carbon prices and fuel switching a quasi experiment in electricity markets within the pennsylvania new jersey maryland electricity market delaware and maryland participate in the regional greenhouse gas initiative rggi but other states do not providing a quasi experimental setting to study the rggi program using a difference in difference framework we find that overall the rggi program led to 6 22 million short tons of co2 reduction per year in delaware and maryland or about 19 10 of the average total potential annual emissions in these two states from 2009 to 2013 counterintuitively however the reduction is mainly achieved through reduction of coal inputs and emission leakage instead of fuel switching from coal to natural gas or from fossil fuel coal and natural gas to non fossil fuel

on the option to invest in pollution control under a regime of tradable emissions allowances optimal decisions of a firm facing the option of retrofitting its plant to reduce pollution and thereby eliminate the need to purchase emissions allowances are analysed the decision is treated as a real option with the price of pollution permits following a known stochastic process the model is formulated as a set of one dimensional partial differential equations at discrete points in time the firm owner makes optimal decisions about the retrofit including whether to mothball temporarily the model is used to analyse a firm s decision to instal a scrubber as a result of the 1990 u s clean air act jel classification q25 d81 g31 sur la possibilite d investir dans le controle de la pollution dans un regime de permis d emission de pollution echangeables commercialement ce memoire examine les decisions optimales d une entreprise face a la possibilite d adapter ses installations pour reduire la pollution et ce faisant d eliminer le besoin de se procurer des permis d emission de pollution sur le marche le decision est traitee comme une option reelle ou le prix des permis resulte d un processus stochastique connu le modele est formule sous forme d un ensemble d equations differentielles partielles a une dimension a des points discontinus dans le temps le proprietaire de l entreprise prend des decisions optimales de mise a niveau des installations y compris la possibilite de les fermer temporairement le modele est utilise pour analyser une decision d installer un epurateur suite a la mise en place de la loi americaine de 1990 clean air act

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

foreign direct investment and wage inequality evidence from china summary this study provides micro level evidence on the close link between foreign participation and wage inequality we investigate the wage premium and the wage spillover effect of foreign invested enterprises in the chinese manufacturing sector the results indicate a significant foreign premium in both wage and non wage compensation the presence of foreign and hong kong macao and taiwan hmt investment results in a significantly negative spillover in terms the wage level in domestic firms and discourages wage growth in such firms overall the evidence suggests that exposure to foreign investment increases inter enterprise wage inequality

an interim evaluation of sulfur dioxide emissions trading ide iv of the 1990 clean air act amendments established the first large scale long term environmental program to rely on tradable emissions permitscalled allowances in this program to control pollution this program was designed to cut acid rain by reducing sulfur dioxide so2 emissions from electric generating plants to about half their 1980 level beginning in 1995 it is of interest both as a response to an important environmental issue and as a landmark experiment in environmental policy this experiment comes at a particularly important time since emission trading is under serious consideration with strong u s backing for use to deal with global climate change by curbing emissions of carbon dioxide co2 the economic stakes in climate change surpass those in acid rain by several orders of magnitude intergovernmental panel on climate change 1996 this article summarizes the results to date of our ongoing empirical analysis of compliance costs and allowance market performance under the u s acid rain program

the market for tradable ghg permits under the kyoto protocol a survey of model studies abstract this paper gathers results from 25 models of the market for tradable greenhouse gas ghg emission permits under the kyoto protocol due to diverging projections of emissions growth and different modeling approaches the model results differ substantially the average market volume is approximately 17 and 33 billion usd under global trading and annex b trading respectively including non carbon ghg lowers compliance costs and permit prices in the absence of the us permit demand roughly equals hot air from the former soviet union these countries can increase their revenues from selling permits by restricting supply which raises the permit price

currency crises sunspots and markov switching regimes abstract this paper investigates the theoretical properties of a class of escape clause models of currency crises as well as their applicability to empirical work we show that under some conditions these models give rise to an arbitrarily large number of equilibria as well as cyclic or chaotic dynamics for the devaluation expectations we then propose an econometric technique based on the markov switching regimes framework by which these models can be brought to the data we illustrate this empirical approach by studying the experience of the french franc between 1987 and 1993 and find that the model performs significantly better when it allows the devaluation expectations to be influenced by sunspots

the behavior of the exchange rate in the genetic algorithm and experimental economies this paper studies the behavior of the exchange rate in the kareken wallace overlapping generations economy with two currencies in which decision rules are updated using the genetic algorithm the analysis shows that a stationary monetary equilibrium of the kareken wallace model is not stable under the genetic algorithm dynamics the fluctuations in the genetic algorithm exchange rate are driven by fluctuations in the portfolio fractions which change over time in response to the inequality between the rates of return on two currencies further both the genetic algorithm simulations and the experiments with human subjects were characterized by continuing fluctuations of the exchange rate with first period consumption values close to a stationary value

itqs firm dynamics and wealth distribution does full tradability increase inequality concerns over the re distributive effects of individual transferable quotas itq s have led to restrictions on their tradability we consider a general equilibrium model with firm dynamics to evaluate the redistributive impact of changing the tradability of itqs a change in tradability would happen for example if permits are allowed to be traded as a separate asset from ownership of an active firm if the property right is associated with ownership of an active firm the permit can be leased in each period but it is not possible to exit the industry and keep the right however allowing the permits to be traded as a separate asset has two effects first it leads to a greater concentration of production in the industry second it directly converts a non tradable asset into a tradable one and this is equivalent to giving a lump sum transfer to all firms the first effect implies a concentration in revenues while the second implies a redistribution of wealth we calibrate our model to match the observed increase in revenue inequality in the northeast multispecies groundfish u s fishery we show that although observed revenue inequality measured by the gini coefficient increases by 12 wealth inequality is reduced by 40

sulfur allowance trading and the regional clean air incentives market a comparative design analysis of two major cap and trade permit programs this paper investigates in detail the design parameters of the two mostprominent us cap and trade permit program the us epa sulfur allowancetrading program and the south californian regional clean air incentivesmarket reclaim in contrast to expectations the two programs turn out to be rather different in several important design parameter choices common elements emerge primarily in the existence of an ambitious quantifiedenvironmental target mandatory use of stringent emission monitoring methodsand stiff penalties for non compliance coexisting command and controlregulations the creation of a competitive permit market structure andsome distributional concessions in the initial permit allocation generalizing from these common features we find that provisions to assurepolitical acceptance functional interdependencies and overlapping regulation are the most important influences on the design of applied cap and trade permit programs

foreign investment and productive efficiency the case of mexico this paper examines whether the relative performance of firms within mexican manufacturing industries varies systematically with the presence of foreign subsidiaries it also analyzes how foreign entry influences the technological structure in host country industries the findings suggest that 1 foreign presence in an industry is positively correlated with structural efficiency and 2 foreign entry is related to structural changes only in the modern part of the industries the most important source of spillover efficiency is found to be in the competitive pressure induced by the foreign firms i introduction a widely held view among economists studying foreign investment is that one of the important contributions to the host country is likely to stem from external effects or spillovers the spillovers can be of different kinds the foreign firms may influence the productivity and growth of the domestically owned firm they may change the nature and evolution of concentration they may alter financing marketing and technological and managerial practices in the industries that they enter et cetera because of great methodological difficulties in investigating these effects empirically in addition to lack of data few empirical investigations appear in the literature three available econometric studies deal with the influence of foreign investment on the technical efficiency of host country firms one focuses on australia caves 1974 one on canada globerman 1979 and one on mexico blomstrom and persson 1983 all three find some support for the spillover benefit hypothesis but none of the studies analyzes the nature of spillover efficiency in depth the present paper is an attempt to identify through what mechanisms the spillover efficiency of foreign investment takes place by analyzing the effects of foreign investment on the productive efficiency of the industrial structure in mexico we will examine whether the relative performance of firms within an industry varies systematically with the presence of foreign subsidiaries we will also analyze the impact of foreign investment on structural change that is how foreign entry influences the technological structure in host country industries

seller incentive properties of epa s emission trading auction abstract the new clean air act amendments instruct the environmental protection agency epa to conduct annual sealed bid offer auctions of emission allowances the auction pricing rules are discriminative and sellers with the lowest asking prices receive the highest bids this paper assesses the seller incentives of this auction and demonstrates that the auction rules cause sellers to choose asking prices that under reveal their cost of emission control furthermore increasing the number of sellers intensifies this misrepresentation if the number of buyers remains fixed the epa s rules can therefore generate significantly biased price signals and reduce the efficiency of the allowance trading market

the political economy of market based environmental policy the u s acid rain program the u s acid rain program enacted in 1990 gave valuable tradable sulfur dioxide emissions permits called allowances to electric utilities we examine the political economy of this allocation though no senate or house votes were ever taken hypothetical votes suggest that the actual allocation would have beaten plausible alternatives while rent seeking behavior is apparent statistical analysis of differences between actual and benchmark allocations indicates that the legislative process was more complex than simple models suggest the coalition of states that produced and burned high sulfur coal both failed to block acid rain legislation in 1990 and received fewer allowances than in plausible benchmark allocations some of these states may have received additional allowances to cover 1995 99 emissions by giving up allowances in later years and some major coal producing states seem to have focused on benefits for miners and on sustaining demand for high sulfur coal

multinational corporations economic and human rights impacts on developing countries a review and research agenda developing countries are attracting a significant portion of global foreign direct investments governments of such countries often compete fiercely for attracting multinational corporations mncs in the expectation of the advantages they will bring to their economies often prioritising economic goals over fundamental human rights for a long time economists have analysed the economic impacts of mncs while a parallel strand of work in political science business ethics and international law investigates the repercussions of mnc operations on human rights despite the significant relatedness and complementarities these two bodies of literature have so far poorly interacted this paper addresses this limitation and systematically analyses and integrates existing micro level empirical evidence on the economic and human rights impacts of mncs on developing countries it provides a critical analysis of what is known and highlights what we do not know about the factors that mediate the positive and or negative impacts of mnc operations on host developing countries based on a critical analysis of the literature it discusses avenues for future research in this field and sets the grounds for a new interdisciplinary research agenda on this subject

auctioning countermeasures in the wto we offer a first formal analysis of auctioning retaliation rights within the wto we show that the auctions exhibit externalities among bidders and we characterize equilibrium bidder behavior under alternative auction formats if the violating country is prevented from bidding to retire the right of retaliation against it then the possibility of auction failure arises whereby no bids are made despite positive valuation by bidders if the violating country is instead permitted to bid then auction failure is precluded and indeed the right of retaliation is always retired we evaluate these different auction formats from normative revenue compliance efficiency standpoints

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

trade of permits for greenhouse gas emissions bilateral trade need not be the answer the kyoto protocol sets national quotas on ghg emissions and allows international trade of these quotas taking terms of trade effects into account we argue that this trade is characterized by asymmetric identity dependent externalities and show that bilateral trade of permits may not be sufficient for an efficient allocation of emissions we derive conditions under which bilateral trade does improve the allocation of permits the conditions are strong in this sense we argue that for emissions permits market design matters

resale markets and the assignment of property rights the consumption of an indivisible good causes identity dependent externalities to non consumers we analyse resale markets where the current owner designs the trading procedure but cannot commit to future actions we ask the following questions 1 doer the identity of the initial owner matter for the determination of the final consumer 2 is the outcome always efficient the major conclusion of our paper is that the irrelevance of the initial structure of property rights arises in resale processes even if there are transaction costs that hinder efficiency this result complements the coasian view where the irrelevance of the assignment of property rights is a consequence of efficiency

fdi impact and spillover evidence from china s electronic and textile industries m ultinational corporations mncs may invest in a host country when they possess non tangible productive assets that cannot be easily licensed but can be transferred within the firm direct equity participation in the host country is therefore required for mncs to reap the rents from their nontangible productive assets which may include technological know how marketing and managing skills relationships with suppliers and customers and reputation if foreign direct investment fdi does effectively convey these assets we should expect fdi to boost the productivity of the host country firms that receive fdi a more complex issue is the indirect spillover effects of fdi to non fdi domestic firms to the extent that fdi may bring new products and technologies to the host country non fdi receiving domestic firms may also stand to benefit from fdi through personnel turnover demonstration effects and knowledge spillovers the presence of fdi in a certain industry however may exert adverse effect on domestic firms in that industry by enjoying better technologies and lower production costs firms with fdi may cut into the market share of domestic firms without fdi in a short run imperfectly competitive market structure the productivity of domestic firms may be reduced when sales fall so that fixed costs are spread over fewer units in the long run however the increased competition induced by the increased presence of fdi in domestic industries may force

mutual productivity spillovers between foreign and local firms in china the existing literature treats advanced technology sourcing as the only cause of reverse productivity spillovers from local to foreign firms and implies that mutual spillovers between foreign and local firms can only happen in the developed world this paper argues that the diffusion of indigenous technology and local knowledge helps the productivity enhancement of multinationals so that there can be mutual spillovers even in a developing country the results from a large sample firm level econometric analysis and a comparative case study of seven companies in chinese manufacturing support this new argument as mutual spillovers are identified between local chinese firms and overseas chinese or oecd invested firms

a two level dynamic game of carbon emission trading between russia china and annex b countries this paper proposes a computable dynamic game model of the strategic competition between russia and developing countries dcs mainly represented by china on the international market of emission permits created by the kyoto protocol the model uses a formulation of i a demand function for permits from annex b countries and ii marginal abatement costs mac in russia and china provided by two detailed models gemini e3 is a computable general equilibrium model that provides the data to estimate annex b demand for permits and macs in russia poles is a partial equilibrium model that is used to obtain mac curves for china the competitive scenario is compared with a monopoly situation where only russia is allowed to play strategically the impact of allowing dcs to intervene on the international emission trading market is thus assessed

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

entitling the pollutee liability versus standard under private information this paper considers and compares two different legal means full liability and standard to reduce and to regulate pollution at a local level accounting for private information about benefits and costs the familiar polluter pays principle makes the polluter liable for any damage since the courts lack information about the true damage the pollutee can and presumably will overstate this damage nevertheless voluntary arrangements bypassing the courts exist e g for coasean reasons however such out of court arrangements fail to improve in many cases the inefficient allocation of pollution due to agency costs given these unsatisfactory consequences of the polluter pays principle even after allowing for contracts around the law we propose a modification of standards the pollutee is entitled that a certain standard is satisfied yet can trade this right for financial compensations contracts induced by this legal rule are countervailing the optimal mechanism switches between subsidies and payments and first best efficiency holds at both ends and this characteristic allows such a privatized standard to track the first best quite well and often better than the polluter pays principle this relative ranking under private information is the opposite of the one that holds under uncertainty here liability dominates the standard

currency crisis evolution of beliefs and policy experiments abstract we study a model of currency crisis where agents beliefs are the only source of volatility containing the potential for currency devaluation using the basic framework of arifovic and masson 2003 we simulate the model for a large number of parameter specifications the learning dynamics of our agent based computational model based on imitation of successful expectational rules and occasional experimentation result in recurrent currency crises recurrent crises are a robust feature of the dynamics regardless of the model s parameter specifications we discuss both the impact of imitation and experimentation on the model s dynamics as well as the impact of the parameter values on the duration of episodes of devaluation and periods of no devaluation in addition we compare the first difference in interest rate spread statistics of the data generated in our simulations and real world data finally we conduct policy experiments in our agent based type environment designed to examine the power of the interest rate policy changes in decreasing the number as well as the duration of the episodes of currency crisis our results indicate that the policy of decreasing rather than increasing the emerging market interest rate proves more effective at reducing the likelihood of devaluation

an experimental investigation of the seller incentives in the epas emission trading auction the clean air act requires the epa to conduct annual auctions of emission allowances under the discriminative auction rules sellers with the lowest asking prices receive the highest bids this paper studies an inverted version of this auction in which buyers face the same incentives as sellers in the epa auction consistent with theoretical predictions buyers bid above their valuation auction outcomes are inefficient and increasing the number of buyers increases bids buyers facing human opponents compete more aggressively than the risk neutral prediction but bids do not differ systematically from this prediction when buyers face computerized nash robots copyright 1995 by american economic association

foreign direct investment inflows and the industrialization of african countries summary this paper examines the relationship between inward foreign direct investment fdi and the industrialization process in africa it uses panel data from 49 countries over the period of 1980 2009 the results indicate that fdi did not have a significant impact on the industrialization of these countries while other variables such as the size of the market the financial sector and international trade were important this study concludes that the role of fdi in the transformation agenda which is currently being discussed in africa should be carefully analyzed to maximize the impact of these capital inflows

accounting for sources of fdi technology spillovers evidence from china using a set of panel data of 11 324 firms in china from 1996 to 1999 the paper finds that positive technology spillovers from fies to domestic firms occur through tangible assets rather than intangible assets through domestically consumed products rather than exported products through traditional products rather than new products and through fies employing unskilled workers rather than fies employing skilled workers fies are found to generate negative spillovers through exports and through employment of skilled workers

free trade and global warming a trade theory view of the kyoto protocol this paper demonstrates how three important results in environmental economics true under mild conditions in closed economies are false or need serious amendment in a world with international trade in goods since the three results we highlight have framed much of the ongoing discussion and research on the kyoto protocol our viewpoint from trade theory suggests a re examination may be in order specifically we demonstrate that in an open trading world but not in a closed economy setting 1 unilateral emission reductions by the rich north can create self interested emission reductions by the unconstrained poor south 2 simple rules for allocating emission reductions across countries such as uniform reductions may well be efficient even if international trade in emission permits is not allowed and 3 when international emission permit trade does occur it may make both participants in the trade worse off and increase global emissions