renewable natural resource management and use without markets natural resources by their nature are not readily bent to the status of private property efficient resource use is complicated by jurisdictional externalities public goods non use values and beneficiaries spatially separated from the location of resources the task is made more challenging by ecological complexity that obscures cause benefits and effects costs and dramatic time lags between individual actions and subsequent social consequences that together with substantial uncertainty introduce the chance of irreversibilities resource economists have played a major role in the literature on externalities the development of individual transferable quotas non market valuation techniques and common property management

endogenous growth and the possibility of eliminating pollution abstract this paper studies the effect on optimal growth of the possibility that at some moment in the future a technology is discovered that eliminates pollution we formalize this possibility as a probability p per unit of time of discovering such a technology we focus on steady state behavior and show that the optimal rate of growth increases with the hope of eliminating pollution for an economy where there is no growth in the steady state of the optimal trajectory when p 0 a positive p may imply positive growth the higher the value of the probability the larger the endogenous rate of growth

renewable resource management with environmental prediction variations in environmental conditions affect renewable resource growth the ability to predict such variations is improving providing scope for improved management we generalize a common stochastic stock recruitment model to explore how optimal management changes with environmental prediction we obtain three main results first while it might seem that a prediction of adverse future conditions should lead to more conservative management the opposite may be true second optimal management requires only a one period ahead forecast suggesting forecast accuracy is more important than forecast lead time finally we derive conditions on environmental fluctuations guaranteeing positive optimal harvest in every period gestion d une ressource renouvelable quand on predit les conditions futures de l environnement les variations dans les conditions de l environnement affectent la croissance de la ressource renouvelable la capacitea prevoir ces variations s ameliore et ouvre la possibilite d ameliorer la gestion de la ressource les auteurs utilisent un modele de ressource renouvelable avec croissance stochastique et obtiennent trois resultats d abord alors qu il peut sembler que des previsions pessimistes de conditions difficiles dans l avenir peuvent conduire a une gestion plus conservatrice le contraire peut etre vrai ensuite la gestion optimale requiert seulement une prediction pour la prochaine periode voila qui suggere qu il est plus important d avoir une prevision exacte que d avoir des previsions a plus long terme enfin on developpe les conditions pour les fluctuations de l environnement qui garantissent une recolte positive optimale a chaque periode

best policy response to environmental shocks applying a stochastic framework abstract the paper develops a general framework for the analysis of environmental shocks in growing economies endogenous capital investments allow identifying the dual role of capital as a buffer against shocks and a source of pollution we study the effects of recurring natural disasters on optimal growth and efficient environmental policies emissions may cause continuous fluctuations entail discrete and recurring jumps or trigger so called tipping points with large costs to the economy closed form solutions are provided for all the model variants we discuss possible applications in environmental economics and identify current research gaps

pricing carbon and adjusting capital to fend off climate catastrophes the optimal reaction to a potential productivity shock as a consequence of climate tipping is to substantially tax carbon in order to curb the risk of tipping but to adjust capital as well in order to smooth consumption when tipping occurs we also allow for conventional marginal climate damages and decompose the optimal carbon tax in two catastrophe components and the conventional component we distinguish constant and increasing marginal hazards moreover the productivity catastrophe is compared with recoverable catastrophes and with a shock to the climate sensitivity finally we allow for investments in adaptation capital as an alternative to counter the potential adverse effects of climate tipping quantitatively the results are investigated with a calibrated model for the world economy

pollution control under a possible future shift in environmental preferences abstract we examine how the possibility of a future shift in environmental preferences affects optimal pollution emissions for example is a more stringent carbon cap called for if excessive carbon emissions today may trigger a shift toward greener preferences in the future in contrast to the related literature which largely focuses on regime shifts in damages not preferences we find that the possibility of a shift in environmental preferences can induce higher or lower optimal current emissions this hinges on an economically interesting interplay between the magnitude of the possible shift whether the shift is endogenous and the magnitude of environmental damages this helps reconcile the tension between the conservationists view of pollution reduction to reduce damage and lessen the likelihood of regime shift and the traditional economic rationale emphasizing risk and discounting

renewable resource management with stochastic recharge and environmental threats abstract exploitation diminishes the capacity of renewable resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of extreme environmental conditions and on the resource state determining its resilience when the former is uncertain and the latter evolves stochastically the uncertainty regarding the event occurrence is the result of the combined effect of these two uncertain components we study optimal management in this setting the environmental threat renders the single period discount factor policy dependent and as a result the compound discount factor becomes history dependent existence of an optimal markovian deterministic stationary policy is established and the optimal state process is shown to converge to a steady state distribution

ethical influences on the evolution of the us tradable permit approach to air pollution control abstract in 1975 a novel approach to air pollution control was implemented in the usa from this rather humble beginning this approach has now been expanded rather dramatically in several different directions this paper describes this evolution shows how the design of the system has been adapted to accommodate ethical concerns and describes how the latest versions of this approach have transformed the regulatory process which spawned the approach in the first place

welfare measurement under threats of environmental catastrophes abstract welfare measures under threats of environmental catastrophes are studied using the parable apparatus of weitzman and lofgren on the welfare significance of green accounting as taught by parable j environ econ manage 32 1997 139 153 the occurrence probability of the catastrophic events is driven at least partly by anthropogenic activities such as natural resource exploitation without external effects the green nnp is a genuine welfare measure vis a vis a particular parable economy often however the occurrence hazard constitutes a public bad treated as an externality by agents who ignore their own contribution to its accumulation in such cases the green nnp although accounting for the event hazard rate per se fails to properly internalize future effects on the hazard rate of current economic activities and as a result overestimates welfare the bias term associated with the green nnp is derived and expressed in a simple and interpretable form

nuclear power externalities and non standard pigouvian taxes the external effects arising from the use of nuclear power are in a fundamental way related to uncertainty in this paper we locate these external effects and derive a dynamic pigouvian tax in order to make the decentralized economy support the command optimum another interesting result is that a small constant energy tax which we interpret as a second best policy can take the decentralized economy reasonably close to the command optimum

climatic tipping points and optimal fossil fuel use the economics of climate change is characterized by many uncertainties regarding for instance climate dynamics economic damages and potentially irreversible climate catastrophes using an optimal growth model of a fossil fuel driven economy subject to climate externalities and potentially irreversible climatic regime shifts this paper contributes to the understanding of how the risk of such events impacts on optimal fossil fuel use carbon taxes and fossil fuel prices over time we show that in excess to an increase in the expected present value of marginal damages and an increase in the probability of triggering the event there also exists a third opposing effect this effect comes from the fall in value of remaining fossil fuel reserve which results from the potential regime shift which may or may not occur sometime in the future and implies that optimal fossil fuel policy shifts towards using more resources early on this effect is related to the idea of the green paradox we prove the existence of this effect and show under which circumstances it can become quantitatively important numerically the green paradox effect seems to be somewhat smaller than but comparable in size to the increase in expected marginal damages in general our findings highlight the importance of considering the supply side impacts on climate policy in response to catastrophic climate events

the management of fragile resources a long term perspective excessive exploitation diminishes the capacity of natural resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of random environmental conditions and the resource state determining its resilience examples include species extinction ecosystem collapse disease outburst and climate change induced calamities the policy response to the catastrophic threat is measured in terms of its effect on the long term behavior of the resource state to that end the l methodology developed originally to study autonomous systems is extended to non autonomous problems involving catastrophic threats

coping with multiple catastrophic threats we study intertemporal policies for dealing with multiple catastrophic threats with endogenous hazards allowing inter alia for gradual mitigation efforts that accumulate to reduce occurrence risks the long run properties of the optimal policies are characterized in terms of the key parameters damage hazard sensitivity and natural degradation rate associated with each type of catastrophic threat effects of background threats on the optimal response to a potential catastrophe are illustrated numerically

managing the endogenous risk of disease outbreaks with non constant background risk there is a growing concern that risks of disease outbreak and pandemics are increasing over time we consider optimal investments in prevention before an outbreak using an endogenous risk approach within an optimal control setting using the threat of pandemic influenza as an illustrative example we demonstrate that prevention expenditures are relatively small in comparison to the potential losses facing the usa and these expenditures need to be flexible and responsive to changes in background risk failure to adjust these expenditures to changes in background risk poses a significant threat to social welfare into the future

income convergence within an economic union the role of factor mobility and coordination abstract in the context of a human capital based growth model we show the essential role of labor mobility in equalizing income levels for countries that start off from different initial income positions human capital externalities cum labor mobility are the driving forces behind the income level equalization process in a non cooperative equilibrium labor mobility will be limited and income level equality will not be achieved coordination will allow free mobility of labor within an economic union leading to income convergence coordination of educational policies will also help internalize the inter regional human capital externalities to ensure efficient growth for members of the union

regulation with anticipated learning about environmental damages a regulator anticipates learning about the relation between environmental stocks and economic damages for a model with linear quadratic abatement costs and environmental damages and a general learning process we show analytically that anticipated learning decreases the optimal level of abatement at a given information set if learning causes the regulator to eventually decide that damages are higher than previously thought learning eventually increases abatement learning also favors the use of taxes rather than quotas using a model that is calibrated to describe the problem of global warming we show numerically that anticipated learning causes a significant reduction in first period abatement and a small increase in the preference for taxes rather than quotas even if the regulator s initial priors about environmental damages are much too optimistic he is able to learn quickly enough to keep the expected stock trajectory near the optimal trajectory

unemployment duration in the recession the local labour market area scale green a e 1985 unemployment duration in the recession the local labour market area scale reg studies 19 111 129 this paper examines spatial variations in the duration of uncompleted unemployment spells using median lower and upper quartile duration measures within a local labour market area llma framework regional hierarchical and functional differentials in unemployment duration during the recession are investigated using a nineteen fold llma classification it is discovered that pre existing spatial differentials in unemployment duration experience were largely maintained with longer durations recorded in the north than in the south around provincial conurbations than in the london metropolitan region at higher than at lower levels of the urban hierarchy and in llmas with a manufacturing employment base than in those with a service or commercially oriented employment structure

inertia risk improving economic models of catastrophes we model endogenous catastrophic risk in a new way we call it inertia risk which accounts for delays between physical variables and the hazard rate a characteristic often observed in reality the added realism significantly affects optimal policies relative to the standard model of catastrophic risk the probability of a catastrophe occurring at some point in time can span the entire interval 0 1 and is not 0 or 1 as is typical in standard models inertia risk can also generate path dependences we illustrate the implications for policy in a simple model of climate change

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

optimal control of pollution accumulation with long run average welfare this paper considers the problem of pollution accumulation in order to maximize the long run average welfare functional in environmental economics we approach the problem by solving the associated hamilton jacobi bellman equation in the classical sense via the viscosity solution method the optimal policy is shown to exist in a feedback from and the maximum value is also obtained independently of the initial level of pollution an equilibrium of the optimal stock of pollution is discussed

dynamic resource management under the risk of regime shifts abstract this paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner s perspective based on a fairly general model a condition for a precautionary policy is discussed by applying the framework to a common property resource problem with a linear production technology we illustrate how the qualitative as well as quantitative nature of equilibrium is altered due to the possibility of regime shifts in particular when the risk is endogenously affected by the players behavior potential regime shifts can facilitate the precautionary management of resources as long as the resource stock is in good shape as the stock of resource becomes scarce however the precautionary effect vanishes and more aggressive resource exploitation emerges the impacts of irreversibility on the equilibrium behavior are highlighted it is also shown that there can exist a resource depletion trap in which a regime shift once it happens triggers a continuous decline of resource stock no matter which regime materializes in the subsequent periods

catastrophes and ex post shadow prices how the value of the last fish in a lake is infinity and why we should not care much abstract catastrophic risk is currently a hotly debated topic this paper contributes to this debate by showing two results first it is shown that for a certain class of optimal control problems the derivative of the value function with respect to the initial state may approach infinity as the state variable goes to zero even when the first order partial derivatives of the integrand and transition functions are finite in the process it is shown that standard phase diagrams used in optimal control theory contain more information than generally recognized and that the value function itself may be easily illustrated in these diagrams second we show that even if the value function has an infinite derivative at some point it is not correct to avoid this point in finite time at almost any cost the results are illustrated in a simple linear quadratic fisheries model and proven for a more general class of growth functions

linking common property resource management to human capital outcomes in regions where common pool resources provide significant support to their surrounding communities any climate change related shock could produce multiple livelihood repercussions in this paper a model explores how the health of common pool resources could impact upon human capital outcomes for communities that struggle to find alternate livelihood options when traditional means such as agriculture become unsustainable the management of common pool resources is modeled as a strategic interaction process between two heterogeneous communities that are directly or indirectly dependent upon it an unconstrained harvesting of common resources such as forestry not only depletes its stocks but it also indirectly affects crop output through soil degradation a number of situations are constructed where communities are able to successfully finance human capital accumulation through proper management of their common pool resources however results also warn that communities that are faced with limited opportunities towards accumulating human capital must plan ahead to prevent the depletion of their common resources below critical levels when non linear feedbacks to soil degradation emanate from low levels of common pool stocks human capital outcomes as well as future livelihoods of such communities are threatened

the optimal management of renewable resources under the risk of potential regime shift abstract complex dynamic systems can undergo changes in feedbacks between system components causing a rapid and persistent shift in system behavior regime shifts and potentially reduce welfare from declining provision of important ecosystem services in this paper we provide an analytical condition that determinfilefs whether the threat of a potential regime shift causes management to be more aggressive or more precautionary in numerical simulations we find that aggressive management can occur for reasonable parameter values which is counter prior results that the potential for harmful regime shift always leads to precautionary management

the cost of uncertainty about the timing of social security reform abstract we develop a model to study optimal decision making in the face of uncertainty about the timing and structure of a future event the model is used to study optimal decision making and welfare when individuals face uncertainty about when and how social security will be reformed for young individuals with many years to optimally hedge the risks that they face the welfare cost of uncertainty about the timing and structure of reform is just a few basis points of total lifetime consumption in contrast the cost of reform uncertainty can be greater than 1 of total lifetime consumption for individuals close to retirement even if they have saved optimally up to that point finally the cost is significantly higher still for those who do not save optimally to hedge these risks

abrupt positive feedback and the social cost of carbon optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment the optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages this component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon if the hazard of a catastrophe is constant no correction is needed of the usual pigouvian tax the results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth which set in motion a positive feedback loop convex enough hazard functions cause overshooting of the carbon tax but a linear hazard function gives rise to undershooting a more convex hazard function and a high discount rate speed up adjustment

consumption pollution tradeoffs in an environment vulnerable to pollution related catastrophic collapse abstract this paper considers the consequences of an avoidable risk of irreversible environmental catastrophe for society s optimal long run consumption pollution tradeoffs the risk is assumed to be a nondecreasing function of pollution concentration which evolves as a dynamic environmental renewal process the main objective of the paper is to derive qualitative insights regarding the effects of such risk on optimal management

fiscal flows in the united states and canada lessons for monetary union in europe regional flows of federal taxes and transfers within the united states and canada are used to analyze long term fiscal flows the redistributive element and short term responses to regional business cycles the stabilization element in the united states long run flows amount to 22 cents in the dollar while the stabilization effect is 31 cents in the dollar in canada the redistributive effect is larger 39 cents and the stabilization effect smaller 17 cents federal flows appears to depend on the institutional structure of the country concerned however in both countries the redistributive element is considerably larger than the amounts involved in the ec structural funds program as for stabilization national fiscal policies in the ec appear to have been as effective as federal governments in the united states and canada in cushioning shocks to incomes

climate tipping and economic growth precautionary capital and the price of carbon the optimal reaction to a climate tipping point that becomes more imminent with global warming is to be precautionary in adjusting capital to prepare for the calamity and to price carbon to make catastrophic change less imminent the saving response can be positive or negative if the mean lag for the impact of the catastrophe is long enough the saving response will be negative because the precautionary return in the keynes ramsey rule becomes negative we also show the separate effects of the elasticity of intertemporal substitution eis and the relative risk aversion rra using duffie epstein preferences focusing on a productivity catastrophe we calibrate our model and show how sensitive the policy responses are to the degrees of eis and rra the trend rate of economic growth the hazard rate and how long it takes for the catastrophe to have its full impact

accounting for global warming risks resource management under event uncertainty abstract optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect the uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved taking atmospheric pollution level as the state variable it is found that uncertainty implies the existence of an equilibrium interval within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint the determination of the interval requires no knowledge of the optimal policy in contrast ignoring event occurrence risk implies a single equilibrium level attracting the optimal process from any initial level

dividends safety and liquidation when liabilities are long term and stochastic abstract this paper investigates the optimal management of a firm faced with a long term liability that occurs at a random date three issues are analysed the optimal dividend policy optimal expenditure on safety to delay the occurrence of the liability and the optimal liquidation date of the firm an owner faced with dynamic unlimited liability never liquidates and therefore accumulates capital to the golden rule level for long term liabilities dividend payments and safety expenditure are non decreasing over time the owner protected by limited liability may liquidate the firm in finite time in order to avoid paying the liability if this is the case then it accumulates less capital than the dynamic unlimited liability owner and may decrease dividend payments and safety expenditure over time the paper shows that a finite liquidation date is more likely to be optimal when the arrival rate of the liability occurrence increases over time

optimal management with potential regime shifts we analyze how the threat of a potential future regime shift affects optimal management we use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics and exogenous versus endogenous probabilities of regime shift prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock we show that all other cases yield unambiguous results in particular with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels

carbon prices for the next hundred years this paper examines the socially optimal pricing of carbon emissions over time when climate change impacts are unknown potentially high consequence events the carbon price tends to increase with income but learning about impacts or their absence decouples the carbon price from income growth the price should grow faster than the economy if the past warming is not substantial enough for learning the true long run social cost it grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so a quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years

time perspective and climate change policy the tendency to foreshorten time units as we peer further into the future provides an explanation for hyperbolic discounting at an inter generational time scale we study implications of hyperbolic discounting for climate change policy when the probability of a climate induced catastrophe depends on the stock of greenhouse gasses we characterize the set of markov perfect equilibria mpe of the inter generational game amongst a succession of policymakers each policymaker reflects her generation s preferences including its hyperbolic discounting for a binary action game we compare the mpe set to a restricted commitment benchmark we compare the associated constant equivalent discount rates and the willingness to pay to control climate change with assumptions and recommendations in the stern review on climate change ymy picture of the world is drawn in perspectivey i apply my perspective not merely to space but also to time ramsey

a theory of disasters and long run growth abstract this paper develops a unified framework in which various types of catastrophic shocks can be simultaneously considered within a standard model of economic growth we first establish the basic existence and equivalence results we then apply the framework to an endogenous growth model to consider the influence of disasters on the long term equilibrium and the transition phase the result shows that while experiencing disasters may lower the average growth rate of the affected countries there exist various channels through which the risk of disasters and long term economic performance are positively correlated this finding reconciles the apparently contradictory evidence in recent empirical studies

strategic exploitation of a common resource under environmental risk abstract we study the effect of environmental risk on the extraction of a common resource using a dynamic and non cooperative game in which an environmental event impacts the renewability and the quality of the resource we show that the anticipation of such an event has an ambiguous effect on extraction and the tragedy of the commons a risk of a reduction in the renewability induces the agents to extract less today while a risk of a deterioration in the quality has the opposite effect moreover when environmental risk induces conservation the tragedy of the commons is worsened

the impact of sectoral shifts and the aggregate labour market on unemployment duration this study investigates the effects of sectoral shifts among industries on unemployment duration these effects are decomposed into two subeffects the overall effect and the specific industrial effect the former is equal for all of the unemployed in all industries while the latter depends on the tightness of the demand for labour of the industry in question in addition the impact of the aggregate labour market on unemployment duration is also explored the empirical results show that most of the overall and all of the specific effects are significant indicating that the sectoral shifts among industries as well as the aggregate labour market do in fact impact unemployment duration and that the effects on unemployment duration vary in terms of their tightness in the different industrial labour markets

models as usual for unusual risks on the value of catastrophic climate change we study the role of alternative intertemporal preference representations in a model of economic growth stock pollutant and endogenous risk of catastrophic collapse we contrast the traditional discounted utility model which assumes risk neutrality with respect to intertemporal utility with a multiplicative choice model that displays risk aversion in that dimension first we show that both representations of preferences can rationalize the same business as usual economy for a given interest rate and no pollution externality second once we introduce a collapse risk whose hazard rate is a function of the pollution stock multiplicative preferences recommend a much more stringent policy response an illustration in the context of climate change indicates that switching to the multiplicative preference representation has a similar effect in terms of policy recommendations as scaling up the schedule of the hazard rate by a factor of 100

differences in unemployment duration a regional or a personal problem 1988 differences in unemployment duration a regional or a personal problem applied economics vol 20 no 9 pp 1233 1251

one money for europe lessons from the us currency union currency union barry eichengreen the creation of a monetary union in europe is often justified by the desire to reap the full benefits of economic integration the complete removal of capital controls raises a large number of issues the case for free capital mobility is strong but not overwhelming it hinges on issues of technology transport costs market structure and labour mobility and in the end is an empirical matter for which us experience may provide useful information policy making institutions differ in important respects however the us tradition of fiscal federalism for example has no ec wide counterpart yet its functions seem a desirable feature of a monetary union in particular it is shown to play an important role in absorbing regional disturbances mostly via the tax system us experience also suggests that a currency union creates pressure for fiscal policy harmonization affecting both taxes and spending although a currency union fundamentally alters the balance of payments adjustment process the potential problem of depressed regions remains a serious one given the increased tightness of the external constraint the limited extent of labour mobility and other features of european labour markets solutions based on us experience include extensive swap facilities and a european version of fiscal federalism

re employment probabilities of unemployment benefit recipients this article studies transitions out of unemployment for benefit recipients in spain we analyse the duration of unemployment distinguishing between spells that end in recall workers returning to the previous employer and spells that end in exit to a new job this distinction allows us to find that the recall hazard rate increases around the time of exhaustion of benefits however this happens only for workers receiving unemployment insurance ui because we are unable to replicate this result for workers receiving unemployment assistance ua we believe the finding lends support to the hypothesis that in spain firms and workers make a strategic use of ui

pollution control in an uncertain environment abstract the effects of the threat of occurrence of environmental catastrophes on optimal pollution control are considered recent analysis of irreversible events is extended to two types of reversible events single occurrence and multiple occurrence recurrent events while it is possible that the threat of irreversible events induces more pollution we show that reversible events under quite general conditions induce more conservation less pollution the analysis is carried out via a simple method the h method to identify optimal steady states by comparing steady state policies with small variations from them for recurrent events the optimal state process must approach a unique steady state from any initial level in this case the h method characterizes the dynamic behavior of the optimal state process without actually solving for it

a new look at the ui effect on transitions from unemployment into wage employment in spain the limited duration of the ui benefits entitlement this article is a new look at the study of the unemployment insurance effect on the transition probability from unemployment into wage employment in spain it is found that individuals increase their search effort and reduce their reservation wage as the unemployment insurance benefit entitlement exhaustion approaches and their exit rate equals that of the unemployed who never got benefits from the exhaustion moment financial constraints are not important in spain business cycle affects more to long term unemployed and finally it is found that the probability of being offered a vacancy decreases with time spent in unemployment having allowed for unobservable heterogeneity

regime shifts and resilience in fisheries management a case study of the argentinean hake fishery we investigate the role of potential regime shifts in argentinean hake fishery and the inter linkage between ecological and economic resilience we develop a theoretical model incorporated with the hazard function for resource management under alternative conditions and derive the corrective tax applying the model to the case of argentinean hake fishery we obtain insights for fishery management in the presence of risk for a regime shift based on three value functions our model simulation indicates that the higher the relative loss from the fishery collapse the more important the risk management would be with the resilience value taken into account a higher level of fish stock leads to a higher optimized value and a lower corrective tax rate when the stock level is lower we need to introduce a higher tax rate to best avoid the fishery collapse decomposing the marginal value of the fish stock into a stock service value for fish production and a resilience value for flip risk reduction we find that a higher fish stock leads to a lower tax rate because of the higher resilience of the fish stock and hence the corrective tax rate as an instrument for managing fishery becomes less important

endogenous discounting and climate policy under risk of abrupt climate change the occurrence hazard is added to the social discount rate as a result the social discount rate 1 increases and 2 turns endogenous to the global warming policy the second effect bears profound policy implications that are magnified by economic growth in particular we find that greenhouse gases ghg emission should be terminated at a finite time so that the ensuing occurrence risk will vanish in the long run due to the public bad nature of the catastrophic risk the second effect is ignored in a competitive allocation and unregulated economic growth will give rise to excessive emissions in the long term the ghg emission paths under the optimal and competitive growth regimes lie at the extreme ends of the range of feasible emissions

transboundary pollution game with potential shift in damages abstract complex systems exposed to pollution may suddenly and permanently shift to a dangerous regime this paper studies a dynamic game among countries that face the prospect of such a shift each country derives some flow utility from its own emissions which are chosen unilaterally but flow emissions by all countries increase the pollution stock in the world in addition to generating global damages such as global warming the pollution stock may trigger an irreversible and abrupt jump in global damages or catastrophe at an unknown date in the future we ask whether endogenous and exogenous threats of such a jump in damages or catastrophe mitigate the tragedy of the commons and examine their implications on welfare our analysis yields different emission responses to these threats as compared to the related literature that focuses only on the single polluter case for example when the hazard rate is exogenous and countries commit to nonlinear strategies we find that the threat of a possible jump in damages or catastrophe may induce a lower or larger emission level and initial welfare due to multiple equilibria these results are maintained when the hazard rate endogenously depends on emission decisions

energy transition under irreversibility a two sector approach in this paper we analyze the optimal energy transition of a two sector economy energy and final goods with exhaustible oil reserves a renewable source of energy and a pollution threat the latter corresponds to a pollution threshold above which a part of the capital is lost following flooding for instance we show that the optimal energy transition path may correspond to a corner regime in which the economy starts using both resources then crosses the pollution threshold and therefore loses a part of its capital at the end the sole adoption of the renewable energy is optimal only in the long run this result is in line with the asymptotic energy transition arguments stating that the transition to clean energy may happen only in the long run we also show that economy reduces the use of energy resource as long as the productivity of capital and energy services is high therefore public policies should promote investments in energy innovation that targets productive sector home appliances and buildings and helps to save both money and energy we extend the present model to allow for additional investment in energy saving technologies our main results show that this additional investment favours the energy transition in the sense that it increases the time within which the economy may experience the catastrophe and the welfare of the society for policy implications economic instruments such as taxes on dirty energy subsidies on clean energy or incentives for energy saving technologies need to be implemented in order to promote the energy transition this is particularly important for developing countries that mostly rely on polluting energy resources and are the most vulnerable to climate change but those economic instruments should be carefully designed in line with the asymptotic energy transition result

international tax competition and gains from tax harmonization abstract in a world economy there are two types of distortions which can be caused by capital income taxation in addition to the standard closed economy wedge between the consumer saver marginal intertemporal rate of substitution and the producer investor marginal productivity of capital i international differences in intertemporal marginal rates of substitution implying an inefficient allocation of world savings across countries and ii international differences in the marginal productivity of capital implying an inefficient allocation of world investment across countries the paper focuses on the structure of taxation for countries which are engaged in tax competition and on potential gains from a tax harmonization we show that if the competing countries are sufficiently coordinated with the rest of the world then tax competition leads each country to apply the residence principle of taxation and there are no gains from tax harmonization if however there is not sufficient coordination then tax competition leads to low capital income taxes and the tax burden falls on the internationally immobile factors the outcome is nevertheless still efficient relative to the available constrained set of tax instruments

regulating environmental threats environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than or in addition to inflicting a damage gradually the possibility of abrupt occurrence of climate change related calamities is a case in mind the uncertainty associated with the realization of these threats and their public bad nature complicate the design of optimal economic response we derive a pigouvian hazard tax schedule that implements the socially optimal outcome the tax is based on the expected cost of the hazard generating activities and serves to reduce hazardous emissions well in advance of the catastrophic occurrence a numerical example illustrates possible effects of the proposed regulation scheme implications for climate policy are discussed

regime shifts and uncertainty in pollution control we develop a simple model of managing a system subject to pollution damage such as climate change under the risk of an abrupt and random jump in the damage function the model allows the full dynamic characterization of the optimal emission policies under uncertainty the results imply precautionary behavior in contrast with the ambiguous outcomes reported in the literature for models of catastrophic occurrences the framework is used to analyze the adaptation vs mitigation dilemma and provides a simple criterion to determine when adaptation activities should be undertaken

optimal adaptation strategies to face shocks on groundwater resources we consider an exogenous and reversible shock to a groundwater resource namely a decrease in the recharge rate of the aquifer we compare optimal extraction paths and the social costs of optimal adaptation in two cases under certainty i e when the date of occurrence of the shock is known and under uncertainty when the date of occurrence of the shock is a random variable we show that an increase in uncertainty leads to a decrease in precautionary behavior in the short run and to an increase in precautionary behavior in the long run we apply our model to the particular case of the western la mancha aquifer in spain we show that in this context it is advantageous for the water agency to acquire information on the date of the shock especially for high intensity and intermediate risk events

on adaptation and the demand for health the purpose of this paper is to analyse the impacts of adaptation to failing health this is done by integrating adaptation processes in a grossman type of pure consumption model model simulations show that adaptation affects the health variables by lowering the incentives to invest in health as well as smoothing the optimal health stock path over the life cycle whether or not the risk of mortality is an object of choice has important effects when studying adaptation as well as for the joint development of the health variables

coalition formation in fisheries with potential regime shift a system can undergo rapid regime shift in which the growth of natural resources suddenly and permanently declines we examine how the threat of such a shift alters the strategic management of a common pool renewable resource we consider exogenous and endogenous threats and examine their effects on both incentives to join a coalition and harvest decisions we find that an exogenous threat of reduced resource growth may cause the coalition to grow in size and perhaps of most interest we identify conditions under which members of the stable coalition reduce harvest while non members increase harvest in response to the threat in contrast an exogenous threat of total stock collapse may destabilize coalitions resulting in higher harvest from former members but reduced harvest by non members when the threat of either type of shift is endogenous the threat of regime shift can induce stable coalitions with more than two members in particular we identify cases in which the first best full cooperation is sustained as an equilibrium outcome finally we find that the relation between the magnitude of the shift and the size of stable coalitions may be negative

optimal fishery management with regime shifts an assessment of harvesting strategies this paper compares outcomes from informed and uninformed harvesting strategies for a fish stock with switching dynamics where the probability of switching is influenced by climate using data on sea surface temperature anomalies the impacts of climate on the conservation and the welfare that can be extracted from the stock are investigated results indicate that an informed management policy leads to stock biomass and resource rents that are up to 2 7 and 2 times higher respectively than under an uninformed policy also the fishery is open 54 longer under the informed policy the magnitude of these effects depends on the choice of the discount rate indicating that when the future is highly discounted gains from the informed policy dissipate