occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

decoupling china s carbon emissions increase from economic growth an economic analysis and policy implications as the world s second largest carbon emitter china has long been criticized as a free rider benefiting from other countries efforts to reduce greenhouse gas emissions but not taking responsibility for its own emissions china has been singled out as one of the major targets at the subsequent negotiations after the kyoto meeting bq analyzing the historical contributions of interfuel switching energy conservation economic growth and population expansion to china s co2 emissions during 1980 97 this article clearly demonstrates that the above criticism is unjustified moreover given the fact that the role of china is an issue of perennial concern at the international climate change negotiations the article envisions some efforts and commitments that could be expected from china until its per capita income catches lip with the level of middle developed countries by emphasizing the it win win strategies these efforts and commitments are unlikely to jeopardize china s economic development and at the same time would give the country more leverage at the international climate change negotiations subsequent to the buenos sires meeting c 2000 elsevier science ltd all rights reserved

inequality and rules in the governance of water resources this paper considers two types of farmer with unequal land endowments who voluntarily contribute to a joint project for the maintenance of an irrigation network the collective output water is distributed according to some allocation rule and used by each farmer in combination with land to produce a final good the analysis shows that the initial degree of inequality affects the allocation rule that maximises the amount of water collectively provided specifically two forces act in opposite directions the first effort augmenting force pushes the distribution of water towards the agent with the higher return to water in the attempt to maximise the aggregate level of effort this is the prominent force when efforts are highly substitute if efforts display some degree of complementarity the effort mix alongside with aggregate effort becomes important a second effort mix force then emerges that favours more egalitarian or even progressive water allocation rules

the kyoto protocol a review and perspectives international concern about climate change has led to the kyoto protocol negotiated in 1997 which contains legally binding emission targets for industrialized countries to be achieved during the commitment period 2008 2012 while proponents of the protocol celebrate it as a breakthrough in international climate policy opponents criticize that its approach namely setting targets and timetables for emission reductions is seriously flawed this paper provides a critical assessment of the protocols potential performance and discusses amendments to foster its effectiveness and efficiency it concludes that even without any effective emission reductions in the initial commitment period the ratification of kyoto is important for the further policy process of climate protection the kyoto protocol has established a flexible broad based international mechanism that provides a valuable starting point for shaping efficient climate policies in the future

heterogeneity returns to scale and collective action i analyze the effects of resource inequality and valuation heterogeneity on the provision of public goods with increasing or decreasing returns to scale in production the existing literature typically takes the agents characteristics as given and known to the researcher in contrast this paper compares collective action provision across groups of agents with resources and valuations for the public good drawn from different known joint distributions specifically i characterize the expected equilibrium public good level as function of various distributional properties and moments a resource valuation distribution that first order stochastically dominates another distribution always results in higher expected public good provision level independent of the production technology with decreasing returns to scale in the public good production higher resource inequality results in higher expected provision with increasing returns the same result holds when the mean resource level is relatively low but expected provision decreases in inequality when the mean resource level is high a parallel result holds for agents valuations l auteur analyse les effets de l inegalite des ressources et de l heterogeneite dans l evaluation de biens publics dont la production se fait avec des rendements croissants et decroissants a l echelle la litterature specialisee suggere habituellement que les caracteristiques des agents sont donnees et connues du chercheur a contrario ce memoire compare l action collective de groupes d agents dont les ressources et les evaluations du bien public sont tirees de distributions conjointes connues specifiquement le niveau d equilibre anticipe du bien public est fonction de divers moments et proprietes de ces distributions une distribution conjointe ressources evaluations qui en domine une autre au sens stochastique de premier ordre resulte toujours en un niveau de bien public anticipe plus eleve quelle que soit la technologie de production quand les rendements a l echelle sont decroissants une inegalite de ressources plus grande resulte en un niveau de bien public anticipe plus eleve quand les rendements sont croissants le meme resultat s ensuit si le niveau moyen de la ressource est relativement bas mais le niveau de bien public anticipe decroit quand le niveau moyen de la ressource est eleve des resultats paralleles sont notes pour ce qui est des evaluations du bien public par les agents

wealth inequality and collective action abstract we study the effect of inequality in the distribution of endowments of private inputs e g land wealth that are complementary in production with collective inputs e g contribution to public goods such as irrigation and extraction from common property resources on efficiency in a class of collective action problems we focus on characterizing the joint surplus maximizing level of inequality making due distinction between contributors and non contributors in a framework that allows us to consider a wide variety of collective action problems ranging from pure public goods to impure public goods to commons we show that while efficiency increases with greater equality within the groups of contributors and non contributors so long the externalities positive or negative are significant there is an optimal degree of inequality between these groups

china s capacities for mitigating climate change summary economic growth and structural change have turned china into the largest emitter of greenhouse gases in the world the country has no international commitments to reduce its emissions but it has developed domestic policies and climate relevant capacities which do have mitigative effects economic and political reforms have supported capacity development however so far china s climate relevant actions have not been influenced by climate considerations potential emission reductions are mainly a by product of measures embedded in energy and transport policies aimed at cutting energy costs and increasing energy security

estimating the marginal abatement cost curve of co2 emissions in china provincial panel data analysis abstract this paper estimates the marginal abatement cost curve macc of co2 emissions in china based on a provincial panel for the period of 2001 2010 the provincial marginal abatement cost mac of co2 emissions is estimated using a parameterized directional output distance function four types of model specifications are applied to fit the mac carbon intensity pairs the optimal specification controlling for various covariates is identified econometrically a scenario simulation of china s 40 45 carbon intensity reduction based on our macc is illustrated our simulation results show that china would incur a 559 623 yuan t roughly 51 57 increase in marginal abatement cost to achieve a corresponding 40 45 reduction in carbon intensity compared to its 2005 level

income distribution political instability and investment abstract this paper successfully tests on a sample of 71 countries for the period 1960 85 the following hypotheses income inequality by fuelling social discontent increases sociopolitical instability the latter by creating uncertainty in the politico economic environment reduces investment as a consequence income inequality and investment are inversely related since investment is a primary engine of growth this paper identifies a channel for an inverse relationship between income inequality and growth we measure socio political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two equation model in which the endogenous variables are investment and an index of socio political instability our results are robust to sensitivity analysis on the specification of the model and the measure of political instability and are unchanged when the model is estimated using robust regression techniques

dyke maintenance and other stories some neglected types of public goods the orthodox summation model of a pure nonexcludable public good assumes that each individual consumes a quantity of public good defined as the sum of all individuals contributions to that good recently hirshleifer 1983 1985 has analyzed models that do not fall within this class at one extreme is the weakestlink in which the total quantity available to each consumer equals the smallest individual contribution at the other is the best shot in which the total quantity available equals the largest individual contribution hirshleifer s example of the weakest link case concerns a circular region of which each citizen owns a pie shaped slice the perimeter is marked by a dyke floods may penetrate the weakest point of the dyke and cause damage equally throughout the region each citizen decides the height and state of repair of that section of the dyke adjoining his piece of land its maintenance constituting his contribution to the public good thus the level of protection enjoyed by all is determined by the least well maintained section of the dyke an example of the best shot case concerns a number of antimissile batteries ringing a city firing at an incoming icbm all that matters is the accuracy of the best shot bliss and nalebuff 1984 discuss dragon slaying as another example of a best shot situation section ii of this paper introduces a class of functions of which the summation weakest link and best shot are examples section iii analyzes the properties of equilibrium when consumers have identical tastes and incomes section iv analyzes the implications of income redistribution in the summation case the equilibrium is unaffected by the initial redistribution over a range and outside that range transfers help the recipient and hurt the donor within the broader class of models however the invariance property does not generally hold and there may be opportunities for paretoimproving income redistribution i give an example similar to the weakest link case in which a pareto improving redistribution is

the voluntary provision of a pure public good the case of reduced cfc emissions and the montreal protocol abstract this paper applies the theory of the voluntary provision of a pure public good to the behavior of nations to curb chlorofluorocarbon cfc emissions during the late 1980s by devising an empirical test we determine that these cutbacks in emissions are consistent with nash behavior when taste parameters are controlled the relationship between emission cutbacks and national income is nearly linear as implied by the theory if the sample is purged of potential outliers then the linear relationship results a significant taste parameter is the extent of political and civil freedoms while a marginally significant parameter is geophysical position in terms of latitude

how ambitious are china and india s emissions intensity targets abstract several developing economies have announced carbon emissions targets for 2020 as part of the negotiating process for a post kyoto climate policy regime china and india s commitments are framed as reductions in the emissions intensity of the economy by 40 45 and 20 25 respectively between 2005 and 2020 how feasible are the proposed reductions in emissions intensity for china and india and how do they compare with the targeted reductions in the us and the eu in this paper we use a stochastic frontier model of energy intensity to decompose energy intensity into the effects of input and output mix climate and a residual technology variable we use the model to produce emissions projections for china and india under a number of scenarios regarding the pace of technological change and changes in the share of non fossil energy we find that china is likely to need to adopt ambitious carbon mitigation policies in order to achieve its stated target and that its targeted reductions in emissions intensity are on par with those implicit in the us and eu targets india s target is less ambitious and might be met with only limited or even no dedicated mitigation policies

energy caps alternative climate policy instruments for china abstract decoupling fossil energy demand from economic growth is crucial for china s sustainable development especially for addressing severe local air pollution and global climate change an absolute cap on coal or fossil fuel consumption has been proposed as a means to support the country s energy and climate policy objectives we evaluate potential energy cap designs that differ in terms of target fuel point of control and national versus regional allowance trading using a global numerical general equilibrium model that separately represents 30 provinces in china first we simulate a coal cap and find that relative to a cap on all fossil fuels it is significantly more costly and results in high localized welfare losses second we compare fossil energy cap designs and find that a national cap on downstream fossil energy use with allowance trading across provinces is the most cost effective third we find that a national fossil energy cap with trading is nearly as cost effective as a national co2 emissions trading system that penalizes energy use based on carbon content as a fossil energy cap builds on existing institutions in china it offers a viable intermediate step toward a full fledged co2 emissions trading system

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

the social cost of carbon and its policy implications the shadow price or social cost of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today cost benefit analysis would set the optimal amount of greenhouse gas emission reduction at the point where this social cost just equals the incremental cost of controlling emissions the higher the value for the social cost of carbon the more control is warranted this comparison assumes that cost benefit analysis is the correct way of determining climate change policy and many believe this is not the case because of the very long term irreversible and potentially catastrophic nature of global warming but in the short run at least a comparison of cost and benefits is required and in any event all decisions imply costs and benefits but what is the right figure for the social cost of carbon this paper reviews the uk government s assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits moreover adoption of the uk government s shadow price would have formidable implications for energy policy in the uk and for policies on afforestation copyright 2003 oxford university press

carbon taxes and joint implementation an applied general equilibrium analysis for germany and india germany has committed itself to reducing its carbon emissions by 25 percent in 2005 as compared to 1990 emission levels to achieve this goal the government has recently launched an environmental tax reform which entails a continuous increase in energy taxes in conjunction with a revenue neutral cut in non wage labor costs this policy is supposed to yield a double dividend reducing both the problem of global warming and high unemployment rates in addition to domestic actions international treaties on climate protection allow for the supplementary use of flexible instruments to exploit cheaper emission reduction possibilities elsewhere one concrete option for germany would be to enter joint implementation with developing countries such as india where germany pays emission reduction abroad rather than meeting its reduction target solely by domestic action in this paper we investigate whether an environmental tax reform cum joint implementation ji provides employment and overall efficiency gains as compared to an environmental tax reform stand alone etr we address this question in the framework of a large scale general equilibrium model for germany and india where germany may undertake joint implementation with the indian electricity sector our main finding is that joint implementation offsets adverse effects of carbon emission constraints on the german economy ji significantly lowers the level of carbon taxes and thus reduces the total costs of abatement as well as negative effects on labor demand in addition ji triggers direct investment demand for energy efficient power plants produced in germany this provides positive employment effects and additional income for germany for india joint implementation equips its electricity industry with scarce capital goods leading to a more efficient power production with lower electricity prices for the economy and substantial welfare gains

marginal abatement costs of carbon dioxide emissions in china a parametric analysis this paper investigates the technical inefficiency shadow price and substitution elasticity of hbox co 2 emissions of china based on a provincial panel for 2001 2010 using linear programming to calculate a quadratic parameterized directional output distance function we show that china s technical inefficiency increases over the period implying further scope for hbox co 2 emissions reduction in the medium and longer term at best by 4 5 and 4 9 respectively our results notwithstanding regional differences highlight increases in the shadow price of hbox co 2 abatement 1 000 yuan ton in 2001 to 2 100 yuan ton in 2010 additionally increasingly steep substitution elasticity highlights the difficult reality of reducing china s hbox co 2 emissions

revealing the political decision toward chinese carbon abatement based on equity and efficiency criteria abstract china s economic reform over the past 30 years has allowed the free market to drive economic development however government still plays a key role in the energy sector by allocating energy conservation and emissions abatement how does the government make an equity decision as a tradeoff to market efficiency this is an unanswered question the purpose of this paper is to illustrate the government s preference toward equity and efficiency using the provincial level co 2 intensity allocation data we investigate the political decision that the government made based on the equity and efficiency criteria we find that the equity index plays a more important role than the efficiency index in determining the co 2 intensity target in addition political factors such as social stability are found to be important factors

did higher inequality impede growth in rural china this paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural china using a rich longitudinal survey spanning the years 1987 2002 and controlling for an array of household and village characteristics the paper finds that households located in higher inequality villages experienced significantly lower income growth through the 1990s however local inequality s predictive power and effects are significantly diminished by the end of the sample the paper exploits several advantages of the household level data to explore hypotheses that shed light on the channels by which inequality affects growth biases due to aggregation and heterogeneity of returns to own resources previously suggested as candidate explanations for the relationship are both ruled out instead the evidence points to unobserved village institutions at the time of economic reforms that were associated with household access to higher income activities as the source of the link between inequality and growth the empirical analysis addresses a number of pertinent econometric issues including measurement error and attrition but underscores others that are likely to be intractable for all investigations of the inequality growth relationship

history social divisions and public goods in rural india we examine the influence of three historically important sources of social divisions on the availability of public goods in rural india colonial power landowner peasant relations as determined by the land tenure system and social fragmentation based on the hindu caste system and the presence of sizable religious minorities using data on public goods from 1991 we find that regions that were under british colonial power in the pre independence period and those where agrarian power was concentrated in the hands of landlords have lower access to these goods as do areas with high levels of social fragmentation jel h41 p16

inequality and inefficiency in joint projects a group of agents voluntarily participates in a joint project in which efforts are not perfectly substitutable the output is divided according to some given vector of shares a share vector is unimprovable if no other share vector yields a higher sum of payoffs when the elasticity of substitution across efforts is two or lower only the perfectly equal share vector is unimprovable and all other vectors can be improved via lorenz domination for higher elasticities of substitution perfect equality is no longer unimprovable our results throw light on the connections between inequality and collective action

network economics and the environment insights and perspectives local interactions and network structures appear to be a prominent feature of many environmental problems this paper discusses a wide range of issues and potential areas of application including the role of relational networks in the pattern of adoption of green technologies common pool resource problems characterized by a multiplicity of sources the role of social networks in multi level environmental governance infrastructural networks in the access to and use of natural resources such as oil and natural gas the use of networks to describe the internal structure of inter country relations in international agreements and the formation of bilateral links in the process of building up an environmental coalition for each of these areas we examine why and how network economics would be an effective conceptual and analytical tool and discuss the main insights that we can foresee

pure public goods versus commons benefit cost duality sandler and arce 1 pure public goods versus commons benefit cost duality by todd sandler school of international relations university of southern california von kleinsmid center 330 los angeles ca 90089 0043 tsandler usc edu 213 740 9695 213 742 0281 fax and daniel g arce m department of economics rhodes college 2000 n parkway memphis tn 38112 1690 arce rhodes edu 901 843 3121 901 843 3736 fax final revision november 2002 sandler is the robert r and katheryn a dockson professor of international relations economics university of southern california and arce is the robert d mccallum distinguished professor of economics business rhodes college sandler s and arce s research was funded through the dockson and mccallum endowments respectively we have profited from the helpful comments of two anonymous referees

international equity and differentiation in global warming policy ne of the major obstacles to reaching a comprehensive agreement on global warming is the setting of greenhouse gas emission reduction targets for individual countries long standing tensions between industrialized and developing countries have raised the issue of equity in burden sharing moreover individual industrialized nations have pleaded special circumstances and have sought differentiation in their obligations this paper analyzes alternative rules for distributing tradable carbon dioxide emissions permits a non linear programming model which distinguishes between allocation based and outcome based rules is used to analyze the relative welfare outcomes the model is applied to the world body of nations and yields several important policy implications

political institutions and pollution control this paper models the selection of environmental policies under authoritarian and democratic regimes and tests the hypothesis that political institutions systematically affect the enactment of environmental regulations the results support the contention that political institutional arrangements rather than resource endowments largely determine policies concerning environmental regulation copyright 1992 by mit press

how can china reach its co2 intensity reduction targets by 2020 a regional allocation based on equity and development in late 2009 the chinese government committed to cut its carbon dioxide emissions per unit of gross domestic product gdp by 40 to 45 of 2005 levels by 2020 this has raised the issue of how to allocate the co2 reduction target regionally to meet the national reduction target to meet this objective the following aspects may be taken into consideration equity principles common but differentiated responsibilities intensity reduction target fulfillment and economic difference and reduction potential among provinces this paper selects per capita gdp accumulated fossil fuel related co2 emissions and energy consumption per unit of industrial added value as indicators for emission reduction capacity responsibility and potential respectively based on these three indicators a comprehensive index is developed and an intensity allocation model constructed as decision makers may have different preferences when allocating the reduction burden we allocate different weights to the indicators analyzing the results using cluster analysis the following aspects may also be considered together with the national regional development strategy to determine how to share the burden the reduction potential of various regions implementation potential of the plans and promotion of a highly efficient low carbon economic development model

regional allocation of co2 emissions allowance over provinces in china by 2020 the mitigation efforts of china are increasingly important for meeting global climate target since the rapid economic growth of china has led to an increasing share in the world s total co2 emissions this paper sets out to explore the approach for realizing china s national mitigation targets submitted to the unfccc as part of the copenhagen accord that is to reduce the intensity of co2 emissions per unit of gdp by 40 45 by 2020 as well as reducing the energy intensity and increasing the share of non fossil fuel consumption through regional allocation of emission allowance over china s provinces since the realization of china s mitigation target essentially represents a total amount emission allowance allocation problem an improved zero sum gains data envelopment analysis optimization model which could deal with the constant total amount resources allocation is proposed in this study by utilizing this model and based on several scenarios of china s economic growth co2 emissions and energy consumption a new efficient emission allowance allocation scheme on provincial level for china by 2020 is proposed the allocation results indicate that different provinces have to shoulder different mitigation burdens in terms of emission intensity reduction energy intensity reduction and share of non fossil fuels increase

information and the concept of option value this paper examines the arrow fisher henry concept of option value and analyzes its properties including its relationship to the value of information and the effects of increasing uncertainty about the future consequences of irreversible development it is shown that this option value is distinct from but bounded by the value of information in the overall decision problem also it is distinct from a concept of option value that appears in b s bernanke quart j econom 98 85 106 1983 however when there is a continuum of development levels rather than a binary choice between full development and no development some of these conclusions need to be modified

heterogeneity and collective management evidence from common forests in himachal pradesh india summary this paper conducts a statistical investigation into the impact of differences in economic benefits wealth and social classes within the community on collective management of forests there are two key results first social parochialism is not a pre requisite for collective management of forests moderate levels of social diversity are associated with low collective management but at high levels of social diversity collective management is high second moderate wealth heterogeneity is beneficial however at high levels and in the presence of benefit heterogeneity it decreases collective management similarly benefit heterogeneity reduces collective management if wealth heterogeneity also exists these results run counter to the dominant understanding of heterogeneity but may be seen as alternate explanations under a specific socioeconomic context

marginal abatement costs of co2 emission reductions geographical flexibility and concrete ceilings an assessment using the poles model abstract the kyoto protocol envisage the setting up of flexibility mechanisms allowing annex b countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency the current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for annex b countries and also of introducing ceilings to trade this paper analyses the stakes and economic potential of adopting this instrument both for those countries that made commitments in kyoto and for developing countries it is based on a formal approach that allows for a consistent framework of analysis the emission permit market is in fact simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the poles model after analysing these marginal abatement cost curves and comparing them with those produced by other models we explore two different configurations for a competitive market a market limited to the annex b countries and a world market the results produced by the model show that widening the market to include developing countries is more effective than the annex b market solution it reduces the cost of implementing kyoto for oecd countries and at the same time allows the countries of the south to benefit from selling the permits this research also shows that introducing restrictions on exchanges for annex b countries could have a counter productive redistribution effect with the ethical argument that underlies that particular measure

economic and environmental impacts of the kyoto protocol in 2003 the kyoto protocol which imposes legally binding greenhouse gas emission constraints on industrialized countries is likely to enter into force the protocol has been celebrated as a milestone in climate protection but standard economic theory casts doubt that it will go beyond symbolic policy in this paper we show that the final concretion of the kyoto protocol is consistent with the theoretical prediction kyoto more or less boils down to business as usual without significant compliance costs to ratifying parties jel classification d58 q43 q58 consequences economiques et environnementales du protocole de kyoto en 2003 le protocole de kyoto qui impose aux pays industrialises l obligation de reduire leurs emissions de gaz a effet de serre entrera probablement en vigueur si le protocole a ete accueilli comme un grand pas en avant dans le combat pour proteger l environnement la theorie economique jette un regard sceptique sur la portee reelle d un tel accord et le considere comme un geste symbolique dans ce memoire on montre que la concretisation finale de l accord de kyoto s arrime aux predictions theoriques kyoto n est rien de plus que business as usual et n impliquera pas de couts significatifs pour les parties qui ont signe le protocole

after kyoto alternative mechanisms to control global warming after more than a decade of negotiations and planning under the framework convention on climate change fccc the first binding international agreement to control the emissions of greenhouse gases has come into effect in the kyoto protocol the first budget period of 2008 2012 is at hand moreover the scientific evidence on greenhouse warming strengthens steadily as observational evidence of warming accumulates the institutional framework of the protocol has taken hold solidly in the european union s emissions trading scheme ets which covers almost half of europe s carbon dioxide emissions notwithstanding this apparent success the kyoto protocol is widely seen as somewhere between troubled and terminal early troubles came with the failure to include the major developing countries along with lack of an agreedupon mechanism to include new countries and extend the agreement to new periods the major blow came when the united states withdrew from the treaty in 2001 by 2002 the protocol covered only 30 percent of global emissions while the hard enforcement mechanism in the ets accounts for about 8 percent of global emissions even if the current protocol is extended models indicate that it will have little impact on global temperature change unless there is a dramatic breakthrough or a new design the protocol threatens to be seen as a monument to institutional overreach nations are now beginning to consider the structure of climate change policies for the period after 2008 to 2012 some countries states cities companies and even universities are adopting their own climate change policies are there in fact alternatives to the scheme of tradable emissions permits embodied in the protocol the fact is that alternative approaches have not had a serious hearing among natural scientists or among policymakers what are some alternatives for global public goods there are three potential approaches command and control regulation quantity oriented market approaches and taxor price based regimes of these only the tradable quantity and the price like regimes have any hope of being reasonably efficient under a tradable quantity approach an agreement proceeds by setting limits on emissions by different countries the limits are partially or wholly transferable among countries this is the approach taken under the kyoto protocol this approach has very limited international experience under existing protocols such as the cfc chlorofluorocarbon mechanisms and somewhat broader experience under national trading regimes such as the u s sulfur dioxide regime a radically different approach is to use harmonized prices fees or taxes as a method of coordinating policies among countries this approach has no international experience in the environmental area although it has modest experience nationally in such areas as the u s tax on ozone depleting chemicals on the other hand the use of harmonized price type measures has extensive international experience in fiscal and trade policies such as with the harmonization of taxes in the european union and harmonized tariffs in international trade these thoughts on the structure of international agreements to control global warming should not be regarded as negotiating strategies

inequality and conservation on the local commons a theoretical exercise to analyse the effect of asset inequality on co operation within a group we consider a twoplayer nonco operative model of conservation of a common pool resource overexploitation by one user affects another s payoff by reducing the next period catch we give necessary and sufficient conditions such that conservation is a nash equilibrium and show that increasing inequality does not in general favour full conservation however once inequality is sufficiently great further inequality can raise efficiency thus the relationship between inequality and economic efficiency is u shaped finally we analyse the implications for conservation if players have earning opportunities outside the commons the daily livelihood of vast masses of the rural poor in many countries depends on the success with which common pool resources cprs such as forest resources grazing lands in shore fisheries and irrigation water are managed and on the environmental consequences of their management understanding the factors that lead to success or failure of community management of these resources is thus critical to rural development cpr management is a collective action dilemma a situation in which mutual cooperation is collectively rational for the group as a whole but individual cooperation is not necessarily individually rational for each member one factor that has not always been recognised as critical to the outcome of collective action dilemmas is heterogeneity among the resource users in this paper our attention will be largely restricted to a single but potent kind of heterogeneity inequality in asset ownership olson 1965 hypothesised that inequality might favour the provision of a public good

can good projects succeed in bad communities abstract the lack of social capital is frequently given as an explanation for why communities perform poorly yet to what extent can project design compensate for these community specific constraints i address this question by examining determinants of collective success in a costly problem for developing economies the upkeep of local public goods it is often difficult to obtain reliable outcome measures for comparable collective tasks across well defined communities in order to address this i conducted detailed surveys of community maintained infrastructure projects in northern pakistan the findings show that while community specific constraints do matter their impact can be mitigated by better project design inequality social fragmentation and lack of leadership in the community do have adverse consequences but these can be overcome by changes in project complexity community participation and return distribution moreover the evidence suggests that better design matters even more for communities with poorer attributes the use of community fixed effects and instrumental variables offers a significant improvement in empirical identification over previous studies these results provide evidence that appropriate design can enable projects to succeed even in bad communities

income inequality and the quality of public services a developing country perspective abstract that the high growth rising inequality phenomenon experienced by many high growth developing economies in the recent past may lead to discontent among the poor is a well discussed issue this paper argues that as the demand for higher quality of the public services rises with income the rising income in the hands of the rich leads to their dissatisfaction about the quality of available public services thereby inducing them to form their own club for self provision of the public services whenever possible this however results in a lowering of quality available to the others outside the club despite less crowding at the publicly provided facilities

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

disaggregating energy use cap among china s provinces the 2015 paris climate change negotiations represents the most ambitious worldwide effort to date to combat climate change as the largest energy consumer and carbon emitter china pledges 60 65 cut in carbon intensity below 2005 levels by 2030 to accelerate china s climate efforts china has also committed to cap its primary energy use at 4 8 billion tons of coal equivalent in 2020 this paper proposes an equitable and efficient scheme to disaggregate this national goal among provinces a three step disaggregation procedure is proposed which takes into account the initial allocation national redistribution and inter provincial adjustment first this study allocates the incremental energy quota taking 2010 as the base year second part of the energy quota is set aside by the central government for redistribution purposes while an incremental energy quota index comprising equity and efficiency criteria is used for initial allocation among provinces finally historical efforts and inter provincial energy flows are considered for inter provincial adjustment this disaggregation scheme is flexible and can be easily extended to allocation and management of other resource and environmental targets the empirical findings can assist decision makers in identifying which provinces are likely to over consume the energy quota relative to the proposed allocation and which provinces are likely to perform better in energy conservation moreover the results show that the energy cap set for 2020 is unachievable without further action market based instruments such as an energy allowance trading market are strongly recommended to achieve the energy use target in an equitable and cost effective manner

green consumerism and pollution control abstract in this paper we show that collective action by environmentally aware green consumers who derive benefits from consuming environmentally cleaner products can reduce pollution and improve social welfare in the same manner as pollution taxes or subsidies for reducing pollution can we construct a model with two competing firms each producing a good of different environmental quality and two types of consumers with high and low preferences for environmental quality and characterize a benchmark equilibrium in which each consumer acts individually and disregards that his decision to buy a good may affect the level of pollution we then show that compared to the benchmark equilibrium collective action by consumers with high preference who take into account the impact of their combined decision to buy a good on pollution will result in an equilibrium with not only lower pollution and higher social welfare but also higher prices and profits for the firms

cost benefit analysis and environmental policy the use of cost benefit analysis cba in british environmental policy has gone through several stages early applications of cba tended to ignore environmental impacts altogether leave them for a subsidiary impact analysis or provide only a partial monetization of impacts currently cba is the subject of renewed interest in government departments in the environment agency and among other agencies providing guidance and advice to government while the amount of cba being undertaken has increased its influence on policy making is open to question obstacles remain much cba is expensive and this means that benefits transfer is widely regarded as essential currently however the validity of much benefits transfer is questionable other problems arise from misunderstandings about the nature of economic values and the links to individuals self interest and from concerns that cba results will crowd out flexibility in decision making especially the likely context of multiple political objectives over and above economic efficiency none the less cba has begun to have influence in the setting of environmental taxes and alternative decision rules appear to suffer as many if not more shortcomings as those faced by cba copyright 1998 by oxford university press

the oslo protocol on sulfur reduction the great leap forward the increasing number of international environmental agreements ieas and the fact that under some agreements emissions have been reduced beyond agreed targets are frequently viewed as success stories of international cooperation we argue that success can only be measured if abatement targets under an iea are compared with estimated abatement levels in the absence of a treaty and are evaluated in terms of costs and benefits we analyze the oslo protocol on sulfur reduction showing that this iea is not the great leap forward when compared with the calculated nash equilibrium and the social optimum however we also demonstrate that under the oslo protocol more ambitious targets could not have been realized due to strong free rider incentives

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

equity efficiency trade off in china s energy capping policy abstract as a part of the transition to a sustainable economy china has set a cap on primary energy consumption for the first time of 5 0 billion tonnes of standard coal equivalent by 2020 however there is a debate on the cap feasibility and failure to adequately address the underlying equity efficiency trade off which hampers achievement this paper identifies some key challenges ahead including the coal dominant energy mix declining financial support inconsistent central local goals rising costs of energy saving measures and quality of energy statistical data by quantifying the preference of each providence toward equity based or efficiency based allocation schemes the great disparity among provinces is revealed and the equity efficiency trade off relationship is confirmed developing regions primarily located in central and western areas tend to favor equity based disaggregating schemes contrarily developed coastal provinces strongly favor efficiency based schemes the present national disaggregation schemes are mainly based on historical energy consumption but disregard the provincial development gap and efficiency factors we conclude that this ambitious goal is likely within reach but increased efforts and flexible instruments are needed

welfare bounds in the fair division problem to any anonymous division method corresponds a lower and an upper bound function they measure the impact on a given agent s utility of the other agents preferences the highest lower bound is the equal split utility the lowest upper bound is the indirect utility from equal split at a canonical price these two bounds are compatible yet any method with the elqual split lower bound exhibits the growth paradox and any method with the lowest upper bound generates envy we criticize competitive equilibrium from equal split because it puts no finite upper bound on any agent s welfare

scientific progress and irreversibility an economic interpretation of the precautionary principle abstract we consider the problem of the optimal use of a good whose consumption can produce damages in the future scientific progress is made over time that provides information on the distribution of the intensity of damages we show that this progress induces earlier prevention effort only if prudence is larger than twice absolute risk aversion this paper thus identifies the class of quite restrictive but plausible conditions such that scientific uncertainties justify an immediate reduction of the consumption of a potentially toxic substance

the demand for insurance against common shocks abstract in recent years index based insurance has been offered to smallholder farmers in the developing world to protect against common shocks such as weather shocks despite their attractive properties these products have met with low demand we consider the frequent situation where farmers are members of groups with common interests we show that this creates strategic interactions among group members in deciding to insure that reduce the demand for insurance for two reasons one is free riding due to positive externalities on other group members when a member chooses to insure the other is potential coordination failure because it may not be profitable for a risk averse member to insure if the other members do not as a consequence we argue that the demand for insurance against common shocks could increase if the insurance policy were sold to groups rather than to individuals

assessment of china s climate commitment and non fossil energy plan towards 2020 using hybrid aim cge model china made a commitment in copenhagen to reduce its carbon dioxide emissions per unit of gdp from 40 to 45 compared with the 2005 level by 2020 and is determined to vigorously develop non fossil fuels this study analyzes the effects and impacts of policies that could help to achieve china s copenhagen commitments with a hybrid static cge model in which the electricity sector is disaggregated into 12 generation technologies four scenarios are developed including the reference scenario a the reference scenario b and two carbon constraint scenarios the results show that carbon intensity in terms of gdp will fall by 30 97 between 2005 and 2020 in the reference scenario a and will be reduced further by 7 97 if china s targeted non fossil energy development plans can be achieved in the reference scenario b however the rest of the 40 45 target must be realized by other measures such as carbon constraint it is also observed that due to carbon intensity constraints gdp loss would be from 0 032 to 0 24 compared to the reference scenario b and co2 emission reductions are due mainly to decreases in coal consumption in the electricity sector and manufacturing sector

determinants of collective action on the local commons a model with evidence from mexico i develop a model of cooperation in small irrigation systems i give conditions under which an equalizing redistribution of wealth increases the level of equilibrium cooperation but also show that some redistributions that increase inequality can also increase cooperation the distributive rule a combination of arrangements for maintenance cost sharing and water allocation also affects the cooperation level i estimate statistical models of cooperation for three maintenance indicators using field data from a study of mexican irrigation societies social heterogeneity and landholding inequality are significantly associated with lower maintenance distributive rules that allocate water proportionally to landholding size likewise reduce maintenance

task divisions in teams with complementary tasks abstract a team leader and a team follower non cooperatively produce a team specific public good out of two complementary tasks both team members are identically productive and can contribute to both tasks by moving first the team leader effectively determines the division of the tasks in the team we show that the existence of multiple but finitely many types of task divisions is associated with a non convex leader s budget constraint non convexity generates discontinuities and non monotonicities in the equilibrium provision of the good and also in the follower s utility if incomes are redistributed within the team non monotonicity of the follower s utility motivates the follower to give a cash transfer to the leader having received the cash transfer the leader adopts a task division that compensates the contributions of the follower hence we observe a non cooperative gift exchange with a monetary gift to the leader and a subsequent non monetary reward to the follower through a lighter task allocation these gift exchanges disappear in the presence of infinitely many types of task divisions generated by a continuum of complementary tasks

measuring environmental efficiency of industry a case study of thermal power generation in india technical and environmental efficiency of some coal fired thermal power plants in india is estimated using a methodology that accounts for firm s efforts to increase the production of good output and reduce pollution with the given resources and technology the methodology used is directional output distance function estimates of firm specific shadow prices of pollutants bad outputs and elasticity of substitution between good and bad outputs are also obtained the technical and environmental inefficiency of a representative firm is estimated as 0 06 implying that the thermal power generating industry in andhra pradesh state of india could increase production of electricity by 6 while decreasing generation of pollution by 6 this result shows that there are incentives or win win opportunities for the firms to voluntarily comply with the environmental regulation it is found that there is a significant variation in marginal cost of pollution abatement or shadow prices of bad outputs across the firms and an increasing marginal cost of pollution abatement with respect to pollution reduction by the firms this result calls for the use of economic instruments like pollution taxes instead of command and control regulation used currently in india to reduce air pollution

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

empowerment and efficiency tenancy reform in west bengal the paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity theoretically the net impact of tenancy reform is shown to be a combination of two effects a bargaining power effect and a security of tenure effect analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the indian state of west bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there

reducing conflict in global warming policy the potential of equity as a unifying principle abstract international agreement on global warming mitigation is likely to prove difficult efficiency based policies will result in disparate costs and benefits among nations and thus hinder cooperation this paper suggests that consideration be given to an equitable sharing of the economic impacts of global warming policy acknowledging that there is no universally held concept of equity the policy implications of several alternatives are explored because there is considerable variation in these implications it will be important for decision makers to clarify their preferred concepts of equity during the course of their negotiations on policies to address global warming

public goods provision and redistributive taxation abstract this paper studies the relationship between redistributive taxation and tax deductible charitable contributions redistribution has two opposite effects on voluntary giving the price of charitable giving decreases with the degree of redistribution and this has a positive effect on the total amount of giving substitution effect however redistribution leads to lower consumption for the contributors and therefore has a negative effect on contributions to the charity income effect the theoretical model developed in this paper demonstrates that under a general class of utility functions the substitution effect dominates the income effect hence charitable giving increases with the tax rate in purely egalitarian societies the public good is provided efficiently and the total welfare is maximized independent of the ex ante income inequality however the positive impact of taxation on charitable giving and welfare may disappear if individuals generate their income levels in anticipation of taxation and redistribution does not take into account the cost of effort

quantifying regional economic impacts of co2 intensity targets in china we acknowledge the support of the ministry of science and technology of china through the institute for energy environment and economy at tsinghua university and the support from graduate school of tsinghua university which is supporting zhang da s doctoral research as a 22 visiting scholar at the massachusetts institute of technology we are also grateful for the support provided by rio tinto china and social science key research program from national social science foundation china of grant no 09 zd029 we further acknowledge the support of eni s p a icf international and shell founding sponsors of the china energy and climate project for supporting this model development work we would further like to thank dr john reilly dr sergey paltsev dr kyung min nam dr henry chen paul kishimoto and tianyu qi at joint program on the science and policy of global change and participants in the annual meeting of china energy and climate project and ecomod 2012 conference for helpful comments and discussion 23

in praise of inequality public good provision and income distribution abstract it is shown that if all individuals contribute towards the provision of a public good their utilities are equalised even if the income distribution is unequal it may seem that there is then no role for redistributive policy but it is proved that social welfare can be raised by creating sufficient income inequality that only the rich provide public goods