cost benefit assessment of energy efficiency investments accounting for future resources savings and risks in the australian residential sector this article focuses on the impact of the discount rate on cost benefit assessment of investment options for residential building efficiency an integrated thermal modeling life cycle costing approach is applied to an extensive sample of dominant house designs for australian conditions the relative significance of predicted thermal performance and the applied discount rate on the present value of energy savings from alternative investment scenarios is investigated costs and benefits are also evaluated at the economy wide scale including carbon pricing considerations and for a test case household faced with alternative investment options at the point of construction the influence of the applied discount rate on produced cost benefit calculations is investigated as is the interaction between critical cost benefit input parameters findings support that the discounting framework is the primary driver of difference in estimates about costs and benefits of higher standards of efficiency in the residential sector results demonstrate that agreement on a low discount rate based on sustainability principals would prioritise those projects with significant environmental benefits

discounting in a world of limited growth this paper explores the consequences fordiscounting of assuming limits to growth one of the main determinants of the discount rate is the rate of economic growth if growth rates decline in the future then the discount rate should not be constant but also decline over time in fact we would then need not a single discount rate but rather a variable discount schedule this would imply higher present values for the distant future the paper analyses how discount rates would vary with different assumptions about the patterns of growth and the pure rate of time preference

intergenerational transfers and the social discount rate this paper investigates the relationship between intergenerational asset transfers and the choice of the discount rate for use in cost benefit analysis in a model of a competitive overlapping generations economy constrained by a socially managed exhaustible resource provided that there are no distortions in capital markets and that all agents hold perfect foresight cost benefit techniques will result in a pareto efficient resource allocation if the discount rate is set equal to the market rate of interest but since the path of the interest rate depends on the level of intergenerational transfers cost benefit techniques do not ensure a socially desirable distribution of welfare between generations a social optimum will result only if intergenerational transfers are properly chosen and enforced decentralized private altruism may result in intergenerational transfers that both present and future individuals would agree are too small if members of the present generation attach positive weight to the general welfare of future generations not simply their personal descendants in a world where intergenerational transfers are non optimal second best policy making may imply a constrained optimum that is inefficient together these findings suggest that cost benefit analysis is at best a partial criterion to policy formulation that should be used only in conjunction with ethical principles that define the proper distribution of welfare between present and future generations

time preference in global warming calculations a proposal for a unified index abstract many aspects of the calculation of the impacts of greenhouse gas ghg emissions and the costs and benefits of possible response options are highly sensitive to the way in which time preference is incorporated into the computations the intergovernmental panel on climate change ipcc used global warming potentials gwps to standardize inputs of different gases with differing radiative forcings and atmospheric lifetimes in the results emphasized by the ipcc s second assessment report a 100 year time horizon and no discounting is used and this has been adopted by the kyoto protocol for use in the first commitment period 2008 2012 here an alternative unified index is proposed that assigns explicit weights to the interests of different generations in contrast to discounting including the zero discount rate used by the ipcc the generationally weighted index forces policy makers to face the moral assumptions that underlie their choices related to global warming

earnings management and auditor specialization in the post sox era an examination of the banking industry abstract this study examines the impact of auditor specialization on bank loan loss provisions for a large cross section of us banks for the period 2002 2006 we find a positive relationship between earning before provision and loan loss provision suggesting that bank managers use llp to smooth earnings in the post sox period however this relationship is significantly moderated by audit industry expertise providing strong evidence that industry specialization constrains income smoothing in further analysis we find some evidence that auditor specialization is more effective in reducing potentially incoming increasing earnings management our results hold after controlling for self selection bias and are robust to alternative measures of industry specialization overall our findings support the conclusion that audit industry expertise plays an effective monitoring role in constraining management s discretionary accounting choices

cross country determinants of bank income smoothing by managing loan loss provisions abstract this paper studies the determinants of income smoothing by management of loan loss provisions in banks around the world using a panel database of 3221 bank year observations from 40 countries and controlling for unobservable bank effects and for the endogeneity of explanatory variables we find that bank income smoothing depends on investor protection disclosure regulation and supervision financial structure and financial development results suggest there is less bank income smoothing not only with the strength of investor protection but also with the extent of accounting disclosure restrictions on bank activities and official and private supervision while there is more income smoothing with market orientation and development of a country s financial system

an analysis of household mobility and tenure choice an empirical study of korea abstract this paper develops a model of households joint mobility tenure decisions which improves upon the sole existing model in two important ways first the probabilistic structure is appropriately framed to capture the simultaneity of the mobility and tenure decisions second the model is based more directly on utility maximization theory an additionally distinguishing characteristic of the model is the fact that all independent variables in the estimation are expressed in flow terms this is done in an effort to more truly reflect their importance in the decision making of the household the model is estimated using microlevel data from korea the coefficients and derived elasticities are consistent with expectations and korean households are found to behave in a manner similar to that in the united states this suggests that the basic motivations underlying households mobility tenure decisions are invariant across countries

on the environmental discount rate abstract in this paper i show that environmentalism itself can provide a rigorous foundation for the low and declining discount rates that environmentalists seem to favor in long term cost benefit calculations if indeed it is a stylized fact that we are moving toward a world where environmental spending is increasingly important that scenario per se may significantly lower the social rate of return a formula is derived for the ratio of social to private discount rates as a simple function of two operational environmental parameters the formula is used to explain why the social rate of return ought to be lower than the private rate and why this gap called environmental drag when measured in terms of equivalent evaporation of national income may be expected to increase over time

tenure choice and expected mobility a synthesis abstract this study employs a joint logit probability model to estimate the effects of a vector of independent variables on the household s current tenure choice and expected mobility which are hypothesized to be simultaneously determined in the empirical analysis it was found that the coefficient on the endogenous variables tenure choice and expected mobility is the most highly significant of all the coefficients estimated in addition in previous analyses the age of the household head has always exhibited a highly significant positive effect on the probability of ownership however in this analysis it is demonstrated that this age variable was acting as a proxy for the expected mobility and wealth of the household

federal discount rate policy the shadow price of capital and challenges for reforms abstract this paper addresses the problem of determining discount rate policies that are both consistent with basic economic principles and implementable given real world constraints the paper first examines the discounting policies of the three federal oversight and budget agencies as they apply to public investment regulation lease purchase and asset divestiture decisions one prominent technique that has been suggested as a means of improving discounting policy the shadow price of capital approach is then considered in detail key aspects of its implementation are considered including the determination of program cost incidence rates of saving and reinvestment and proper aggregation of capital costs the analysis suggests that there are significant empirical challenges associated with this approach

who actually decides parental influence on the housing tenure choice of their children we focus on the role of within family socialisation and the relationship between socialisation and resource transfers in the intergenerational transmission of housing preferences the formation of

capital adequacy ratio regulations and accounting choices in commercial banks abstract this study examines a commercial bank manager s incentives to reduce regulatory costs imposed when the bank s capital adequacy ratio falls below its regulatory minimum it also tests the general political sensitivity hypothesis that a manager seeks to reduce political costs incurred when revenue is unusually large tests of adjustments to the loan loss provision loan charge offs and securities gains and losses attempt to control for exogenous economic conditions and previous investing decisions results are consistent with hypotheses associating accounting adjustments with capital adequacy ratio guidelines but fail to support the political sensitivity hypothesis

reconsidering monetary policy an empirical examination of the relationship between interest rates and nominal gdp growth in the u s u k germany and japan abstract the rate of interest the price of money is said to be a key policy tool economics has in general emphasised prices this theoretical bias results from the axiomatic deductive methodology centring on equilibrium without equilibrium quantity constraints are more important than prices in determining market outcomes in disequilibrium interest rates should be far less useful as policy variable and economics should be more concerned with quantities including resource constraints to investigate we test the received belief that lower interest rates result in higher growth and higher rates result in lower growth examining the relationship between 3 month and 10 year benchmark rates and nominal gdp growth over half a century in four of the five largest economies we find that interest rates follow gdp growth and are consistently positively correlated with growth if policy makers really aimed at setting rates consistent with a recovery they would need to raise them we conclude that conventional monetary policy as operated by central banks for the past half century is fundamentally flawed policy makers had better focus on the quantity variables that cause growth

cross disciplinary evidence for hyperbolic social discount rates researchers in different disciplines have independently found evidence to suggest that the social discount rate may be hyperbolic rather than exponential in nature both behaviorist research and some empirical economics studies support the hyperbolic discounting hypothesis u s and u k government discounting dispensations for some long run public development projects are explicable in terms of an underlying hyperbolic social discount rate a statistical aggregation argument demonstrates that even if the behaviorist economics and public choice evidence for hyperbolic discounting is not conclusive the social discount rate of a set of people who individually express time preferences best modeled by exponential discounting functions is nonetheless hyperbolic further empirical economics studies of discounting preferences are required comparisons of different national discounting practices would also be useful to see how widespread is the use of unusually low exponential rates of discount for long run projects the application of hyperbolic discounting would have most impact in long run benefit cost analyses however government agencies would require overwhelming evidence before switching from exponential to hyperbolic discounting

household tenure choice and migration abstract a model of the joint tenure choice and migration decision is estimated unlike previous work that has considered each decision separately or examined the premigration tenure status choice jointly with the migration decision this analysis addresses change in tenure status as well the empirical findings indicate that variables often thought to affect either or both tenure status of the residence location change decision have offsetting or augmenting effects on their joint probabilities which are masked if the decisions are examined independently

time inconsistent resource conservation contracts abstract are certain types of commonly observed resource conservation contracts inefficient in this paper we construct a model embodying realistic characteristics of resource contracts we find that resource contracts that share these characteristics are economically inefficient this inefficiency stems from a time inconsistency inherent in the contracts there are two possible ways to overcome this time inconsistency the first is to employ a sufficiently large penalty for early termination of the contract the second and possibly easier method is to offer an upward sloping conservation payment schedule so far overlooked by policy makers under this payment schedule the agent s ex ante and ex post contract choices coincide social externalities are fully internalized and the contractual outcome is economically efficient even in the absence of a penalty for early termination

cash in your face the cost of racial and ethnic discrimination in housing abstract according to recent evidence racial and ethnic discrimination in housing continues to be widespread this paper estimates the cost this discrimination imposes on black and hispanic households building on the work of 4 the paper develops a housing search model and measures the cost of discrimination by its impact on the gain a household can achieve through housing search the cost of discrimination is then calculated for a representative sample of households the punchline black and hispanic households pay a discrimination tax of almost 4 000 on average every time they search for a house to buy

environmental policy under a non market discount rate abstract this paper looks at pollution emissions when a non market discount rate is used to evaluate environmental policy and policy is subject to continuous review through time it is shown that a non market rate leads to time inconsistent policy future regulators will want not to follow the current regulator s optimal plans even when the current regulator has perfect foresight and there is no uncertainty therefore the discount rate has different effects depending on whether government can commit to future environmental regulation we then show in a simple linear model that when the environmental discount rate is below the market rate pollution is higher under no commitment than under commitment even under no commitment however a lower discount rate leads to lower emissions we argue that the debate might be better framed over prices i e the value of the environment in the future rather than the discount rate this treatment removes the inconsistency problem yet ensures that future generations interests are represented in policy decisions

why are hispanic and asian american homeownership rates so low immigration and other factors abstract the homeownership rates of hispanic and asian american households are significantly less than that of other demographic groups in the us especially after accounting for income and other characteristics this naturally leads to an investigation of the impact of immigration characteristics of various groups on the propensity for homeownership it is found that being an immigrant has a substantial negative effect on the probability of being a homeowner but that this effect dissipates over time the relative youth of these two groups in and of itself plays a significant role in lowering their homeownership rate as does the relatively high rate of residence in areas with high value rent ratios