an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

propensity to consume farm family disposable income from separate sources farm family disposable income is generated from farm operations off farm sources and government payments if these three income components are fungible a dollar from one source is a perfect substitute for a dollar from another source then the propensities to consume each should be the same this study examines the farm family propensity to consume from separate income sources results indicate that the propensity to consume off farm income and government payments is higher than the propensity to consume farm income

compensation and rewards for environmental services cres and efficient design of contracts in developing countries behavioral insights from a natural field experiment the use of economic incentives for biodiversity mostly compensation and reward for environmental services including payment for es has been widely supported in the past decades and became the main innovative policy tools for biodiversity conservation worldwide these policy tools are often based on the insight that rational actors perfectly weigh the costs and benefits of adopting certain behaviors and well crafted economic incentives and disincentives will lead to socially desirable development scenarios this rationalist mode of thought has provided interesting insights and results but it also misestimates the context by which real individuals come to decisions and the multitude of factors influencing development sequences in this study our goal is to examine how these policies can take advantage of some unintended behavioral reactions that might in return impact either positively or negatively general policy performances we test the effect of income s origin low effort based money vs high effort based money on spending decisions necessity vs superior goods and subsequent pro social preferences future pro environmental behavior within madagascar rural areas using a natural field experiment our results show that money obtained under low effort leads to different consumption patterns than money obtained under high efforts superior goods are more salient in the case of low effort money in parallel money obtained under low effort leads to subsequent higher pro social behavior compensation and rewards policies for ecosystem services may mobilize knowledge on behavioral biases to improve their design and foster positive spillovers on their development goals

the varying impacts of agricultural support programs on u s farm household consumption farm households are economic agents whose income is derived from farm off farm and government sources this article uses farm level data from the agricultural resource management survey arms and recent advances in the econometric theory of dynamic pseudo panels to show that farm households consume various sources of income differently at the margin particular attention is given to a specific type of lump sum government transfer payment intended to be decoupled from independent of farm production decisions the results suggest that relatively decoupled government subsidies have a greater marginal effect on farm household consumption than subsidies that are tied to market conditions farm households often receive income from off farm employment and government support payments in addition to farm production revenues if income is fungible then marginal consumption should not vary by income source however carriker et al 1993 show that farm household consumption does vary at the margin by income source they find that off farm income and income from government subsidies are consumed at a higher marginal rate than income from farm production revenues if farm household consumption varies at the margin by income source different types of government payments may affect consumption differently closely following carriker et al 1993 this analysis further disaggregates sources of farm household income and compares how different types of government payments affect farm household consumption it is shown that government payments that are relatively decoupled from farm production decisions are consumed at a much higher marginal rate than government payments that

applying real options in investment decisions relating to environmental pollution abstract this study focuses on how to assess the optimal environmental investment decisions under economic and ecological uncertainty and establishes the continuous time model using the real option approach to optimize environmental pollution policy unlike traditional cost benefit analysis this work extends the model of pindyck r s 2002 optimal timing problems in environmental economics journal of economic dynamics and control 26 9 10 1677 1697 and attempts to identify the storage threshold of pollution stocks and the optimal timing for implementing environmental pollution decisions

why have private savings rates in the united states and canada diverged abstract one of the central questions in macroeconomics for many years has been whether government policy can affect private saving rates and if so to what extent and through what channels the question has remained controversial because as with other macroeconomic questions experiments to check divergent hypotheses cannot be deliberately performed so economists must rely upon the often dubious evidence from the limited experiments with which nature and history have endowed us this paper discusses the results of an exceptionally good natural experiment that has been provided by canada and the u s over the past thirty five years after moving in tandem for almost twenty five years american and canadian private saving rates have diverged dramatically over the last decade the primary conclusion emerging from our analysis of this phenomenon is that tax policies can have a potent impact on private savings behavior differences in tax structures and in the interactions of taxation and inflation appear to be important factors explaining the divergent behavior of the american and canadian private savings rates recognizing the importance of asset revaluations caused partially but not entirely by tax effects also helps to explain the different behavior of u s and canadian savings there may also be a relationship between government deficits and the private savings differential

csr in stakeholde expectations and their implication for company strategy recent years have seen dramatic changes in the attitudes and expectations brought to bear on companies over ten years of research at mori has shown the increasing prominence of corporate responsibility for a wide range of stakeholders from consumers and employees to legislators and investors

growth and the external constraint lessons from the spanish case the present article attempts to determine the role played by the balance of payments constraint on economic growth in spain 1960 94 using cointegration techniques this empirical exercise also serves to reveal some shortcomings in the usual procedures for estimating thirlwall s law in particular the spanish case reveals how important it is to introduce a variable that expresses the competitiveness gains generated by improvements in quality of the goods and services into the export function it also demonstrates the inadequate simplification entailed in an a priori exclusion of relative prices in external equilibrium equation not taking these two aspects into consideration may give rise to an erroneous confirmation of thirlwall s law especially if as in the spanish case both effects offset each other finally if the aim is to analyse long term relationships between variables it would seem advisable to use procedures such as cointegration with variables in levels

consumer response to tax rebates many households received income tax rebates in 2001 of 300 or 600 these rebates represented advance payments of the tax cut from the new 10 percent tax bracket based on a survey of a representative sample of households this paper finds that only 22 percent of households receiving the rebate would spent it instead they would either save it or use it to pay off debt this very low rate of spending represents a striking break with past behavior which would have suggested a much higher rate of spending the low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand this abstract was borrowed from another version of this item

the 45 rule revisited the purpose of this note is to update and reconsider the 45 rule or thirlwall s law by applying cointegration techniques to export equations based on national accounts data for 16 countries the income demand elasticities derived on this basis are fairly close to those found earlier whereas the relative price elasticities are much lower with the marshall lerner condition satisfied for only few of the 16 countries more important to the validity of the 45 rule is that the conditions for cointegration are not satisfied suggesting that the equations are misspecified and that current external accounts are non stationary when analysing this issue further it appears that the reasons for the apparent breakdown of the 45 rule can be traced to developments in the 1970s and 1980s when countries were exposed to major changes in their terms of trade and real effective exchange rates

income risk and farm consumption behavior abstract using panel data from illinois grain farmers a direct test of the relationship between income risk and farm consumption behavior is conducted the estimation results indicate that income risk significantly affects farm consumption and the results are robust using alternative risk measures this finding casts doubt on the relevance of the conventional life cycle permanent income hypothesis which implies that risk has no effect on consumption

testing theories of consumption behavior using information on aggregate shocks income seasonality and rainfall in rural india we develop an integrated framework for testing theories of consumption behavior by examining how agricultural households in rural india respond to anticipated and unanticipated seasonal income fluctuations using information on village level rainfall surprises we estimate idiosyncratic unanticipated income shocks by allowing weather risk to impact households differently depending on observable characteristics in applying our methodology to unique panel data on consumption debt and intrahousehold gift exchanges we address a number of shortcomings in previous tests of theories of consumption behavior yet we find no evidence against the hypothesis that households smooth idiosyncratic fluctuations in their income our approach also uncovers several interesting features of rural credit and insurance markets

microenterprise growth and the flypaper effect evidence from a randomized experiment in ghana standard models of investment predict that credit constrained firms should grow rapidly when given additional capital and that how this capital is provided should not affect decisions to invest in the business or consume the capital we randomly gave cash and in kind grants to male and female owned microenterprises in urban ghana for women running subsistence enterprises we find no gain in profits from either treatment for women with larger businesses we strongly reject equality of the cash and in kind grants only in kind grants cause growth in profits suggesting a flypaper effect whereby capital coming directly into the business sticks there but cash does not the results for men also suggest a lower impact of cash but differences between cash and in kind grants are less robust there is suggestive evidence that the difference in the effects of cash and in kind grants is associated more with lack of self control than with external pressure

investment risks under uncertain climate change policy abstract this paper describes results from a model of decision making under uncertainty using a real options methodology developed by the international energy agency iea the model represents investment decisions in power generation from the perspective of a private company the investments are subject to uncertain future climate policy which is treated as an external risk factor over which the company has no control the aims of this paper are to i quantify these regulatory risks in order to improve understanding of how policy uncertainty may affect investment behaviour by private companies and ii illustrate the effectiveness of the real options approach as a policy analysis tool the study analysed firms investment options of coal and gas fired power plants and carbon capture and storage ccs technologies policy uncertainty is represented as an exogenous event that creates uncertainty in the carbon price our findings indicate that climate policy uncertainty creates a risk premium for power generation investments in the case of gas and coal fired power generation the risk premium would lead to an increase in electricity prices of 5 10 in order to stimulate investment in the case of ccs the risk premium would increase the carbon price required to stimulate investment by 16 37 compared to a situation of perfect certainty the option to retrofit ccs acts as a hedge against high future carbon prices and could accelerate investment in coal plant this paper concludes that to minimise investment risks in low carbon technologies policy makers should aim to provide some long term regulatory certainty

corporate social responsibility theories mapping the territory the corporate social responsibility csr field presents not only a landscape of theories but also a proliferation of approaches which are controversial complex and unclear this article tries to clarify the sit uation mapping the territory by classifying the main csr theories and related approaches in four groups 1 instrumental theories in which the corporation is seen as only an instrument for wealth creation and its social activities are only a means to achieve economic results 2 political theories which concern themselves with the power of corporations in society and a responsible use of this power in the political arena 3 integrative theories in which the corporation is focused on the satisfaction of social demands and 4 ethical theories based on ethical responsibilities of corporations to society in practice each csr theory presents four dimensions related to profits political performance social demands and ethical values the findings suggest the necessity to develop a new theory on the business and society relationship which should integrate these four dimensions

balance of payments constrained growth a rejoinder to professor thirlwall professor thirlwall has argued that the growth rate of a country is constrained by the requirement that the external current account must broadly balance he maintains that a country s growth can be analysed using a dynamic harrod trade multiplier and that a country s long run growth rate y will approximate to the ratio of the rate of growth of exports x to the income elasticity of demand for imports a in a recent article in this journal mcgregor and swales 1985 doubts were expressed about the theoretical and empirical grounds on which thirlwall makes these claims in his reply thirlwall argues that such doubts are unfounded he clarifies his theory on a number of points he argues that his theory was subjected to inappropriate empirical tests and whilst accepting that equation 1 can be derived from a strict neoclassical model he invites the reader to choose between the plausibility of the neoclassical story as against the keynesian alternative

sustainable competitive advantage combining institutional and resource based views this article suggests that the context and process of resource selection have an important influence on firm heterogeneity and sustainable competitive advantage it is argued that a firm s sustainable advantage depends on its ability to manage the institutional context of its resource decisions a firm s institutional context includes its internal culture as well as broader influences from the state society and interfirm relations that define socially acceptable economic behavior a process model of firm heterogeneity is proposed that combines the insights of a resource based view with the institutional perspective from organization theory normative rationality institutional isolating mechanisms and institutional sources of firm homogeneity are proposed as determinants of rent potential that complement and extend resource based explanations of firm variation and sustainable competitive advantage the article suggests that both resource capital and institutional capital are indispensable to sustainable competitive advantage 1997 john wiley sons ltd

the ricardian approach to budget deficits persistent budget deficits have increased economists interest in theories and evidence about fiscal policy this paper develops the ricardian approach and contrasts it with standard models the discussion considers from major theoretical objections to ricardian equivalence finite lifetimes imperfect capital markets uncertainty about future taxes and incomes and the distorting effects of taxation the paper then considers empirical evidence on interest rates consumption and saving and current account deficits the conclusion is that the ricardian approach is a useful first order approximation and that this approach will probably become the benchmark model for assessing fiscal policy this abstract was borrowed from another version of this item

farmers marginal propensity to consume an application to illinois grain farms the marginal propensity to consume mpc for a sample of eighteen illinois farms over the 1979 86 period is determined four consumption models were estimated using disposable household income plus depreciation as the measure of income estimated short run mpcs ranged from 0 007 to 0 020 while long run mpcs varied between 0 143 to 0 381 these results indicate farm family consumption responded little to changes in income and that the life cycle hypothesis model explains consumption significantly better than the other models robustness of the results is demonstrated using a larger sample of farms for 1986 87

off farm labor supply responses to permanent and transitory farm income a sample of iowa farm couples is used to evaluate whether off farm labor supply decisions respond to permanent and transitory components of farm income off farm labor supply of both spouses declines in response to increases in permanent farm income farm wives also reduce off farm labor supply in response to positive transitory farm income shocks consequently one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed

agricultural profits and farm household wealth recent decades especially since 1973 have been an era of decreasing production profits that threaten the survival of many midand small sized american farms blank 2003 normally the survival of a firm depends on its profitability both in absolute and relative terms to remain viable a firm must offer returns that are both sufficient to cover the owner s financial obligations and competitive with returns from alternative investments if a firm is profitable the wealth of its owners can increase over time an unprofitable firm on the other hand reduces owners wealth yet american agriculture is full of firms that routinely earn low or negative returns on equity from production operations blank 2002 thus complicating the evaluation of the industry s economic health and prospects this suggests that macro level forecasts of american agriculture s future structure and performance require a micro level understanding of the relationship between farm profits and owner wealth this paper addresses that relationship

ecology driven real options an investment framework for incorporating uncertainties in the context of the natural environment the role of uncertainty within an organization s environment features prominently in the business ethics and management literature but how corporate investment decisions should proceed in the face of uncertainties relating to the natural environment is less discussed from the perspective of ecological economics the salience of ecology induced issues challenges management to address new types of uncertainties these pertain to constraints within the natural environment as well as to institutional action aimed at conserving the natural environment we derive six areas of ecology induced uncertainties and propose ecology driven real options as a conceptual approach for systematically incorporating these uncertainties into strategic management we combine our results in an integrative investment framework and illustrate its application with the case of carbon constraints

mental accounting and decision making the relationship between relative and absolute savings abstract the formation of mental accounts by individuals has been hypothesised to explain an apparent departure from rationality in certain decision making scenarios in particular the potential monetary saving on an item is viewed topically relative to the original expected cost of that item rather than relative to the original expected cost of all items purchased on the same shopping trip in other words in a number of contexts the relative saving to be made has been found to be more important than the absolute saving this paper extends previous experimental work by describing a new experiment that seeks to discover whether this mental accounting characteristic applies more widely we find that the effect is not detected as the level of absolute saving to be gained increases suggesting that topical accounts are less important in such contexts

the effects of benefit timing and income fungibility on food purchasing decisions among supplemental nutrition assistance program households the supplemental nutrition assistance program snap is the largest nutritional safety net in the united states prior research has found that participants have higher consumption shortly after receiving their benefits followed by lower consumption towards the end of the benefit month known as the snap benefit cycle this consumption pattern has been found to have negative effects on beneficiaries we hypothesize two behavioral responses of snap participants may work in tandem to drive much of the cycle 1 short run impatience a higher preference to consume today and 2 fungibility of income the degree of substitutability between a snap dollar and a cash dollar using data from the national food acquisition and purchase survey foodaps a newly developed nationally representative survey of daily food acquisitions by snap households we find evidence of both behavioral responses however the degree of short run impatience and fungibility of income is found to differ significantly across poverty levels and use of grocery lists to plan food purchases snap households could gain from food purchase planning education

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

evaluating environmental investments a real options approach the paper presents a model that determines when at which output price level it is optimum for a firm to invest in environmental technologies and which are the main parameters that affect this decision our analysis shows that firms require high output price levels to be induced to invest in environmental technologies because they optimally would not want to commit to a heavy irreversible investment that could turn out to be unprofitable in the event of a price fall a comparative static analysis predicts that firms in industries with high output price volatility would be more reluctant to invest in environmental protection technologies and would be more willing to operate at low output levels thus attaining low emission levels increases in the interest rate would also reduce optimal environmental investment levels

thirlwall s law and balance of payments constrained growth more on the debate the various criticisms that have levelled against thirlwall s law by mcgregor and swales are examined it is shown that their arguments are untenable the relationship between the necolassical law of one price and thirlwall s law is clarified thirlwall s law is not overwhelmingly rejected by the evidence as mcgregor and swales assert their suppression of the influence of the price term on the estimates used in the test proposed by mccombie is inappropriate their regression analyis is also mid specified and a preferable specification provides no support for their conclusions they repeatedly argue that thirlwall s modele cannot account for changes in market shares and the that the estimated income elasticities of demand for exports and imports cannot capture the effects of non price competition this was shown to be erroneous by mccombie and the reasons advanced are further elaborated mcgregor and swales provide another interpretation of the relationship between thirlwll s law and the harrod foreign tr

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

thirlwall law and balance of payments constrained growth further comment on the debate this paper reviews the debate that has occurred in applied economics over thirlwall s law mccombie 1989 mcgregor and swales 1985 1986 thirlwall 1986 the empired evidence concering the validity of the law is re assessed using a variety of tests including that suggested by mccombie 1989 and the new data set provided by bairam 1988 the law is overwhelmingly rejected by the evidence contrary to the conclusions of mccombie and bairam the rationale for the assumption of constant relative prices which is required to derive thirlwall s law is reconsidered the original law of one price rationale renders the approach incoherent the more recent rationale of sticky oligopolistic price improves the internal consistency of the model but necessitates consideration of non price competition however neither the theory underlying thirlwall s law nor empirical tests of the law property account for this in principle the law cannot be employed to distinguish between demanding constrained and supply co

sub saharan africa s growth south south trade and the generalised balance of payments constraint using the post keynesian balance of payments constrained growth approach we investigate the recent increase in sub saharan africa ssa growth focussing on the contribution of south south trade the model is estimated by panel co integration on a sample of 20 low and lower middle income ssa countries using annual data from 1990 to 2008 and considering three partner areas ssa itself developing asia and the rest of the world the results show that in the past decade the balance of payments constraint of ssa has been relaxed this shift has occurred through different channels of transmission the other ssa countries contributed through the real growth effect developing asia through the market share effect and the rest of the world through the terms of trade effect these results help reconcile puzzling evidence on the pattern of ssa external indebtedness and provide new insights on the role of asian drivers on ssa growth as well as on the sustainability of ssa growth recovery

global environmental risks the need to manage climate risks is not a new it has shaped social institutions for many centuries in medieval england a peasant farmer s land was broken into many widely dispersed parcels economic historians interpret this as a way of hedging climate risk see references in bromley 9 land in different locations would be affected differently by droughts floods and frosts by spreading land holdings over different locations as well as by organizing agricultural cooperatives and buying insurance farmers have managed climate risk for many centuries

dealing with uncertainties when governing csr policies as corporate social responsibility involves a voluntary business endeavour to address social and environmental issues beyond legal compliance governments cannot fall back on hierarchical command and control policies to support it as such it is complementary with the increasing popularity of public policies known as new governance policies where the government is engaged in a horizontal inter organizational network of societal actors and where public policy is both formed and executed by the interacting and voluntary efforts from a multitude of stakeholders however such policies are known to generate substantive uncertainty about the content of csr and its related issues strategic uncertainty regarding the behavior of the actors involved and institutional uncertainty related to the interaction process involved in the institutional change we explore new governance policy instruments to address these uncertainties in the context csr and discuss the experiences with these methods in the european union

static versus dynamic specifications and the harrod foreign trade multiplier the validity of the harrod foreign trade multiplier is tested using new econometric techniques the equations obtained still support the conclusions drawn from the results obtained in the past

thirlwall s law and balance of payments constrained growth a comment on the debate 1989 thirlwall s law and balance of payments constrained growth a comment on the debate applied economics vol 21 no 5 pp 611 629

social security benefits consumption expenditure and the life cycle hypothesis this paper examines the impact of changes in social security benefits on aggregate consumption expenditure under the null hypothesis there should be no contemporaneous effect at the monthly frequency because increases in benefits have always been announced at least 6 weeks prior to payment the paper develops overwhelming evidence contrary to the null that benefits have affected aggregate spending the results have strong implications for several important issues including ricardian equivalence government policy irrelevance and the excess sensitivity of consumption to changes in income

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

sensitivity to market incentives the case of policy loans the standard neoclassical theory is rejected as an explanation for the observed reluctance of most holders of whole life insurance to borrow against the cash value of their policies at favorable rates of interest even when the neoclassical theory is augmented with transactions costs and short awareness lags several empirical tests using survey and time series data reject the standard theory in favor of an explanation invoking self imposed rules against borrowing or the debt ethic this evidence lends support to the psychology based theories of thaler and shefrin 1981 copyright 1987 by mit press

aging and the income value of housing wealth abstract the potential of reverse annuity mortgages to increase the current income of the elderly is analyzed we conclude that most low income elderly also have little housing equity in general a reverse annuity mortgage would substantially affect the income only of the single elderly who are very old whose life expectancy is short on the other hand if the transfer were in the form of a lump sum payment rather than an annuity the payment would increase the liquid wealth of most elderly families by a large fraction thus legislation that would facilitate the market for reverse mortgages could improve substantially the financial status of a small proportion of the elderly

evaluating the power investment options with uncertainty in climate policy abstract this paper uses a real options approach roa for analysing the effects of government climate policy uncertainty on private investors decision making in the power sector it presents an analysis undertaken by the international energy agency iea that implements roa within a dynamic programming approach for technology investment choice case studies for gas coal and nuclear power investment are undertaken with the model illustrative results from the model indicate four broad conclusions i climate change policy risks can become large if there is only a short time between a future climate policy event such as post 2012 and the time when the investment decision is being made ii the way in which co 2 and fuel price variations feed through to electricity price variations is an important determinant of the overall investment risk that companies will face iii investment risks vary according to the technology being considered with nuclear power appearing to be particularly exposed to fuel and co 2 price risks under various assumptions and iv the government will be able to reduce investors risks by implementing long term say 10 years rather than short term say 5 years climate change policy frameworks contributions of this study include 1 having created a step function with stochastic volume of jump at a particular time to simulate carbon price shock under a particular climate policy event 2 quantifying the implicit risk premium of carbon price uncertainty to investors in new capacity 3 evaluating carbon price risk alongside energy price risk in investment decision making and 4 demonstrating roa to be a useful tool to quantify the impacts of climate change policy uncertainty on power investment

investing in finite life carbon emissions reduction program under risk and idiosyncratic uncertainty this paper aims at emphasizing the ability of new frameworks of real option model to highlight key characteristics of industrial carbon emissions reduction program investment decision we develop both theoretical arguments and numerical simulations with structural parameters calibrated on real life data we find that both radical uncertainty and risk lead to speed up green investments compared to the predictions of real option models that are normally used in green investment literature the conventional wait and see attitude questioned in recent developments of the real option theory is not validated in conclusion our results should foster companies to implement green investments and help governments to define appropriate incentives to encourage green investments of particular note the paper highlights that finance theory is not necessarily an obstacle to green investment decisions

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

structural changes cointegration and the empirics of thirlwall s law thirlwall s law establishes a relation between the long run growth rate the growth of exports and the long run income elasticity of imports the estimation of this parameter requires cointegration techniques which in turn require a large span of data thus exposing the estimates to risks of structural changes while this problem has been recognized in the literature the evidence produced is still partial being concerned with a very limited number of countries and in some respects unsatisfactory in this article we fill this gap by assessing thirlwall s empirical regularity on a sample of 22 organization for economic cooperation and development oecd countries using econometric techniques that allow for the presence of a shift of unknown date in the long run parameters the results are generally supportive of thirlwall s hypothesis and allow us to reconcile and qualify the evidence provided in the existing literature

emissions trading and investment decisions in the power sector a case study in finland abstract organizations which consider investment in or divestment of power production licences capacity within the european community are exposed to the impacts of the european union emission allowance trading scheme eu ets in this paper the consequences of the eu ets on investment decisions are explored in a country specific setting in finland first we review the general mechanisms through which the eu ets influences size timing and cashflows of an investment next we discuss the projected changes in finnish power producers investment environment and examine the financial impacts due to the eu ets on a case investment decision a hypothetical condensing power plant 250 mwe the standard discounted cash flow dcf analysis is extended to take into account the value of two real options the option to wait and the option to alter operating scale in a quantitative investment appraisal the impact of emissions trading not only depends on the expected level of allowance prices but also on their volatility and correlation with electricity and fuel prices the case study shows that the uncertainty regarding the allocation of emission allowances is critical in a quantitative investment appraisal of fossil fuel fired power plants

the balance of payments constrained growth rate and the natural rate of growth new empirical evidence this paper implements a panel approach to investigate the empirical relevance of thirlwall s law which states that long run growth must be consistent with balance of payments bop equilibrium and is thus determined on the demand side building on ardl modelling mean group and pooled mean group estimation methods we use annual data over the 1960 2010 years for a panel of 22 oecd countries and find significant support for the law next we also explore empirically the hypothesis that the bop constrained growth rate yb must equal the natural or potential rate of growth yn and find that the data do not reject this hypothesis finally we adopt a new approach based on panel granger causality methods to explore the direction of causality between yb and yn the results indicate the existence of unidirectional long run causality from yb to yn thus reinforcing the view embodied in the law that long run growth is demand determined and constrained by the bop

emerging carbon constraints for corporate risk management abstract while discussions about global sustainability challenges abound the financial risks that they incur albeit important have received less attention we suggest that corporate risk assessments should include sustainability related aspects especially with relation to the natural environment and encompass the flux of critical materials within a company s value chain such a comprehensive risk assessment takes into account input as well as output related factors with this paper we focus on the flux of carbon and define carbon constraints that emerge due to the disposition of fossil fuels in the input dimension and due to direct and indirect climate change effects in the output dimension we review the literature regarding the financial consequences of carbon constraints on the macroeconomic sector and company level we conclude that a financial consequences seem to be asymmetrically distributed between and within sectors b the individual risk exposure of companies depends on the intensity of and dependency on carbon based materials and energy and c financial markets have only started to incorporate these aspects in their valuations this paper ends with recommendations on how to incorporate our results in an integrated carbon risk management framework

thirlwall and balance of payments constrained growth this paper outlines the theory which thirlwall uses to determine the growth of domestic income and argues that crucial elements of this theory appear to be very weak the empirical evidence presented by thirlwall to support his argument for balance of payments constrained growth is considered