markets for pollution control when firms are noncompliant the problem of noncompliance and enforcement in transferable discharge permit tdp markets has not received much attention this paper examines the consequences of noncompliance for a tdp market given fairly general assumptions about the characteristics of the enforcement policy in place the analysis reveals that when firms are noncompliant tdp markets retain their efficiency property only under some fairly stringent conditions the effect of noncompliance on the equilibrium permit price raises some important questions about the ability of a tdp market to achieve and remain in equilibrium when firms are noncompliant

intra metropolitan variation in earnings and labor market discrimination an econometric analysis of the atlanta labor market one of the most enduring debates concerning racial differences in earnings is whether housing segregation within metropolitan areas adversely affects the employment opportunities of urban blacks two possible negative effects can be listed first the decentralization of lower skilled jobs combined with the suburban residential exclusion of low income households may have caused wage rates within the suburban labor market to rise above those paid within the central city if this is the case and if housing market discrimination restricts the relative ability of blacks to offer their labor supply to suburban employers then at least part of the racial difference in earnings can be attributed to housing segregation second housing segregation may cause private sector labor market discrimination to be more severe within the central city in comparison to suburban areas as suggested by becker s taste for discriminating model 3 a relatively large black labor supply within the central city may require a lower black to white earnings ratio in order to induce prejudiced employers to hire large numbers of black workers with the workforce of most central cities becoming increasingly black this may be an important factor in explaining racial differences in earnings surprisingly while variation in discrimination among occupations regions industries and sectors have been examined in some detail spatial differences in discrimination between the central city and suburbs have largely escaped analysis in this paper the earnings of private sector workers broken down by occupation race and sex are compared between worksite areas encompassing the metropolitan area of atlanta georgia while an extensive literature can be found on interregional differences in earnings little evidence exists on the spatial variation in wage rates within metropolitan regions in fact virtually nothing has been done on this issue since the classic study of the chicago labor market by rees and shultz 19

tradeable permits missing markets and technology this paper examines the effects of missing markets heterogeneous pollutants and the pollution technology of firms on the efficacy of transferable pollution permits under the assumption of perfect competition in all markets we show that if firms can substitute among pollutants then setting the optimal number of permits for only one pollutant will not in general lead to an efficient outcome the degree of the inefficiency will depend on the information set available to the regulator and the substitutability among pollutants by firms when establishing transferable pollution rights regulators should therefore consider the technology of firms if firms discharge pollutants in the same fixed proportions then the regulator need only set a market for one of the pollutants to ensure an efficient outcome where firms can substitute among pollutants however establishing a market for only one pollutant provides an incentive for firms to substitute to unregulated ones this is an important policy issue as substitutability among pollutants within and across production processes may dampen the dynamic advantages of a tradeable permit policy

trading for the future signaling in permit markets abstract permit markets are celebrated as a policy instrument since they allow i firms to equalize marginal costs through trade and ii the regulator to distribute the burden in a politically desirable way these two concerns however may conflict in a dynamic setting anticipating the regulator s future desire to give more permits to firms that appear to need them firms purchase permits to signal their need this raises the price above marginal costs and the market becomes inefficient if the social cost of pollution is high and the government intervenes frequently in the market the distortions are greater than the gains from trade and non tradable permits are better the analysis helps to understand permit markets and how they should be designed

implementing marketable emissions permits the environmental protection agency is introducing bubbles offsets and banks as a way of controlling pollution with market incentives to obtain standards for each source and guide the reallocation of emissions the new method is not a true market because polluters must go through the permitting procedure in order to trade emission allowances this study examines whether an efficient market without source by source review is feasible it considers the importance of enough participants competitiveness sensitivity to geographic emission patterns and trading flexibility to sustain marketable permits the design features that address these problems are permit life market definition market initiation and market operation a stable permit market eliminates some of the uncertainties in decision making because it allows firms to select a preferred level of risk 9 references dck

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

male sub metropolitan black white wage gaps new evidence for the 1980s this study analyses trends in us male black white earnings gaps by sub metropolitan residence large suburban earnings gaps existed in 1979 however central city gaps exhibited the largest increases during the 1980s the increases are decomposed into changes in measurable characteristics changes in the prices of measurable characteristics changes in discrimination and or unobservable skills and changes in white earnings inequality changes in measured characteristics and their prices and changes in inequality account for little of the increases in central city gaps either labour market discrimination worsened or racial differences in unobservable skills widened a review of the literature suggests that this paper s evidence is more consistent with a worsening in discrimination

black residential centralization and the spatial mismatch hypothesis abstract black residential centralization is found to be an important determinant of black employment status when estimated across metropolitan areas mas to avoid neighborhood selection the effects are greatest in large mas for the young and elderly and for individuals with less than a college education instrumental variable iv estimates support ordinary least squares ols results black residential centralization can account for 48 62 of the black white employment differential among 18 30 year olds living in large mas when estimated together black residential centralization job centralization and segregation all have large effects but the effects of black centralization and job centralization are considerably larger

pollution from the electric power sector in japan and efficient pollution reduction abstract under the scheme of the kyoto protocol there are plans for the efficient reduction of carbon dioxide emissions in the electric power sector nuclear power generation which emits no carbon dioxide in the process of generating electricity has come under scrutiny however this energy produces a new environmental issue the disposal of radioactive waste first we derive shadow prices of carbon dioxide and low level waste as marginal abatement costs in the case of the electric power sector in japan employing a directional output distance function it is found that the shadow prices are us 39 per tonne for carbon dioxide and us 1531 per liter for low level waste secondly we calculate the indirect morishima elasticity between carbon dioxide and low level waste in order to identify their substitutability and it is found that the substitution of low level waste for carbon dioxide is easier than the reverse this result suggests that with the amount of generated electricity fixed carbon dioxide can be substituted more easily by low level waste when the relative price of carbon dioxide increases for example as a result of implementation of a carbon dioxide tax or an emissions trading system

the innovation impact of the eu emission trading system findings of company case studies in the german power sector abstract this paper provides a detailed analysis of how the european emission trading system eu ets as the core climate policy instrument of the european union has impacted innovation towards this end we investigate the impact of the eu ets on research development and demonstration rd d adoption and organizational change in doing so we pay particular attention to the relative influences of context factors policy mix market factors and public acceptance and firm characteristics value chain position technology portfolio size and vision empirically our qualitative analysis is based on multiple case studies with 19 power generators technology providers and project developers in the german power sector which were conducted in 2008 09 we find that the innovation impact of the eu ets has remained limited so far because of the scheme s initial lack of stringency and predictability and the relatively greater importance of context factors additionally the impact varies significantly across technologies firms and innovation dimensions and is most pronounced for rd d on carbon capture technologies and organizational changes our analysis suggests that the eu ets on its own may not provide sufficient incentives for fundamental changes in corporate innovation activities at a level which ensures political long term targets can be achieved

benchmarking in the european union emissions trading system abatement incentives abstract this paper investigates abatement incentives for allowance allocation based on output and sector specific benchmarks here called output based allocation or benchmarking special attention is given to updated allocation and we assume that allowances can be traded with other sectors open cap we confirm earlier studies that output based allocation based on ex ante data provide the same abatement incentives as auction or grandfathering and also confirm that output based allocation with updated output and ex ante benchmarks provides as high abatement incentives as auction but constitutes a production subsidy however we also find that benchmarking with updated output and updated benchmarks reduces abatement incentives somewhat but less so than updated grandfathering an allocation rule where the sector cap is prescribed ex ante for instance based on historic emissions and distributed to installations in proportion to their updated production preserves full abatement incentives and avoids some of the costs associated with the determination of benchmarks however this rule also constitutes a production subsidy which decreases with industry concentration if a sector is split into smaller groups each with one benchmark per sub sector benchmarking evolves toward grandfathering since benchmarking is conditioned on production this allocation method protects production from leakage i e migrating to areas where firms face no emissions cost this may actually be the most compelling reason for choosing benchmarking

intraurban wage gradients evidence by race gender occupational class and sector abstract a general functional form is used to estimate intraurban wage gradients for various groups of workers with 1980 data from the philadelphia detroit and boston metropolitan areas as predicted by the standard monocentric model of urban land use the following results are obtained for most groups of white workers negative and statistically significant wage gradients steeper wage gradients for higher wage earners and an increase in the steepness of wage gradients as the cbd is approached positive wage gradients are not found for black workers despite the fact that suburban employers hire large numbers of these workers who reside within the central city this result is taken as support for the hypothesis that blacks have been disadvantaged by job suburbanization and continued housing market segregation

residential segregation and the economic status of black workers new evidence for an old debate abstract scholars have long debated whether ghetto residence lowers the earnings of blacks most empirical studies on this question have been flawed because they have not considered the simultaneous effects of choices of work and residence locations and the effects of intrametropolitan variation in rents and wages this paper estimates a revealed preference model of intraurban location with data from the 1980 public use microdata sample for cleveland detroit and philadelphia to test whether black male household heads who are employed full time year round are less likely than whites to live and work at their best locations we measure the wages rents and commuting costs associated with each possible job residence location combination in these cities for each person given their job qualifications and their housing needs a revealed preference approach is used to evaluate the economic welfare of individuals at each possible location and then compare the actual distribution of work and residence locations by race with the welfare maximizing distribution the divergence in these distributions by race measures the economic effects for employed black male household heads of residential segregation in ghettos we find that the economic status of blacks can be improved significantly by changing their intrametropolitan job locations surprisingly this conclusion holds regardless of whether or not blacks keep their current residential locations while changes in residential locations can improve the economic status of blacks relative to whites by decreasing commuting and or the cost of housing such residential changes do not significantly alter the physical accessibility of better paying jobs

capacity utilization and new source bias evidence from the us electric power industry abstract while prior research has shown that new source bias has increased construction costs and delayed the building of new electric power plants this research explores the empirical question of whether increased operating costs caused by new source bias are larger than the cost savings of newer technology if new sources do have higher operating costs an incentive exists to utilize order plants more intensively statistical evidence of these differing utilization rates is found

fiscal interactions and the costs of controlling pollution from electricity i quantify the costs of controlling so 2 carbon and nox emissions from power generation accounting for interactions between environmental policies and the broader fiscal system i distinguish a dirty technology coal that satisfies baseload demand and a clean technology gas that is used at peak period and i distinguish sectors with and without regulated prices estimated emissions control costs are substantially lower than in previous models of fiscal interactions that assume a single constant returns technology and competitive pricing the results are reasonably robust to alternative scenarios such as full price deregulation and market power in the deregulated sector

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

the benefits of spatially differentiated regulation the response to acid rain by u s states prior to the acid rain program location is a crucial driver of both the marginal abatement and damage costs of sulfur dioxide emissions by u s coal fired power plants before the start of the acid rain program in 1995 old boilers were subject to emission rate standards set by individual states we investigate how individual states adjusted their sulfur regulation laws in response to acid rain and whether they accounted for differences in marginal abatement costs vulnerability to agricultural damages special industry interests or inter state externalities the welfare gain compared to a uniform reduction in emission rate standards is estimated to be 21 million in 1995 dollars annually

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

a new approach to measuring shadow price reconciling engineering and economic perspectives abstract shadow price is one of the most important pieces of information in environmental decision making two different approaches namely economic and engineering have been applied to obtain the shadow price of undesirable outputs while using different methodological backgrounds and perspectives the current study proposes a new conceptual framework and an economic estimation model to reconcile the shadow price estimates derived via the two approaches we also suggest a new mapping rule that incorporates the concept of abatement level which is a basic element in the engineering approach as a result the proposed model generates continuously changing estimates i e comprising a shadow price curve based on the abatement level we further investigate the determinant factors of shadow price by using second step regression the suggested methodology is used to investigate the shadow price of carbon emissions in south korean electricity generating plants thus yielding relevant policy implications

the costs of water pollution regulation in the pulp and paper industry this paper studies plant level data on actual and permitted levels of water pollution emissions for the pulp and paper industry there is widespread and substantial overcompliance with the relevant regulations aggregate bod emissions in 1992 were only 50 of the amount allowed overcompliance appears to imply a zero marginal abatement cost and its prevalence therefore has the potential to substantially change the debate over the costs of regulation we show instead that plants incurred substantial costs to overcomply marginal abatement costs were roughly 13 000 ton in 1992 we discuss possible explanations for costly overcompliance and their implications for estimation

does capital market structure affect farm investment a comparison using french and british farm level panel data this article considers whether differences in the structure of agriculture credit markets in france and the united kingdom alters the investment sensitivity to financial variables particularly cash flow using two panel datasets of french and british farms three approaches are used to test the sensitivity of investment to internal finance an inventory investment model a fundamental q model and euler equations for machinery investment the results suggest that the contrasting capital markets structures do induce differences in overall investment sensitivity to cash flow and its pattern across both farms with varying levels of collateral and between inventory and machinery investment this article explores whether differences in the structure of agricultural credit markets in france and the united kingdom affects access to credit theoretically asymmetric information in capital markets means that banks base their lending decisions on factors such as available collateral rather than projected profitability stiglitz and weiss binks and ennew hubbard if such information costs are affected by market structure the organization of the market also becomes a potentially important factor historical differences in the structure of agricultural capital markets in developed countries have long been recognized oecd in particular in many countries specific agricultural credit institutions for example farmer cooperative banks appeared in the first half of the twentieth century because of the difficulties faced by farmers in obtaining credit from commercial lenders the degree of state involvement in agricultural credit markets has also varied considerably across countries from

cattle cycles is there a role for a financial accelerator the hypotheses that endogenous credit constraints based on fluctuating asset values and cash flow prolong and accentuate us cattle cycles and that more diversified cow calf firms are less affected by this phenomenon are tested breeding cattle inventories are an interesting example to study credit constraints because they are among the most cyclical of economic time series firms have heterogeneous diversification levels and they avoid many of the problems with previous investment cash flow sensitivities studies noted by kaplan and zingales the results are consistent with earlier credit constraint studies i e breeding cattle inventories are sensitive to shifting credit constraint regimes and cow calf firms with higher diversification levels are less affected by credit constraints

assessment of initial emission allowance allocation methods in the korean electricity market abstract korea will introduce an emission trading policy from 2015 the rules for the initial allocation of emission allowances have not been decided yet this paper assesses the effect of various initial emission allowance allocation methods of the korean electricity market this study employs the mixed complementarity problem which is able to incorporate operation investment and emission trade decisions in the deregulated electricity market in order to provide more realistic results in particular the allocation rules to existing plants and new entrants are modeled separately in this study the model quantifies the impacts of different allocation rules on emissions capacity mix emission allowance prices electricity prices and social welfare we examine typical allocation rules such as auction to all power plants best available technology bat benchmark to all power plants fuel specific benchmark to existing power plants along with bat benchmark to new entrants and fuel specific benchmark to all power plants we find that giving free allocations to new power plants prompts more new investment and this raises overall social welfare even though the direct cost of achieving the emission reduction target rises while the auction is the most powerful policy to reduce emissions in the electricity sector giving away permits to all power plants based on a fuel specific benchmark encourages investment increases output and leads to a greater level of welfare from an imperfectly competitive industry

investment and disinvestment principles with nonconstant prices and varying firm size applied to beef breeding herds variable beef breeding herd sizes are found to be optimal given cyclical beef prices traditional replacement theory does not allow variable firm size because unequal investment replacement and disinvestment culling rates are not possible if firm size changes cost of production per unit endogenously changes given a u shaped cost curve optimal investment and disinvestment rules for variable firm size are developed based upon the firm s cost curve and discounted net revenue flows for a finite rolling planning horizon current and future investment and disinvestment decisions are linked by their mutual effect on firm size and hence production cost per unit

emissions trading with updated allocation effects on entry exit and distribution allocation of emissions allowances may have significant distributional and efficiency effects it is well known that cost efficiency may be achieved if allowances are auctioned or distributed in a lump sum manner e g based on emissions levels before the start of the system grandfathering bohringer and lange eur econ rev 49 2041 2055 2005 show that a cost effective outcome can also be achieved if the base year for allocation is continually updated updating given that banking and borrowing are prohibited in this paper we examine whether updating alters the entry and exit conditions for firms compared to grandfathering and how it affects profits for new and existing firms we find that the two schemes function surprisingly similar first the incentives to entry and exit are identical second the total value of free quotas to existing firms based on emissions before the system starts is also identical without any auctioning with updating initial claims for free allowances have a shorter lifetime compared to grandfathering but quota prices are higher as firms anticipate the effect of current emissions on future claims to free allowances the two effects exactly cancel each other out if there is some combination of auction and free allocation the total value of free quotas will always be highest under grandfathering if the auction rate is the same entry and exit incentives are still equal

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

the effect of sulfur regulations on the u s electric power industry a generalized cost approach abstract this paper estimates the effects of sulfur dioxide emission regulations on the us electric power industry during the 1975 1990 period by utilizing a generalized cost function along with shadow input prices in the presence of various regulations including those intended to control sulfur dioxide emissions firms will likely fail to minimize production costs the null hypothesis of cost minimization is rejected implying that the use of a neoclassical cost function is inappropriate for this study a comparison of the results obtained by estimating a generalized cost function and those obtained with a neoclassical cost function reveals that the use of a neoclassical restriction brings an underestimation of the average percentage increase in cost by 1 1 percentage points

potential cost savings from internal external co2 emissions trading in the korean electric power industry abstract korea plans to introduce an emissions trading scheme for the controlling greenhouse gas emissions in 2015 using shephard s 1970 output distance function we first estimate the shadow price of co 2 for power generators in the korean fossil fueled electric generation industry then by assuming that each power generator is required to reduce co 2 emissions by one ton we compute the potential cost savings from internal trading among generators within the same plant and from external trading across plants at prevailing market prices the results indicate that on average the generators paid 14 63 to abate one ton of co 2 emissions in 2007 plants realized additional gains through external trading in particular cost savings from trades between different fuel fired plants were substantial

internal net worth and the investment process an application to u s agriculture recent models of firm investment decisions stressing informational imperfections in capital markets provide a foundation for interpreting evidence that movements in internal finance can predict investment spending even after one controls for measures of firms investment opportunities while such evidence is suggestive it is often open to other interpretations we examine these models using data on equipment investment in the u s agricultural sector this sector is particularly interesting because it has experienced large fluctuations in net worth and the profitability of investment and reasonable measures of net worth can be constructed our findings provide support for a class of internal funds models of investment under asymmetric information

market perceptions and inventory price employment plans ordered probit analyses of national federation of independent business survey data show that individual firms generally conform to the stock adjustment model of inventory investment with the predicted response more likely when inventories are perceived as excessive than when deficient contrary to inferences about slow adjustment speeds from aggregate data inventory adjustments by individual firms do not tend to take more than three months to complete there is no evidence that price is used to achieve desired inventory targets but prices are sticky in that changes set in motion one quarter tend to continue into the next quarter copyright 1989 by mit press

abatement and allocation in the pilot phase of the eu ets we use historical industrial emissions data to assess the level of abatement and over allocation that took place across european countries during the pilot phase 2005 2007 of the european union emission trading scheme using a dynamic panel data model we estimate the counter factual business as usual emissions scenario for eu member states comparing this baseline to allocated and verified emissions we find that both over allocation and abatement occurred along with under allocation and emissions inflation over the three trading years of the pilot phase we find over allocation of approximately 280 million euas and total abatement of 247 mt co2 however we calculate that emissions inflation of approximately 73 mt co2 also occurred possibly due to uncertainty about future policy design features

regulatory constraints on environmental markets abstract there have been several recent regulatory reforms aimed at promoting economic efficiency these reforms fall into two broad categories those aimed at promoting competition in specific industries and those aimed at addressing problems that cut across several industries this analysis examines two reforms that fall into the latter category both of these policies are specifically designed to enhance environmental quality while promoting cost savings the analysis focuses on the biases and inefficiencies associated with the use of these policies the paper concludes with a discussion of the possibility of designing more efficient alternatives in light of the political constraints that are imposed on regulators

fundamental q cash flow and investment evidence from farm panel data this study used a 1976 1992 panel data set to test whether farm machinery investors face finance constraints tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable results indicated that 1 credit constraints were generally not a problem during the 1970s boom 2 credit constraints became a problem during the 1980s and early 1990s because of tighter credit and or more conservative financial managerial styles 3 the investment cash flow relationships of low debt and older operator farms were not significantly affected by farm business cycles and 4 the investment cash flow relationships of high debt and young operator farms were affected strongly by business cycles debt level was the strongest determinant of credit constraints asset size and operator age were less important

incentives and prices in an emissions trading scheme with updating abstract emissions trading schemes where allocations are based on updated baseline emissions give firms less incentive to reduce emissions for a given quota or allowance price nevertheless according to bohringer and lange on the design of optimal grandfathering schemes for emission allowances europ econ rev 49 2005 2041 2055 such allocation schemes are cost effective if the system is closed and allocation rules are identical across firms in this paper we show that the cost effective solution may be infeasible if marginal abatement costs grow too fast moreover if a price cap or banking borrowing is introduced the abatement profile is no longer the same as in the case with an auction or lump sum allocation in addition we show that with allocation based on updated emissions the quota price will always exceed marginal abatement costs possibly misguiding policy makers and investors about abatement costs numerical simulations indicate that the quota price most likely will be several times higher than marginal abatement costs unless a significant share of allowances is auctioned

tradeable carbon permit auctions how and why to auction not grandfather abstract an auction of carbon permits is the best way to achieve domestic carbon caps designed to limit global climate change to minimize administrative costs permits would be required at the level of oil refineries natural gas pipe lines natural gas liquid sellers and coal processing plants to maximize liquidity in secondary markets permits would be fully tradable and bankable the government would conduct quarterly auctions a standard ascending clock auction in which price is gradually raised until there is no excess demand would provide reliable price discovery an auction is preferred to grandfathering giving companies permits based on historical output or emissions because it allows reduced tax distortions provides more flexibility in distribution of costs provides greater incentives for innovation and reduces the need for politically contentious arguments over the allocation of rents

taxes versus tradable discharge permits a review in the light of the u s and european experience the u s and west european environmental protection programs have incorporated different economic instruments for controlling pollution the u s has made extensive use of tradable permits of several forms but has never used direct pollution taxes the countries of the european community have long used an array of pollution taxes but have never used tradable permits a review and critique of these experiences and an analysis of the attributes of taxes and tradable permits seeks identify the strengths and weaknesses of each instrument and to provide guidelines for the successful implementation of each system

an empirical investigation of intraurban wage gradients abstract intraurban wage gradients have received little attention in the urban literature but have been shown theoretically to be important indicators of the spatial characteristics of urban economic activity this study examines the spatial distribution of wages of five groups of municipal public employees in the chicago smsa negative wage gradients significant at the 0 05 level are found for four of the five labor groups results show that monthly wages decrease on average as much as 24 per additional mile from the city center

an econometric model of cattle inventories dynamic regression equations are estimated for each beef cattle breeding herd and beef cattle inventories at two levels of aggregation the u s and montana the analysis for montana was utilized as a guide for specification of the national equation to reduce the inference problem associated with letting the sample data help specify the model rational lags on average price received by farmers for calves and the ratio of fed beef to corn prices at omaha constitute the primary explanatory variables the equations perform exceedingly well over the sample period 1950 80 and in post sample forecasts with the sample truncated back to 1970

cost minimizing regulation of sulfur emissions regional gains in electric power environmental regulations set maximum allowable rates for sulfur dioxide emissions from electric utilities by ignoring firm differences in marginal abatement costs and preventing emissions trading these standards do not minimize the cost of reducing einissions this paper estimates marginal abatement cost functions for 56 utilities for 1973 79 marginal costs vary substantially across firms due to differences in the price of low and high sulfur fuels and the intensity of regulation the potential savings from a cost minimizing reallocation of abatement resources are estimated for five regions current expenditures are found to be 47 higher than cost minimizing levels i mplementation of the 1970 clean air act amendments relies extensively on technology based emission standards economists long have recognized that these standards can result in an inefficient allocation of pollution control resources engineering based restrictions ignore or oversimplify differences in abatement costs among polluters limited empirical research suggests that current standards result in substantially higher costs as much as ten times higher than a cost minimizing regulatory scheme 2 these studies however are based on engineering estimates of marginal abatement costs the models often assume that all polluters adopt control technologies that are required only for new plants and that have been largely unadopted by polluting firms 3 the impact of changing factor prices on marginal abatement costs typically is ignored the difficulty is that the resulting estimates of the cost of regulation neither adequately reflect the range of control options available to polluters nor take into account how polluters actually have responded to environmen

the political economy of pollution markets historical lessons for modern energy and climate planners this article explores some of the central economic and political problems with the use of tradable permits to solve environmental problems drawing from transaction cost economics political economy and market theory it does so by looking at the history of three programs for curbing pollution in the united states the clean air act the leaded gasoline phase out and water permits in wisconsin the article begins by briefly summarizing the history of each of these programs before looking at a host of challenges related to political compromises in program design transaction costs spatial distortions such as geographic sensitivity and wrong way trading of credits temporal distortions such as the episodic nature of pollution and volatility of market prices and market abuses these concerns are raised with an eye for how historical experience may inform the current debate about how to design effective market mechanisms to respond to climate change and other forms of energy related environmental degradation

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

impacts of alternative allowance allocation methods under a cap and trade program in power sector emission trading is considered to be a cost effective environmental economic instrument for pollution control however the policy design of an emission trading program has a decisive impact on its performance allowance allocation is one of the most important policy design issues in emission trading not only for equity but also for policy performance in this research an artificial market for sulfur dioxide so2 emission trading was constructed by applying an agent based model the performance of the jiangsu so2 emission trading market was examined under different allowance allocation methods and transaction costs the results showed that the market efficiency of emission trading would be affected by the allocation methods when the transaction costs are positive the auction allowance allocation method was more efficient and had the lowest total emission control costs than the other three allocation methods examined however the use of this method will require that power plants pay for all of their allowance and doing so will increase the production costs of power plants on the other hand output based allowance allocation is the second best method

a ten year rule to guide the allocation of eu emission allowances abstract member states in the european union eu are responsible for national allocation plans governing the initial distribution of emission allowances in the co2 emission trading system including rules governing allocations to installations that close and to new entrants the european commission has provided guidelines to discourage the use of allocation methodologies that provide incentives affecting firms compliance behavior for example by rewarding one type of compliance investment over another we find that the treatment of closures and new entrants by member states is inconsistent with the general guidelines provided by the eu we propose stronger eu guidance regarding closures and new entrants a more precise compensation criterion on which to justify free allocations and a ten year rule as a component of future eu policy that can guide a transition from current practice to an approach that places greater weight on efficiency

the spatial mismatch hypothesis what has the evidence shown this paper reviews 20 years worth of empirical evidence on the spatial mismatch hypothesis after briefly surveying the relevant models from urban and labour economics and recent trends in employment and population suburbanisation the empirical evidence on spatial effects is examined this literature includes evidence on the effects of residential segregation residential suburbanisation and employment suburbanisation and direct measures of access such as travel times the most recent evidence suggests that spatial mismatch is relevant for explaining black white employment differences though the magnitudes of these effects remain unclear

bretton woods blueprint for a greenhouse gas agreement abstract this paper describes the remarkable parallels between the problems faced in the drafting of the 1944 bretton woods agreement which established the rules and institutions governing the international financial system and the problems faced in drafting a greenhouse gas agreement the parallels include the need to induce countries to sacrifice economic sovereignty in order to provide a public good the need to facilitate capital investment and provide adjustment loans to be fair to developing versus developed nations to offer technical assistance monitor behavior punish offenders and promote a globally efficient allocation of resources it is claimed that between them the organizations which emerged from the bretton woods agreement namely the imf gatt and world bank have the necessary attributes of the needed global atmospheric control agency furthermore it is argued that there are striking parallels between the reserve accounts at the imf and the crediting and debiting of greenhouse gas emissions and absorptions between special drawing rights sdrs and rights for greenhouse gas emissions as well as in numerous other characteristics the paper concludes by noting that the almost half century of influence of the bretton woods institutions suggests we might borrow from their charters organizational designs membership incentives and procedures for adaptation and change

space and unemployment the labor market effects of spatial mismatch the aim of this article is to analyze the effects of housing discrimination on the wages and unemployment rates of black workers the unemployment effect is first analyzed using a simple minimum wage model an efficiency wage model is then adopted in order to endogenize both unemployment and wages under both models suburban housing discrimination leads to a higher unemployment rate for blacks in the central city than in the suburbs under the efficiency wage model black wages are also lower in the center the analysis thus generates a link between unemployment and a seemingly unrelated phenomenon racial discrimination in the housing market

an alternative approach to the analysis of wage differentials a key question in many studies of male female or black white wage differentials is how much of the differential can be explained by economic factors and how much remains unexplained the unexplained portion is then ascribed to discrimination since oaxaca 17 first formalized this decomposition the residual difference methodology has been the dominant methodology utilized in empirical studies of wage differentials 4 7 8 10 15 18 but recently the validity of the assumptions underlying the residual difference methodology have been called into question by butler 5 6 in this paper the theoretical underpinnings of the residual difference methodology are reexamined and an alternative theoretical framework for this methodology is suggested the new framework overcomes the shortcomings inherent in oaxaca s specification of the model and therefore provides a sound theoretical foundation for the residual difference decomposition

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

credit constraints farm characteristics and the farm economy differential impacts on feeder cattle and beef cow inventories a recurrent topic in the macroeconomic literature is the financial accelerator the notion that informational asymmetries introduce inefficiencies to financial markets which amplify and propagate the effects of real or monetary shocks with the purpose of finding empirical evidence that is consistent with a financial accelerator operating in the cattle sector inventory investment models are estimated with an appended cash flow variable the inclusion of cash flow is motivated by the notion that investment by credit constrained farms should be sensitive to movements in internal funds results are consistent with the financial accelerator operating in the feeder cattle but not in the cow calf sector

urban diversity and economic growth at the risk of some simplification it is possible to identify four periods of intense study of cities by economists each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modem economy the first of these periods occurred in the decade after world war i only about ten years after the truck revolutionized the transport of goods within urban areas this period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities robert murray haig 1926 and a number of other microeconomists at columbia analyzed the spatial pattems of manufacturing activity in lower manhattan and in the rest of new york city haig jmd his colleagues devoted considerable attention to where things belong in an urban area p 402 providing the first systematic economic analysis of urban spatial structure for example they analyzed the garment industry concluding that it was destined by nature to disperse north of 14th street and predicting that it would follow the estabhshed spatial pattem of the cooperage barrelmaking industry standardization in size and quality of barrels had meant that identical barrels could be made throughout the new york metropolitan area even in new jersey and the introduction of the truck meant that they could be transported cheaply throughout the region and exported the second of these periods though not in chronological order began in the mid 1960s it formalized many of the insights about location incentives within urban areas which had been uncovered a half century before mixed them with the logic of heinrich von thunen s 1826 ancient theories about agricultural crops and land values and applied them to the hotisehold sector the works of william alonso 1964

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

how emission certificate allocations distort fossil investments the german example despite political activities to foster a low carbon energy transition germany currently sees a considerable number of new coal power plants being added to its power mix there are several possible drivers for this dash for coal but it is widely accepted that windfall profits gained through free allocation of ets certificates play an important role yet the quantification of allocation related investment distortions has been limited to back of the envelope calculations and stylized models so far we close this gap with a numerical model integrating both germany s particular allocation rules and its specific power generation structure we find that technology specific new entrant provisions have substantially increased incentives to invest in hard coal plants red to natural gas at the time of the ets onset more precisely disproportionate windfall profits compared more than half the total capital costs of a hard coal plant moreover shorter periods of free allocations would not have turned investors favours towards the cleaner natural gas technology because of pre existing economic advantages for coal in contrast full auctioning of permits or a single best available technology benchmark would have made natural gas the predominant technology of choice

financial structure of farm businesses under imperfect capital markets recent finance studies have considered whether gaps between a firm s costs of internal and external sources of investment funds arising from capital market imperfections influence its investment behavior and funding preferences this study tests the applicability of the pecking order and partial adjustment theories of financial structure to farm businesses by fitting a set of simultaneous financial equations with farm panel data from illinois model results indicate that illinois farms adjust to long run financial targets for equity debt and leasing but that additional financing needs follow a pecking order that is stronger for farms with greater asymmetric information problems copyright 2000 oxford university press