the gender earnings differential in the russian transition economy using data from the russia longitudinal monitoring survey rlms the first nationally representative household survey in the russian federation the author examines the gender earnings differentia

a path dependent contingent claims approach to capacity investments this note presents a contingent claims approach to strategic capacity planning we develop models for capacity choice and expansion decisions in a single firm environment where investment is irreversible and demand is uncertain these models illustrate specifically the relevance of path dependent options analysis to planning capacity investments when the firm adopts demand tracking or average capacity strategies it is argued that asian average type real options can explain hysteresis phenomena in addition to providing superior control of assets in place

a quick algorithm for pricing european average options an algorithm is described that prices european average options the algorithm is tested against monte carlo estimates and is shown to be accurate the speed of the algorithm is comparable to the black scholes algorithm a closed form solution is derived for european geometric average options

on the effect of demand randomness on inventories and costs we explore analytically cardinal effects of the extent of demand randomness on optimal inventory levels and the associated expected costs to model changes in demand randomness we make extensive use of a mean preserving transformation commonly used in probabilistic microeconomics as well as the notion of risk pooling aggregating independent demands for the single period news vendor model the order quantity and associated costs are shown to depend on the randomness parameter in a simple and highly interpretable manner we show by a simple example that in some situations risk pooling might neither reduce inventories nor move them closer to the mean or median demand the managerial relevance of such analyses is discussed

pricing european average rate currency options abstract this paper develops a simple methodology that yields closed form analytical approximations for valuing european option claims involving the arithmetic average of future foreign exchange rates the main advantage of the approach is that it avoids the need to adopt time consuming numerical procedures the precision of the resulting formula and the distributional assumption that underlies it is examined by way of monte carlo simulations jel f31

investment and capacity choice under uncertain demand this paper extends the real options literature by discussing an investment problem where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand after the project is installed with a certain maximum capacity this capacity is fixed as an upper boundary to the output and cannot be adjusted later on it turns out that in the framework of this once and for all decision uncertainty in future demand leads to an increase in optimal installed capacity but on the other hand it causes investment to be delayed to an extent that even small uncertainty makes waiting and accumulation of further information the optimal decision for large ranges of demand limiting the capacity which may be installed weakens this extreme effect of uncertainty

collaboration in tool development and capacity investments in high technology manufacturing networks the procurement of capital intensive tools for hi tech industries is one of the most complex tasks astronomical amounts of capital are invested in the processing equipment further there is a large effort from the original equipment manufacturer oem in customizing the high capital intensive equipment to suit their production process this problem has received little attention from the quantitative decision making literature for the first time we analyze the problem of oem deciding on collaborating with the tool supplier via a special type of contract which we refer as collaboration options we show that there are benefits to both the oem and the tool suppliers from the collaboration we develop a two stage strategic model for collaborative tool development and optimal capacity investment in the first stage we solve an optimal collaboration problem faced by the oem we formulate this problem as a discrete time stochastic stopping problem for a finite horizon we use a policy iteration algorithm for deciding on optimal collaboration policy in the second stage we model the optimal investment decision of the oem in tool development and capacity acquisition using real options theory unlike the traditional options literature we consider the option value determined from the first stage model and decide on the optimal amount for investment

real investment options with multiple sources of rare events abstract we value real investment options when the underlying asset follows a mixed jump diffusion process involving various types sources of rare events jumps these jumps are assumed independent of each other with each type having a log normally distributed jump size and a random poisson distributed arrival time they may represent uncertainties about the arrival and impact on the underlying investment of new information concerning technological innovation competition political risk regulatory effects and other sources an analytic solution is presented for european claims call or put options with multiple sources of jumps a discrete time markov chain methodology implemented within a finite difference scheme is proposed for the valuation of american as well as european options the approach is also applicable to financial options with multiple types of rare events the approach is illustrated through valuing complex real options with compound features involving interactions between optimal investment and subsequent operating decisions specifically we value a growth option and an extension option

discrimination empirical evidence from the united states the study of discrimination received a major impetus in the 1960 s when increasing social attention focused upon race and gender differentials in market outcomes gary becker s the economics of discrimination 1957 strongly influenced empirical research by providing a definition of wage discrimination and suggesting a specific way in which it might operate during the following years new theories were developed and refined in an attempt to explain why there appears to be continued discrimination in spite of market forces presumably operating against it similarly a large amount of empirical work has been done to determine whether and how much discrimination actually exists and to a lesser extent to test the implications of the various theories even so the hope expressed by becker in the preface of the second edition 1971 that our understanding of discrimination would increase so rapidly that the materials in his book would become obsolete before another decade began has clearly not been fulfilled here we review what has been learned in the intervening years and suggest some fruitful directions for future research 1 the focus of this paper like that of most of the empirical research in this area is on determining the extent of discrimination rather than on testing alternative models of discrimination

achieving co2 reductions in colombia effects of carbon taxes and abatement targets in this paper we investigate co2 emission scenarios for colombia and the effects of implementing carbon taxes and abatement targets on the energy system by comparing baseline and policy scenario results from two integrated assessment partial equilibrium models tiam ecn and gcam and two general equilibrium models phoenix and meg4c we provide an indication of future developments and dynamics in the colombian energy system currently the carbon intensity of the energy system in colombia is low compared to other countries in latin america however this trend may change given the projected rapid growth of the economy and the potential increase in the use of carbon based technologies climate policy in colombia is under development and has yet to consider economic instruments such as taxes and abatement targets this paper shows how taxes or abatement targets can achieve significant co2 reductions in colombia though abatement may be achieved through different pathways taxes and targets promote the entry of cleaner energy sources into the market and reduce final energy demand through energy efficiency improvements and other demand side responses the electric power sector plays an important role in achieving co2 emission reductions in colombia through the increase of hydropower the introduction of wind technologies and the deployment of biomass coal and natural gas with co2 capture and storage ccs uncertainty over the prevailing mitigation pathway reinforces the importance of climate policy to guide sectors toward low carbon technologies this paper also assesses the economy wide implications of mitigation policies such as potential losses in gdp and consumption an assessment of the legal institutional social and environmental barriers to economy wide mitigation policies is critical yet beyond the scope of this paper

share green growth regional evaluation of green output performance in china abstract reducing carbon emissions is much more difficult than reducing other pollutants through current technology promoting the efficiency of energy use and developing clean energy are the only two economically feasible approaches for the future however without low carbon technology pursuing green growth could negatively affect production activities in this study we develop a directional distance function ddf model based on the slacks of the output oriented slack based measure along an endogenously determined directional vector we can calculate the efficiency scores by reducing the undesirable output and expanding desirable output simultaneously the global malmquist index is integrated with the ddf model to capture the dynamic change of output performance based on the output performance of green growth we use counterfactual thinking to evaluate gdp losses caused by limiting carbon emissions the empirical study using the provincial data of china shows that technological progress not efficiency change pushes green growth in china we also find that pursuing green growth in china would lead to a gdp loss of 7 8 furthermore a sub regional analysis shows that the eastern regions were almost immune to the strict carbon control policy while the midwestern regions were affected severely to alleviate the gdp loss we offer suggestion on setting up a green growth sharing mechanism among regions

investment timing and optimal capacity choice for small hydropower projects this paper presents a method for assessing small hydropower projects that are subject to uncertain electricity prices we present a real options based method with continuous scaling and we find that there is a unique price limit for initiating the project if the current electricity price is below this limit it is never optimal to invest but above this limit investment is made according to the function for optimal size the connection between the real option and the physical properties of a small hydropower plant is dealt with using a spreadsheet model that performs a technical simulation of the production in a plant based on all the important choices for such a plant the main results of the spreadsheet are simulated production size and the investment costs which are in turn used for finding the value of the real option and the price limit the method is illustrated on three different norwegian small hydropower projects

the impact of investment lags on investment decision abstract this paper suggests a valuation framework for an investment project through the concept of real options generally in real asset world decision time and its payment time are not identical this so called investment lag problem should be considered when valuing real assets when investment lags exist firms accommodation capacities play important roles in this paper the real effect of investment lag on investment value is tested upon various conditions we show the valuation process of real assets under the risk neutral world the closed form formula is also provided for valuing real assets including r d project

climate change policy in brazil and mexico results from the mit eppa model based on an in depth analysis of results from the mit economic projection and policy analysis eppa model of climate policies for brazil and mexico we demonstrate that commitments by mexico and brazil for 2020 made during the un climate meetings in copenhagen and cancun are reachable but they come at different costs for each country we find that brazil s commitments will be met through reduced deforestation and at no additional cost however mexico s pledges will cost 4 billion us dollars in terms of reduced gdp in 2020 we explore short and long term implications of several policy scenarios after 2020 considering current policy debates in both countries the comparative analysis of these two economies underscores the need for climate policy designed for the specific characteristics of each country accounting for variables such as natural resources and current economic structure our results also suggest that both brazil and mexico may face other environmental and economic impacts from stringent global climate policies affecting variables such as the value of energy resources in international trade

fixed versus flexible production systems a real options analysis in this work we address investment decisions in production systems by using real options as is standard in literature the stochastic variable is assumed to be normally distributed and then approximated by a binomial distribution resulting in a binomial lattice the methodology establishes a discrete valued lattice of possible future values of the underlying stochastic variable demand in our case and then computes the project value we have developed and implemented stochastic dynamic programming models both for fixed and flexible capacity systems in the former case we consider three standard options the option to postpone investment the option to abandon investment and the option to temporarily shut down production for the latter case we introduce the option of corrective action in terms of production capacity that the management can take during the project by considering the existence of one of the following i a capacity expansion option ii a capacity contraction option or iii an option considering both expansion and contraction the full flexible capacity model where both the contraction and expansion options exist leads as expected to a better project predicted value and thus investment policy however we have also found that the capacity strategy obtained from the flexible capacity model when applied to specific demand data series often does not lead to a better investment decision this might seem surprising at first but it can be explained by the inaccuracy of the binomial model the binomial model tends to undervalue future decreases in the stochastic variable demand while at the same time tending to overvalue an increase in future demand values

the determinant of production entry and exit model on financing behavior this study seeks for equity debt values and the relevant potential firm value with financing or not when the real options approach is assessed the paper deals with the following relative problems 1 the assessment rule of decision whether to stop production or not 2 whether the dis investment cost or salvage could reflect the production scale 3 whether the rate of capital cost or the rate of return in different stages could reflect the suitable risk premium 4 when the investment cost exit cost and salvage are the linear functions of production volume and follow the geometric brownian motion to analyze the optimum external financing behavior and to decide the production thresholds of production entry and exit

downscaling heterogeneous household outcomes in dynamic cge models for energy economic analysis abstract downscaling methods for dynamic computable general equilibrium models are developed and analyzed the methods produce outcomes for a variety of different household types by downscaling the aggregate quantities from an economic growth model with a representative household this approach uses household survey data and long term population projections for different household types to compare the performance of the downscaling methods vs a general equilibrium model with multiple household groups under a variety of conditions including demographic change technological change and a carbon tax both recursive dynamic and forward looking downscaling methods produce results that approximate well a multiple household model run the recursive dynamic downscaling method is applied to an illustrative example estimating impacts of a carbon tax on aggregate co 2 emissions and the energy demand of different household groups for a middle of the road development scenario

gender wages and discrimination in the ussr a study of a russian industrial town male and female wage equations are estimated from survey data from the city of taganrog in 1989 the first such estimates on data collected in the ussr reductions in working hours for low paid female professionals resulting in relatively high hourly rates encouraged women to acquire higher education while maintaining an unequal and conservative gender division of labour decomposition of the wage gap shows strong indications of discrimination a wage function estimated from the pooled sample as in oaxaca and ransom 1994 explains a larger share of the gender gap but does so because it disregards aspects of discrimination

macroeconomic impacts of climate change mitigation in latin america a cross model comparison abstract in this paper we analyse macroeconomic consequences of greenhouse gas emission mitigation in latin america up to 2050 through a multi model comparison approach undertaken in the context of the climacap lamp research project we compare two carbon tax scenarios with a business as usual scenario of anticipated future energy demand in the short term with carbon prices reaching around 15 tco 2 by 2030 most models agree that the reduction in consumer spending as a proxy for welfare is limited to about 0 3 by 2050 at carbon prices of 165 tco 2 there is much more divergence in the estimated impact on consumer spending as well as gdp across models and regions which reflects uncertainties about technology costs and substitution opportunities between technologies we observe that the consequences of increasingly higher carbon prices in terms of reduced consumer spending and gdp tend to be fairly linear with the carbon price in our cge models however the consequences are divergent and nonlinear in our econometric model that is linked to an energy system model that simulates step changes in technology substitution the results of one model show that climate policy measures can have positive effects on consumer spending and gdp which results from an investment stimulus and the redistribution of carbon price revenues to consumers

output decision under demand uncertainty with stochastic production function a contingent claims approach this paper presents a contingent claims analysis of output decisions for the firm facing technological and demand uncertainty the paper reveals that i the optimal output level increases with the higher interest rate when the firm is subject to demand and technological uncertainty ii the effect of demand volatility and production lead time on the optimal output level could be either positive or negative iii the optimal project value decreases with the higher demand volatility iv the optimal project value decreases with the longer production lead time when the firm is subject to demand uncertainty and v the optimal project value decreases with the higher interest rate when the firm is subject to demand uncertainty it increases with the higher interest rate however when the firm is subject to both demand and technological uncertainty some important managerial implications are discussed

market and institutional determinants of wage differentiation in russia using a range of official and survey data the author evaluates the relative success of two approaches competitive labor market theory and industrial relations theory institutional economics in explaining wage determination in russia following a review of the analysis of wage determination by an influential team of world bank economists the author shows that increased wage inequality in russia is dominated by inequality within occupational categories within local labor markets such inequality he suggests is primarily associated with inter firm differences in wage levels rather than barriers to labor mobility or differences in human capital such a pattern of differentiation entirely accords with the analyses of those institutional economists and industrial relations theorists who stress the role of the wage in regulating and motivating the labor force above its role in securing labor market equilibrium the paper concludes by outlining the institutional framework of wage determination that underli

energy technology roll out for climate change mitigation a multi model study for latin america in this paper we investigate opportunities for energy technology deployment under climate change mitigation efforts in latin america through several carbon tax and co2 abatement scenarios until 2050 we analyze what resources and technologies notably for electricity generation could be cost optimal in the energy sector to significantly reduce co2 emissions in the region by way of sensitivity test we perform a cross model comparison study and inspect whether robust conclusions can be drawn across results from different models as well as different types of models general versus partial equilibrium given the abundance of biomass resources in latin america they play a large role in energy supply in all scenarios we inspect this is especially true for stringent climate policy scenarios for instance because the use of biomass in power plants in combination with ccs can yield negative co2 emissions we find that hydropower which today contributes about 800 twh to overall power production in latin america could be significantly expanded to meet the climate policies we investigate typically by about 50 but potentially by as much as 75 according to all models electricity generation increases exponentially with a two to three fold expansion between 2010 and 2050 we find that in our climate policy scenarios renewable energy overall expands typically at double digit growth rates annually but there is substantial spread in model results for specific options such as wind and solar power the climate policies that we simulate raise wind power in 2050 on average to half the production level that hydropower provides today while they raise solar power to either a substantially higher or a much lower level than hydropower supplies at present depending on which model is used also for ccs we observe large diversity in model outcomes which reflects the uncertainties with regard to its future implementation potential as a result of the challenges this co2 abatement technology experiences the extent to which different mitigation options can be used in practice varies greatly between countries within latin america depending on factors such as resource potentials economic performance environmental impacts and availability of technical expertise we provide concise assessments of possible deployment opportunities for some low carbon energy options for the region at large and with occasional country level detail in specific cases

long term abatement potential and current policy trajectories in latin american countries abstract this paper provides perspectives on the role of latin american and latin american countries in meeting global abatement goals based on the scenarios developed through the climacap lamp modeling study abatement potential in latin america among other things is influenced by its development status the large contributions of non co2 and land use change co2 emissions and energy endowments in most scenarios in this study the economic potential to reduce fossil fuel co2 as well as non co2 emissions in latin america in 2050 is lower than in the rest of the world in total when measured against 2010 emissions due largely to higher emission growth in latin america than in the rest of the world in the absence of abatement the potential to reduce land use change co2 emissions is complicated by a wide range of factors and is not addressed in this paper land use emissions are largely addressed in a companion paper the study confirms the results of previous research that the variation in abatement costs across models may vary by an order of magnitude or more limiting the value of these assessments and supporting continued calls for research on the degree to which models are effectively representing key local circumstances that influence costs and available abatement options finally a review of policies in place in several latin american countries at the time of this writing finds that they would be of varying success in meeting the emission levels proposed by the most recent ipcc reports to limit global temperature change to 2 c

capacity expansion under stochastic demands we consider the problem of optimally meeting a stochastically growing demand for capacity over an infinite horizon under the assumption that demand for product follows either a nonlinear brownian motion or a non markovian birth and death process we show that this stochastic problem can be transformed into an equivalent deterministic problem consistent with earlier work by a manne the equivalent problem is formed by replacing the stochastic demand by its deterministic trend and discounting all costs by a new interest rate that is smaller than the original in approximate proportion to the uncertainty in the demand

online low price guarantees a real options analysis a common practice among large retailers is the low price guarantee rebating consumers if they find an identical product cheaper elsewhere this provides consumers with some level of comfort in their purchase decision a similar low price guarantee is provided by numerous service industries that allow reservation of capacity yet do not penalize the consumer for failure to keep that reservation examples include hotels and car rental given that a consumer is not required to keep the reservation they may make another reservation either at a competing firm or the same firm if future prices decline the increasing availability of pricing information on the internet affords consumers the opportunity to be more strategic in their purchasing behavior as consumers we are able to quickly and easily check prices from numerous service or goods providers the ease of price information potentially makes these guarantees very costly to the service or good provider we analyze the implied costs associated with these guarantees by making analogies to financial options motivation for this research comes from a large car rental firm dollar thrifty automotive group inc that considered offering a low price guarantee to all consumers that book a reservation though their website

on the decomposition of wage differentials the often used method for decomposing wage differentials into human capital and discrimination components is reformulated so that both t he disadvantage or cost discrimination it imposes on a black or minority wage earner and the advantage or benefit it bestows on a white or majority wage earner can be estimated copyright 1988 by mit press

robust capacity planning under uncertainty the existence of uncertainty influences the investment production and pricing decision of firms therefore capacity expansion models need to take into account uncertainty this uncertainty may arise because of errors in the specification statistical estimation of relationships and in the assumptions of exogenous variables one such example is demand uncertainty in this paper a cautious capacity planning approach is described for solving problems in which robustness to likely errors is needed the aim is to cast the problem in a deterministic framework and thereby avoid the complexities inherent in nonlinear stochastic formulations we adopt a robust approach and minimize an augmented objective function that penalises the sensitivity of the objective function to various types of uncertainty the robust or sensitivity approach is compared with friedenfelds equivalent deterministic demand method using numerical results from a large nonlinear programming capacity planning model it is shown that as ca

uncertainties in macroeconomic assessments of low carbon transition pathways the case of the european iron and steel industry abstract the climate targets agreed in paris 2015 render deep decarbonization of energy and emission intensive industries crucial policy makers are interested in the macroeconomic consequences of such decarbonization pathways and often rely on integrated modelling studies however the underlying modelling assumptions and uncertainties often remain unquestioned or invisible although they may govern the models results for the case of a zero process emission pathway of the european iron and steel industry we demonstrate how different assumptions on different layers of uncertainty influence results we show that effects strongly depend on technology choice prevailing macroeconomic states as well as regional characteristics the underlying socio economic development and the climate policy trajectory seem to play a less important role particularly we find that the choice of model i e which macroeconomic theory strand it arises from influences the sign and magnitude of macroeconomic effects and thus should be well understood in terms of appropriate interpretations by both modelers and policy makers we emphasize that model assumptions should be transparent results sought as to be robust across a range of possible contexts and presented together with the conditions under which they are valid to that end co design and co production in research would support its relevance and applicability