto efficient as an application we compute the recursive nash bargaining solution in a model of two heterogeneous agents bargaining over the use of a productive asset with constant gross rate of return and study how the time preference rates and the elasticities of substitution affect the solution

dynamic voluntary provision of public goods abstract the paper considers a dynamic public goods problem in which individuals contributions are accumulated over time analyzing the infinite duration dynamic game with continuous contributions and flow benefits the paper demonstrates that the free riding problem is aggravated when players contributions are conditional on the observable collective contributions hence without commitment an additional incentive to depress contributions arises a current contributor can free ride on all future contributions as well as on current ones

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a dynamic game of waste management abstract the paper studies a differential game of waste management disposal each of three neighbouring regions is endowed with a stock of waste but no additional waste is generated in any region and waste does not decay from natural reasons a region s stock of waste can be reduced only by dumping on its neighbours the model features two externalities a strategic externality caused by the fact that the payoff of a coalition depends on the actions of players outside the coalition and a stock externality caused by the fixed overall amount of waste the game has a finite time horizon and it is shown that intertemporal core theoretic cooperation can be sustained under intuitive conditions

unilateral production restrictions in a dynamic duopoly abstract this paper examines a dynamic game of exploitation of a productive asset by a duopoly a closed loop nash equilibrium of the game is constructed and used to analyze the effects of a unilateral production restriction surprisingly such unilateral action may result in a decrease of the long run asset s stock we also exhibit production restrictions that can result simultaneously in an increase of the asset s stock and the long run profits of the firm that is being imposed the production restriction moreover a unilateral decrease of the production of one firm can induce its rival to also decrease its production

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way