unanticipated aggregate disturbances and tests of the life cycle consumption model several recent studies have used data on food consumption from the panel study of income dynamics psid to test t he rational expectations life cycle hypothesis against the alternative of prevalent liquidity constraints these tests invoke the rational expectations restriction that income forecast errors are independent of lagged information this restriction however applies only in a time series context it is possible that unanticipated macroeconomic disturbances cause forecast errors to be correlated with lagged information in a cross section of families the authors present evidence of such a correlation in the psid data show that this correlation biases previous tests of the life cycle model toward rejection and derive a proper test of the life cycle model using pa nel data copyright 1993 by mit press

growth habit formation and catching up with the joneses when habits are introduced multiplicatively in a capital accumulation model the consumers objective function might fail to be concave in this paper we provide conditions aimed at guaranteeing the existence of interior solutions to the consumers problem we also characterize the equilibrium path of two growth models with multiplicative habits the internal habit formation model where individual habits coincide with own past consumption and the external habit formation or catching up with the joneses model where habits arise from the average past consumption in the economy we show that the introduction of external habits makes the equilibrium path inefficient during the transition towards the balanced growth path we characterize in this context the optimal tax policy

habit formation in consumer preferences evidence from panel data this paper tests for the presence of habit formation using household data a simple model of habit formation implies a condition relating the strength of habits to the evolution of consumption over time when the condition is estimated with food consumption data from the panel study on income dynamics the results yield no evidence of habit formation at the annual frequency this finding is robust to a number of changes in the specification it also holds for several proxies for nondurables and services consumption created by combining psid variables with weights estimated from consumer expenditure survey data

consumption saving and habit formation abstract in this paper we consider models of habit formation and derive closed form solutions for consumption and saving under certainty equivalence and uncertainty we find that consumption depends not only on permanent income and income risk but also on past consumption similarly saving depends not only on future income changes and income risk but also on past saving

a test of the habit formation hypothesis using household data numerous studies have confirmed the importance of habit formation as represented by a lagged dependent variable in demand analysis although all work to date has been based on aggregate time series data this study uses household level bls interview panel data to test the habit hypothesis an interrelated demand system for seventeen goods is estimated from cross section data and compared with a similar system based on time series data the results show that the habit component is significantly different between the two data sets and much smaller in the cross section data habit effects while not as large in cross section data as time series are still highly significant several explanations are offered concerning why the two sets of estimates differ copyright 1991 by mit press

energy backcasting a proposed method of policy analysis abstract there have recently emerged a number of analyses which suggest that there exists a large potential for soft energy policy paths it is difficult to illustrate this argument using conventional forecasting techniques therefore these analyses tend to use an alternative method called energy backcasting this involves setting policy goals and then determining how those goals could be met as yet however little attention has been paid to the theoretical aspects of backcasting techniques in this article a specific backcasting method is proposed which it is argued allows consideration of many factors obscured in traditional energy supply and demand forecasts

sustainability in mining minerals and energy new processes pathways and human interactions for a cautiously optimistic future the supply of minerals and energy is critical to global society however this supply is associated with social and environmental impacts leading to concerns of generational and intergenerational equity in light of these concerns a call for papers for a special volume on the mining industry was issued with the view that such academic work could assist in reducing the negative impacts associated with this industry this paper introduces the special volume the sustainability agenda of the minerals and energy supply and demand network an integrative analysis of ecological ethical economic and technological dimensions the special volume contains 84 articles divided into several themes sustainability accounting and reporting corporate social responsibility future mining challenges integrative frameworks for sustainability management aspects mining in a developing context and new frontiers in the oil and gas industry the special volume also includes two letters on contemporary issues with commentaries on these from experts in the fields viz community conflict and land rehabilitation insights obtained across these themes are summarized and recommendations are made of what is needed to build upon the findings of this special volume a research agenda is proposed for the future from the gaps and synergies identified the overall contribution of this special volume is that it renews the debate on the sustainability challenges for the mining industry and provides transdisciplinary insights into resolving some of these challenges

pollution tax design and green national accounting abstract this paper concerns social accounting when pollution gives rise to a consumption externality the purpose of the paper is to reconcile the willingness to pay technique as a means of collecting information put forward in earlier studies with the growth theoretical approach to social accounting this is accomplished by designing approximations of pigouvian emission taxes on the basis of currently available willingness to pay information the paper analyses the welfare effects of these taxes as well as to what extent they can be used to measure approximately the value of depletion of environmental capital in the national accounts

a guide to public sector debt and deficits government deficits reinterpreted willem h buiter public sector debt and deficits are a matter of concern to governments throughout the world after presenting data on the public debt and deficits in the uk and abroad this paper considers four key issues first does an increase in the budget deficit today make an increase in inflation in the future more likely in economies like the uk the answer is no because the scope for raising revenue by money creation is limited compared to raising taxes second how does one evaluate the consistency of a given spending and tax programme a number of measures are presented which indicate the adjustment that must be made to spending and tax plans if the government is to remain solvent third it is often argued that an increase in budget deficits will merely crowd out private spending the paper shows that the truth of this proposition depends critically on the state of the economy the time horizon and whether the increased deficit is temporary or permanent finally the question of deriving a suitable measure of fiscal stance is considered developing an index of fiscal impact requires a suitable economic model and a number of different measures are considered and criticized conventional deficit measures whether actual cyclically corrected or inflation corrected are a poor indicator of the government s true fiscal stance

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

consumption and habits evidence from panel data the purpose of this paper is to test for the presence of habit formation in consumption decisions using household panel data we use the test proposed by meghir and weber 1996 and estimate the within period marginal rate of substitution between commodities which is robust to the presence of liquidity constraints to that end we use a spanish panel data set in which households are observed up to eight consecutive quarters this temporal dimension is crucial since it allows us to take into account time invariant unobserved heterogeneity across households fixed effects and therefore to investigate if the relationship between current and past consumption reflects habits or heterogeneity our results confirm the importance of accounting for fixed effects when analyzing intertemporal consumption decisions allowing for time non separabilities once fixed effects are controlled for and a proper set of instruments is used the results yield supporting evidence of habit formation in the demand system of food at home transport and services

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

a superior measure of consumption from the panel study of income dynamics abstract this paper provides a simple technique for assigning a measure of total consumption to households in the panel study of income dynamics psid using regressions from the consumer expenditure surveys of 1972 1973 and 1983 linear predictions of total consumption are estimated which are stable over time and explain up to 78 percent of the total variance in consumption

ossified materialism introduction to the special volume on absolute reductions in materials throughput and emissions drawing from papers in this special volume sv this introductory paper on absolute reductions argues that the magnitude scope and urgency of the sustainability challenge require a drastic change in global civilisation including a radical transformation of the institutional arrangements and socio technical systems that facilitate the pursuit of wellbeing the authors of this paper identify four main challenges to absolute reductions including the resource intensive conventional template for development macroeconomic structures and trade policies creating burden shifting and inequality a resourceefficiency improvements fallacy and the dominant consumerist culture and lifestyles the paper demonstrates

japan s energy security predicament post fukushima if energy security is defined as the availability of energy at all times in various forms in sufficient quantities and at affordable prices without unacceptable or irreversible impact on the economy and the environment japan is facing an energy security predicament for a country that was already uneasy about energy security the march 11 2011 earthquake and tsunami which caused a nuclear catastrophe in tepco s fukushima daiichi nuclear power plant turned this unease into outright anxiety with the temporary and or permanent closure of many nuclear reactors japan has had to replace lost power tokyo has had no choice but to secure additional fossil fuels a strategy that has negatively affected japan s economy due to rising fuel costs the increase in japan s fossil fuel consumption has also caused a significant increase in greenhouse gas emissions and affected tokyo s commitment to kyoto targets this paper analyzes the consequences of the 2011 nuclear disaster for japan s energy security recognizing that japan s future energy policy choices are constrained and path dependent the paper outlines energy policy recommendations for japan s government

wec energy policy scenarios to 2050 abstract at the world energy congress held in sydney in september 2004 the world energy council wec decided in a follow up to the scenario work global energy perspectives last produced in 1998 to draw up new global energy scenarios for the period up to the year 2050 three fundamental changes were resolved compared with previous work policy scenarios were to be worked out bottom up based on the specific knowledge of the wec members from the various world regions second plausible basic assumptions were to be made for the scenarios to gear them to the wec s sustainability goals of accessibility availability and acceptability the three as finally the scenarios were to have a sufficiently long time horizon and contain clear recommendations for political measures designed to reach the outcomes aimed at by 2050

interdependence between energy and metals in china evidence from a nexus perspective abstract the lack of knowledge about the interdependence between energy and metals hinders sustainable management of the two essential resources in this study a hybrid framework which combines the environmentally extended input output analysis eeioa and ecological network analysis ena was constructed to evaluate energy metals use and flows within china s economic system in 2012 from the perspective of nexus furthermore the structural properties of nexus networks and mutual relationships between sectors were simultaneously explored the results show that hybrid energy direct energy metals related energy and hybrid metals direct metals energy related metals used by all the sectors were 1 22 and 1 05 times their direct energy and direct metals use respectively in both hybrid energy and metal networks mining industry and construction industry had a strong control and dependence relationship over 50 with other sectors reflecting the tight inter sectoral connection between energy use and metals use therefore stabilizing these main control and dependence pathways is essential to the system s effective operation in addition alleviating excess industrial capacity and optimizing economic structure are two effective measures to improve the currently low energy metals circulation efficiency within china s economy system by revealing the nexus between energy and metals in china this study provides important policy implications for trade offs and synergies between energy and metals use

social interactions and habit formation in a model of female labour supply this paper investigates the influence of habit formation and preference interdependence on labour supply behaviour of married females a novelty of the paper is that we incorporate direct survey information on reference groups of individuals in a neoclassical labour supply model for that purpose we first estimate a latent variables model relating the direct information to the true but unobserved reference groups one of the most interesting features of the model is that the presence of young children becomes an insignificant factor in the hours equation while it remains a significant factor in the participation decision in addition the labour supply curve is much flatter in a model with habit formation and preference interdependence than in a model without it both habit formation and preference interdependence contribute significantly to the explanation of female labour supply 1998 elsevier science s a all rights reserved

should we test the life cycle permanent income hypothesis with food consumption data abstract most household consumption studies use food consumption data i show that in aggregate data one cannot reject the life cycle hypothesis using food but can reject it using other goods existing micro tests of the life cycle hypothesis thus may have low power

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

integrated resource planning irp and power sector reform in developing countries abstract the integrated resource planning irp approach is one that considers both supply and demand side options to meet the need for a resource while minimising the costs accruing to the firm and to society this paper focuses on irp as a tool for the power sector in the light of the existing problems and the ongoing reforms in developing countries it looks at the advantages that irp would afford juxtaposing these with the barriers to such a planning process those encountered in the past as well as the possibilities in view of structural changes it then discusses the policies that would enable the irp approach to be usefully employed to mitigate the problems of the power sector although irp has receded in importance in some areas of the world there are perceptible benefits for developing countries these could adopt such planning methods through the agents and the instruments suggested

rational habit formation abstract this paper discusses consumer demand under rational habit formation if consumer tastes change endogenously through habit stocks depending on past consumption the rational consumer will make allowance of the future habit forming effects of current consumption a model with rational habit formation is made formally equivalent to an intertemporal consumer model without habit formation by redefining the cost of consumption and wealth the cost of consumption is obtained by adding the cost of future induced consumption to the rental price of the commodity the extended wealth concept is obtained by subtracting the cost of the initial stocks of habits and the cost of future physically necessary consumption from wealth the paper also investigates the implication of rational habit formation for constructing one period cost of living indices

the contemporary european copper cycle 1 year stocks and flows abstract substance flow cycles can provide a picture of resource uses and losses through a geographic region allowing us to evaluate regional resource management and estimate gross environmental impacts this paper traces the flow of copper as it enters and leaves the european economy over 1 year and provides the numerical accounting of copper flows that are further analyzed in a companion paper in this issue we examine the major flows of copper from ore as it is extracted from the earth transformed into products and discarded or recycled a regional material flow model was developed to estimate patterns of copper use in the early 1990s in select european countries successive mass balance calculations were used to determine copper flows including the amount of metal that enters use in society and is deposited in waste repositories a database that records temporal and spatial boundary conditions and data quality was developed for continental substance flow analysis the majority of copper is mined smelted and refined outside of europe across the life cycle a net total of 1900 gg year of copper is imported into europe about 40 of cathode copper produced within the system is made from old and new scrap it is estimated that approximately 8 kg of copper per person enters use in society largely in infrastructure buildings industry and private households the majority of copper in finished products is contained in pure form 70 the remainder in alloy form the waste management system in europe recycles about 60 of the copper from waste the copper discard flow from post consumer waste is roughly five times higher than that from copper production waste this ratio would decrease if we consider production wastes generated outside of the european system boundary the net addition of copper to the stock in society in the system is about 6 kg person given the in service lifetime of the applications of copper identified in this model most of the copper processed during the last few decades still resides in society mostly in non dissipative uses

genuine saving and positional externalities much evidence suggests that people are concerned with their relative consumption yet positional externalities have so far been ignored in savings based indicators of sustainable development this

welfare equivalent nnp and habit formation this note concerns the importance of habit formation for social accounting with internal habit formation earlier procedures for welfare measurement in the first best apply with minor modification

the permanent income hypothesis and the real interest rate some evidence from panel data abstract a test of the permanent income hypothesis in panel data is formulated taking into account both the time series and cross section variation in the rate of return the over identifying restrictions of the theory rejected

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

the credit constrained consumer an empirical study of demand and supply in the loan market this article presents an empirical analysis of credit constrained households in which models of both demand and supply sides of the market for loans are simultaneously estimated we develop a discrete choice logit model of the consumers decision on whether or not to apply for credit combining this with a reduced form logistic model for the banks credit granting decision we then estimate the model with cross sectional data as a nonlinear ordered sequential logit our findings shed light on the criteria used by banks in assessing credit applications and reveal the strong dependence of preferences on demographic characteristics the results also suggest that agents face significant fixed costs in applying for loans the fact that we jointly estimate models of both supply and demand sides of the credit market enables us to examine whether particular groups in the population are more frequently credit rationed because they tend to demand more loans or because they are viewed as bad credit risks by lenders

responsible mineral and energy futures views at the nexus societal prosperity is underpinned by access to the increasingly interdependent resources of minerals and energy in an era of mineral resource constraints and radical transition in the energy sector this paper reviews the extent to which a long term view of production and use is adopted in both fields a long term view including the mineral energy nexus is deemed to be necessary although not sufficient for managing future resource constraints and energy transitions alarmingly it identifies that the future of minerals resources and production is generally considered 5 10 years ahead rather than several decades or more as for energy additionally the sectors are generally studied independently rather than with a focus on the nexus with these findings as evidence of an unaddressed problem the paper then focusses on the current forces for change in the minerals industry namely community drivers regarding social licence to operate new technologies and consumer and government drivers on responsible minerals as discussions of sustainable development become displaced by the emerging discourse of responsible minerals what is adopted and discarded whilst responsible minerals considers chain of custody it does not adopt a long term view and overlooks the mineral energy nexus using three illustrative cases at the nexus of i rare earths renewables ii coal steel and iii uranium nuclear we extend the theoretical discussion on responsible with a range of contemporary examples from the perspectives of producing australia and consuming countries japan switzerland and propose a research agenda for an expanded notion of responsible minerals which recognises the complexity of the mineral energy nexus and connects it to progressing sustainable futures