the privatization of electricity distribution in turkey a legal and economic analysis this paper analyzes the recent regulatory reform in the turkish electricity distribution market from a legal and economic perspective we highlight tensions between the judiciary politicians and bureaucracy and discuss their economic consequences the paper engages in a discussion of economic consequences of legal procedures we stress interactions between legal decisions and economic institutions the historical positions of the constitutional court and danistay council of state on privatizations have been ambivalent and it is hard to qualify them as an incentive for privatization and reform despite some recent liberal decisions we address reasons behind their decisions and offer some suggestions toward improving the privatization process

evidence of under investment in energy r d in the united states and the impact of federal policy investments in energy technology research and development r d and in associated human and institutional capacity are fundamental to our ability to respond to changing economic and environmental needs this paper uses data on r d investments and patent records to examine the relationship between expenditures on r d and innovation with a particular focus on the energy sector we observe that r d spending and patents both overall and in the energy sector have been highly correlated over the past two decades in the us in addition we observe that the r d intensity of the us energy sector is extremely low when compared to other sectors we argue that the data illustrates the critical role of public policy as evidenced by the impact of recent technology transfer related legislation on the total number and on the ownership of innovations resulting from federally sponsored r d we conclude that there has been a significant and sustained pattern of under investment in the us energy sector and that recent declines in energy r d exacerbate this situation innovation for the us energy infrastructure is also a significant driver of the international energy economy thus the spillover from us under investment detracts from the global capacity to respond to emerging risks such as global warming

regulating stock externalities under uncertainty abstract using a simple analytical model incorporating benefits of a stock costs of adjusting the stock and uncertainty in costs we uncover several important principles governing the choice of price based policies e g taxes relative to quantity based policies e g tradable permits for controlling stock externalities as in weitzman rev econom stud 41 4 1974 477 the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities with flatter marginal benefits and steeper marginal costs favoring prices but some important adjustments for dynamic effects are necessary including correlation of cost shocks across time discounting stock decay and the rate of benefits growth applied to the problem of greenhouse gases and climate change we find that a price based instrument generates several times the expected net benefits of a quantity instrument

discriminatory dealing with downstream competitors evidence from the cellular industry one concern about regulated monopolies entering unregulated vertically related markets is that they will discriminate against competitors of their unregulated affiliates however prohibiting regulated monopolies from offering related goods may preclude production by the most efficient provider we take advantage of variation across geographic cellular phone markets in the us to examine the effect of integration on output quality and prices we find some evidence consistent with efficiencies greater concentration of lines to users is associated with greater output and higher quality and some consistent with discrimination greater interconnection facility ownership concentration is associated with lower output and quality

terrorism in a bargaining framework a lthough hostage seizures are a small percentage of terrorist incidents they represent some of the most spectacular and influential events 2 the takeover of the american embassy in tehran on november 14 1979 the seizure of eleven dpec oil ministers on december 21 1975 and the capture and killing of nine israeli athletes on september 5 1972 are incidents not easily forgotten from 1968 through 1982 of the approximately 8 000 reported terrorist events 540 7 percent were transna

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

economic growth and climate the carbon dioxide problem in contemplating the future course of economic growth in the west scientists are divided between one group crying wolf and another which denies that species existence one persistent concern has been that man s economic activities would reach a scale where the global climate would be significantly affected unlike many of the wolf cries this one in my opinion should be taken very seriously the present article will first give a brief overview of the climatic implications of economic activity with special reference to carbon dioxide and then will present possible strategies for control a more complete report with references to the literature on climatic change is contained in nordhaus 1976 it is thought that the economic activities which most affect climate are agriculture and energy of these the latter is probably more significant is certainly more easily analyzed and will be discussed here in the energy sector emissions of carbon dioxide particulate matter and heat are of significance for the global climate

incentive based policy design for pollution control and biodiversity conservation a review this paper provides a succinct review of the main developments in the literature on incentive based policy mechanisms in the contexts of pollution control and biodiversity conservation dating from the early beginnings of the science in the 1960s a focal point in the review is on the design features of these policy mechanisms key developments in policy design were originally established in controlling externalities arising from pollution and have since been extended to policy design tailored towards biodiversity conservation special emphasis is given to the spatial characteristics of the environmental problems underlying both pollution control and biodiversity conservation the paper concludes by drawing some lessons and setting out elements of a future research agenda in both policy domains

longitudinal methods to investigate the role of health determinants in the dynamics of income related health inequality the usual starting point for understanding changes in income related health inequality irhi over time has been regression based decomposition procedures for the health concentration index however the reliance on repeated cross sectional analysis for this purpose prevents both the appropriate specification of the health function as a dynamic model and the identification of important determinants of the transition processes underlying irhi changes such as those relating to mortality this paper overcomes these limitations by developing alternative longitudinal procedures to analyse the role of health determinants in driving changes in irhi through both morbidity changes and mortality with our dynamic modelling framework also serving to identify their contribution to long run or structural irhi the approach is illustrated by an empirical analysis of the causes of the increase in irhi in great britain between 1999 and 2004

incentives of carbon dioxide regulation for investment in low carbon electricity technologies in texas abstract this paper compares the incentives a carbon dioxide emissions price creates for investment in low carbon dioxide emitting technologies in the electricity sector we consider the extent to which operational differences across generation technologies particularly nuclear wind and solar photovoltaic create differences in the incentives for new investment which is measured by the operating profits of a potential entrant first astylized model of an electricity system demonstrates that the composition of the existing generation system may cause electricity prices to increase by different amounts over time when a carbon dioxide price is imposed differences in operation across technologies therefore translate to differences in the operating profits of a potential entrant then a detailed simulation model is used to consider a hypothetical carbon dioxide price of 10 50 per metric ton for the electric reliability council of texas ercot market the simulations show that for the range of prices considered the increase in electricity prices is positively correlated with output from a typical wind unit but the correlation is much weaker for nuclear and photovoltaic consequently a carbon dioxide price creates much stronger investment incentives for wind than for nuclear or photovoltaic technologies in the texas market

environmental taxation and unemployment some evidence on the double dividend hypothesis in europe abstract the employment double dividend hypothesis suggests that an appropriately designed fiscal reform in which emission charges are used to subsidize employers social security contributions may realize at least two relevant policy goals a better quality of the environment and at the same time an increase in employment levels this paper uses a newly developed econometric general equilibrium model for the european union as well as for each member country and presents simulation results up to the year 2010 of the effects of a european carbon tax the revenues from which are recycled to reduce employers social security contributions the results show that recycling carbon tax revenues may provide an employment double dividend only in the short run

pricing to preclude sabotage in regulated industries abstract we characterize the optimal access price and retail price for a vertically integrated incumbent supplier v that faces limited competition from a new entrant in the retail sector the optimal prices provide v with a relatively high wholesale profit margin and a relatively low retail profit margin consequently v has no incentive to raise the costs of its retail rival

correlated uncertainty and policy instrument choice abstract for two decades environmental economists have generally maintained that benefit uncertainty is irrelevant for choosing between price and quantity instruments but that cost uncertainty matters with the identity of the efficient instrument depending upon the relative slopes of the marginal benefit and cost functions but in the presence of simultaneous correlated uncertainty such policy instrument recommendations may be inappropriate with plausible values of relevant parameters the conventional identification of a price instrument will be reversed to favor instead a quantity instrument the opposite reversal from the choice of a quantity instrument to a price instrument seems less likely to occur

the dynamics of health in the british household panel survey this paper considers the dynamics of a categorical indicator of self assessed health using eight waves 1991 1998 of the british household panel survey bhps our analysis has three focal points the relative contributions of state dependence and heterogeneity in explaining the dynamics of health the existence and consequences of health related sample attrition and the investigation of the effects of measures of socioeconomic status with a particular focus on educational attainment and income to investigate these issues we use dynamic panel ordered probit models there is clear evidence of health related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health the models show strong positive state dependence and heterogeneity accounts for around 30 of the unexplained variation in health copyright 2004 john wiley sons ltd

a measure of horizontal inequity politicians academicians and the general public alike have perceived that the status quo tax and transfer legislation creates inequities among living units tax laws create numerous situations in which living units with seemingly equal abilities to pay are taxed quite different amounts state by state differences in welfare eligibility rules benefit schedules and administrative procedures the general unavailability of cash welfare to childless nonaged healthy couples and single individuals and other features of transfer programs similarly provide vastly different levels of income support to units with equal needs advocates of major tax and welfare reform have marshalled such evidence into a central argument in favor of their proposals while there is wide agreement that the process of redistributing incomes abounds with inequities there have been few attempts to quantify their extent 2 this paper develops a measure of horizontal inequity and illustrates its use section ii discusses the concept of horizontal equity then builds upon familiar lorenz curve gini coefficient analysis to derive the inequity index the third part considers some problems of implementing the measure and illustrates it section iv provides a short conclusion

contracting with qualified suppliers in an extension of the laffont tirole model a buyer fully qualifies a set of suppliers ex ante and awards production to the most efficient ex post the buyer s incomplete information about production costs biases ex ante market structure in favor of a greater number of qualified suppliers further extensions that allow product differentiation and learning by doing suggest explanations for split production awards and less than fully qualified suppliers it may be difficult to specify ex ante precisely how the assets will be employed in production grossman and hart 1986 once relationship specific assets are in place the characteristics of the transaction and the gains from trade will be determined by ex post contracting between the buyer and the seller a safeguard for the buyer is to contract with more than one potential supplier to invest in the relationship specific assets required for production then after production require ments become clear the buyer can structure a competition between these suppliers for the right to produce this article analyzes when a second sourcing policy is desirable and how the buyer should structure it asanuma s 1989 description of the two vendor policy of automobile manufac turers in japan provides a context for the analysis japanese automobile manufac turers contract out for various kinds of components for example headlamps brakes or steering columns the common practice is to purchase each component from a small and relatively stable group of qualified suppliers with the purposes of assuring supply and of creating competition moreover for a particular part for a particular model there is a tendency for an automobile manufacturer to purchase from a single supplier in the group for the life of the model my understanding from interviews and the trade press is that u s automobile manufacturers also sole source from a select group of qualified suppliers but with

instrument choice for environmental protection when technological innovation is endogenous this paper compares qualitatively and quantitatively the welfare effects of emissions taxes auctioned emissions permits and free grandfathered permits when technological innovation is endogenous we find that there is no unambiguous case for preferring any of these policy instruments the relative welfare ranking of instruments depends on the costs of innovation the extent to which innovations can be imitated the slope and level of the marginal environmental benefit function and the number of polluting firms we illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not

separation of regulators against collusive behavior we show that the separation of powers in regulation may act as a commitment against the threat of regulatory capture splitting regulatory tasks and monitoring technologies among several nonbenevolent regulators may reduce their discretion in engaging in socially wasteful activities when regulators make collusive offers that are accepted by the agent whatever his characteristics competition between regulators relaxes collusion proofness constraints and improves social welfare this result is robust to different specifications of the agent s preferences and to the timing of the game as long as one insists on safe side contracting offers we also discuss how separation affects both allocative efficiency and the distribution of rents in the economy

thank goodness for stickiness unravelling the evolution of income related health inequalities before and after the great recession in europe the great recession in europe sparked concerns that the crisis would lead to increased income related health inequalities irhi did this come to pass and what role if any did government transfers play in the evolution of these inequalities motivated by these questions this paper seeks to i study the evolution of irhi during the crisis and ii decompose these evolutions to examine the separate roles of government versus market transfers using panel data for 7 eu countries from 2004 to 2013 we find no evidence that irhi persistently rose after 2008 even in countries most affected by the crisis our decomposition reveals that while the health of the poorest did indeed worsen during the crisis irhi were prevented from increasing by the relative stickiness of old age pension benefits compared to the market incomes of younger groups austerity measures weakened the irhi reducing effect of government transfers

awarding monopoly franchises the authors analyze how to award a monopoly franchise when the objective is to maximize expected consumers surplus net of transfer payments to the producer potential producers initially possess independent private information about uncertain production costs only the chosen producer subsequently observes realized production costs after awarding the franchise to the producer with the lowest expected costs prices are optimally set above realized marginal cost these ex post distortions foster more competitive bidding ex ante the distortions for any bid cost pair are invariant to the number of bidders n though expected distortions and profits decline with n copyright 1987 by american economic association

how much income mobility is there in britain using the first four waves of the british household panel survey 1991 4 and a variety of methods we show that there is much mobility in household net income from one year to the next in britain however most income changes from one year to the next are not very large and when incomes are longitudinally averaged so that transitory variations are smoothed out substantial permanent income differences are revealed there is some evidence of greater mobility for those in the tails of the income distribution relative to the middle and for elderly persons compared to non elderly persons

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

government intervention in production and incentives theory a review of recent contributions national science foundation the commissariat general du plan and the center for energy policy research at m i t

collaborative mechanism of a sustainable supply chain with environmental constraints and carbon caps abstract negative impacts on environment such as carbon emissions and pollution resulting from the business activities of firms in a supply chain have attracted great attention worldwide hence one of the crucial issues for supply chain management is the trade off between economic objectives and environmental sustainability this paper focuses on investigating the government policy incentive mechanism with which supply chain members are motivated to work collaboratively to reduce carbon and pollutant emissions by investing in producing environmental friendly products efp such a mechanism affects the transfer price through negotiation between the supply chain firms and consequently it has an impact on the supply chain s value transition and profit allocation a collaborative supply chain decision making framework is formulated with environmental constraints and carbon caps its objective is to maximize the net present value of an integrated supply chain as well as satisfy the interests of its individual members our key contribution lies in exploring a decision making mechanism for an environmentally sustainable supply chain that is jointly constrained by environmental carrying capacities and carbon caps and also takes into account government policy incentives the results show that collaboration between supply chain members plays a crucial role in improving their environmental performance as the transfer price is determined through negotiations to share government subsidies to satisfy the individual interests of supply chain members while the level of pollutants and carbon emissions are in compliance with environmental standards

the timing of taxes on co2 emissions when technological change is endogenous abstract how do technology spillovers affect the relationship between emissions taxes and technological change without spillovers a regulator applies pigovian taxes which lead to a first best optimum optimal emissions and optimal technology investment given spillovers pigovian taxes are likely to be second best optimal if emissions saving technology and production technology are equally undersupplied raising taxes above the pigovian level boosts emissions saving investment but only at the expense of production investment the technologies are equally undersupplied when there is a degree of symmetry between the sectors and the economy is on a balanced growth path on a transition path with rising atmospheric stocks and a high level of investment in emissions saving technology a regulator may raise carbon taxes above the pigovian level in order to encourage investment in emissions saving technology at the expense of production technology i show this using both analytical and numerical results

prices versus quantities versus hybrids in the presence of co pollutants we investigate the optimal regulation of a pollutant given its abatement interaction with another pollutant under asymmetric information about firms abatement costs we take a policy relevant second best approach by assuming that the co pollutant is regulated exogenously but perhaps not efficiently our focus is on optimal policy choice in this setting and we derive rules for determining whether a pollutant should be regulated with an emissions tax an emissions market or a market with price controls given the regulation of its co pollutant we find that the policy choice for a pollutant is unaffected by its interaction with a co pollutant that is controlled with a fixed number of tradable permits because changes in emissions of the primary pollutant do not affect aggregate emissions of the co pollutant however when a co pollutant is controlled with a tax the policy choice for the primary pollutant must account for its effect on expected co pollutant damage through changes in the variance of co pollutant emissions consequently standard conclusions about the environmental policy choice problem must be modified in this case our results have important implications for designing policies for greenhouse gases under uncertainty

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the problem of the commons still unsettled after 100 years the problem of the commons is more important to our lives and thus more central to economics than a century ago when katharine coman led off the first issue of the american economic review as the us and other economies have grown the carrying capacity of the planet in regard to natural resources and environmental quality has become a greater concern particularly for commonproperty and open access resources the focus of this article is on some important unsettled problems of the commons within the realm of natural resources there are special challenges associated with renewable resources which are frequently characterized by open access an important example is the degradation of openaccess fisheries critical commons problems are also associated with environmental quality a key contribution of economics has been the development of market based approaches to environmental protection these instruments are key to addressing the ultimate commons problem of the twenty first century global climate change jel q15 q21 q22 q25 q54

price controls and banking in emissions trading an experimental evaluation we present results from laboratory emissions markets designed to investigate the effects of price controls and permit banking on limiting permit price risk while both instruments reduce between period price volatility and within period price dispersion combining price controls and permit banking yields important benefits banking alone produces high permit prices in earlier periods that fall over time but the combined policy produces lower initial prices and lower volatility however banking price controls and the combination all produce higher between period emissions volatility hence for emissions markets that seek to control flow pollutants with strictly convex damages efforts to limit permit price risk can result in higher expected damage

decarbonising the power sector via technological change differing contributions from heterogeneous firms abstract in the power sector technological change is a key lever to address the decarbonisation needed to avoid dangerous climate change policy makers aim to accelerate and redirect technological change by targeting relevant firms via climate policy e g the european union emissions trading system eu ets and climate relevant technology policies e g feed in tariffs changes in firm s behaviour i e their research and development r d as well as diffusion activities are at the heart of technological change however firms are heterogeneous actors with varying attributes which perceive policy differently hence they can be expected to react very heterogeneously to these new policies based on an original dataset of 201 firms we perform a cluster analysis grouping firms along their r d and diffusion activity changes we then compare these clusters with regards to the characteristics of the contained firms our analysis results in seven clusters showing very diverse contributions to low carbon technological change suggesting potential for policy to become more effective a comparison of the firms characteristics allows us to derive indicative recommendations on how to adjust the policy mix in order to induce contributions from most firms in the power sector

pricing regulation under bypass competition we analyze optimal pricing policies in local telecommunications subject to bypass for the access of long distance carriers we first consider the case of a regulated monopoly that operates the local network and has access to an additional technology bypass more efficient for large customers we then study how competition in bypass affects the optimal nonlinear pricing policy and the resulting allocation when transfers are allowed between the regulator and the network operator bypass competition benefits consumers at the expense of the taxpayer otherwise it benefits large consumers but hurts small ones

a competitive carbon emissions scheme with hybrid fiscal incentives the evidence from a taxi industry abstract as two major approaches to reduce carbon emissions command and control instruments and market based carbon trading systems have their own weaknesses our paper first proposes a type of endogenous equilibrium methodology to dynamically derive the industrial carbon emissions standards at the equilibrium the sum of all carbon assets and liabilities is zero in the considered industry moreover the standards fall over time with low carbon technological advance most importantly combining pigou s and coase s ideas we construct a fiscal instrument accounting for both carbon taxes and allowances based on the dynamically improved emissions standards and carbon trading prices this no revenue for government method implements a self operated ecology for carbon trading market finally considering the waterloo recession of carbon prices we introduce an adjustment factor into the model which generates a negative feedback mechanism with carbon prices to support our idea we present the application to beijing taxi industry in detail and raise relative policy implications based on the evidence

designing a private industry government auctions with endogenous market structure abstract this paper considers government mechanisms for auctioning production rights in which both the winners and the market structure doupoly dual sourcing monopoly sole sourcing or government owned production are a function of the bids in designing the optimal mechanism the government considers the tradeoffs among consumer surplus producer surplus and revenue under incomplete information doupoly is implemented less frequently and government production more frequently than under complete information when bidders are symmetric the optimal mechanism can be implemented as a modified second price auction applications to privatization deregulation and defense procurement are discussed

the new economics of regulation ten years after the new economics of regulation is an application of the principal agent methodology to the contractual relationship between regulators and regulated firms after a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed a survey of the main results obtained in the new economics of regulation is then provided in particular concerning the implementation of optimal contracts by a menu of linear contracts the dichotomy between pricing and cost reimbursement rules the auctioning of incentive contracts the dynamics of contracting under limited commitment and the hierarchical problems in regulation empirical implications are then discussed and avenues of further research are described in the conclusion

access pricing and competition abstract in many industries electricity telecommunications railways the network can be described as a natural monopoly a central issue is how to combine the necessary regulation of the network with the organization of competition in activities which use the network as an input and are potentially competitive generation of electricity value added services road transportation in this paper we derive access pricing formulas in the framework of an optimal regulation under incomplete information first we study how access pricing formulas take into account the fixed costs of the network and the incentive constraints of the natural monopoly over the network second we examine the difficulties coming from the accounting impossibility to disentangle costs of the network and costs of the monopoly s competitive goods third the analysis is extended to the cases where governmental transfers are prohibited where the competitors have market power and where competitors are not regulated fourth the possibility some consumers bypass the network is taken into account finally the role of access pricing for inducing the best market structure is assessed the conclusion summarizes our results and suggests avenues of further research

a framework to compare environmental policies 1 introduction to analyze environmental policy proposals it is important to determine the conditions under which some policies might work better than others when will a pollution tax work better than the sale of permits or some other alternative which is easier to administer or to enforce does one policy apply better to some kinds of pollutants than to others which policy has a greater chance of getting enacted this paper provides a framework to compare alternative policies for each pollutant in each context one policy may be more efficient while others better account for competing objectives like administrative efficiency political feasibility and fairness using this framework the paper will analyze and compare eight types of policies clearly no single policy instrument will work best in all cases under some circumstances command and control cac instruments might be necessary in either of two forms i emission restrictions sometimes called performance standards or ii technology restrictions that might be called design standards if emissions are difficult or impossible to measure for example then the authorities can at least enforce rules that require the proper installation of the required pollution control equipment such as a flue gas desulfurization unit scrubber on every electric power plant or a catalytic converter on every automobile in other cases that are important to identify these cac instruments can be replaced by incentive instruments such as taxes subsidies or permits as suggested by pigou 1932 the pollution problem could be addressed by i taxes on the pollution or ii subsidies to abatement a pigouvian tax applies to the pollutant itself rather than to output at a rate equal to the pollutant s marginal environmental damages med the term incentive instruments includes both the pigouvian tax and the subsidy to abatement and it includes two other policies that involve permits such as those traded by electric utilities under the clean air act amendments of 1990 those permits could be i grandfathered or handed out to existing firms in proportion to past emissions or ii sold at auction by the government a simple analytical model is used below to demonstrate conditions under which the pigouvian tax is equivalent to a government sale of permits much of the environmental economics literature finds that the use of incentives is more cost effective than cac restrictions with imperfect information the regulatory authorities may or may not know what is the cheapest form of abatement technology thus cac regulations may require technology that is more expensive than necessary with a tax or a price per unit of emissions however each firm has incentives to find and to undertake any form of abatement that is cheaper than buying a permit since only the cheapest forms of abatement are undertaken these incentive policies can minimize the total cost of achieving any given level of pollution protection so far this cost effectiveness argument does not distinguish between taxes subsidies permits that are handed out or permits sold at auction yet the handout of permits does not raise any revenue thus a new literature in environmental economics concentrates on a distinction between policies that raise revenue like a tax on pollution or the sale of permits as opposed to polices that do not raise revenue like the handout of permits or a cac restriction on emissions 2 the model below will be used to reflect on this distinction as well so far i have listed two cac policies two pigouvian solutions and two versions of a permit policy yet in some cases with well defined property rights even with pollution coase 1960 shows how the private market can still achieve economic efficiency on its own government does not need to intervene at all except perhaps to help enforce property rights through a court system

combining price and quantity controls to mitigate global climate change abstract uncertainty about compliance costs causes otherwise equivalent price and quantity controls to behave differently and leads to divergent welfare consequences although most of the debate on global climate change policy has focused on quantity controls due to their political appeal this paper argues that price controls are more efficient simulations based on a stochastic computable general equilibrium model indicate that the expected welfare gain from the optimal price policy is five times higher than the expected gain from the optimal quantity policy an alternative hybrid policy combines both the political appeal of quantity controls with the efficiency of prices using an initial distribution of tradeable permits to set a quantitative target but allowing additional permits to be purchased at a fixed trigger price even sub optimal hybrid policies offer dramatic efficiency improvements over otherwise standard quantity controls for example a 50 trigger price per ton of carbon converts the 3 trillion expected loss associated with a simple 1990 emission target to a 150 billion gain these results suggest that a hybrid policy is an attractive alternative to either a pure price or quantity system

technologies energy systems and the timing of co2 emissions abatement an overview of economic issues abstract this paper provides an overview of economic issues involved in timing limitations on co2 emissions from energy systems it highlights issues relating to technology availability development and diffusion and the inertia of energy systems as being particularly important the paper sets this in the context of wider uncertainties surrounding the problem and briefly considers other aspects relevant to timing the paper is stimulated by the debate in the usa about optimal abatement paths in particular recent claims that it would be economically preferable to defer such abatement action in favour of measures that support technology development but do not affect emission trends for many years this paper categorizes the various economic issues involved and concludes that for each economic argument that has been advanced to justify deferring emission constraints there are counter vailing economic arguments that could be used in support of rapid near term emissions abatement rational policy lies between these extremes a policy of deferring all emissions abatement exposes economic systems and industries as well as the environment to significantly greater costs and risks than those arising from a more balanced approach furthermore the modelling studies that have been used to justify deferring emissions abatement do so because they embody the economic factors favourable to delay and largely neglect the countervailing issues to the point where their results have little relevance to the overall problem of timing emissions abatement

carbon markets and technological innovation this paper examines the effects of firm level innovation in carbon abatement technologies on optimal cap and trade schemes with and without price controls we characterize optimal cap and trade regulation with a price cap and a price floor and compare it to the special cases of pure taxation and a simple emissions cap innovation shifts the tradeoff between price and quantity based instruments towards quantitybased emissions trading schemes more specifically an increase in innovation effectiveness lowers the optimal emissions cap and leads to relaxed price controls unless the slope of the marginal environmental damage curve is small because of the decrease in the emissions cap innovation in abatement technologies can lead to a higher expected carbon price so as to provide sufficient incentives for private r d investments the expected carbon price decreases once innovative technologies are widely used

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

soft and hard price collars in a cap and trade system a comparative analysis we use a stochastic dynamic framework to compare price collars price ceilings and floors in a cap and trade system with uncertainty in the level of baseline emissions and costs we consider soft collars which provide limited volume of additional emission allowances a reserve at the price ceiling and hard collars which provide an unlimited supply of additional allowances thereby preventing allowance prices from exceeding the price ceiling conversely allowances are removed from the market if prices fall to the floor we find that increasing the size of the reserve strictly lowers expected net present values of compliance costs however there is a diminishing effect as the allowance reserve is expanded most of the expected cost savings are achieved with a modest reserve consequently a rather limited soft price collar could provide considerable assurance about cost while preventing the possibility that emissions could spiral out of control

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

enforcement and price controls in emissions trading this paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms abatement costs the analysis highlights how an enforcement strategy can cause abatement cost risk to be transmitted to enforcement costs via the price of permits when this occurs accommodating the effect of abatement cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second best optimal values however it is possible to design an enforcement strategy that shields enforcement costs from abatement cost risk by tying sanctions directly to permit prices this enforcement strategy stabilizes enforcement effort the optimal permit supply and price controls are independent of enforcement costs and the policy produces the second best optimal outcome

optimal bypass and cream skimming this paper develops a normative model of regulatory policy toward bypass and cream skimming it analyzes the effects of bypass on second degree price discrimination on the rent of the regulated firm and on the welfare of low demand customers it shows that pricing under marginal cost may be optimal for the regulated firm excessive cream skimming occurs if access to the bypass technology is not regulated and the prohibition of bypass may increase or decrease the regulated firm s rent jel 026 613 the regulation of natural monopolies is often associated with policies toward competition including restrictions on entry this paper is concerned with a common form of competition which threatens the regulated firm on its most lucrative markets examples abound in the telecommunications industry the development of microwave radio and communication satellites in the 1960 s introduced the possibility that big telecommunication customers might bypass the major common carrier att and the 1978 natural gas policy act in the united states has created the possibility for industrial plants to bypass the local distribution utilities by building direct connections to the pipelines gas producers or intermediaries

prices versus quantities with incomplete enforcement abstract i study whether incomplete enforcement of a regulation has any impact on the choice between price e g taxes and quantity e g tradeable quotas instruments results indicate that a second best design accounting for incomplete enforcement can be implemented equally well with either instrument as long as the benefit and cost curves are known with certainty if these curves are uncertain to the regulator however the quantity instrument performs relatively better than the price instrument the reason is that the effective amount of control under the quantity instrument is no longer fixed which makes this instrument come closer to a non linear instrument

optimal incentive contracts with multiple agents abstract a setting in which a single principal contracts with two agents who possess perfect private information about their own productivity is considered with correlated productivities each agent s private information also provides a signal about the other agent s productivity in contrast to the setting in which there is only one agent it is shown that such private information may be of no value to the agents it is only if the agents are risk averse that their private information may allow them to command rents moreover when the agents are constrained only to reveal their private information truthfully as a nash equilibrium the pareto optimal incentive scheme may induce the agents to adopt strategies other than truth telling this leads to the consideration of truth telling equilibria that are not pareto dominated in the subgame played by the agents among all such equilibria the one preferred by the principal restricts one agent to tell the truth as a dominant strategy and the other as a nash response to truth

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

the role of economics in climate change policy many policy problems have frustratingly long histories of inefficient regulation that can be difficult or impossible to reverse even where large efficiency gains might be had from doing so climate change is an exception however because little real action has been undertaken to date it presents an unusual opportunity for an efficient economic policy to be employed right from the beginning however the opportunity could easily be lost ongoing negotiations conducted under the auspices of the united nations framework convention on climate change have so far produced the kyoto protocol a deeply flawed agreement that manages to be both economically inefficient and politically impractical in this article we examine the key economic characteristics of climate change and argue that economic theory provides good guidance on the design of an efficient and politically realistic policy because climate change involves vast uncertainties and has potentially enormous distributional effects neither of the standard market based environmental policy instruments is a viable approach a tradable permit system would be inefficient and an emissions tax would be politically unrealistic however a hybrid policy combining the best features of the two would be an efficient and practical approach we then compare our hybrid proposal to the kyoto protocol and argue that it overcomes the protocol s shortcomings

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

incentives for advanced pollution abatement technology at the industry level an evaluation of policy alternatives abstract in this research we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry from most to least incentive the policy instruments can be rank ordered as follows i auctioned permits ii emissions taxes and subsidies iii issued marketable permits iv performance standards including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive based instruments with the starting point normalized in this fashion the instrument rankings are invariant with respect to the size of firms the size of the industry or the industry s abatement cost structure

on a fundamental advantage of permits over taxes for the control of pollution we extend the tax versus permits literature by considering permit supply functions and pollution tax functions that are generalizations of the usual constant permit supply and constant pollution tax rate in our model pollution is not uniformly mixed and the regulator is uncertain about the polluting firms abatement costs we determine the optimal permit supply functions and the optimal pollution tax functions using these functions we show that permits lead unambiguously to lower total expected costs than taxes we analyze the magnitude of this difference for a simple model of climate change by relating the optimal permit supply functions to weitzman am econ rev 68 683 691 1978 we provide a new interpretation of his results

repeated auctions of incentive contracts investment and bidding parity with an application to takeovers this article considers a two period model of natural monopoly and second sourcing the incumbent supplier invests in the first period after observing the incumbent s first period performance the buyer may break out in the second period the investment may or may not be transferable to the second source and it may be monetary or take the form of human capital we determine whether the incumbent should be favored at the reprocurement stage and how the slope of his incentive scheme should evolve over time we find that the gains from second sourcing are not so large as one might hope finally we reinterpret the second source as a raider and the breakout as a takeover we discuss the desirability of defensive tactics and obtain a rich set of testable implications concerning the size of managerial stock options the extent of defensive tactics the firm s performance and the probability of a takeover

persistence in health limitations a european comparative analysis this paper investigates the persistence in health limitations for individuals within the member states of the european union we use the full eight waves of data available in the european community household panel echp to explore the relative contributions of state dependence unobserved heterogeneity and socioeconomic characteristics in particular income education and activity status and how these vary across countries we focus on binary measures of health limitations constructed from the answers to the question are you hampered in your daily activities by any physical or mental health problem illness or disability dynamic non linear panel data models are specified and estimated using both pooled and random effects probit and logit models together with complementary log log models the random effects probit specifications are preferred results reveal high state dependence of health limitations which remains after controlling for measures of socioeconomic status there is heterogeneity in the socioeconomic gradient across countries

a note on correlated uncertainty and hybrid environmental policies this note examines the effects of correlated uncertainty between abatement costs and pollution damage on hybrid emissions control policies in particular i show how correlated uncertainty affects the structure and performance of control policies that combine permit trading with price controls moreover i show how correlated uncertainty affects the choice between a simple emissions tax versus a hybrid policy under correlated uncertainty constant marginal damage is no longer necessary or sufficient for a tax to be an optimal policy

optimal procurement mechanisms we analyze optimal mechanisms in environments where sellers are privately informed about quality a methodology is provided for deriving conditions that are necessary and sufficient to determine when two simple trading environments maximize either social or private surplus the commonly used auction mechanism is frequently inefficient in procurement environments often the optimal mechanism is simply to order potential suppliers and to tender take it or leave it offers to each sequentially we completely characterize the environments in which either mechanism is optimal in doing so we develop a general methodology that determines when and if a given trading institution is optimal

the value allocation of an economy with differential information we analyze the shapley value allocation of an economy with differential information since the intent of the shapley value is to measure the sum of the expected marginal contributions made by an agent to any coalition that he she belongs to the value allocation of an economy with differential information provides an interesting way to measure the information advantage of an agent this feature of the shapley value allocation is not necessarily shared by the rational expectation equilibrium thus we analyze the informational structure of an economy with differential information from a different and new viewpoint

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

rising inequalities in income and health in china who is left behind during the last decades china has experienced double digit economic growth rates and rising inequality this paper implements a new decomposition on the china health and nutrition panel survey 1991 2006 to examine the extent to which changes in level and distribution of incomes and in income mobility are related to health disparities between rich and poor we find that health disparities in china relate to rising income inequality and in particular to the adverse health and income experience of older wo men but not to the growth rate of average incomes over the last decades these findings suggest that replacement incomes and pensions at older ages may be one of the most important policy levers in combating health disparities between rich and poor chinese

network interconnection in telecommunications this paper discusses industries such as telecommunications where firms each have their own customers and must interconnect with other firms to provide a comprehensive service two scenarios are considered i the case of a symmetric unregulated industry and ii the case of an industry with a dominant regulated incumbent in the first provided there is sufficient product differentiation it is shown that firms agree to set interconnection charges above associated costs in order to obtain the joint profit maximising outcome in the second a formula for the welfare maximizing interconnection charge is derived relations with the efficient component pricing rule are discussed

dynamic efficiency in experimental emissions trading markets with investment uncertainty this study employs a laboratory experiment to assess the performance of tradable permit markets on dynamic efficiency arising from cost reducing investment the permit allocation rule is the main treatment variable with permits being fully auctioned or grandfathered the experimental results show significant investment under both allocation rules in the presence of ex ante uncertainty over the actual investment outcome however auctioning permits generally provides stronger incentives to invest in r d leading to greater dynamic efficiency compared to grandfathering

longitudinal analysis of income related health inequality this paper considers the characterisation and measurement of income related health inequality using longitudinal data the paper elucidates the nature of the jones and lopez nicolas 2004 index of health related income mobility and explains the negative values of the index that have been reported in all the empirical applications to date the paper further presents an alternative approach to the analysis of longitudinal data that brings out complementary aspects of the evolution of income related health inequalities over time in particular we propose a new index of income related health mobility that measures whether the pattern of health changes is biased in favour of those with initially high or low incomes we illustrate our work by investigating mobility in the general health questionnaire measure of psychological well being over the first nine waves of the british household panel survey from 1991 to 1999

the damage costs of climate change toward more comprehensive calculations it is argued that estimating the damage costs of a certain benchmark climate change is not sufficient what is needed are cost functions and confidence intervals although these are contained in the integrated models and their technical manuals this paper brings them into the open in order to stimulate discussion after briefly reviewing the benchmark climate change damage costs region specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate furthermore cost functions are assumed to be quadratic as an approximation of the unknown but presumably convex functions results from the damage module of the integrated climate economy model fund are presented next uncertainties are incorporated and expected damages are calculated it is shown that because of convex loss functions and right skewed uncertain ties the risk premium is substantial calling for more action than analysis based on best guess estimates the final section explores some needs for further scientific research

diversification incentives under price based and cost based regulation this article considers two schemes of regulationforfirms that serve both monopoly markets and markets subjected to substantial competition the first form cost based regulation combines elements of rate of return regulation on monopoly markets with filly distributed cost pricing much like the form of regulation currently in place in the domestic telephone industry the secondform price based regulation would establish rate caps on noncompetitive services and allow the firm to enter into competitive markets and charge whatever prices it might like in those markets models of both forms of regulation are developed and analyzed with respect to incentives for cost misreporting choice of technology cost reducing innovation choices of prices and output levels and diversification into competitive markets

revolving doors and the optimal tolerance for agency collusion in this article i study how the presence of a revolving door and potential collusion between a regulator and a regulated firm affect the regulator s performance incentives contrary to the conventional wisdom these seemingly undesirable features of the regulatory system may serve the interests of the government because i the regulator s efforts to enhance her industry qualifications may have a complementary effect on her regulatory performance and ii the regulator may become more aggressive in regulation so as to signal her industry qualifications to the firm collusion between a regulator and a firm also can be beneficial because a regulator may increase her monitoring effort in order to increase the chance of achieving a profitable side contract with the firm and side contracting may not always succeed

absolute income relative income income inequality and mortality we test whether mortality is related to individual income mean community income and community income inequality controlling for initial health status and personal characteristics the analysis is based on a random sample from the adult swedish population of more than 40 000 individuals who were followed up for 10 17 years we find that mortality decreases significantly as individual income increases for mean community income and community income inequality we cannot however reject the null hypothesis of no effect on mortality this result is stable with respect to a number of measurement and specification issues explored in an extensive sensitivity analysis

renegotiation design with multiple regulators abstract one striking feature of the internal organization of governments is the existence of multiple regulators this paper explains this organizational choice as coming from the government s limited ability to commit the separation of powers between two regulators is modeled as a stackelberg common agency game with respect to the case of a single regulator the allocative efficiency and the regulated firm s informational rent are both reduced in the unique equilibrium of this game however when regulators have a limited ability to commit this static cost of regulators separation becomes a dynamic benefit separation makes renegotiation harder and improves commitment journal of economic literature classification numbers d82 l51

price dynamics in the european union emissions trading system and evaluation of its ability to boost emission related investment decisions abstract the price of permits in the european union emissions trading system eu ets has historically been highly sensitive and prone to jumps we consider different stochastic processes to model the price of permits and show that the variance gamma vg model provides the best fit for the price distribution among a selection of infinite activity processes using this result as a starting point we assess the effects of the eu ets in delivering low carbon investments at the firm level by modeling a price taker electricity producer subject to the eu ets jurisdiction we compute via least squares monte carlo the value of the real option the greenhouse gas emitter has consisting in the opportunity to switch from its current high carbon technology to a cleaner one we use a vg specification for carbon prices and a mean reverting brennan schwartz process for the price of fuel moreover we further analyze the investment decision problem in case of a co 2 price stabilization mechanism in the form of a price floor by explicitly computing the expected value of the investment project by means of fourier methods our results show that the introduction of the price stabilization mechanism significantly affects the timing of the investment decision and supports emission related investments