on the practical limits to substitution abstract this paper considers the arguments for weak vs strong sustainability the weak sustainability position held by many mainstream neoclassical economists such as solow and weitzman is that almost all kinds of natural capital can be substituted by man made capital the contrary position known as strong sustainability holds that many of the most fundamental services provided by nature cannot be replaced by services produced by humans or man made systems the paper discusses the limits of substitution from a physical point of view it concludes that while there is considerable scope for substitution in some domains the limits to substitutability in the medium term at least are real and important in effect the paper supports the strong sustainability position

unauthorized immigration and fiscal competition abstract reflecting upon recent enforcement policy activism of us states and countries within the eu towards unauthorized workers we examine the overlap of centralized federal and decentralized state or regional enforcement of immigration policies in a spatial context among other results we find that if interstate mobility is costless internal enforcement is overprovided and border enforcement and local goods are underprovided when regions take more responsibility in deciding policies this leads to higher levels of unauthorized immigration under decentralization interregional migration costs moderate such over underprovision moreover income distributive motives in the host country may shape the design of immigration policies in specific ways the basic model is extended in several ways first we study how the policies change when regions can exclude unauthorized immigrants from the consuming of regionally provided goods or services second we assume that the potential number of unauthorized immigrants is endogenous and finally we examine the effect of considering an alternative spatial configuration that includes border and interior regions

migrants in a guest worker system a utility maximizing approach this paper examines the behavior of utility maximizing migrants in a system of guest worker migration their pattern of leisure and commodity consumption at home and abroad is analysed and related

the law of demand and risk aversion this note proposes a necessary and sufficient condition on a utility function to guarantee that it generates a demand function satisfying the law of demand this condition can be interpreted in terms of an agent s attitude towards lotteries in commodity space as an application we show that when an agent has an expected utility function her demand for securities satisfies the law of demand if her coefficient of relative risk aversion does not vary by more than 4

ramsey discounting of ecosystem services most ecosystem services which are essential for human well being are globally declining while the production of consumption goods measured by gdp is still growing to adequately account for this opposite development in public cost benefit analyses it has been proposed based on a two goods extension of the ramsey growth model to apply good specific discount rates for manufactured consumption goods and for ecosystem services using empirical data for ten ecosystem services across five countries and the world at large we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods in a conservative estimate we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods on global average ecosystem services should be discounted at a rate that is 0 9 pm 0 3 points lower than the one for manufactured consumption goods the difference is larger in less developed countries and smaller in more developed countries this result supports and substantiates the suggestion that public cost benefit analyses should use country specific dual discount rates one for manufactured consumption goods and one for ecosystem services

sustainability limited substitutability and non constant social discount rates abstract the paper shows how limited substitutability in consumption between different classes of goods affects the magnitude and time development of social discount rates it decomposes the discount rates into an absolute growth and a relative growth or substitutability effect the paper relates between good and intertemporal substitutability to the notions of weak and strong sustainability it analyzes under which circumstances low as opposed to high between good substitutability increases the weights given to long run environmental services

tariff endogeneity evidence from 19th century europe abstract this paper tests an endogenous tariff model for six european countries from around the mid 19th century until the eve of world war 1 ww1 the tariff rate was generally cointegrated with real gnp real wages the price level and the external trade balance results from granger causality tests suggest that real gnp and the price level may be important endogenous determinants of tariff levels

on welfare frameworks and catastrophic climate risks recent theoretical work in the economics of climate change has suggested that climate policy is highly sensitive to fat tailed risks of catastrophic outcomes weitzman 2009 68 such risks are suggested to be an inevitable consequence of scientific uncertainty about the effects of increased greenhouse gas concentrations on climate criticisms of this controversial result fall into three categories the first suggests that it may be irrelevant to cost benefit analysis of climate policy the second challenges the fat tails assumption and the third questions the behavior of the utility function assumed in the result this paper analyses these critiques and suggests that those in the first two categories have formal validity but that they apply only to the restricted setup of the original result which may be extended to address their concerns they are thus ultimately unconvincing critiques in the third category are shown to be robust however they open up new ethical and empirical challenges for climate economics that have thus far been neglected how should we value catastrophes as a society i demonstrate that applying results from social choice to this problem can lead to counterintuitive results in which society values catastrophes as infinitely bad even though each individual s utility function is bounded finally i suggest that the welfare functions traditionally used in climate economics are ill equipped to deal with climate catastrophes in which population size changes drawing on recent work in population ethics i propose an alternative welfare framework with normatively desirable properties which has the effect of dampening the contribution of catastrophes to welfare

implications of immigration policies for the u s farm sector and workforce i background in 1942 the united states and mexico signed the bracero program a formal agreement to draw seasonal labor to work in u s agriculture which provided employment opportunities to poor rural mexicans 1 however this program was abolished in 1964 ending the legal seasonal labor supply to u s agriculture in the southwestern states concurrently the united states passed the immigration act of 1965 establishing a quota of 120 000 legal immigrants per year the abandonment of the bracero program the new legal immigrants quota limits and economic inequality between the united states and mexico paved the way for steady entry of illegal laborers and led to eventual insurmountable illegal immigration population in the united states because illegal immigration was not a serious problem in the 1960s and 1970s legislation addressed only the number of legal immigrants allowed to enter the united states but in the 1980s illegal immigration began to emerge as a national problem and extensive debates entrenched around issues such as preventing the entry of unauthorized workers providing public services to illegal immigrants and even legalizing these workers consequently the u s congress attempted to address the immigration problems by enacting the 1986 immigration reform and control act irca the goals of irca were to eliminate the stock of undocumented workers through amnesty 2 and domestic enforcement of employer sanctions and curb the influx of illegal immigrants by increasing the border surveillance amnesty failed to eliminate the stock of illegal immigrants because only about half of the illegal immigrants filed for citizenship and it created future expectation of amnesty and more illegal unauthorized entry furthermore domestic sanctions on employers of undocumented workers and deportation of these workers were scantly enforced to stop the influx of immigrants irca focused heavily on tightening border control the irca also legislated the h 2a program which allowed agricultural employers to bring in guest workers during seasonal operations ers 2007 however farmers complained that the cumbersome paperwork of h 2a and bureaucratic delay were not conducive to procure seasonal laborers at the time of peak farm operations such as vegetable and fruit picking 3 in spite of irca s amnesty provision and strengthened control measures illegal immigration continued to rise about 12 million unauthorized immigrants resided in the united states in 2007 martin 2007 which is reaffirmed by many popular press reports leading to an extended congressional debate that began at the start of this decade to solve the illegal immigration problem several bills were proposed by the house of representatives the senate and the white house addressing issues related to increased domestic and border enforcements 4 paths to citizenship and guest worker programs montgomery 2006 these bills were not passed because of major disagreements among lawmakers over providing citizenship and guest worker programs as a result of the failed legislations and the september 11 attack the government primarily focused on border security accordingly funding for border enforcement has steadily increased 5 and resources were diverted from domestic to border enforcement however boucher and taylor 2007 documented that increased funding to secure the border did not deter undocumented workers from crossing the border because determined immigrants eventually find a way to enter the country by repeated attempts following september 11 2001 the u s immigration and customs enforcement ice further decreased the number of human hours devoted to worksite inspection because monitoring critical infrastructure took priority gao 2005 for example from 1999 to 2003 the number of human hours for domestic enforcement decreased from 480 000 to 18 000 6 7 but by late 2005 the u

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

willingness to accept willingness to pay and the income effect abstract the gap between willingness to pay wtp and willingness to accept wta has previously been studied by searching for evidence of substitutability the neoclassical hypothesis or status quo bias testing for neoclassical versus psychological theories of preferences we study the gap differently asking whether the observed pairs of wta and wtp are consistent with neoclassical preferences we use sugden s alternatives to the neoclassical theory of choice in i bateman k g willis eds valuing environmental preferences theory and practice of the contingent valuation method in the us eu and developing countries oxford university press oxford pp 152 180 chapter 6 result showing that the effect of income on wtp can be approximated from information on the ratio wta wtp drawing inferences from a meta analysis of 201 wta wtp ratios we conclude that the data are not consistent with neoclassical preferences

on the incidence of us tariffs this paper provides evidence on the incidence of tariffs on products of export interest to developing countries by investigating the relationship between per capita incomes of us trading partners and tariff rates it constitutes the first attempt to assess the incidence of tariffs imposed by the us on countries that span the entire range of per capita incomes average tariff rates are lower for the poorest and richest countries and higher for countries in the middle of the income distribution this finding is not consistent with the widely held view that tariffs used by industrial nations bear more heavily on products of export interest to poorer developing countries than on imports from industrial nations it is consistent with the tariff escalation pattern reported in earlier studies if advanced countries account for most products at the high end of the fabrication scale results show that poorest countries will find it difficult to escape tariffs by attaining higher levels of economic development

illegal immigration a supply side analysis abstract this paper analyzes the supply side determinants of illegal immigration using a three sector general equilibrium model of the source country agricultural liberalization raises illegal immigration while liberalization of the high tech sector reduces it in contrast capital mobility in the source country renders trade policy ineffective for controlling illegal immigration paradoxically increased enforcement by the host country may raise source country unskilled wages although illegal immigration falls finally under capital mobility a rise in the source country restrictions on capital inflow raises the level of illegal immigration and reduces the effectiveness of border enforcement efforts by the host country

environmental inequality and economic valuation i study how the economic value of a heterogeneously distributed environmental public good depends on how the endowment with this good and income are distributed i find that the effect of environmental inequality on the societal willingness to pay wtp for the environmental good is determined both by its substitutability and by the correlation of its provision with income specifically environmental inequality decreases societal wtp for substitutes but this effect is reversed if the environmental good is a complement or distributed strongly in favour of richer households moreover i show that richer households living in places where environmental good endowment is high increases decreases societal wtp if and only if the environmental good is a substitute for complement to consumption goods i propose novel adjustment factors for structural benefit transfer to control for differences in the spatial distribution of environmental goods using forest preservation in poland as an empirical example i find that societal wtp is up to 4 higher for equal access to forests and up to 8 higher for an equal distribution of both income and access to forests

cooperation punishment and immigration abstract we study the incentive to cooperate in a society comprised of citizens and immigrants the level of cooperation is governed by a steady state under population dynamics along with the behavior of individual citizens and immigrants we provide an equilibrium characterization exhibiting a uniquely determined positive level of cooperation in society we then use this framework to study the impact of government programs aimed at punishing immigrants who defect when agents produce offspring we show that a consequence of such punishment is that while the incentive for immigrants to defect decreases there is an equilibrium substitution effect whereby citizens realize an increased incentive to defect

discounting in the presence of scarce ecosystem services abstract the discount rate for cost benefit analysis has to take account of future scarcity of ecosystem services in consumption and production previous literature focuses on the first aspect and shows the importance of the relative price effect for given growth rates of consumption and ecosystem services this paper focuses on intermediate ecosystem services in production and shows that for limited substitutability and a low growth rate of these ecosystem services the growth rate of consumption and thus the discount rate declines towards a low value using a ramsey growth model the paper distinguishes three cases if ecosystem services can be easily substituted the discount rate converges to the usual value in the long term secondly if ecosystem services can be easily substituted in production but not in consumption the relative price effect is important finally and most interestingly if ecosystem services cannot be easily substituted in production the discount rate declines towards a low value and the relative price effect is less important another part of the previous literature has shown that a declining discount rate is the result of introducing several forms of uncertainty but this paper reaches that conclusion from an endogenous effect on the growth rate of the economy

giffen goods and the law of demand the paradoxical aspect of the giffen paradox is the inability of demand theory to explain why giffen goods are apparently so rare the resolution of the paradox arises from the distinction between the shape of market demand curves and the sequence of equilibrium prices that will be observed in markets in which quantity supplied changes the sense in which the giffen case is unlikely to occur is that the probability of identifying a giffen good is less than the probability that such a good exists

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

the effect of subsistence on collapse and institutional adaptation in population resource societies abstract we extend the brander taylor model of population and resource development in an isolated society by adding a resource subsistence requirement to people s preferences this improves plausibility amplifies population overshoot and collapse and can destabilize the steady state and allows for complete cessation of non harvesting activities in line with archaeological evidence for many societies we then use bifurcation techniques to give a global analysis of four types of institutional adaptation an ad valorem resource tax and quotas on total resource harvest total harvest effort and per capita effort in all cases we find that a higher subsistence requirement makes it harder or often impossible for adaptation to avoid overshoot and collapse

immigration remittances and business cycles we use data on border enforcement and macroeconomic indicators from the united states and mexico to estimate a two country business cycle model of labor migration and remittances the model matches the cyclical dynamics of labor migration to the united states and documents how remittances to mexico serve an insurance role to smooth consumption across the border during expansions in the destination economy immigration increases with the expected stream of future wage gains but it is dampened by a sunk migration cost that reflects the intensity of border enforcement during recessions established migrants are deterred from returning to their country of origin which places an additional downward pressure on the wage of native unskilled workers thus migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle enhancing the volatility of unskilled wages and remittances we quantify the welfare implications of various immigration policies for the destination economy

limits to substitution between ecosystem services and manufactured goods and implications for social discounting this paper examines implications of limits to substitution for estimating substitutability between ecosystem services and manufactured goods and for social discounting based on a model that accounts for a subsistence requirement in the consumption of ecosystem services we provide empirical evidence on substitution elasticities we find an initial mean elasticity of substitution of two which declines over time towards complementarity we subsequently extend the theory of dual discounting by introducing a subsistence requirement the relative price of ecosystem services is non constant and grows without bound as the consumption of ecosystem services declines towards the subsistence level an application suggests that the initial discount rate for ecosystem services is more than a percentage point lower as compared to manufactured goods this difference increases by a further half percentage point over a 300 year time horizon the results underscore the importance of considering limited substitutability in long term public project appraisal

immigration control and the welfare state abstract we examine a model of a rich country with a redistributive public sector and facing costly immigration control when illegal immigrants have access to the public sector we show that as border control becomes more expensive inequality in the rich country increases redistributive transfers decrease and then may increase some immigration is permitted and foreign aid may be used to reduce the migration pressure because of nonconvexities we also show that a small increase in the poor country s population can lead to the collapse of the redistributive public sector we then consider excluding illegal immigrants from the public sector e g california proposition 187 we find that collapse is no longer possible and that the rich country takes the toughest official stance on immigration but does not enforce it with border controls

the derivation of discount rates with an augmented measure of income abstract most developed economies invest in public goods such as national defense education infrastructure and the environment discount rates used to evaluate such projects should reflect the rate of return on the current mix of investment opportunities rates derived from the productivity of private capital neglect returns beyond the market boundary the present paper derives discount rates using an augmented measure of national income inclusive of non market goods in an empirical application focusing on air pollution and climate damages in the united states economy the paper reports that the difference between augmented and market discount rates averages 0 3 percentage points from 1999 to 2014

is the income elasticity of environmental improvements less than one we estimated the income elasticity of environmental improvements for a number of european data sets the value of this parameter is consistently found to be less than one with few exceptions our findings are compared with state of the art contingent valuation studies from other countries we also compared our findings with those reported in the literature on charitable donations and corporate donations these studies show a similar pattern donations decrease as a percentage of income as income increases

skills and the pattern of migration the role of qualitative and quantitative restrictions on international labor mobility this paper develops a two country model of international migration in an attempt to study the role of both qualitative and quantitative restrictions on international labor mobility individuals are distinguished in terms of their ability and age enabling the model to examine factors which influence the age and skill profile of those who migrate as well as the equilibrium flow of migrants and the pattern of factor rewards in the two economies effects of changes in certain parameters of the model are related to the nature of the immigration policy enforced by the host country the role of emigration restrictions is also considered excerpt

the bias in favor of pro tariff lobbies abstract we show that the probability of success of the pro tariff lobby defined as a decreasing function of the ratio of consumer loss to producer gain rent generated by the tariff rises with the tariff under very general conditions this appears as an exception to becker s view that less distortionary measures tend to be adopted over their more distortionary counterparts we then provide a micro foundation for our probability definition using the imperfectly discriminating lobbying framework

protectionist responses and declining industries abstract this paper employs a three factor ricardo viner model of a small economy to analyse the effect of a falling world import price on the domestic price of the economy s importable good in the presence of an endogenously determined tariff the outcome is seen to depend on a the way in which the recycled tariff revenue is allocated to the three factor groups and b differences in relative risk aversion across those groups however under reasonable assumptions hillman s 1982 result that a declining industry will continue to decline is seen to hold in our general equilibrium framework

income treatment effects in contingent valuation the case of the swedish predator policy this paper provides case study evidence on two relevant issues in estimating the relationship between wtp and income using contingent valuation 1 the choice of income measure and 2 the modelling choice addressing these issues a sensitivity analysis is performed on a dataset concerning implementation of the swedish predator policy the results show that the estimated income elasticity of wtp varies between 0 12 and 0 40 for the models estimated the main conclusion drawn from the analysis is that controlling for the number of adults in the household is important for finding a significant income effect when the household income measure is used besides this finding the empirical analysis finds little support for the hypothesis that the choice of income measure and modelling assumptions significantly influence the overall model fit

intergenerational discounting with intragenerational inequality in consumption and the environment it is now established that the consumption discount rate is determined by the growth of consumption multiplied by the elasticity of marginal utility but distributive concerns are rarely reflected in the literature assuming a social welfare function with inequality aversion we consider a consumption discount rate that can be decomposed into the growth effect and the intragenerational distribution effect the framework is then extended to include population change and inequality in the environment as an amenity in a utility with constant elasticity of substitution numerical examples illustrate that distributional effects turn non negligibly negative that may reduce consumption discount rate by 1 3 for plausible parameters once distribution is adjusted for both population and the environment

why and when do governments initiate public enterprise reform initiating public enterprise reform is a complex decision influenced by economic factors as well as the ideological biases and personalities of political leaders nevertheless the use of a contracting framework yields important generalizations about what drives the decision this article argues that the decision depends fundamentally on the potential efficiency gains from the reform and its associated transactions costs costs arise because of asymmetries in information and opportunism problems that usually plague contract negotiations the article identifies observable variables that may affect either the potential gains or the transactions costs uses them to construct a simple probit decision making model and tests the model using data from fifteen developing countries over a twenty year period

the uncompensated law of demand a revealed preference approach abstract milleron and malinvaud 1974 mityushin and polterovich 1978 and others provide conditions under which the uncompensated law of demand uld holds these conditions are based on properties of the consumer s unobservable utility function in this paper we introduce the new idea of a giffen commodity vector and show how in terms of it and the derivative of a consumer s inverse demand a new necessary and sufficient condition for the uld may be obtained as both the giffen vector and a consumer s inverse demand are observable this allows us to obtain a revealed preference style necessary and sufficient condition for the uld without relying on conditions based on unobservables such as differential or curvature properties of a consumer s utility function

illegal aliens unemployment and immigration policy abstract this paper develops a simple two country model of illegal immigration in an attempt to examine the interaction among variables such as the stock of migrant labor the unemployment rates of the two economies and the rate of spending by the host country on the enforcement of its immigration restrictions the focus of the analysis is on the dynamics of immigration policy and on its role in determining the nature of the mechanism by which disturbances to the labor market of one country are transmitted to that of the other in the short run and in the long run

contingent valuation a new perspective after several decades of academic research on the contingent valuation cv method a consistent behavioral explanation of hypothetical bias is still lacking based on evidence from economics economic psychology and the political sciences i propose an explanation that is based on two simple working hypotheses about respondent behaviour in contingent valuation surveys the first hypothesis is that survey respondents are unable to form consistent preferences about unfamiliar goods unless the choice context offers reliable informative cues that can be rationally exploited in simplified heuristics the second hypothesis is that the probability and impact of strategic responses in dichotomous choice questions about public goods depends on the extent to which the presented hypothetical costs differ from the actual costs the literature on hypothetical bias is revisited in the light of these behavioral hypotheses i find that the hypotheses are generally supported by the empirical data moreover the hypotheses are able to explain several important empirical phenomena that previous research has not been able to explain in particular they solve the puzzle that pre election polls but not cv surveys are able to predict actual referendum outcomes and they explain why income effects on willingness to pay are lower in cv responses than in actual votes if confirmed by further studies the hypotheses will have important implications for future research and practice first the hypothetical costs presented in the dichotomous choice question should to be close enough to the actual costs to be credible to all respondents this can be achieved by specifying the costs as a percentage rather than absolute change in taxes second the respondents should be given the option to answer based on information about the positions of large parties and interest groups with known political orientation rather than based on the raw policy information theory and evidence suggest that this new survey paradigm largely eliminates the fundamental problems of the conventional stated preference methods

the concept and measurement of subsistence a survey of the literature abstract subsistence is a widely used concept but most of the time its precise meaning is not property stated this study attempts to provide an appropriate exposition of the concept by examining the manner in which it is used and the role it plays in different theoretical analyses and policy formulations it has been shown that contrary to the conventional notion of a minimum standard of physical needs only subsistence is an absolute minimum standard of physical and mental survival and productive efficiency the lowest standard of social desirability is given by the needs of physical and mental survival in addition to these the standard of subsistence includes the needs of physical and mental efficiency for productive living in the society the attainment of a certain minimum of physical mental and social magnitudes provides the standard of subsistence commodities or their characteristics are the needs of this standard income by providing the command over these needs affords an individual the capability to attain it hence income is used to characterize subsistence three different methods of subsistence determination have been identified the most commonly used methods the social and the scientific ones are found to be arbitrary the determination of subsistence from the analysis of the agents declaration or behavior seems to be a better method while the declaration or expenditure based studies suffer from various limitations studies based on the behavior of income earning offer a better direction

willingness to pay for improved air quality in sweden the aim of the paper is to quantify individual willingness to pay measures of improved air quality in sweden by using the contingent valuation method cvm such measures are important for policy makers when deciding about public investments and policy instruments in order to regulate environmental impacts e g from road transportation and industry the mean willingness to pay wtp for a 50 reduction of harmful substances where the respondents live and work was about 2000 sek year which is of the same order of magnitude as earlier stated preference studies in nordic countries most parameters in the econometric analysis had the expected sign wtp was increasing in income wealth and education it was larger for men members of environmental organizations people living in big cities which are on average more polluted and people who own their house or apartment it was lower for retired people however the additional wtp for people in big cities although significantly higher than for other people

environmental goods and the distribution of income the paper presents a theoretical investigation of the distributional impacts of environmental commodities it introduces an appropriate framework defines concepts for measuring benefits and examines the determinants of benefit incidence within this setup its emphasis is on methodology and on recognizing the relevant economic variables and information it turns out that in an equal preference model the magnitude of the income elasticity of marginal willingness to pay for an environmental good is the crucial variable determining progressivity it is related to a number of other elasticities which are more easily accessible to an empirical estimation

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

living wages protection for or protection from low wage workers living wage laws are touted as anti poverty measures yet they apply to only a small fraction of workers most commonly covering only employers with city contracts the apparent contradiction between broad anti poverty goals and narrow coverage suggests that goals other than poverty reduction may partly underlie living wage campaigns this paper considers the hypothesis that living wage laws act to maintain or increase rents among unionized municipal workers by raising the wages that city contractors would have to pay living wage laws may reduce the incentives for cities to contract out work that would otherwise be done by unionized municipal employees hence increasing the bargaining power of municipal unions and leading to higher wages for their members the evidence presented here from an analysis of cps data for 1996 2000 indicates that the wages of unionized municipal workers are indeed increased as a result of living wage laws covering contractors

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

the simple analytics of optimal growth with illegal migrants a clarification abstract this paper reexamines the welfare effects of illegal immigration studied by hazari and sgro the simple analytics of optimal growth with illegal migrants journal of economic dynamics and control 28 1 141 151 in contrast to their negative conclusion we obtain ambiguous welfare prediction which is due to the presence of two opposing effects at work a positive exploitation effect and a negative intertemporal effect with cobb douglas production technology we show that per capita domestic consumption rises in the presence of illegal migration

the newly industrializing countries in the international system explanations of the growth of the newly industrializing countries nics by neoclassical economists and dependency theorists neglect the role of politics in shaping development strategies different social configurations state structures and ideas about development help explain the divergent policy choices made by the export oriented east asian nics korea and taiwan and the more inward looking countries of latin america particularly mexico and brazil these different strategic choices in turn account for variations in the patterns of external dependency that characterize countries in the two regions

progression under the benefit approach to the theory of taxation abstract the implications for progression of the benefit approach to the theory of taxation are studied in this paper it is concluded that the case for progression rests on the degree of substitutability between public and private goods

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

elasticities of demand and willingness to pay for environmental services in sweden are environmental services luxuriesor necessities are low income groupsrelatively more willing to pay forenvironmental improvements than high incomegroups the discussion on the shape of theenvironmental kuznets curve and environmentaljustice call for analyses that approach thesequestions following a survey based approachfor modelling the demand for public goods thispaper provides estimates of income and priceelasticities of demand for reduced marineeutrophication effects in the case of thebaltic sea using data from five swedishcontingent valuation studies point estimatesindicate that reduced marine eutrophicationeffects can be classified as a necessity and anordinary and price elastic service confidenceintervals show however that the classificationas a necessity is not statisticallysignificant income elasticities of willingnessto pay not to be confused with incomeelasticities of demand are estimated for abroad range of environmental services insweden a basic finding is that income tends toinfluence willingness to pay positively andsignificantly the elasticity estimates are inmost cases greater than zero but less thanunity indicating that the benefits ofenvironmental improvements tend to beregressively distributed in a cost benefitanalysis of a project suggesting environmentalimprovements distributional concerns thereforecall for an introduction of weights or at leasta sensitivity analysis of how weighting wouldchange decisions about the project s socialprofitability

risk preference immigration policy and illegal immigration abstract the paper analyzes the effects of government policy upon illegal immigration the model used as a vehicle for this analysis is an extension of ethier s one small country model of illegal immigration to a two country context we distinguish between the cases of capital immobility and free capital mobility and consider illegal immigration when there are border patrols by the government and when there are internal enforcement procedures in effect unlike previous researchers who have assumed risk neutrality we examine the impacts of government policy when prospective illegal immigrants exhibit risk averse and risk loving behavior the relaxation of the risk neutrality assumption leads to the possibility of multiple and unstable equilibria moreover attitudes to risk and the probability of detection are shown to have implications for some equilibrium responses to tighter surveillance

how many cake eaters chouette on a du monde a diner abstract we use a cake eating model with a non renewable resource and a backstop technology to describe the intertemporal effect of a sudden increase of the population level e g due to migration the migrants enter an economy in which there is already surplus labor and they receive transfers from natives these assumptions imply that the present discounted value of natives welfare falls the counterintuitive result is that the flow of natives utility can increase at the time of the population change

sustainability of an economy relying on two reproducible assets evaluating the sustainability of a society requires a system of shadow or accounting values derived from the sustainability objective as a first step toward the derivation of such shadow values for a maximin objective this paper studies an economy composed of two reproducible assets each producing one of two consumption goods the effect of the substitutability between goods in utility is studied by postulating in turn neoclassical diminishing marginal substitutability perfect substitutability and perfect complementarity the degree of substitutability has strong effects on the maximin solution affecting the regularity or non regularity of the program and on the accounting values this has important consequences for the computation of genuine savings and the sustainability prospects of future generations

income inequality and willingness to pay for environmental public goods we study how the distribution of income among members of society and income inequality in particular affects social willingness to pay wtp for environmental public goods we find that social wtp for environmental goods decreases increases with income inequality if and only if environmental goods and manufactured goods are substitutes complements we derive adjustment factors for benefit transfer to control for differences in income distributions between a study site and a policy site for illustration we quantify how social wtp for environmental public goods depends on the respective income distributions for empirical case studies in sweden and the world at large we find that the adjustment for income inequality can be substantial

political economy sectoral shocks and border enforcement in this paper we examine the correlation between sectoral shocks and border enforcement in the united states enforcement of national borders is the main policy instrument the u s government uses to combat illegal immigration the motivation for the exercise is to see whether border enforcement falls following positive shocks to sectors that are intensive in the use of undocumented labor as would be consistent with political economy models of how enforcement policy against illegal immigration is determined the main finding is that border enforcement is negatively correlated with lagged relative price changes in the apparel fruits and vegetables and slaughtered livestock industries and with housing starts in the western united states this suggests that authorities relax border enforcement when the demand for undocumented workers is high

the monotonicity of individual and market demand this paper studies the monotonicity of individual and market demand with the aid of the indirect utility function we identify sufficient and in a sense necessary conditions on an agent s indirect utility which will guarantee that he has a monotonic demand function our conditions also point to a natural way of extending the result of hildenbrand 1983 hildenbrand showed that market demand is monontonic if the income distribution has a downward sloping density even though individual agents demand function might violate monotonicity using the indirect utility function we introduce a measure of violations of individual monotonicity that allows us to identify a larger class of density functions that will generate a monotonic market demand

us immigration policies and dynamics of cross border workforce in agriculture given the contentious debate on immigration this study develops a dynamic model to analyse the effects of stricter border and domestic enforcement and streamlining the guest worker programme on cross border migration from mexico employment and production in us labour intensive and mexican agriculture and the us and mexican wage rates the model incorporates labour leisure decisions of mexican workers and labour market dynamics and linkages the findings show stricter border and domestic controls exacerbate the labour shortage problems and reduce the us agricultural production streamlining the guest worker programme provides a steady supply of farm workers and has negligible impact on the us wage

the parallel market of illegal aliens a computational approach abstract this paper develops the notion of illegal aliens as a parallel market in coexistence with the regular market of legal labor in the presence of both price controls on legal labor by minimum wage legislation and quantity controls on illegal aliens by immigration laws illegal aliens involve not only rural urban migration but also tax evasion and deportation costs we develop an analytical equilibrium structure which links markets for legal labor and illegal aliens illustrate how much an equilibrium can be computed and explore some implications of the linkage using united states data

the uncompensated law of demand in an exchange economy abstract recently in these letters franks and bryant 2017 provided new necessary and sufficient conditions for the uncompensated law of demand uld when consumer income is exogenous and not price dependent we now consider price dependent incomes and provide new necessary and sufficient conditions for the uld to hold for a consumer in an exchange economy like franks and bryant 2017 these conditions avoid unobservables such as preferences or utility and hence are revealed preference in character our theorem 1 establishes that consumers in an exchange economy satisfy the uld if and only if they consume exactly and only their initial endowment interestingly unless a consumer lives in a state of personal autarky there will always be a price variation for which their behaviour violates the uld

the transferability of benefit transfer contingent valuation of water quality improvements in costa rica abstract identical contingent valuation studies of willingness to pay wtp for improvements in coastal water quality were conducted in the town of jaco and city of puntarenas on the pacific coast of costa rica several common hypotheses for benefit transfer reliability were tested for the transfer of wtp estimates between the two communities as well as between districts within puntarenas this study finds no basis for the claim that the reliability of benefit transfer increases with proximity between the study site where wtp estimates are taken from and the policy site estimates are transferred to the claim that transfer of wtp adjusted by the benefit function outperforms transfers of unadjusted or simple income adjusted wtp is rejected for this particular study results also show that census type socio economic site characteristics are necessary but not sufficient to explain site specific differences in wtp the trade offs in designing valid and reliable benefit transfer studies with transferable results are discussed

giffen behavior and subsistence consumption this paper provides the first real world evidence of giffen behavior i e upward sloping demand subsidizing the prices of dietary staples for extremely poor households in two provinces of china we find strong evidence of giffen behavior for rice in hunan and weaker evidence for wheat in gansu the data provide new insight into the consumption behavior of the poor who act as though maximizing utility subject to subsistence concerns we find that their elasticity of demand depends significantly and nonlinearly on the severity of their poverty understanding this heterogeneity is important for the effective design of welfare programs for the poor jel d12 012

long term substitutability between environmental and man made goods abstract substitutability between environmental and man made goods plays a major role in the sustainability debate the notion of substitutability covers a continuous spectrum with perfect substitutability at one end and poor substitutability at the other in this paper it is shown that if economic growth sustains a sharp distinction emerges between perfect and poor substitutability without any intermediate interpretation of substitutability if poor substitutability prevails environmental resources will eventually constitute the major part of total consumption value we relate our results to baumol s disease and assess the implications of this phenomenon for the compensation of environmental losses

sustainable development and resilience in ecosystems two new important developments in environmental and resource economics is presented non convex dynamics of ecosystems and wealth as an indicator of sustainable development non convex dynamics imply existence of resilience that is the robustness of systems to withstand exogenous perturbations resilience can be regarded as an insurance against flips of the system into different basins of stability sustainable development according to the bruntland report is the provision of productive resources to future generations to make it possible for them to live as well as the present generation thus the value of changes in productive assets is therefore an index of whether an economy is on a sustainable path or not resilience can be regarded as one such productive asset and the paper discusses how one can define the value of this asset

are ecosystem services replaceable by technology this paper assesses the evidence for and against the view that the processes that deliver ecosystem services are so fundamental within ecosystems that neither the services themselves nor the goods that they deliver to humans could be replaced technologically i consider cases where the natural processes have been replaced and also the probably more common and usually less invasive cases where they have been enhanced by technological interventions supporting services are probably least amenable to technology with the major exception of nutrient cycling which has been extensively replaced by the use of chemical fertilizers final services offer more examples of actual or potential replacement including the highly controversial example of geoengineering for climate regulation finally there are numerous examples of replacement technologies for environmental goods especially in the case of energy fossil and many renewable fuels fibres artificial fibres and biochemicals industrial pharmaceuticals the full economic costs of replacement technologies have rarely been explored and in some cases it appears that the replacement is more expensive than the natural service enhancement technologies in contrast supplement the output of ecosystem services and are probably in most cases more benign the doubts about true costs and the fact that many supporting and final services seem either irreplaceable or only replaceable at huge cost adds to the need to protect them

foreign aid and illegal immigration abstract we develop a two country model of illegal immigration we analyse the effect of foreign aid on illegal immigration and consider both exogenous and endogenous income repatriation in the former an increase in aid increases illegal immigration if the total amount of aid is small a transfer of resources from border control to aid increases illegal immigration when the total amount of aid is small under endogenous income repatriation aid has no effect on illegal immigration when the preferences of the immigrants and their family members are the same if the preferences are different aid may increase illegal immigration

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive

choices and the value of natural capital sustainability requires maintaining opportunities for future generations so they can meet their needs opportunities are passed to future generations through a set of capital assets nature provides an important class of these assets but markets seldom reveal the marginal value of natural capital rather the marginal social worth or asset price must be imputed based on intertemporal exchange in the context of assessing whether intertemporal allocation rules lead to sustainable development appropriate asset prices must be based on the actual allocations and trade offs society makes therefore measuring economic programmes that enable the measurement of asset prices is an important empirical task we review the theory of measuring natural capital asset prices and discuss the key elements of measuring economic programmes that enable the measurement of natural capital asset prices we place the measurement of economic programmes and natural capital asset prices in the context of wealth based sustainability metrics

a strictly concave non spliced giffen compatible utility function we propose a new bivariate utility function for the analysis of giffen behavior the function is strictly concave and twice continuously differentiable with marginal utilities that are strictly positive the function is defined by a single equation rather than by two or more spliced functional forms we contend that in the search for giffen compatible utility functions it is helpful to consider explicitly the elasticities of the consumer s marginal rate of substitution with respect to the quantities of the two goods