linking permit markets multilaterally we formally study the determinants magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets we provide two novel decomposition results for these gains characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed using the paris agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking we quantify the efficiency gains we find that the computed gains can be sizable and are split roughly equally between effort and risk sharing

bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

trading for the future signaling in permit markets abstract permit markets are celebrated as a policy instrument since they allow i firms to equalize marginal costs through trade and ii the regulator to distribute the burden in a politically desirable way these two concerns however may conflict in a dynamic setting anticipating the regulator s future desire to give more permits to firms that appear to need them firms purchase permits to signal their need this raises the price above marginal costs and the market becomes inefficient if the social cost of pollution is high and the government intervenes frequently in the market the distortions are greater than the gains from trade and non tradable permits are better the analysis helps to understand permit markets and how they should be designed

country size and the medium term growth process some cross country evidence abstract this paper summarizes the findings of an empirical study of the influence of country size and remoteness on the sources of growth and nature of the growth process in industrializing countries various hypotheses were investigated in the study in the context of a model of disequilibrium growth which allows for technological spillover between sectors and between countries the model was estimated for a large sample of developing economies for 1973 1985 the stability of the model s parameters for various dimensions of size and remoteness was tested evidence of significant structural breaks permitted inferences to be drawn about how the nature and extent of technological spillovers are influenced by country size this paper reports on the results and implications of the empirical tests

industrialisation catching up and economic growth a comparative study across the world s capitalist economies various hypotheses are examined seeking to explain inter country convergence at the upper end but divergence at the lower end of the world income rankings a model of disequilibrium growth with sector specific technological progress and spillover is developed and then estimated on two samples of capitalist economies 1960 85 it is found that the degree of disequilibrium between agriculture and industry is greatest in the least developed economies but their rate of labor transfer has been slow technological spillover has stimulated productivity growth in less developed agricultural sectors but not in the industrial sectors of the least developed economies copyright 1991 by royal economic society

small states small problems income growth and volatility in small states abstract small states have attracted a large amount of research in this paper we test whether small states are any different from other states in terms of their income growth and volatility outcomes we find that controlling for location small states have higher per capita gdp than other states this income advantage is largely due to a productivity advantage constituting evidence against the idea that small states suffer from an inability to exploit increasing returns to scale small states also do not have different per capita growth rates than other states small states do have greater volatility of annual growth rates which is in part due to their greater volatility of terms of trade shocks this terms of trade based volatility is in turn due to small states greater openness their greater openness on balance has however a positive net payoff for growth the one differential policy measure that might be relevant for small states is to further open up to international capital markets in order to better diversify risk but the benefits of even that are still unresolved in the literature we conclude that small states are no different from large states and so should receive the same policy advice that large states do

does the specialist matter differential execution costs and intersecurity subsidization on the new york stock exchange this article tests for differences in execution costs among specialist firms for new york stock exchange listed securities execution cost differences provide a measure of the relative performance of specialist firms we find a substantial difference in effective spreads and order processing costs across specialist firms controlling for stock characteristics while economically significant the differences in execution costs between specialist firms are much smaller than the cross market differences reported by huang and stoll 1996 within a specialist firm there is a positive relation between order processing costs and trading activity that is consistent with the hypothesis that active stocks subsidize inactive stocks this article investigates whether differential execution costs exist across new york stock exchange nyse specialist firms and among stocks traded by the same specialist firm execution costs are paid by investors when completing a trade and are separate from the commission costs paid to a broker execution costs arise from the bid ask spread and the price impact of an investor s order on the future bid ask quote stoll 1985 shows that a transactionally efficient financial market which minimizes execution costs also minimizes the deviation in transaction prices from the true price of the underlying security evidence of differential execution costs for similar securities can be used to identify high cost and low cost liquidity providers on the nyse furthermore differential execution costs among stocks traded by the same specialist firm provide evidence consistent with a subsidy from actively traded to inactively traded stocks

an emission saved is an emission earned an empirical study of emission banking for light duty vehicle manufacturers abstract this paper presents results of an empirical study of emission banking for light duty vehicle manufacturers an intertemporal model of manufacturers choices is combined with econometrically estimated abatement cost functions to simulate the cost savings and emission effects of an averaging trading and banking marketable permit system relative to command and control regulations while the cost savings of such a system are estimated to be modest the intertemporal emission effects may be sizable the sensitivity of the results to discount rates abatement cost functions and model specifications is also explored

terminating links between emission trading programs abstract links between emission trading programs are not immutable as highlighted by new jersey s exit from the regional greenhouse gas initiative in 2011 this raises the question of what to do with existing permits that are banked for future use choices that have consequences for market behavior in advance of or upon speculation about delinking we consider two delinking policies one differentiates banked permits by origin the other treats banked permits the same we describe the price behavior and relative cost effectiveness of each policy treating permits differently generally leads to higher costs and may lead to price divergence even with only speculation about delinking

manufacturing exports economic growth and the current account in a small island economy simulation results from an econometric model for cyprus abstract the paper provides some background information about economic conditions in cyprus and presents a dynamic econometric model for this economy the model is estimated using the three stage least squares method a number of simulation exercises designed to uncover the dynamic multipliers in the economy of cyprus are performed the main finding of this paper is that manufacturing exports seem to provide a very small impetus to economic growth and have only a marginal beneficial influence on the current account balance both results can in fact be ascribed to the narrow resource base of a small island economy this is reflected in the high import content of manufactured products since raw materials and machinery required for the production of these goods are usually imported as a result the strategy of diversification through the support of manufacturing seems to be one with doubtful economic benefits

cost raising strategies advantage rivals by raising their costs in this paper we show that strategies designed to raise rivals costs have a number of advantages over predatory pricing they are credible do not necessarily require the victim to exit and do not necessarily require the existence of classical market power the paper sets up a general model proves a number of general results and then applies the model to specific strategies involving overbuying inputs and vertical integration

the economics of pollution permit banking in the context of title iv of the 1990 clean air act amendments abstract this paper presents a model of the collective emission permit banking behavior of electricity generating units affected by title iv of the clean air act amendments of 1990 a rigorous treatment of the constraint that pollution permits cannot be borrowed from future allocations is introduced this approach enables an analysis of the impact of future changes in electricity demand regulations and technologies on the present permit price and emissions level the effect of uncertainty on the banking behavior is also explored

politics matters regulatory events as catalysts for price formation under cap and trade this paper investigates how the political process of making cap adjustments has shaped market outcomes in the world s largest cap and trade system the eu ets capitalizing on an event study method that incorporates an econometric technique designed to handle parameter instability and model uncertainty we assess the news implied price response to 29 hand collected announcements about the eu ets supply schedule our findings document a high market responsiveness to political events and reveal how market participants view the evolution of cap stringency in the light of a particular announcement we provide evidence that a sequence of strong event induced price drops evolve in the backloading decision process which is consistent with the interpretation that market participant s confidence in the political support for reform and probably the eu ets in general has been unsettled we also document positive price reactions to the 2020 and 2030 policy packages but not the 2050 roadmaps

quotes order flow and price discovery the goal of this article is to examine the impact of 1975 congressional mandate to integrate the trading of nyse listed stocks the conclusions are most of the time the new york stock exchange nyse quote matches or determines the best displayed quote and the nyse is the most frequent initiator of quote changes non nyse markets attract a significant portion of their volume when they are posting inferior bids or offers indicating they obtain order flow for other reasons such as payment for order flow yet when a non nyse market does post a better bid or offer it does attract additional order flow

sustainable development in small island developing states agricultural intensification economic development and freshwater resources management on the coral atoll of tongatapu small island developing states sids are vulnerable due to their small size in both biophysical and socio economic senses they are increasingly confronted with the environmental consequences through utilisation of their fragile natural resources for economic development here we illustrate the dilemmas experienced by sids associated with sustainable economic development our focus is the main island of the kingdom of tonga tongatapu located in the south pacific ocean we analyse the intensification of agriculture and the attendant pressures on the islands freshwater resources we combine environmental and economic data tongatapu 256 km 2 is a raised coral atoll and the freshwater resources exist as lenses that float on top of denser salt water underneath the island since 1987 tonga has exported squash pumpkin solely to japan over the last 10 years these exports have accounted for more then 40 of total export earnings and represent 60 to 70 of gdp derived from agricultural export this increase in exports is matched by an abrupt increase in the import and usage of agricultural chemicals the island s freshwater lenses are increasingly under pressure from agricultural intensification in the economic decision process environmental impacts are not taken into account this is partly because of overlapping institutional responsibilities of water management and opaque institutional structures which are highlighted in the paper the environmental consequences experienced by sids in terms of primary production stresses the need of taking natural capital into account when the benefits from international trade are evaluated at the same time pollution will result in irrecoverable losses in terms of tourist potential improved agricultural practices have to be implemented through educational tools to ensure continuing economic prosperity derived from agricultural exports economic development of sids should also focus on the maintenance of kin relationships overseas securing rent incomes and regional cooperative development efforts c 2006 elsevier b v all rights reserved

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

third market broker dealers cost competitors or cream skimmers this article compares the bid ask spread for new york stock exchange nyse listed securities before and after a major third market broker dealer bernard l madoff investment securities madoff begins to selectively purchase and execute orders in those securities tests reveal the quoted bid ask spread tightens when madoff enters the market furthermore trading costs as measured by the difference between the transaction price and the midpoint of the contemporaneous bid ask spread do not increase together these results suggest that the adverse selection problem associated with allowing agents to selectively execute orders in exchange listed securities may be economically insignificant

carbon pricing and system linking lessons from the new zealand emissions trading scheme abstract textbook theory of linking carbon systems suggests linking reduces marginal abatement costs contrasting theoretical work and policy analyses suggests that linking or at least unfettered linking may not always be beneficial the new zealand emissions trading scheme nz ets is unique in that until 2013 it allowed unlimited use of kyoto allowances nz ets thus provides an ideal context to explore the effect of linking and linking restrictions on carbon pricing of small systems using data on importation and exportation of allowances we provide the first empirical analysis of the determinants of allowance prices in the early phase of the nz ets our results indicate that imports of offsets rather than fundamentals have been the major price determinant moreover the pricing of new zealand units nzus can be placed into three distinct periods delineated by two structural breaks in the first period the system is largely autarkic in the second period as international offset prices drop below the nzu price the system becomes a price taker in the final period following policy interventions the system regains some independence the case of the nz ets shows that small trading systems need to impose or have the option to impose quantitative import restriction so as to reap the benefits lower abatement cost but not the drawbacks importation of distortions and market integrity issues of linking

international emissions trading with endogenous allowance choices abstract this paper compares endogenous choices of tradable and non tradable emission allowances by non cooperative countries i find that the cost savings of trading do not necessarily lead to less pollution in particular environmentally more concerned countries usually choose less allowances if these are tradable but this may be offset by the choice of more allowances on the side of environmentally less concerned countries moreover if the establishment of a trading system requires the unanimous approval of all countries there may be no agreement on trading even if it were to lead to less pollution overall conversely a trading system may find unanimous approval even if it induces more pollution

small country size and returns to scale in manufacturing abstract this paper tests the hypothesis that small country size is associated with constraints relating to economies of scale in manufacturing the study adopts a production function approach utilizing data from 43 differently sized countries the results confirming the hypothesis lend empirical support to the presumption that small countries face serious disadvantages in terms of production cost per unit in their manufacturing sectors suggesting that such countries are as a result seriously disadvantaged in terms of international competitiveness in manufacturing trade

causes of the eu ets price drop recession cdm renewable policies or a bit of everything new evidence the price of eu allowances euas in the eu emissions trading scheme eu ets fell from almost 30 tco2 in mid 2008 to less than 5 tco2 in mid 2013 the sharp and persistent price decline has sparked intense debates both in academia and among policy makers about the decisive allowance price drivers in this paper we examine whether and to what extent the eua price drop can be justified by three commonly identified explanatory factors the economic recession renewable policies and the use of international credits capitalizing on marginal abatement cost theory and a broadly extended data set we find that only variations in economic activity and the growth of wind and solar electricity production are robustly explaining eua price dynamics contrary to simulation based analyses our results point to moderate interaction effects between the overlapping eu ets and renewable policies the bottom line however is that 90 of the variations of eua price changes remains unexplained by the abatement related fundamentals together our findings do not support the widely held view that negative demand shocks are the main cause of the weak carbon price signal in view of the new evidence we evaluate the eu ets reform options which are currently discussed

testable competing hypotheses from structure performance theory efficient structure versus market power this paper provides a structure performance theory that can accommodate leading firm efficiency as well as several competing market power hypotheses the author derive s testable implications distinguishing the simple collusion product differentiation and scale economy hypotheses from the innovative lea ding firm alternative it is shown that recent evidence of a positive market share price cost margin pcm relationship and a nonpositive concentration pcm relationship can reject the scale economy and simpl e collusion hypotheses in homogeneous product markets unfortunately this same evidence cannot reject the product differentiation hypothe sis in favor of leading firm efficiency copyright 1988 by blackwell publishing ltd

the persistence of dominant firm market share raising rivals cost on the new york stock exchange to explain the persistence of dominant new york stock exchange nyse market share in stock trading of listed securities from 1992 to 2002 we develop a dominant firm price leadership model and hypothesize that nyse specialists raised the costs of rival market makers the model predicts that natural and induced cost advantages will determine the nyse s market share vis a vis the regional exchanges electronic trading systems and nasdaq dealers empirically nyse market share increases with economies of scale and scope abnormal price volatility high asymmetric information and with trading practices that raise rivals costs such as failure to display limit orders that bettered the existing quotes

a comparison of the economic performance of different micro states and between micro states and larger countries the economic performance of micro states and those sub national regions enjoying a high degree of autonomy is a generally under researched area this paper builds on earlier research armstrong and read 1995 by employing quantitative techniques to test 1 a the extent to which the economic performance of micro states differs by comparing their gnp per capita with that of the region in which they are located and with the countries to which they are adjacent 2 b whether some micro states perform better than others as a result of differences in their economic structure and 3 c whether the rates of growth of micro states have been faster or slower than those of larger countries considerable diversity among micro states is revealed although most exhibit strong economic performance

the short run macroeconomic impact of foreign aid to small states an agnostic time series analysis abstract this paper investigates the short run macroeconomic impact of aid in small developing countries sdcs by using a vector auto regression var model to study the impact of aid on net import absorption and domestic demand spending we focus on average country effects within two country sub groups and find substantial differences between aid dependent sdcs and other sdcs that are more dependent on natural resources tourism or financial services in aid dependent sdcs aid absorption more or less equals spending although only half of the aid flow is absorbed and spent in the non aid dependent group aid does not seem to be absorbed or spent in any systematic fashion

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