the hazard of moral hazard untangling the asian crisis abstract the paper critically examines the explanations of the asian crisis which emphasize the role of national policies and institutions that allegedly created moral hazard by overprotecting the investors industrial policy crony capitalism and government guarantees accorded to banks and industrial firms that are considered too important to fail we also discuss the international dimension of the moral hazard argument in the presence of international monetary fund imf bail out the paper finds these explanations theoretically ill defined and empirically weak and argues that the prescriptions for changes in policy and institutions based on them are unlikely to prevent similar kinds of crises in the future

a minimum wage can be welfare improving and employment enhancing abstract we examine whether minimum wages can fulfill a useful role as part of an optimal tax transfer scheme the government cannot observe household abilities only their incomes and is constrained to ensure that those working are at least as well off as those not working a minimum wage combined with the institutional features of typical welfare systems allows the incentive constraint to be severed at the ability level associated with the minimum wage if such a scheme can be enforced the government can increase the amount of redistribution from those working to those not working and possibly lower the number of unemployed

a bibliometric analysis of research on carbon tax from 1989 to 2014 abstract as one of the most cost effective means of emission reduction carbon tax has attracted considerable attention from economists and international organizations and has led to a large number of related research using the bibliometric method this paper characterizes the carbon tax literature from 1989 to 2014 based on the network database platform of web of science the results indicate that the usa occupies a leading position in the carbon tax field the vrije university amsterdam massachusetts institute of technology and stanford university were the most productive research institutes energy policy 143 has been the most productive journal followed by energy economics 44 and energy 38 in general the cooperation of authors institutes and nations are continuing to strengthen however the growth rate at the author level was significantly higher than the others in addition the current key research areas in the carbon tax field based on co keyword analysis are as follows climate change and relevant policy carbon emissions trading socio economic effects of carbon tax renewable energy endogenous technological change and carbon capture and storage the results of this paper will help researchers grasp the current research in the carbon tax field but also provide a supporting role for future work

the impact of minimum wages on youth employment in portugal textabstractfrom january 1 1987 the legal minimum wage for workers aged 18 and 19 in portugal was uprated to the full adult rate generating a 49 3 increase between 1986 and 1987 in the legal minimum wage for this age group this shock is used as a natural experiment to evaluate the impact of the minimum wage change on teenagers employment by using a large firm level micro data set it is shown that by comparing the employment growth of 18 19 year old workers with their 20 25 year old counterparts one can identify the employment effects of the minimum wage hike the same comparisons are done with 30 35 year old workers this study finds that the rise in the minimum wage significantly reduced employment this conclusion is reinforced by evidence showing that these employment effects are concentrated in firms more likely to be affected by the change in the law

the consequences of minimum wage laws some new theoretical ideas economists generally agree that the effect of a binding minimum wage law is to move firms backward along the demand curve for low skill workers however this prediction of worker displacement depends critically on the assumption that the productivity of firms labor is not dependent on the wage in this paper we show that in a conventional efficiency wage model a minimum wage may increase the level of employment in low wage jobs the formal logic of our model is similar to the case of labor demand under monopsony but arises in a model with a large number of employers

minimum wages for domestic workers impact evaluation of the indian experience abstract what impact does minimum wage legislation have on wages and employment opportunities in an informal sector in a developing country the paper answers this question in the context of minimum wage legislation for domestic workers in india over the period of 2004 2012 combining matching procedure with difference in difference estimation approach supported by extensive robustness checks the paper estimates both the short run and the long run impact of the legislation on real wages and employment results show a positive impact of the legislation on real wages in the shortrun while there is limited evidence of this effect persisting in the long run further the legislation did not seem to have any impact at the extensive margin on the probability of being employed as a domestic worker over short or long run our analysis further reveals that the wages of majority of workers remain below the minimum wage available evidence from the ground in line with theoretical predictions point towards weak enforcement of the legislation as the potential driving factor of observed results as india recently extended national level minimum wage for all workers the paper provides a cautionary tale on the potential pitfalls of implementation of this legislation in informal sector and suggests some ways to overcome the same

the origins and development of the northeast asian political economy industrial sectors product cycles and political consequences theories of the product cycle hegemony and the world system are used to analyze the creation and development of the northeast asian political economy in this century japan south korea and taiwan have each developed in a particular relationship with the others the three taken together form a hierarchical constantly interacting political economic unit during the period of colonial rule japan was unique in building an imperial economic unit marked by a strong role for the state whether in tokyo or taipei by a tight integral unking of all three nations into a communications and transport network running toward the metropole and by a strategy of both using the colonies for agricultural surpluses and then locating industries there after 1945 a diffuse american hegemony replaced japan s unilateral system but elements of the prewar model have survived strong states direct economic development in south korea and taiwan here termed bureaucratic authoritarian industrializing regimes both countries are receptacles for japan s declining industries and both countries develop in tandem if in competition with each other the most recent export led competition has seen taiwan succeed where south korea has temporarily failed leaving seoul in an export led trap burdened with rapidly increasing external debt taiwan furthermore has industrialized relatively free of social disruption whereas korean society resisted its transformation at japanese hands and remains more rebellious today there can be one japan and one taiwan but not two or many of either in the world economy

small and medium sized enterprises in the republic of korea implications for the development of technology intensive industries korea s miraculous growth and meteoric rise as a newly industrializing economy have carried with them considerable costs initial reliance on korean large business groups the chaebol was an appropriate policy choice for creating competitive advantage through economies of scope for the export market however the neglect of the small and medium sized industrial sector and resulting weak backward linkages with parts industries have become a burden on the performance of these same big businesses this issue is particularly critical because korea must make a transition into more knowledge and technology intensive industries in the face of a rising real wage level this paper examines how the underdevelopment of the small and medium sized industrial sector undermined the overall efficiency of the korean economy in terms of added costs and low quality of final products produced by big businesses thus hindering korea s transition into more technology intensive industries

does economic structure determine financial structure abstract in this paper we examine the relationship between the structure of the real economy and a country s financial system we consider whether the development of the real economic structure can predict the direction of evolution of a country s financial structure using data for 108 countries we find a significant relationship between real economic structure and financial structure next we exploit shocks to the economies in india finland and sweden and south korea and show that changes in the economic structure of a country influence the evolution of its financial system this suggests that financial institutions and capital markets change in response to the structure of industries

special and differential treatment of developing countries and export promotion policies under the wto this paper explains the export promotion measures that can be utilized by developing countries under the current world trade organization wto system and compares the wto members proposals on modification of export promotion provisions in the doha development agenda dda negotiations non reciprocity between developed countries and developing countries in favour of the latter needs to be strengthened in modifying the current wto regulations concerning export promotion due to the extremely different levels of economic development between those two groups of countries therefore from the viewpoint of distributional fairness it suggests ways of modifying the special and differential treatment sdt provisions applied to export promotion policies of developing economies in the agreement on subsidies and countervailing measures of the wto

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

interpreting the korean crisis financial liberalisation industrial policy and corporate governance as the interpretation of its economic miracle has been so the interpretation of the recent crisis in korea remains highly controversial 1 although there are many important issues which have been raised by the korean crisis such as exchange rate policy labour market policy and the architecture of the international financial system chang 1998a three issues have been especially controversial in the debate financial liberalization industrial policy and corporate governance

firm incentives to promote technological change in pollution control reply abstract the process of technological change in pollution control is broken into three basic steps innovation diffusion and optimal agency response firm incentives to promote these steps are then examined under five regulatory regimes direct controls emission subsidies emission taxes free marketable permits and auctioned marketable permits on a relative basis emission taxes and auctioned permits provide the highest firm incentives to promote technological change at times free permits generate lower incentives direct controls which are common regulatory tools usually provide the lowest relative firm incentives to promote technological change

using regional variation in wages to measure the effects of the federal minimum wage the imposition of a national minimum wage standard provides a natural experiment in which the treatment effect varies across states depending on the fraction of workers initially earning less than the new minimum the author exploits this fact to evaluate the effect of the april 1990 increase in the federal minimum wage on teenagers wages employment and school enrollment comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers wages there is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment

employment effects of minimum and subminimum wages panel data on state minimum wage laws using panel data on state minimum wage laws and economic conditions for the years 1973 89 the authors reevaluate existing evidence on the effects of a minimum wage on employment their estimates indicate that a 10 increase in the minimum wage causes a decline of 1 2 in employment among teenagers and a decline of 1 5 2 in employment for young adults similar to the ranges suggested by earlier time series studies the authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers

how effective is the minimum wage at supporting the poor this study investigates the antipoverty efficacy of minimum wage policies proponents of these policies contend that employment impacts are negligible and suggest that consumers pay for higher labor costs through imperceptible increases in goods prices adopting this empirical scenario the analysis demonstrates that an increase in the national minimum wage produces a value added tax effect on consumer prices that is more regressive than a typical state sales tax and allocates benefits as higher earnings nearly evenly across the income distribution these income transfer outcomes sharply contradict portraying an increase in the minimum wage as an antipoverty initiative

environmental policy incentives to adopt advanced abatement technology abstract we investigate incentives through environmental policy instruments to adopt advanced abatement technology first we study the case where the regulator makes long term commitments to policy levels and does not anticipate arrival of new technology we show that taxes provide stronger incentives than permits auctioned and free permits offer identical incentives and standards may give stronger incentives than permits second we investigate scenarios where the regulator anticipates new technologies we show that with taxes and permits the regulator can induce first best outcomes if he moves after firms have invested whereas this does not always hold if he moves first

gasoline demand revisited an international meta analysis of elasticities meta analysis is used to determine if there are factors that systematically affect price and income elasticity estimates in studies of gasoline demand four econometric models are estimated using long run and short run price and income elasticity estimates from previous studies as the dependent variables explanatory variables include functional form lag structure time span national setting estimation technique and other features of the model structure elasticity estimates are found to be sensitive to the inclusion or exclusion of some measure of vehicle ownership static models appear to overestimate short run elasticities underestimate long run price elasticities but pick up the full long run income responsiveness there is variation in the elasticity of demand across countries especially in the short run and gasoline demand appears to be getting more price elastic and less income elastic over time

optimal abatement technology adoption based upon learning by doing with spillover effect abstract we specify a general model of the dynamic abatement technology adoption process and show how the accumulated experience among them can alter the adoption timing learning by doing lbd effect is considered to describe the reduction of the costly price to the adoption moreover spillovers effect which reflects how accumulated experience can be shared among different technologies is integrated into the learning process to ensure the specification convincing some reasonable assumptions are considered such as one abatement technology must conduct its own experience in order to realize the spillover besides to investigate how the abatement process is influenced by the technology allocation under the spillovers effect an endogenous emission path is considered to necessitate a meaningful optimization problem finally apart from obtaining some basic properties of the model we implement an empirical study to verify the effectiveness of the model data from the iron industry in china is used to specify the process which can highlight the spillovers effect among different technologies from a sector angle in the results we find that intrinsic mechanism in the model results in the interplay among abatement coefficient spillover factor and the growing rate of the emission etc collaborative relationships between variables are discussed as well

instrument choice for environmental protection when technological innovation is endogenous this paper compares qualitatively and quantitatively the welfare effects of emissions taxes auctioned emissions permits and free grandfathered permits when technological innovation is endogenous we find that there is no unambiguous case for preferring any of these policy instruments the relative welfare ranking of instruments depends on the costs of innovation the extent to which innovations can be imitated the slope and level of the marginal environmental benefit function and the number of polluting firms we illustrate the types of situations when there can be significant welfare discrepancies between the policies and when there are not

a model of technological breakthrough in the renewable energy sector abstract models with induced technological change in the energy sector often predict a gradual expansion of renewable energies and a substantial share of fossil fuels remaining in the energy mix through the end of our century however there are historical examples where new products or technologies expanded rapidly and achieved a high output in a relatively short period of time this paper explores the possibility of a technological breakthrough in the renewable energy sector using a partial equilibrium model of energy generation with endogenous r d our results indicate that due to increasing returns to scale a multiplicity of equilibria can arise in the model two stable states can coexist one characterized by a lower and one by higher supply of renewable energy the transition from the low output to the high output equilibrium is characterized by a discontinuous rise in r d activity and capacity investments in the renewable energy sector the transition can be triggered by a rise in world energy demand by a drop in the supply of fossil fuels or by policy intervention under market conditions the transition occurs later than in the social optimum hence we identify a market failure related to path dependence and technological lock in that can justify a strong policy intervention initially paradoxically well intended energy saving policies can actually lead to higher emissions as they reduce the incentives to invest in renewable energies by having a cushioning effect on the energy price hence these policies should be supplemented by other instruments that restore the incentives to invest in renewable energies finally we discuss the influence of monopoly power in the market for innovations we show that market power can alleviate the problem of technological lock in but creates a new market failure that reduces static efficiency

the timing of taxes on co2 emissions when technological change is endogenous abstract how do technology spillovers affect the relationship between emissions taxes and technological change without spillovers a regulator applies pigovian taxes which lead to a first best optimum optimal emissions and optimal technology investment given spillovers pigovian taxes are likely to be second best optimal if emissions saving technology and production technology are equally undersupplied raising taxes above the pigovian level boosts emissions saving investment but only at the expense of production investment the technologies are equally undersupplied when there is a degree of symmetry between the sectors and the economy is on a balanced growth path on a transition path with rising atmospheric stocks and a high level of investment in emissions saving technology a regulator may raise carbon taxes above the pigovian level in order to encourage investment in emissions saving technology at the expense of production technology i show this using both analytical and numerical results

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

equilibrium wage dispersion and interindustry wage differentials this paper develops a search theoretic explanation of interindustry wage differentials given coordination problems in the labor market the probability of filling a vacancy is an increasing function of the wage offered in equilibrium firms that find vacancies more costly will offer higher wages the model thus explains the persistence of interindustry wage differentials and their correlation with industry average capital labor ratio and profitability additionally the model predicts that high wage firms will receive more applications per job opening and that wages in the labor market will behave as strategic complements

the political economy of industrial policy in korea the article aims to provide some additional empirical support and theoretical consolidation for the emerging alternative interpretation of the korean developmental experience which emphasizes the role of the state after briefly reviewing some mainstream interpretations it presents a detailed account of state intervention in korea where it is revealed that industrial policy played the central role then it explains how the korean state was able to avoid some of the obvious dangers of such a policy which is often associated with economic failures in developing countries it then explores the basis of state power in korea which provided a background for such an outcome copyright 1993 by oxford university press

do good workers hurt bad workers or is it the other way around i study the effect of worker heterogeneities on wages and unemployment in a directed search model a worker s productivity in a given firm depends both on his type and on a worker firm specific component firms advertise unconditional wage offers only the resulting equilibrium is inefficient with a too high wage premium for high type workers and too few high type jobs this reduces the welfare of high type workers my findings contrast with the findings in the literature on labor market segmentation where it is argued that the existence of high type workers forces down wages and reduces welfare for low type workers

climate policy and induced r d how great is the effect abstract carbon taxes or tradable permit systems to address climate change may induce research and development in energy related technologies we construct a single knowledge stock model of r d growth and climate to assess the importance of this effect the contribution of induced r d is shown to be very sensitive to i the duplication externality ii the feasibility of dedicated research subsidies to internalize inter firm knowledge spillovers iii the opportunity cost of r d iv the initial level of research expenditure and v the elasticity of substitution between energy and other factors of production in contrast the direction and scale of the inter temporal research spillover are of secondary importance we find strong support for rezai s 2011 argument that when the business as usual scenario no policy is modeled appropriately all externalities treated as external sacrifices for early generations associated with optimal climate policy are minor or non existent employing our preferred selections for the parameters we find that adding an induced r d component to the model increases the welfare impact of the first best policy optimally chosen carbon tax and research subsidies by an average value of more than 400 and of the second best policy carbon tax alone by approximately 22

the demand for imports in korea a production analysis approach abstract balance of trade problems in the united states and other highly industrialized countries have resulted in cries for korea to liberalize its import policies this paper uses a translog cost function to investigate korea s demand for imports and the effects of trade liberalization on the demand for the country s domestic inputs this study suggest that the domestic inputs and imports are substitutes and that as the proportion of investment goods in korea s gdp increases the demand for imports will also increase thus further liberalization of korea s import policies could present short run problems in the domestic input markets

carbon markets and technological innovation this paper examines the effects of firm level innovation in carbon abatement technologies on optimal cap and trade schemes with and without price controls we characterize optimal cap and trade regulation with a price cap and a price floor and compare it to the special cases of pure taxation and a simple emissions cap innovation shifts the tradeoff between price and quantity based instruments towards quantitybased emissions trading schemes more specifically an increase in innovation effectiveness lowers the optimal emissions cap and leads to relaxed price controls unless the slope of the marginal environmental damage curve is small because of the decrease in the emissions cap innovation in abatement technologies can lead to a higher expected carbon price so as to provide sufficient incentives for private r d investments the expected carbon price decreases once innovative technologies are widely used

minimum wage effects on employment substitution and the teenage labor supply evidence from personnel data using personnel data from a large us retail firm i examine the firm s response to the 1996 federal minimum wage increase compulsory increases in average wages had negative but statistically insignificant effects on overall employment however increases in the relative wages of teenagers led to significant increases in the relative employment of teenagers especially younger and more affluent teenagers further analysis suggests a pattern consistent with noncompetitive models where the legislation affected mainly the wages of teenagers and so was only moderately binding it led both to higher teenage labor market participation and to higher absolute employment of teenagers

the effect of minimum wages on immigrants this study examines how minimum wage laws affect the employment and earnings of low skilled immigrants and natives in the united states minimum wage increases might have larger effects among low skilled immigrants than among natives because on average immigrants earn less than natives due to lower levels of education limited english skills and less social capital results based on data from the current population survey for the years 1994 2005 do not indicate that minimum wages had adverse employment effects among adult immigrants or natives who did not complete high school however low skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum

the effect of the minimum wage on the fast food industry using a longitudinal survey of fast food restaurants in texas the authors examine the impact of recent increases in the federal minimum wage on a low wage labor market less than 5 of fast food restaurants were using the new youth subminimum wage in july august 1991 even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991 those federal minimum wage increases greatly compressed the distribution of starting wages in the texas fast food industry two findings at variance with conventional predictions are that 1 employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and 2 price changes were unrelated to mandated wage changes

the effect of minimum wage laws on the distribution of employment theory and evidence abstract recent research casts doubt on the view that minimum wage laws reduce employment we show that in a simple model of bilateral search with heterogeneous workers a minimum wage law increases employment however the increased competition from higher productivity workers makes lower productivity workers worse off without making higher productivity workers better off we provide evidence that minimum wage laws shift employment from adults to teenagers and students this raises concerns about the distributional consequences of minimum wages even when they increase employment

korea the misunderstood crisis abstract the article argues against the conventional wisdom that the current korean crisis is a crisis from underregulation rather than from overregulation it argues that ill managed financial liberalization abandonment of investment coordination and poor exchange rate management were the underlying causes of the crisis it then argues that while certain structural changes made such policy shifts somewhat inevitable there were also poor strategic choices and ideological prejudices involved the article finally discusses whether the current international monetary fund program of institutional reform in the anglo american direction will be able to revive the korean economy in the long run

induced innovation and energy prices this paper uses u s patent data from 1970 to 1994 to study the impact of energy prices on energy efficient innovations theories of technological change have focused both on demand side factors which spur innovative activity by increasing the value of new innovations and supply side factors such as scientific advancements that make new innovations possible data on demand side factors are easily obtained but data on supply side factors that influence innovation are not readily available this paper uses patent citations as a measure of the usefulness of the existing base of scientific knowledge citations to previous patents are used to construct productivity estimates which measure the usefulness of the existing stock of knowledge to inventors in a given energy field for any given year these estimates are then combined with data on demand side factors to estimate a model of induced innovation in energy technologies the results indicate that both energy prices and the supply of knowledge have strongly significant positive effects on innovation the paper concludes with a discussion of the implication of this work for environmental policy

effects of the minimum wage on employment dynamics the voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment we argue that the minimum wage will impact employment over time through changes in growth rather than an immediate drop in relative employment levels we show that commonly used specifications in this literature especially those that include state specific time trends will not accurately capture these effects using three separate state panels of administrative employment data we find that the minimum wage reduces job growth over a period of several years this finding is supported using several empirical specifications

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

firm incentives to promote technological change in pollution control comment following on from an analysis by milliman and prince this article considers further the relative incentives for technical change provided by different pollution control instruments the comments involve the recognition that emission targets are typically chosen fairly arbitrarily because of regulators lack of knowledge of abatement cost schedules there is also a more detailed discussion of the practicability of auctioning emissions permits as these have been less thoroughly covered in the literature than the other instruments

the role of institutions in transition growth the east asian newly industrializing countries abstract this paper rejects both the claims of those who see the east asian story as one of the application of pure laissez faire and the more recent revisionist view that it all resulted from the activity of a highly intrusive government instead this paper emphasizes the role of institutional organizational changes orchestrated by a government which was both sensitive to these systems initial conditions and to the importance of setting the stage for the fullest possible participation through markets of large numbers of dispersed private actors specifically the success or failure of government actions in the dimension of organizational institutional change is related to the three ingredients secularism egalitarianism and nationalism viewed by simon kuznets as essential for modern growth the paper concludes by demonstrating the applicability of these notions to the east asian case especially taiwan during its postwar period of spectacular development success

market failure and government failure f or several decades a debate has been raging in development economics on the relative virtues of the free market as opposed to state intervention with the help of analytical models of a market economy the interventionists demonstrate what they consider serious instances of market failure that is the inability of a market economy to reach certain desirable outcomes in resource use the protagonists of free markets on the other hand compile impressive lists of ill conceived and counterproductive policy measures implemented by the governments of different countries at various times leading to wasteful use of resources in their economies this debate inevitably remains inlconclusive the analytical results on market failure do not disappear in the face of the evidence that most governments or for that matter most economies of less developed countries with or without state intervention have performed rather badly when there appears to be scope for imnprovement over the market outcome the search for the appropriate corrective measures goes on some protagonists of government failure question the significance of such market failures others voice skepticism about the ability of governments to take any action in the economy which is not counterproductive but none of them seems to be able to explain why a less developed country like india failed to grow during the first half of this century under a non interventionist colonial adnministration thus while the debate goes on neither side succeeds in convincing the other

pollution permits and compliance strategies abstract this paper analyzes the impact of spot and futures markets for tradeable pollution permits on the potential polluters compliance decisions polluters can buy permits invest in pollution abatement or else stop production or source out we show that stand alone spot markets induce excessive investment the introduction of a futures market reduces this incentive to invest but is not the optimal way to control pollution a menu of options on pollution rights possibly coupled with intertemporally bundled sales yields higher welfare because of its focus on long run demand elasticities and rent extraction this paper can be applied to a variety of situations such as demand side management public transportation bypass in telecommunications or forward sales by a private monopolist

second best renewable subsidies to de carbonize the economy commitment and the green paradox climate change must deal with two market failures global warming and learning by doing in renewable energy production the first best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax given that global carbon taxes remain elusive policy makers might have to rely on a second best subsidy only with credible commitment the second best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first best levels at the cost of higher fossil fuel use in the short run weak green paradox without commitment the second best subsidy is set to the social benefit of learning it generates smaller weak green paradox effects but the transition to the carbon free takes longer and cumulative carbon emissions are higher under first best and second best with pre commitment peak warming is 2 1 2 3 circ c under second best without commitment 3 5 circ c and without any policy 5 1 circ c above pre industrial levels not being able to commit yields a welfare loss of 95 of initial gdp compared to first best being able to commit brings this figure down to 7

technological change and the timing of mitigation measures we use a coupled carbon cycle and energy systems engineering model to analyze the future time path of carbon emissions under an illustrative co2 concentration stabilization limit of 550 ppm our findings confirm the emission pattern as found by wre global emissions rise initially pass through stabilization in order to decline in the second half of the 21st century we show that for a given co2 concentration target emission trajectories within an intertemporal optimization framework depend mainly on two factors the discount rate and the representation of technological change as either static or dynamic we obtain a similar near term emission time path as wre when using a model with static technology and a discount rate of 7 we obtain a trajectory with lower emissions in the near term when using a lower discount rate and or treating technology dynamics endogenously in the model we briefly outline a model that endogenizes technological change through learning curves we then compare differences in emission trajectories between alternative model formulations of technological change they are sufficiently small as to be of secondary importance when compared to treating co2 concentration stabilization as an inter temporal optimization problem or not whereas our results confirm the computational results of wre we arrive nonetheless at different policy conclusions if long term emission reduction is the goal we cannot follow business as usual even in the short term action needs to start now action does not necessarily mean aggressive short term emission reductions but rather enhanced r d and technology demonstration efforts that stimulate technological learning these are the necessary preconditions that long term reduction targets can be met with improved technology and at costs lower than today we close by pointing out two further critical issues uncertainty and the possible mismatch between the world of economic models and that of climate policy

incentives for advanced pollution abatement technology at the industry level an evaluation of policy alternatives abstract in this research we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry from most to least incentive the policy instruments can be rank ordered as follows i auctioned permits ii emissions taxes and subsidies iii issued marketable permits iv performance standards including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive based instruments with the starting point normalized in this fashion the instrument rankings are invariant with respect to the size of firms the size of the industry or the industry s abatement cost structure

does a recession call for less stringent environmental policy a partial equilibrium second best analysis this paper analyses second best optimal environmental policy responses to real and financial shocks in a two period partial equilibrium model with heterogeneous firms an environmental externality and credit constraints we show that to alleviate credit constraints and encourage investment the second best optimal emission tax falls short of marginal emission damages the optimal response to shocks depends on how the shock affects the size of the environmental and credit market failures and the effectiveness of the tax in alleviating these market failures under mildly restrictive assumptions on functional forms the optimal response to a persistent negative productivity shock or a tightening of credit is to reduce the emission tax our results are informative for how climate change policy should optimally change with the business cycle

the effect of minimum wages on immigrants employment and earnings this study examines how minimum wage laws affect the employment and earnings of low skilled immigrants and natives in the u s minimum wage increases might have larger effects among low skilled immigrants than among natives because on average immigrants earn less than natives due to lower levels of education limited english skills and less social capital results based on data from the current population survey for the years 1994 2005 do not indicate that minimum wages have adverse employment effects among adult immigrants or natives who did not complete high school however low skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum jel classifications j23 j38 j15

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

markets and regulatory hold up problems abstract many regulatory programs such as environmental regulation are effective only if firms make irreversible investments that reduce the cost of compliance a firm potentially subject to regulation may therefore behave strategically by not investing thereby forcing the regulator to void the proposed regulation we show that such incentives which resemble a hold up problem may not be overcome when government s only tool is the imposition of an emissions tax the hold up problem can be overcome by the issuance of tradeable permits a time consistent equilibrium exists with all firms investing and the government imposing regulations even if no permits are traded and their market price is low indeed an observation of no trade may indicate that pollution abatement is great

minimum wage policy with optimal taxes and unemployment abstract using a search model i derive a formula that links the welfare gains from the minimum wage to its effect on low skilled labor force participation and employment this formula shows that the minimum wage is welfare improving if pushing the low skilled labor market tightness downwards brings it closer to its efficient level i estimate the causal effect of the minimum wage on low skilled labor force participation and employment using federal and state minimum wage variation i discuss the policy implications of my estimates when viewed through the lens of the marginal welfare gain formula

innovation in pollution control comparisons of the various institutional arrangements for controlling pollutant emissions from individual sources effluent fees effluent control subsidies marketable permits and direct command and control regulation have usually focused on their static efficiency properties and institutional feasibility e g dales 1968 zerbe 1970 baumol and oates 1975 kneese and schultze 1975 marin 1978 mills and white 1978 spence and weitzman 1978 russell 1979 a relatively neglected area has been the study of how each arrangement influences innovation in pollution control a few studies e g kneese and schultze 1975 marin 1978 mills and white 1978 russell 1979 have casually claimed that the control methods that rely on economic incentives provide superior incentives for innovation but there have been few systematic studies of the question this paper provides a simple model of pollution control innovation by a profitmaximizing polluter who is subject to the various control methods the consequences of the methods will be explored in three major contexts first we assume that the polluter and the innovation is a small enough part of the overall pollution problem so that none of the important marginal conditions are changed by the innovation second we assume that the polluter and the innovation are important enough so that marginal conditions are changed by the innovations but that the governmental authority determining pollution control incentives or levels fails to make the appropriate adjustments third we again assume that the innovation causes marginal conditions to change but in this case the governmental authority makes the appropriate adjustments we use the term ratcheting to describe this last phenomenon in all cases we assume that the innovating polluter correctly predicts the reactions of the governmental authority and bases his innovation decisions on that prediction a profit maximizing entrepreneur would normally be expected to adopt any innovation that promised gains present discounted value to him in excess of initial

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

environmental policy reconsidered the role of technological innovation abstract this paper discusses recent environmental policy wisdom in the light of technological and organizational innovation starting from empirical evidence it argues that the main econometric models which are used in environmental policy analysis do not consider properly the determinants and effects of innovation and offer unreliable estimates of policy effects some solutions to the latter problem show that the integration between environmental policy and industrial policy can be more efficient than traditional environmental policies in the protection of the environment technological cooperation moreover can be an important instrument to stabilize international environmental agreements

economic policy institutions and entrepreneurship economists have debated the issue of state intervention in the economic process in capitalist economies intensively for decades often however without considering the effects of state intervention on entrepreneurship in this paper we undertake a critical analysis of the institutionalist theory of state intervention developed by ha joon chang he identifies two key roles for the state in facilitating structural change namely firstly to pronounce a vision for the future state entrepreneurship and secondly management of conflicts which arise during the process of structural change we also examine how well the swedish model of state intervention fits into chang s model as well as possible drawbacks with the swedish model not least in terms of reducing the incentives for entrepreneurship thirdly we examine the possibility that because of radical changes in its economic and political environment the swedish model has become less successful in carrying out the two key roles outlined by dr chang in the last three decades finally we discuss the implications of these changes for the chang style interventionalist state is there any room left for structural change management by the state in the global era if so what are the appropriate measures and policy levels for this type of intervention and in particular how can proper institutions and incentives for entrepreneurship be used to facilitate the structural change process

who benefits from a minimum wage increase this paper addresses the question of how a minimum wage increase affects the wages of low wage workers most studies assume that there is a simple mechanical increase in the wage for workers earning a wage between the old and the new minimum wage with some studies allowing for spillovers to workers with wages just above this range rather than assume that the wages of these workers would have remained constant this paper estimates how a minimum wage increase impacts a low wage worker s wage relative to the wage the worker would have if there had been no minimum wage increase the method allows for the effect to depend not only on the initial wage of the worker but also nonlinearly on the size of the minimum wage increase using current population survey data from 2005 to 2008 a period with a large number of u s state level minimum wage increases this paper finds that low wage workers who experience a small increase in the minimum wage tend to have lower wage growth than if there had been no minimum wage increase a large increase to the minimum wage increases the wages of not only those workers who previously earned less than the new minimum wage but also spill over to workers with moderately higher wages finally this paper finds little evidence of heterogeneity in the effect by age gender income and race

revisiting the minimum wage employment debate throwing out the baby with the bathwater we revisit the minimum wage employment debate which is as old as the department of labor in particular we assess new studies claiming that the standard panel data approach used in much of the new minimum wage research is flawed because it fails to account for spatial heterogeneity these new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the united states have not reduced employment we explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups our evidence points to serious problems with these research designs we conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage

market government and malaysia s new economic policy leading economic institutions such as the world bank have argued that liberalisation holds the key to growth poverty alleviation and redistribution even recent efforts to model increasing returns within the framework of new growth theories have not resulted in prescriptions for stronger roles for governments the fast growing southeast asian economies are still being used to demonstrate causation between liberalisation and growth poverty alleviation and redistribution using malaysia as an example this paper argues that growth poverty alleviation and redistribution in the country was achieved under circumstances of both interventionist policies as well as market coordination throughout the new economic policy nep period 1970 90 strong incentives were offered to both the import substitution and exportoriented manufacturing sectors and the state made strong forays into the market to redress poverty and inequality the paper also argues that poorly coordinated government intervention generated substantial unproductive rent seeking

bad eggs learning by doing and the choice of technology we model long run economic development through technology adoption under scientific uncertainty about environmental effects there are four possible long run equilibria in a socially planned economy high growth adopt rapidly but abandon damaging technologies once revealed ddt cfcs cautious brake the introduction of new technologies to avoid mistakes genetically modified organisms no growth halt technological progress to preserve secondary knowledge and collapse adopt rapidly without ever abandoning damaging technologies in the base parameterization a short sighted social planner chooses the cautious strategy a far sighted planner chooses the high growth strategy unless damages are irreversible in which case the cautious strategy again dominates regulatory options in the market economy are investigated pollution taxes do not affect the firm s level of precaution if they can only be applied after the adopting firm has reaped the benefits however they do encourage the abandonment of damaging technologies liability rules do affect precaution but may lead to excessive caution or even a no growth trap

soft budget constraints and regional industrial policy reinterpreting the rise and fall of delorean the rise and fall of delorean motor cars limited has traditionally been interpreted as either the result either of john delorean s psychological flaws or as confirming the supposed limitations of activist industrial policy however when the episode is examined in greater historical detail neither of these interpretations is compelling the reinterpretation outlined here draws on institutional analysis as well as a range of archival sources much of it previously unreleased the inefficiencies within the original contractual agreement are highlighted the lack of credibility associated with this agreement was in turn traceable to the institutional environment with its associated risk reward implications under which industrial policy operated this environment had a political element it had been distorted by the troubles and the resulting fears policymakers had of a cumulative causation relationship between violence and unemployment officials in belfast against treasury opposition advocated state led entrepreneurship as a policy response

the distributional impacts of minimum wage increases when both labor supply and labor demand are endogenous we develop and estimate a one shot search model with endogenous firm entry and therefore zero expected profits and endogenous labor supply positive employment effects from a minimum wage increase can result as the employment level depends upon both the numbers of searching firms and workers welfare implications are similar to the classical analysis workers who most want the minimum wage jobs are hurt by the minimum wage hike with workers marginally interested in minimum wage jobs benefiting we estimate the model using cps data on teenagers and show that small changes in the employment level are masking large changes in labor supply and demand teenagers from well educated families see increases in their employment probabilities and push out their less privileged counterparts from the labor market this article has supplementary material online

africa s economic performance limitations of the current consensus historical and micro survey evidence as well as the standard data from international organizations support less pessimistic conclusions on africa s development performance than those reached by many social scientists the changes that have benefited women over the last four decades are highlighted a discussion of growth in agricultural production follows however the complexity and the brutality of processes of social and economic change in sub saharan african economies are also stressed the theoretical implications of these complexities have not been adequately analyzed by world bank economists the bank s recent efforts to reassess its policies are therefore unlikely to achieve the results anticipated

new perspectives on east asian development conventional explanations of rapid growth in east asia have focused on the efficient allocation of resources resulting from market led outward oriented strategies this study challenges that approach east asian success has centred around the accumulation dynamic both because of its direct importance to the growth process and also because of its close and interdependent linkages with exports on this basis the study considers the institutions and policies which were used to manage economic rents in support of rapid growth and to ensure a more strategic and orderly integration into the world economy the study also examines the contribution of regional trade and investment flows to east asian industrialisation the potential for replicating similar strategies is considered

the merits of new pollutants and how to get them when patents are granted the performance of market based environmental regulation is affected by patents and vice versa this interaction is studied for a type of innovation where a new technology reduces emissions of a specific pollutant but at the same time causes a new type of damage if the new pollutant associated with this technology is sufficiently different from existing ones such that marginal damage is increasing in each of them but additive across pollutants a diversification of the pollution portfolio is socially desirable in a situation where the incentives to develop such a technology are created by patents the efficiency of permits is affected by monopoly pricing of the patent holding firm this result carries over to other types of innovation the performance of taxes is limited by either the inability to implement specific pollution mixes or monopoly pricing for constant returns to scale at the industry level the combined use of taxes and permits ensures the first best mix of technologies and provides positive research incentives

globalisation regions and the state exploring the limitations of economic modernisation through inward investment over the past 10 years or so the uk has witnessed intense interregional competition for a small number of large inward investment projects these projects examples of foreign direct investment fdi from far east asia have been relied upon by nation states as panaceas to the economic problems being experienced within older industrial regions central government has adopted a non interventionist approach to fdi and has rather encouraged regional level institutions of governance to provide innovative and competitive packages of aid to the prospective investors through the creation of customised spaces by relying on this fdi local and regional level institutions within the uk have sought to reduce or eliminate those uncertainties associated with local governance and the planning system that would otherwise face potential investors we discuss these issues with reference to three case study fdi examples lg in south wales samsung in the north east of england and hyundai in scotland these projects provide good examples of the prestige attached to large fdi projects by regional and local agencies by passing normal local democratic processes instigating streamlined institutional processes and ignoring environmental protection policies to land the projects for particular regions but the collapse of the south east asian economies and the recent mothballing of both the hyundai and lg plants illustrate some very immediate problems regarding the unsustainability of the nation state both relying on the global market and subordinating local interstices to resolve regional economic problems overall the paper examines how particular state forms and practices operate to privilege certain types of interests and activities at certain scales and how particular state entities are attempting to capture agendas and decisions at particular scales of governance