pollution as a source of endogenous fluctuations and periodic welfare inequality in olg economies this article examines the conditions under which endogenous fluctuations and periodic welfare inequality can emerge in olg economies having an environmental dimension

unequal vulnerability to climate change and the transmission of adverse effects through international trade in this paper we consider the unequal distribution of climate change damages in the world and we examine how the underlying costs can spread from a vulnerable to a non vulnerable country through international trade to focus on such indirect effects we treat this topic in a north south trade overlapping generations model in which the south is vulnerable to the damages entailed by global pollution while the north is not we show that the impact of climate change in the south can be a source of welfare loss for northern consumers in both the short and the long run in the long run an increase in the south s vulnerability can reduce the welfare in the north economy even in the case in which it improves its terms of trade in the short run the south s vulnerability can also represent a source of intergenerational inequity in the north therefore we emphasize the strong economic incentives for non vulnerable and a fortiori less vulnerable economies to reduce the climate change damages on more vulnerable countries

green taxation and individual responsibility the current article aims at studying the effects of taxation on environmental quality in an economy where its agents are responsible individual responsibility towards nature is modelized by the voluntary effort to which the households have agreed insofar as the improvement of environmental quality is concerned it is an original way to show that the individuals may feel committed towards the environment and assume obligations towards it as well as towards environmental public policy given that in our model such effort is taken from one s allocated time for leisure its opportunity cost is that of the sacrificed time for leisure and is therefore equal to the individual s wage we shall highlight that state intervention through the introduction of a green tax always crowds out individual responsibility however the intensity of this crowding out depends on the performance of the state moreover state intervention could depending on the amount of crowding out reduce the overall quality of the environment in a general equilibrium setting we show that the crowding out effect is not systematic this is because there will then be an interaction between effort or work time and the cost of that effort linked to the individual s wage and therefore to production and finally to work effort in this article we shall discuss the conditions under which public policy crowds out individual responsibility within this context

ecosystem services from eye opening metaphor to complexity blinder abstract what started as a humble metaphor to help us think about our relation to nature has become integral to how we are addressing the future of humanity and the course of biological evolution the metaphor of nature as a stock that provides a flow of services is insufficient for the difficulties we are in or the task ahead indeed combined with the mistaken presumption that we can analyze a global problem within a partial equilibrium economic framework and reach a new economy project by project without major institutional change the simplicity of the stock flow framework blinds us to the complexity of the human predicament the ecosystem services approach can be a part of a larger solution but its dominance in our characterization of our situation and the solution is blinding us to the ecological economic and political complexities of the challenges we actually face

sustainability policy and environmental policy a theoretical representative agent economy with a depletable resource stock polluting emissions and productive capital is used to contrast environmental policy which internalises externalised environmental values with sustainability policy which achieves some form of intergenerational equity the obvious environmental policy comprises an emissions tax and a resource stock subsidy each equal to the respective external cost or benefit sustainability policy comprises an incentive affecting the choice between consumption and investment and can be a consumption tax capital subsidy or investment subsidy or a combination thereof environmental policy can reduce the strength of the sustainability policy needed more specialised results are derived in a small open economy with no environmental effects on utility

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

light duty vehicles and external impacts product and policy performance assessment abstract in order to demonstrate that welfare theory can be put into practice mathematical programming methods are used here which can handle the aggregation problems facing us when information concerning the relative valuation of external factors emissions safety risks non renewable energy use noise etc is highly uncertain product and policy performance measures are presented and then applied to one time period real data on the single perhaps most welfare affecting man made consumer product of the 20th century light duty vehicles ldvs the focus when examining costs imposed on society due to individuals or other economic units purchase and use of ldvs is here the total external cost from the choice of ldv technology the relative weights of the external factors are then determined endogenously by first using for each ldv model the unconstrained set of weights most favorable to itself the flexibility of the relative weights is then constrained according to assumed knowledge about true external relative costs by this procedure it is possible to aggregate the multiple societal impact factors of ldvs and thus to measure the total external impact of individual ldv models relative to current best practice technology

structural changes and sustainability a selected review of the empirical evidence abstract the paper offers a review of selected topics in the empirical literature on structural change and sustainability we focus on aspects of structural change that directly affect emissions and energy intensity changes of the sectoral composition of economies trade and international fragmentation of production technological change and innovation and demand we identify several empirical facts first only a few countries have experienced a decoupling between growth and emissions due to proportionately faster growth rather than greater energy efficiency second the long term shift from manufacturing to services has not led in all cases to the de materialisation of economies and a lower environmental burden exploitation of energy efficiency increases depends on the ability of the service sectors to incorporate technical changes to reduce energy intensity third global trade and energy and emissions intensity trends support the pollution haven hypothesis which predicts displacement of the environmental burden from developed to emerging countries the pursuit by developing countries of a long term strategy of trading jobs for emissions is likely to exacerbate the asymmetry related to emissions intensities between developed and less developed economies the review should inform debate on environmental policy within the broader context of innovation and development policies

trade ecologically unequal exchange and colonial legacy the case of france and its former colonies 1962 2015 abstract the role of trade in global environmental change is receiving increasing attention and there is a lively debate about ecologically unequal exchange eue little is known however about the role of colonial legacy for the evolution of physical trade patterns this study provides empirical evidence on the basis of a systematic evaluation of global trade data we quantify in physical and monetary terms the development of trade relations between france its former colonies and the rest the world from the immediate post colonial period until 2015 we use a set of physical trade indicators including physical trade balance and terms of trade to analyse differences in trade patterns and eue the results indicate that colonial ties were very strong in the 1960s but thereafter quickly diminished we find strong evidence for eue between france and its former colonies in the post colonial period and that the colonial factor explains eue between centre and peripheries better than income differences until the 1970s in recent decades colonial legacy increasingly vanished our findings corroborate that socio political factors and in particular colonial legacy play an important role for eue relations and that they deserve more attention in quantitative empirical research on trade

environmental quality public debt and economic development this article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt a public sector of pollution abatement is financed by a tax or by public debt we show that if the initial capital stock is high enough the economy monotonically converges to a long run steady state on the contrary when the initial capital stock is low the economy is relegated to an environmental poverty trap we also explore the implications of public policies on the trap and on the long run stable steady state in particular we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long run steady state finally a welfare analysis shows that there exists a level of public debt that allows a long run steady state to be optimal

do individual preferences explain the environmental kuznets curve abstract some economists maintain the optimistic view that individual preferences of rich people eventually lead to a virtuous circle relationship between rising income and environmental degradation in this article i review some of the models that establish a relationship between individual preferences and environmental quality these models provide a basis for discussion of the key role played by two factors individual preferences and technology they do not however capture the distributive conflicts that occur between different social groups in the process of defining environmental policy neither do they provide a good basis for distinguishing between environmental costs caused by the decisions of particular consumers and those which affect the same consumers this point is related to the various manners in which environmental costs are displaced displacement often occurs within a country for current costs and is even clearer and more relevant when costs are transferred across a great distance or to a remote future in such cases there are few incentives to reduce consumption or alter its composition displacement moreover can become a strategy pursued more or less consciously for maintaining high and rising levels of consumption without dealing with the associated environmental costs

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

optimal tax rules and public sector efficiency with an externality in an overlapping generations model abstract this paper examines optimal tax rules and public sector efficiency integrating them in a second best world with pollution by using an overlapping generations model the second best world is characterized by the comparative statics of green preferences the main results obtained are as follows first the marginal cost of public funds may be reduced by the externalities regardless of the choice of taxes second optimal environmental and non environmental tax rules are additively and directly affected by the dynamic efficiency of capital accumulation per unit labour decal and indirectly by it through the efficiency of the public sector environmental taxes going beyond pigovian ones may be welfare improving if the decal is improved by the environmental tax even optimal non environmental tax rules should additively and directly counter the dynamics of pollution to consider the income effects of the optimal tax system for the future third the additivity property or the principle of targeting does not hold even in the absence of incentive compatibility constraints the essential reasons for this are clarified as follows distortions that should be countered by taxes that is the income effects of the optimal tax system and the decal in this model break the equality between optimal environmental taxes and the externalities measured by governments finally growing environmental concerns may in fact increase pollution the inverse relationship between environmental and labour income taxes may not hold

from production based to consumption based national emission inventories abstract under the united national framework convention of climate change unfccc countries are required to submit national emission inventories nei to benchmark reductions in greenhouse gas ghg emissions depending on the definition and system boundary of the nei the mitigation options and priorities may vary the territorial system boundary used by the unfccc has been critiqued for not including international transportation and potentially causing carbon leakage to address these issues past literature has argued in favour of using consumption based nei in climate policy this article discusses several issues in moving from the standard production based nei to consumption based nei first two distinct accounting approaches for constructing consumption based nei are presented the approaches differ in the allocation of intermediate consumption of imported products second a consistent method of weighting production based and consumption based nei is discussed this is an extension of the previous literature on shared responsibility to nei third due to increased uncertainty and a wide system boundary it may be difficult to implement consumption based nei directly into climate policy several alternative options for incorporating consumption based inventories into climate policy are discussed

trade environment and development the issues in perspective abstract this special issue on trade and the environment brings together a number of papers that are constructively critical of the conventional economic wisdom on the topic we think that this criticism is warranted because of the decidely uncritical way in which free trade has been advocated in much of the literature and especially in policy the papers analyse the validity of the underlying assumptions on which the conventional wisdom is based and provide suggestions for ways to facilitate trade that is also adequately protective of the environment sustainability and other social values in this introductory piece we discuss trade the environment and sustainability summarizing arguments in the papers included in this issue and adding a few additional points not covered by them

tax disturbances and real economic activity in the postwar united states abstract this paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates it finds that systematically including tax variables in a standard real business cycle model substantially improves the model s ability to reproduce basic facts about postwar u s business cycle fluctuations in particular modeling fluctuations in personal and corporate income tax rates increases the model s predicted relative variability of hours and decreases its predicted correlation between hours and average productivity fluctuations in tax rates produce large substitution effects that alter the leisure labor supply decision

environmental valuation under sustainable development environmentalism has evolved since the 1960 s from a concern with the preservation of wilderness in the american experience to a concern over pollution of human habitat throughout the industrialized world northern anxiety spread to the loss of tropical rainforests and biodiversity in the south where environmentalism evolved further in an encounter with indigenous interpretations conditions and priorities by the late 1980 s climate change emerged as a central issue in a now global discourse on the relationship between environment and development the principle of sustainable development that current needs are to be met as fully as possible while ensuring that the life opportunities of future generations are undiminished relative to present is now widely accepted this paper illustrates that incorporating environmental values per se in decision making will not bring about sustainability unless each generation is committed to transferring to the next sufficient natural resources and capital assets to make development sustainable 11 refs 3 figs

carbon taxation when climate affects productivity optimal carbon taxation is evaluated in a model where climate change affects productivity with a numerical us economy model with preexisting taxes the optimal carbon tax is found to exceed marginal social damage by 53 percent and marginal private damage the sum of households marginal willingness to pay by 73 percent the welfare gain from optimal carbon taxation is estimated at 3 58 billion per year when marginal damages are 40 ton employment also increases setting the carbon tax at the pigouvian rate raises welfare by only 3 17 billion the contrasting results in the tax interaction literature are due to the use of marginal private damage when applied to amenity externalities

the design of monetary and fiscal policy a global perspective abstract we study the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies we show that the presence of capital is indeed another independent source of local and global multiplicities even under active policies that yield local determinacy we also show how a very similar mechanism generates multiplicities in models with bonds and distortionary taxation we then explore the design of monetary policies that avoid multiple equilibria we show that interest rate policies that respond to the output gap while potentially a source of significant inefficiencies may be effective in preventing multiple equilibria and costly oscillatory equilibrium dynamics

the political economy of environmental policy with overlapping generations a two sector overlapping generations model illuminates the intergenerational effects of a tax that protects an environmental stock a traded asset capitalizes the economic returns to future tax induced environmental improvements benefiting the current asset owners the old generation absent a transfer the tax harms the young generation by decreasing their real wage future generations benefit from the tax induced improvement in environmental stock the principal intergenerational conflict arising from the tax is between generations alive at the time society imposes the policy not between generations alive at different times a pareto improving tax can be implemented under various political economy settings

austria s co2 responsibility and the carbon content of its international trade abstract seeking to limit global warming to 2 c puts narrow restrictions on the remaining carbon budget while the prevalent accounting framework for carbon emissions is production based production based principle pbp we here quantify the co2 emissions on the basis of the consumption based principle cbp for austria at a methodological level a multi regional input output model with full linkages is used to account for austria s co2 responsibility on a global scale estimates are carried out for the years 1997 and 2004 results show that during 1997 co2 responsibility based on cbp were 36 larger than those based on pbp this relation has increased through time the cbp indicator of 2004 was 44 larger than the pbp in terms of carbon emission location for each euro spent on austrian final demand in 2004 it is estimated that two thirds of the co2 emissions occur outside austrian borders regarding the origin of the emissions embodied in imports it is estimated that about one fourth originated in non annex i countries in 1997 this proportion increased to one third by 2004 due to this divergence between cbp and pbp indicators there is a need to re think current accounting bases in order to properly assign co2 responsibilities

the present value criterion and environmental taxation the suboptimality of first best decision rules this paper examines the links between environmental taxes and distortionary taxation in a dynamic model of climate change and economic growth under first best conditions labor and capital would remain untaxed and carbon dioxide emissions would be taxed at a rate equal to the present value marginal cost they impose on future society setting the discount rate equal to the marginal productivity of capital under secondbest conditions however this decision rule substantially understates optimal emissions taxes when the resulting revenues are used to provide targeted cuts in distortionary taxes conversely relatively low emissions taxes are economically justified given lump sum revenue recycling

monetary policy under a fiscal theory of sovereign default abstract this paper examines equilibrium determination under different monetary policy regimes when the government might default on its debt we apply a cash in advance model where the government does not have access to non distortionary taxation and does not account for initial outstanding debt when it sets the income tax rate solvency is then not guaranteed and sovereign default can affect the return on public debt if the central bank sets the interest rate in a conventional way the equilibrium allocation cannot be determined if instead money supply is controlled the equilibrium allocation can uniquely be determined

welfare and optimum dynamic taxation of consumption and income abstract this paper estimates that the us could attain large welfare gains by implementing an optimal ramsey tax policy that taxes consumption and income it is also found that the welfare implications associated with taxing consumption are quantitatively more important than those associated with dynamically taxing income indeed replacing income taxes with a constant consumption tax leads to a welfare gain that is only slightly lower than that attained by a dynamic policy that taxes consumption and income in computing these welfare gains careful attention is given to the dynamic path of tax rates and the transitional dynamics associated with how the economy responds to a new tax policy

fiscal risk in a monetary union diverse fiscal policies which are subject to fiscal limits and stochastic shocks can threaten price stability in a monetary union the fiscal limits arise due to distortionary taxation and political will stochastic shocks are random and could push a fiscally sound policy towards its limit in equilibrium agents refuse to lend along a path which violates the fiscal limits creating a crisis the crisis requires a policy response to restore lending we focus on two responses default and policy switching both of which must be designed to restore fiscal solvency under the assumption that agents know the policy response we show that default poses no risk to price stability but that policy switching does we simulate the model to quantify fiscal risk in the european monetary union with fiscal variables at end of 2009 values we find that the probability of a fiscal crisis in greece and italy countries whose debt relative to gdp had strayed far above the 60 percent limit is positive but small however a small increase in debt can lead to a large increase in risk

intergenerational competitive equilibria under technological uncertainty and an exhaustible resource constraint abstract this paper presents a model of competitive intertemporal equilibrium in a finite horizon overlapping generations economy facing technological uncertainty and an exhaustible resource constraint individuals form rational expectations regarding future prices and economic conditions and income is redistributed from one generation to the next through government mandated lump sum transfers under uncertainty the relationship between resource price appreciation and the interest rate is mediated by consumers risk aversion with respect to consumption in alternative states of nature the intuitively appealing proposition that the expected resource price rises at the expected rate of interest holds only as a special case if future generations are taken to be state contingent in the sense that their composition depends on the states of nature prevailing when they are born then equilibria are generally pareto efficient but if future generations are state independent so that the set of individuals born at a given date is independent of the prevailing state of nature then equilibria may be inefficient because markets do not exist where successive generations may equilibrate their marginal rates of substitution across consumption in alternative contingent states such inefficiencies may be remedied through the implementation of appropriate intergenerational transfers an optimal intergenerational welfare distribution may be supported as a competitive equilibrium if the income transfer regime is properly selected and enforced the social optima that result for a simple version of the model under the maximin welfare criterion indicate that greater sacrifices are required on the part of the present generation when future generations are taken to be state contingent than when they are regarded as state independent this finding provides a possible explanation for the extreme risk aversion of conservationists with respect to the welfare of future generations

is aging harmful to the environment how does aging affect the environment we analyze this question using anoverlapping generations model featuring uncertain lifetimes andenvironmental externalities we show that whether aging is harmful to theenvironment depends on the curvature of utility function which ismeasured by the degree of relative risk aversion we also explore theimplication of the results for environmental policy in an aging society

the welfare effects of environmental taxation recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second best setting than in a first best setting this question has mainly been addressed indirectly by asking whether the second best optimal environmental tax is higher or lower than the first best pigouvian rate even this indirect question has itself been approached indirectly comparing the second best optimal environmental tax to a proxy for its first best value marginal social damage msd on closer examination however msd becomes ambiguously defined and variable in a second best setting making it an unreliable proxy for the pigouvian rate given these observations the current analysis reevaluates these welfare questions and finds that when compared directly to its first best value the second best optimal environmental tax generally rises with increased revenue requirements even in cases where the second best environmental tax is lower than its first best value the welfare gains may be greater than in a first best setting these results suggest that the marginal fiscal benefit revenue recycling effect exceeds the marginal fiscal cost tax base effect over a range of environmental tax rates that for benchmark models extends above the first best pigouvian rate these findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods

distortionary taxation debt and the price level this paper considers the nominal and real determinacy of equilibria under an exogenously specifi ed path of interest rates in an economy in which taxation is either lump sum or distortionary under lump sum taxation we confirm the well known finding that equilibria display nominal in determinacy if the primary surplus is exogenous endogenous under distortionary taxation this classification is no longer relevant nominal determinacy is always ensured since distortionary taxes establish a link between the allocation and the sequences of taxes and debt and hence the price level regardless of whether the primary surplus is exogenous or endogenous distortionary taxation however increases the scope for real indeterminacy as a general feature the real in determinacy of equilibria depends on the interaction of fiscal and monetary policies i e on the sequences of taxes debt and interest rates if for example fiscal policy runs a balanced budget the central bank should set the nominal interest rate in a way consistent with long run deflation in order to ensure real determinacy this finding is different from a balanced budget policy under lump sum taxes where no such qualification with respect to the interest rate needs to be made

colombian international trade from a physical perspective towards an ecological prebisch thesis abstract prebisch s approach to economic development was based on the notion that there is an international historical division of labour peripheral countries are specialised in exporting primary goods while centre countries export industrial goods the terms of trade for peripheral countries tend to deteriorate this approach can be extended to ecological issues the international centre periphery division does not only involve the monetary exchange of goods and capital but also the physical exchange in which southern countries provide materials and energy so that northern countries can develop their socioeconomic metabolism this metabolic process is guaranteed through cheap prices for primary goods this paper aims to apply and extend prebisch s thought on unequal exchange both monetary and ecological in relation to colombian trade in the period 1970 2002 using material flow analysis

the macroeconomic effects of distortionary taxation abstract prescott 1986 estimates that technology shocks account for 75 of the fluctuations in the postwar u s economy this paper reestimates the contribution of technological change for a standard business cycle model that includes a public sector and fiscal disturbances i find that a significant fraction of the variance of aggregate consumption investment output capital stock and hours of work can be explained by disturbances in labor and capital tax rates and government consumption i also use the model to quantify the welfare costs of capital and labor taxation for both the time series and welfare calculations maximum likelihood estimates of taste technology and policy parameters are used

trade and the environment from a southern perspective the relationship between free trade and the environment is one of the main issues of contention between environmental and ecological economics environmental economics assumes a positive relationship between free trade economic growth and environmental policies environmental externalities may cause important damage however trade is not to be blamed for this instead the fault lies with policy inadequacies at the national level on the other hand some ecological economists criticise the assumptions of environmental economics especially the immobility of production factors and the positive correlation between income and environmental quality they plead for measures to prevent deterioration of northern environmental standards in a race to the bottom due to ecological dumping from the south in this paper we argue that neither environmental economics nor northern ecological economics take into account the structural conditions determining the international trade system based on some new empirical evidence on material flows we stress the notion of environmental cost shifting if physical and political ecology perspectives are adopted a southern approach to the trade and environment issue may arise 2001 elsevier science b v all rights reserved

sustainable development of forest resources in industrialized countries abstract there is no general consensus about what sustainable development means we seek to clarify the meaning and utility of the concept by focusing on forest resources in countries possessing higher levels of per capita incomes the meaning of sustainable development becomes complex when one asks what social goals are being pursued what types of stability are permitted whether amenities and commodities should receive equal consideration and to what landbase the concept should be applied a simulation linear programming model of california s private forest resource is used to demonstrate that strict decade to decade even flow stability of production may result in lower aggregate levels of output over a prolonged planning period with ending levels of the stock resource that are scarcely greater than when output is permitted to vary over the planning period the model was also used to show that greater levels of output and ending stocks are possible when the land base for sustainability assessment is not a restrictively small geographical area or a single class of ownership in the case of national forests and other public lands the application of the sustainable development concept is significantly more complex because of the importance of amenity values and because of the inherent conflict between development and the preservation of ecosystems in a pristine state

distortionary taxation and labor supply this paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework the long term relations predicted by the model are derived and tested using data from canada united states germany and japan in all these countries labor tax changes are found to be persistent and to have played an important role in the observed downward trend in hours worked

central bank independence and the monetary instrument problem we study the monetary instrument problem in a dynamic noncooperative game between separate discretionary fiscal and monetary policy makers we show that monetary instruments are equivalent only if the policy makers objectives are perfectly aligned otherwise an instrument problem exists when the central bank is benevolent while the fiscal authority is short sighted relative to the private sector excessive public spending and debt emerge under a money growth policy but not under an interest rate policy despite this property the interest rate is not necessarily the optimal instrument

the effects of ageing and an environmental trust fund in an overlapping generations model on carbon emission reductions most currently employed integrated assessment models for climate change are of a dynastic nature they employ the ramsey rule linking the interest rate economic growth and the rate of pure time preference this paper argues that although a dynastic framework might be convenient for economic analysis it is restrictive and can be misleading overlapping generations models which do not employ the ramsey rule are more flexible and may give results different from those derived from dynastic models with the integrated assessment model alice 2 0 it is shown how various assumptions on demographic change and public institutions can affect the interest rate thereby influencing the efficient greenhouse gas emission reductions it is concluded that dynastic integrated assessment models are in many respects inappropriate for providing policy makers with quantitative figures about the costs of carbon dioxide emissions and their desirable reduction levels 2001 elsevier science b v all rights reserved

overlapping generations or infinitely lived agents intergenerational altruism and the economics of global warming do we need an overlapping generations model for the economics of global warming to answer this question an infinitely lived agent ila approach and an overlapping generations olg model are contrasted ila and olg can be viewed as polar representations of intergenerational altruism with ila an immortal agent acts through his investment savings decisions as trustee on the behalf of the future generations with olg agents need not behave altruistic they simply save during working years and dissave completely during retirement nevertheless ila and olg must not differ in their implication for greenhouse policy greenhouse gas abatement is a straightforward alternative to physical capital formation and even without altruism each age cohort has an incentive to provide current abatement in order to reduce future damages attributable to climate change indeed under reasonable assumptions and parameter values our simulations reveal such an invariance result provided carbon taxes are the only policy tool and tax revenues are recycled through socially mandated rules projections of economic growth climate change and energy consumption are only insignificantly affected by the choice of approach

towards an ecological theory of unequal exchange articulating world system theory and ecological economics abstract the focus of this paper is on how an ecological perspective might provide us with an analytically more precise way of defining unequal exchange it is only by looking at the ecological conditions of human economies that we can adequately conceptualize the mechanisms which generate inequalities in distribution considerations of market power aside neoclassical economic ideology has dispelled all possible criteria for assessing a market transaction as unequal or unfair one way to assess the occurrence of unequal exchange may be to look at the direction of net flows of energy and materials concrete productive potential but without falling into the trap of equating productive potential with economic value on the contrary it can be analytically demonstrated that unequal exchange emerges from a kind of inverse relationship between productive potential and economic value the notion of a reasonable market price conceals the fact that what is being exchanged are intact resources for products representing resources already spent if we consider longitudinally along the production process any given set of fuels and raw materials destined to be transformed into a given product plus waste its content of available energy will be inversely related to its utility or price in other words the more of its original energy that has been dissipated the higher its price this means that production i e the dissipation of resources will continuously be rewarded with ever more resources to dissipate generating ecological destruction and global core periphery inequalities as two sides of the same coin

a measure of sustainable national income for the netherlands abstract we present calculations on the sustainable national income sni indicator first proposed by hueting which corrects net national income nni for the costs to bring back environmental resource use to a sustainable level using an applied general equilibrium age model specifying 27 production sectors we calculate different variants of sni for the netherlands in 1990 given a set of pre determined sustainability standards the age model is extended with emissions and abatement cost curves based on large data sets for nine environmental themes the model combines the advantages of a top down approach the age model with the information of a bottom up approach the environmental data and data on emissions reductions costs the presented numerical results show that in 1990 dutch sni is about 50 below nni though many uncertainties are still present in the data and the model the enhanced greenhouse effect is the most expensive environmental theme

when can carbon abatement policies increase welfare the fundamental role of distorted factor markets abstract this paper employs analytical and numerical models to assess the welfare effects of a revenue neutral carbon tax and nonauctioned carbon emissions permits taking into account preexisting tax distortions in factor markets the presence of preexisting taxes significantly raises the general equilibrium costs of both policies this cost increase is much greater under emissions permits since this policy does not generate revenues to reduce distortionary taxes under our central estimates emissions permits cannot increase welfare unless environmental damages exceed about 18 per ton of carbon in contrast an appropriately scaled carbon tax is welfare improving so long as environmental damages are positive

chaotic dynamics in a cash in advance economy abstract this paper introduces sufficient conditions for the existence of deterministic cycles and chaos in cash in advance models building on the earlier work of woodford 1994 chaotic equilibria are shown to be particularly likely in the cash in advance model because of a unique characteristic of such models a discontinuous derivative in the difference equation map at the satiation level of real balances the existence of a kink means that chaotic equilibria may exist without implausibly large curvatures in the utility function since a chaotic time series that makes use of the kink would sometimes exhibit zero nominal interest rates the paper also gives an example of chaos in which nominal interest rates remain strictly positive

environmental responsibility versus taxation taxation as a tool of environmental economic policy traditionally aims at generating a discouraging effect upon both the consumer and producer environmental degradation should finally stabilize itself the mechanism of taxation replies to a behavioural stimulus taxes versus subsidies recent economic analyses have not aimed at focusing their studies concerning the very responsibility of economic actors on anything else other than the mechanism of taxation taxes thus imply responsible behaviour we shall attempt to highlight that responsibility could be defined independently from taxation and that the affirmation of responsibility is inversed to taxation technically speaking we shall demonstrate that the taxation extolled by the legislator induces a certain crowding out effect as regards to responsibility in the first part of this article we shall therefore insist that economic policies in terms of taxation drive away the sentiment of individual responsibility we shall reason in terms of production and consumption to demonstrate this fact finally we shall insist that a high degree of responsibility could substitute taxation

optimal environmental taxation in the presence of other taxes general equilibrium analyses this paper examines the optimal setting of environmental taxes in economies where other distortionary taxes are present we employ analytical and numerical models to explore the degree to which in a second best economy optimal environmental tax rates differ from the rates implied by the pigovian principle according to which the optimal tax rate equals the marginal environmental damages both models indicate contrary to what several analysts have suggested that the optimal tax rate on emissions of a given pollutant is generally less than the rate supported by the pigovian principle moreover the optimal rate is lower the larger are the distortions posed by ordinary taxes numerical results indicate that previous studies may have seriously overstated the size of the optimal carbon tax by disregarding pre existing taxes this abstract was borrowed from another version of this item

an overlapping generations model of climate economy interactions a numerically calibrated overlapping generations model of climate change and the world economy is examined in this paper in the absence of intergenerational transfers efficient rates of greenhouse gas emissions abatement rise from 16 in the present to 25 in the long run while mean global temperature increases by 7 40c relative to the preindustrial norm a utilitarian optimum which attaches equal weight to each generation s life cycle utility yields abatement rates that rise from 48 to 89 with a long run temperature increase of 3 40c a second best utilitarian path in which intergenerational transfers are by assumption institutionally infeasible also supports stringent abatement measures i introduction the infinitely lived agent framework pioneered by frank ramsey 1928 has emerged as a central structure in the economics of climate change as characterized by ipcc 1996 working group iii climate change occurs when anthropogenic emissions of greenhouse gases principally carbon dioxide but also chlorofluorocarbons methane nitrous oxide and water vapor contribute to long term increases in mean global temperature potentially disrupting ecological systems and climate dependent production activities the best known study on the economics of this subject is nordhaus 1994 dynamic model of climate and the economy dice which incorporates assumptions regarding the costs and benefits of greenhouse gas emissions in a standard one sector growth model in nordhaus analysis a 50 reduction in greenhouse gas emissions would reduce gross world output by 0 93 a doubling of greenhouse gas concentrations relative to the preindustrial norm which is expected to occur by the middle of the twenty first century would reduce output by

the biophysical perspective of a middle income economy material flows in mexico abstract we analyse natural resource use dynamics in the mexican economy during the last three decades despite low and uneven economic growth the extraction and use of materials in the mexican economy has continuously increased during the last 30 years in this period population growth rather than economic growth was the main driving force for biophysical growth in addition fundamental changes have taken place in the primary sectors in manufacturing and in household consumption and these are reflected in an increasing emphasis on the use of fossil fuels and construction materials mexico s economy has been strongly influenced by international trade since the country commenced competing in international markets in the 1970s mexico mainly exported primary resources this pattern has changed and manufactured goods now have a much greater importance due to a boom in assembling industries in contrast with other latin american countries mexico has achieved a diversification of production moving towards technology intensive products and a better mix in its export portfolio however crude oil exports still represent the single most important export good mexico s material consumption is still well below the oecd average but is growing fast and the current resource use patterns may well present serious social and environmental problems to the medium and long term sustainability of mexico s economy and community information on natural resource use and resource productivity could provide valuable guidance for economic policy planning in mexico

trust law sustainability and responsible action abstract the problem of managing for sustainability is marked by the need to make decisions on behalf of others and by the uncertainties that attend such decisions however the economic literature on sustainability has paid scant attention to how decisions on behalf of others might differ from decisions on behalf of oneself and when risk has been modeled explicitly the expected utility hypothesis has generally been used a generation acts sustainably if the expected value of the next generation s utility is not less than the present s this paper investigates how we think about responsibly acting on another s behalf by looking to the united states law of trusts because in important respects the current generation views its responsibility to the future as a trust relationship trust law illuminates responsible decision making under both risk and uncertainty even under conditions of risk more conservative action than would be suggested by the expected utility hypothesis is warranted because it emphasizes preservation of trust principal and disavows profit maximization trust doctrine indicates that special caution should be exercised in conditions of uncertainty finally resource economic concepts of strong sustainability the precautionary principle and the safe minimum standard of conservation are interpreted according to trust principles

exchange rate policy under sovereign default risk abstract we examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency under interest rate policy and floating exchange rates the equilibrium is indetermined under a fixed exchange rate the equilibrium is uniquely determined and independent of sovereign default

manufacturing exports mining exports and growth cointegration and causality analysis for chile 1960 2001 this study examines the export led growth hypothesis using annual time series data from chile in a production function framework it addresses the problem of specification bias under which previous studies have suffered and focuses on the impact of manufactured and mining exports on productivity growth in order to investigate if and how manufactured and mining exports affect economic growth via increases in productivity the study uses johansen cointegration technique the estimation results can be interpreted as evidence of productivity enhancing effects of manufactured exports and of productivity limiting effects of mining exports

the fiscal myth of the price level i examine the fiscal theory of the price level according to which non ricardian policy and predetermined nominal government debt fiscally determine prices i argue that the non ricardian policy

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

optimal environmental taxes under relative consumption effects abstract this paper explores the interactions between carbon dioxide emissions taxes and a pre existing income tax in a numerically calibrated model of climate change and the world economy based on evidence from the recent empirical literature the model allows for the presence of relative consumption effects in the specification of preferences in the absence of relative consumption effects optimal emissions taxes would rise from us 44 to us 229 per tonne of carbon in year 2000 dollars over the course of the next century these tax rates which arise when emissions tax revenues are used to reduce taxes on personal income are slightly above the present value marginal benefits of emissions control given realistic assumptions concerning the empirical magnitude of relative consumption effects the optimal emissions tax rises from us 63 per tonne in 2005 and us 384 per tonne in 2105 accounting for relative consumption effects reduces the perceived social benefits of consumption thus increasing social willingness to pay for environmental quality while reducing both the costs of tax interaction effects and the benefits of efficient revenue recycling taken together these factors support the implementation of comparatively high environmental taxes in the face of relative consumption effects

labor supply and the double dividend abstract a series of recent articles have argued that environmental taxes and cap and trade permit systems generate large distortions in the labor market the claim is made that the higher prices for dirty goods induced by these incentive based systems generate a tax interaction effect leading to reductions in labor supply that are generally on net welfare reducing for this reason it is argued a double dividend seldom exists however price level increases both by lowering family income and by reducing cross spousal wage substitution effects will tend to have offsetting positive impacts on labor supply these effects are large enough to convert negative labor supply responses to rising prices into positive ones the empirical literature also supports a positive relationship between price level increases and labor supply these observations cast doubt on a central critical assumption underlying the critique of the double dividend in the tax interaction effect literature

biophysical structure of the ecuadorian economy foreign trade and policy implications abstract at the core of this paper lays the notion that a systematic analysis of material flow accounts enables us to discuss the sustainability of an economic model ecuador is going through a socio ecological transition from an agrarian towards an industrial regime based on the use of nonrenewable sources of materials and energy direct material flow indicators are used in this article to analyze the ecological dimension of the economy of ecuador during 1970 2007 this approach enables the concept of societal metabolism to become operative the paper compares societal metabolic profiles showing that per capita use of materials is still at about one fifth of the average in the high income countries of the world physical flows of trade indicate that there is an ecologically unequal exchange whereas a positive trade balance is desirable from an economic policy its counterpart in physical units has been a persistent net outflow of material resources the extraction of which causes environmental impacts and social conflicts

on sustainability and social welfare abstract this paper proposes to define sustainability in terms of leaving it possible for future generations to sustain certain defined targets it is shown that variants of genuine savings and the ecological footprint can then serve as indicators of sustainability the link between sustainability and intergenerational welfare is examined and it is shown how to incorporate indicators of sustainability into a social welfare measure including risk in the analysis

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

the paretian liberal paradox and ecological economics abstract two of the most basic considerations in collective choice are the pareto principle and some minimal protection of individual rights in his impossibility theorem sen 1970 shows that there is a potential inconsistency between preference sovereignty as expressed by the pareto condition and the protection of minimal rights a liberal or liberty condition the paretian liberal paradox plp and the extensive debate surrounding it prompts serious reconsideration of the traditional welfare economics approach the critique of welfarism made by the plp is of central importance for environmental issues given pervasive externalities missing markets uncertainty and potential irreversibilities making collective choice decisions on these issues may require using explicit non utility information and restricting individual preference sovereignty we explore the implications of the plp for long term environmental policy and the transdisciplinary field of ecological economics as a simple pedagogical device relying on sparse principles the plp stimulates an increased awareness of the potential conflict between preferences and rights recognition of the plp focuses attention on what counts as admissible information in collective choice rules for example consideration of the plp illuminates differences in the informational requirements of alternative sustainability concepts

revenue raising vs other approaches to environmental protection the critical significance of pre existing tax distortions using analytical and numerical general equilibrium models we show that preexisting factor taxes produce a tax interaction effect that increases the costs of pollution taxes and quotas under policies that raise revenue and recycle it through cuts in marginal factor tax rates this effect is partially offset by a revenue recycling effect grandfathered pollution quotas such as those used under the 1990 clean air act amendments to regulate electric utilities so2 emissions do not benefit from this offset preexisting taxes raise this regulation s cost by over 70 more than half of this additional cost could be avoided by auctioning quotas and exploiting the revenue recycling effect

on the north south trade in the americas and its ecological asymmetries there has been a long and intensive debate within the scientific community about the role of international trade in the development of countries during the last decades the focus of attention has moved from the pure economic level to the environmental aspects of international trade establishing a simplified system of north south trade for one reference period 2003 this paper attempts to test empirically the extent of potential asymmetries with regard to extracted material flows and contrasts the results with the economic benefits from trade in terms of value added the south is thereby represented by a selection of latin american countries brazil chile colombia ecuador and mexico the north comprises one of their main commercial partners the united states at the methodological level a multi regional input output analysis is used as the tool of investigation results generally support the hypothesis that the south was feeding the north s societal metabolism south north material exports were 1 6 times larger than north south material exports resulting in a net deficit for the south of 324 million tons moreover material intensity of exported commodities from the south was twice as high as that from the north it is worth highlighting however that part of the north south hypothesis fails for the sample of countries since the larger part of the economic surplus has remained in the south contrarily to what would have been expected

environmental economics and ecological economics where they can converge abstract environmental economics and ecological economics share the common objective of understanding the human economy environment interaction in order to redirect the economies towards sustainability in pursuing this objective these two perspectives utilise different types of analytical framework and are opposed to each other on many of the fundamental theoretical and methodological issues while the environmental economics has progressed within a narrowly but sharply focused neoclassical analytical approach the ecological economics has expanded by adopting a diversified approach which led to widen the gap between the two this article makes an attempt to highlight the divergence between these two perspectives on different issues and identifies certain research avenues that would potentially bring convergence between these two perspectives