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

unintended consequences of price controls an application to allowance markets abstract price controls established in a cap and trade allowance market are intended to reduce cost uncertainty by constraining allowance prices between a ceiling and floor however they could provide opportunities for strategic actions by firms that would lower government revenue and increase emissions in particular when the ceiling price is supported by introducing new allowances into the market firms could choose to buy allowances at the ceiling price regardless of the prevailing market price in order to lower the equilibrium price of all allowances those purchases could either be transacted by firms intending to manipulate the market price or be induced through the introduction of inaccurate information about the cost of emissions abatement theory and simulations using allowance elasticity estimates for u s firms suggest that the manipulation could be profitable under the stylized setting and assumptions evaluated in the paper although in practice many other conditions will determine its use

a symmetric safety valve abstract how to set policy in the presence of uncertainty has been central in debates over climate policy concern about costs has motivated the proposal for a cap and trade program for carbon dioxide with a safety valve that would mitigate against spikes in the cost of emission reductions by introducing additional emission allowances into the market when marginal costs rise above the specified allowance price level we find two significant problems both stemming from the asymmetry of an instrument that mitigates only against a price increase one is that most important examples of price volatility in cap and trade programs have occurred not when prices spiked but instead when allowance prices collapsed second a single sided safety valve may have unintended consequences for investment we illustrate that a symmetric safety valve provides environmental and welfare improvements relative to the conventional one sided approach

dynamic supply adjustment and banking under uncertainty in an emission trading scheme the market stability reserve abstract we study the impact of a supply management mechanism smm similar to the market stability reserve proposed in 2015 which preserve the overall emissions cap and we comment on the recent cap changing amendments we provide an analytical description of the conditions under which an smm alters the emissions abatement paths affecting the expected length of the banking period and its variability while abatement strategies of risk neutral firms solely depend on the former for risk averse firms changes in the latter would lead to higher risk premia accelerated depletion of the bank and consequently further reduction of abatement and allowance prices cancellation of part of the reserve could partially outweigh the effect on risk premia sustaining allowance prices

europe s tired poor huddled masses self selection and economic outcomes in the age of mass migration during the age of mass migration 1850 1913 one of the largest migration episodes in history the united states maintained a nearly open border allowing the study of migrant decisions unhindered by entry restrictions we estimate the return to migration while accounting for migrant selection by comparing norway to us migrants with their brothers who stayed in norway in the late nineteenth century we also compare fathers of migrants and nonmigrants by wealth and occupation we find that the return to migration was relatively low 70 percent and that migrants from urban areas were negatively selected from the sending population keep ancient lands your storied pomp cries she with silent lips give me your tired your poor your huddled masses yearning to breathe free the wretched refuse of your teeming shore send these the homeless tempest tost to me i lift my lamp beside the golden door emma lazarus 1883

global inequality of opportunity how much of our income is determined by where we live suppose that all people in the world are allocated only two characteristics over which they have almost no control country of residence and income distribution within that country assume further that there is no migration the authors show that more than one half of variability in income of world population classified according to their household per capita in one percent income groups by country is accounted for by these two characteristics the role of effort or luck cannot play a large role in explaining global distribution of income

optimal migration a world perspective we ask what level of migration would maximize world welfare welfare is assumed to be a weighted average of the utilities of the world s various citizens but the weights are also country specific using a calibrated one sector model we find that unless the weights are heavily biased toward the natives of rich countries the extent of migration that would be optimal far exceeds the levels observed today the claim remains true in a two sector extension of the model all versions of the model assume that migration is the only redistributive tool

the effects of periodic quotas limiting the stock of imports of durables abstract analyses of trade quotas typically assume that the quota restricts the flow of some nondurable good many real world quotas however restrict the stock of durable imports we consider the cases where 1 anyone is free to export against such quotas and where 2 only those allocated portions of the total quota are free to export against such quotas recent econometric investigations of such quotas have focused on the price of the durable as an indicator of tightness induced by the quota we show why this is an inappropriate indicator and suggest alternatives

the effect of emigration from poland on polish wages in this paper we analyse the effect of emigration from poland on polish wages focusing on the 1998 2007 period for poland we use a unique dataset that contains information about household members who are currently living abroad which allows us to develop region specific emigration rates and to estimate the effect of emigration on wages using within region variation our findings show that emigration led to a slight increase in wages for high and medium skilled workers which are the two groups with the largest relative outmigration rates workers at the low end of the skill distribution might have experienced wage decreases

cap and trade programs under delayed compliance consequences of interim injections of permits virtually every analysis of cap and trade programs assumes that rms must surrender permits as they pollute however no program existing or proposed requires such continual compliance some e g the acid rain program limiting so2 emissions require compliance once a year others e g the regional greenhouse gas initiative limiting co2 emissions require compliance every three years the paths of emissions and permit prices would be invariant to compliance timing holland moore 2013 if the government never injected additional permits between successive compliance dates however virtually all emissions trading programs require such injections through either 1 interim permit auctions or 2 sales from cost containment reserves intended to cap permit prices in such cases analyses which abstract from delayed compliance may mislead policy makers for example a cost containment reserve judged sucient to cap prices at a ceiling over a year may sell out in a single day

market design in cap and trade programs permit validity and compliance timing abstract cap and trade programs have considerable heterogeneity in permit validity and compliance timing for example permits have different validities across time e g banking borrowing and seasons and space e g zonal restrictions and compliance timing can be annual in overlapping cycles or in multi year periods we discuss nine prominent cap and trade programs along these dimensions and construct a general model of permit validity and compliance timing we derive sufficient conditions under which abatement is invariant to compliance timing i e compliance timing cannot smooth abatement cost shocks under these conditions i expected compliance costs are invariant ii the variance of compliance costs increases with the delayed compliance iii equilibrium prices may not be unique and iv the delayed compliance equilibrium may rely on degenerate prices not determined by marginal abatement costs we demonstrate the model s broad applicability by illustrating different types of temporal permit validity

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

expecting the unexpected emissions uncertainty and environmental market design we study potential equilibria in california s cap and trade market for greenhouse gases ghgs based on information available before the market started we find large ex ante uncertainty in business as usual emissions and in the abatement that might result from non market policies much larger than the reduction that could plausibly occur in response to an allowance price within a politically acceptable range this implies that the market price is very likely to be determined by an administrative price floor or ceiling similar factors seem likely to be present in other cap and trade markets for ghgs

intertemporal permit trading for the control of greenhouse gas emissions this paper integrates two themes in the intertemporal permitliterature through the construction of an intertemporal bankingsystem for a pollutant that creates both stock and flow damages a permit banking system for the special case of a pollutant thatonly causes stock damages is also developed this latter simpler case corresponds roughly to the greenhouse gas emissionreduction regime proposed by the u s department of state as ameans of fulfilling the u s commitment to the frameworkconvention on climate change this paper shows that environmentalregulators can achieve the socially optimal level of emissionsand output through time by setting the correct total sum ofallowable emissions and specifying the correct intertemporaltrading ratio for banking and borrowing for the case ofgreenhouse gases we show that the optimal growth rate of permitprices and therefore the optimal intertemporal trading rate hasthe closed form solution equal to the ratio of current marginalstock damages to the discounted future value of marginal stockdamages less the decay rate of emissions in the atmosphere given a non optimal negotiated emission path we then derive apermit banking system that has the potential to lower net socialcosts by adjusting the intertemporal trading ratio taking intoaccount the behavior of private agents we use a simplenumerical simulation model to illustrate the potential gains fromvarious possible banking systems

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

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

you can t take it with you immigrant assimilation and the portability of human capital the national origin of an individual s human capital is a crucial determinant of its value education and labor market experience acquired abroad are significantly less valued than human capital obtained domestically this difference can fully explain the earnings disadvantage of immigrants relative to comparable natives in israel variation in the return to foreign schooling across origin countries may reflect differences in its quality and compatibility with the host labor market the return to foreign experience is generally insignificant acquiring additional education following immigration appears to confer a compound benefit by raising the return to education acquired abroad

who leaves deciphering immigrant self selection from a developing country abstract using a novel data set from a developing country the federated states of micronesia fsm i analyze an emigration flow to the united states that has no legal barriers to entry and contains detailed information on the immigrant at home and in the united states i find that highly educated workers relative to the home country average have the highest likelihood of migrating from the fsm to the united states i also compare the premigration wages for the migrants and an observationally equivalent matched nonmigrant group and find that there is a positive and statistically significant difference between the two groups indicating that immigrants are also positively selected on unobserved characteristics the observed selection is consistent with the relatively large differences in home country and destination skill prices at the highest skill levels information on the immigrants characteristics before migration is central to my analysis of determining the nature of immigrant self selection on

the vulnerability of price stabilization schemes to speculative attack this paper examines the effects of government attempts to stabilize the prices of commodities by use of buffer stocks agricultural goods subject to supply uncertainty as well as depletable resources are considered in each case it is shown that the resulting rational expectations competitive equilibrium contains a speculative attack a situation where the entire government stock is suddenly purchased by previously inactive speculators the analysis is applied to the historical attempt to peg the gold price which caused the attack of 1968 the insights gained and the methodology developed also apply to the various international agreements to impose bans on commodity prices which have been proposed by the united nations conference on trade and development

selection in migration and return migration evidence from micro data linked micro data from sweden and finland confirm predictions of migrant selection theory migrants are found to be negatively and return migrants positively selected on observable skills whereas there is only minor selection on unobservable skills

does high inequality attract high skilled immigrants this study examines how the sources and levels of income inequality affect how a country attracts and retains high skilled workers with parameter values that yield realistic levels of emigration our model shows that emigration rates increase with education when the returns to education are higher abroad however the relationship between unobservable skills residual wages and emigration can display an inverse u shaped pattern if unobservable skills are composed of both general and country specific skills using data on israeli emigrants before they decide to emigrate we find strong empirical evidence in support of the model s predictions

transportation costs and international trade in the second era of globalization while the precise causes of postwar trade growth are not well understood declines in transport costs top the lists of usual suspects however there is remarkably little systematic evidence documenting the decline this paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time series pattern of shipping costs the ad valorem impact of ocean shipping costs is not much lower today than in the 1950s with technological advances largely trumped by adverse cost shocks in contrast air shipping costs have dropped an order of magnitude and airborne trade has grown rapidly as a result as a result international trade has also experienced a significant rise in speed

the place premium bounding the price equivalent of migration barriers large international differences in the price of labor can be sustained by differences between workers or by natural and policy barriers to worker mobility we use migrant selection theory and evide

private storage of common property abstract many resources extracted under the rule of capture are not utilized immediately but are stored instead for later use oil is stockpiled fish are frozen groundwater is bottled rivers are dammed land deforested as the way to establish title remains uncultivated we examine the positive and normative effects of such storage privatization of common property through storage may eliminate inefficiencies altogether but the accelerated extraction it induces may also exacerbate them even if rapid extraction does not reduce ultimate recovery once storage commences extraction accelerates until the open access reserves are drained in limiting cases these speculative acquisitions are instantaneous the naturally occurring analogue of policy induced speculative attacks studied in the international finance literature when some reserves are privately owned while others are open access the order of extraction no longer follows the progression from lowest to highest per unit cost first noted by o c herfindahl in extractive resources and taxation m gaffney ed univ of wisconsin press madism 1997 instead the common property may be extracted in its entirety before any private reserves are extracted even if it has the higher per unit extraction cost

alternative approaches to cost containment in a cap and trade system we compare several emissions reduction instruments including quantity policies with banking and borrowing price policies and hybrid policies safety valve and price collar using a dynamic model with stochastic baseline emissions the instruments are compared under the design goal of obtaining the same expected cumulative emissions across all options based on simulation analysis with the model parameterized to values relevant to proposed us climate mitigation policies we find that restrictions on banking and borrowing including the provision of interest rates on the borrowings can severely limit the value of the policy depending on the regulator chosen allowance issuance path although emissions taxes generally provide the lowest expected abatement costs a cap and trade system combined with either a safety valve or a price collar can be designed to provide expected abatement costs near those of a tax but with lower emissions variance than a tax consistently a price collar is more cost effective than a safety valve for a given expected cumulative emissions outcome because it encourages inexpensive abatement when abatement costs decline

permit market auctions with allowance reserves this article investigates pollution permit auctions that incorporate allowance reserves in these auctions the sale of a fixed quantity of permits is supplemented by an additional permit reserve this reserve automatically releases permits if a sufficiently high price is triggered the main justifications for implementing an allowance reserve are to reduce price volatility as well as assisting in cost containment we show paradoxically that incorporating an allowance reserve into a permit auction can decrease firms payoffs increase the clearing price and increase compliance costs this has implications for all major cap and trade markets including the us regional greenhouse gas initiative

endowments and risky choice abstract we report evidence of an endowment effect for risk extending previous results to the popular paired choice lottery setting specifically we observe a distribution of revealed preferences consistent with risk aversion that diminishes in endowed variance although the effect is considerably weaker for compound relative to simple lotteries we also find that in the absence of an obvious endowment subjects behave as if the comparatively lower variance lottery is a cognitive reference point revealing a distribution of preferences indistinguishable from subjects who are explicitly endowed with the low variance lottery finally we report no significant difference in elicited preferences between two popular mechanisms the multiple price list and a variant on the becker degroot and marshak mechanism when no endowment is induced suggesting previously reported differences in behavior between the two mechanisms may be in part a consequence of relative responsiveness to endowment framing

optimal trading ratios for pollution permit markets abstract we demonstrate a novel method for improving the efficiency of pollution permit markets by optimizing the exchange of emissions through trade under full information it is optimal for emissions to exchange according to the ratio of marginal damages under asymmetric information we derive necessary conditions for the marginal damage trading ratios to be optimal illustrate that the marginal damage trading ratios are generally not optimal and show how to improve efficiency using optimal trading ratios we calculate the optimal trading ratios for a global carbon market the gains from using optimal trading ratios rather than marginal damage trading ratios range from substantial to trivial which suggests the need for careful consideration of asymmetric information when designing permit markets