integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

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

alfred marshall lecture social capital as good culture to explain the extremely long term persistence more than 500 years of positive historical experiences of cooperation putnam 1993 we model the intergenerational transmission of priors about the trustworthiness of others we show that this transmission tends to be biased toward excessively conservative priors as a result societies can be trapped in a low trust equilibrium in this context a temporary shock to the return to trusting can have a permanent effect on the level of trust we validate the model by testing its predictions on the world values survey data and the german socio economic panel we also present some anecdotal evidence that these priors are reflected in novels that originate in different parts of the country jel 04 016 043 p16

moral rules the moral sentiments and behavior toward a theory of an optimal moral system how should moral sanctions and moral rewards the moral sentiments involving feelings of guilt and of virtue be employed to govern individuals behavior if the objective is to maximize social welfare in the model that we examine guilt is a disincentive to act and virtue is an incentive because we assume that they are negative and positive sources of utility we also suppose that guilt and virtue are costly to inculcate and are subject to certain constraints on their use we show that the moral sentiments should be used chiefly to control externalities and further that guilt is best to employ when most harmful acts can successfully be deterred whereas virtue is best when only a few individuals can be induced to behave well we also contrast the optimal use of guilt and virtue to optimal pigouvian taxation and discuss extensions of our analysis

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

economic reform and armed conflict in mozambique abstract this paper discusses the evolution of the mozambican economy in the 1980s particular emphasis is placed on the effects of the policy reform package implemented by the government beginning in 1987 this reform centered around the restoration of economic incentives to the agricultural sector is an example of a structural adjustment package pursued under extremely adverse conditions the new strategy has yielded some favorable results but also illustrates some of the limits of price policy in sub saharan africa

food aid food prices and producer disincentives in ethiopia although the short term aims of food aid are well conceived strong concerns have been voiced regarding the long term impacts of such aid on incentives for agricultural producers in recipient countries this article examines the statistical link between food aid shipments and food prices in ethiopia over the period 1996 2006 monthly data from three markets and three commodities are used to estimate a system of seemingly unrelated regression models for food prices results indicate that previous year food aid shipments reduce prices in all producer and consumer markets these effects however appear to be limited to the set of internationally traded commodities that are domestically marketed a recursive regression procedure is used to identify the food aid threshold at which a negative aid effect emerges food aid shipments that constitute less than 10 of domestic production appear to be benign but shipments above this level show signs of being disruptive to local markets we use a simple policy simulation to argue that production sensitive targeting e g conditioning food aid on local food production would help to circumvent disincentive effects copyright 2009 oxford university press

who gets the goods a general equilibrium perspective on food aid in mozambique abstract we employ a computable general equilibrium approach to examine the effects of alternative food aid distribution schemes for drought response food aid to mozambique alternative schemes have very distinct impacts on household welfare and prices compared with monetization of food aid by government direct distribution to households by population shares strongly benefits rural households even assuming that government cannot target food aid strictly at drought stricken rural people our results indicate that when improving household welfare is the primary goal of the food aid direct distribution of food aid to households is preferred

food security strategies under extremely adverse conditions the determinants of household income and consumption in rural mozambique abstract this paper uses household survey data from war torn northern mozambique to examine the factors associated with higher incomes and improved rural household food security incomes and calorie consumption were found to be low and variable in each district and both are highly correlated with land holdings the central role of land holdings is largely a result of serious market failure food market participation rates and the proportion of net buyers are lower than in other sub saharan africa ssa research purchased food as a percentage of total caloric intake and off farm income as a percentage of total income are both very low by ssa standards in short surveyed smallholders have adopted a strategy of marked reliance on farm based own production to ensure their survival it is suggested that land holdings will continue to be key determinants of household income and consumption for the foreseeable future broad based rural development efforts possibly organized around existing cotton growing enterprises may offer one way out of the poverty trap for smallholders

averting catastrophes the strange economics of scylla and charybdis faced with numerous potential catastrophes nuclear and bioterrorism mega viruses climate change and others which should society attempt to avert a policy to avert one catastrophe considered in isolation might be evaluated in cost benefit terms but because society faces multiple catastrophes simple cost benefit analysis fails even if the benefit of averting each one exceeds the cost we should not necessarily avert them all we explore the policy interdependence of catastrophic events and develop a rule for determining which catastrophes should be averted and which should not jel d61 q51 q54

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

the benefit cost ratio as a decision criteria when managing catastrophes previous work has shown that when projects are non marginal it creates an interdependence among projects this implies that policies to manage catastrophes should not be evaluated in isolation but in conjunction with each other as long as relative risk aversion is sufficiently high the benefits of averting one catastrophe depend positively on the background risk created by other catastrophes this specific bias makes it possible to create upper and lower boundaries on the willingness to pay to manage catastrophes and the optimal policy these boundaries can be used to make inferences on which catastrophes should be averted and not and in which order the upper and lower boundaries depend only on the individual catastrophe s benefit cost ratio and the coefficient of risk aversion which both are easy to identify using standard economic frameworks

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

people s opium religion and economic attitudes since max weber there has been an active debate on the impact of religion on people s economic attitudes much of the existing evidence however is based on cross country studies in which this impact is confounded by differences in other institutional factors we use the worldvalues surveys to id entify the relationship between intensity of religious beliefs and economic attitudes controlling for country fixed effects we study several economic attitudes towardcooperation the government working women legal rules thriftiness andthe market economy we also distinguish across religious denominations differentiating on whether a religion is dominant in a country we find that on average religious beliefs are associated with good economic attitudes where good is defined as conducive to higher per capita income andgrowth yet religious people tendto be more racist andless favorable with respect to working women these effects differ across religious denominations overall we find that christian religions are more positively associatedwith attitudes conducive to economic growth r 2003 elsevier science b v all rights reserved jel classification a1 e0 n4 z1

a variance components approach to food grain market integration in northern nigeria a variance components methodology is developed for joint tests on a sample of time series of prices for seasonal differences in the price integration of markets the approach requires a statistically adequate number of observations for each market within seasons characterized by constancy of transactions costs among markets the model is applied to eighteen months of weekly grain prices for twenty two villages in northern nigeria results suggest that markets are not well integrated in the six months covering the harvest period implications are drawn for research on market performance in the region

disasters and the welfare cost of uncertainty the combination of power utility and i i d lognormal consumption growth makes for a benchmark model in which asset prices and expected returns can be found in closed form introducing the consumption based model john h cochrane 2005 12 writes the combination of lognormal distributions and power utility is one of the basic tricks to getting analytical solutions in this kind of model a message of this paper is that the lognormality assumption can be relaxed without sacrificing tractability working under two assumptions that there is a representative agent with power utility and that consumption growth is i i d i introduce in section i a mathematical object the cumulantgenerating function or cgf in terms of which four fundamental quantities that are at the heart of consumption based asset pricing can be simply expressed those quantities are the equity premium riskless rate consumption wealth ratio and mean consumption growth the expressions derived relate the fundamentals directly to the cumulants equivalently moments of consumption growth the lognormal assumption is equivalent to the assumption that all cumulants above the second are zero if one is in the business of making up stochastic processes many suggest themselves most naturally in continuous time although there is an obvious discrete time analogue of brownian motion a random walk with normally distributed increments it is less natural to map poisson processes say into discrete time and therefore harder to deal with the possibility of jumps in consumption in section ii i show that these results carry over to the continuous time setting the i i d growth assumption is replaced by its continuous time analogue log consumption is a levy process disasters and the welfare cost of uncertainty

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

ethics welfare and capital markets abstract we examine implications of a society s cultural emphasis on moral sentiments entrepreneurs and investors interact in a game that entails both adverse selection and moral hazard entrepreneurs may attempt to breach their contracts and expropriate investors an agent is born into a particular culture but chooses whether to develop a moral conscience and thereby subject himself to moral sentiments in equilibrium societies that place less emphasis on guilt exhibit a lower risk of expropriation in contracts a greater net price of capital a larger size of firms increased capital inflows and greater social welfare the results of a greater emphasis on pride are in the same direction

information efficiency and welfare in agricultural markets information and communications technologies icts have spread rapidly in the developing world there has been considerable interest in the potential role icts particularly mobile phones have begun to play in the marketing of agricultural outputs in these countries in this article we discuss the potential impacts icts may have on welfare both in terms of potential efficiency gains via improved arbitrage and welfare transfers among agents in the supply chain via reduced informational asymmetries and market power we also review the recent empirical evidence for such effects

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

food aid and food markets lessons from mozambique abstract a consensus has emerged on food aid policy acknowledging the importance of short run relief considerations while emphasizing that such policy must be driven by a long run developmental perspective this requires explicit attention to the effects of food aid on food markets yet it has long been clear that short and long run objectives of food aid may conflict this tension stands in high relief in mozambique one of the most food aid dependent countries in the world this paper examines the factors determining the effects of yellow maize food aid on markets for yellow maize and white maize the staple crop in mozambique the paper finds that a food aid has helped fuel the growth of a competitive small scale milling industry and informal marketing system b yellow and white maize are substitutes in consumption and c continued availability of yellow maize food aid at prices well below import parity will depress incentives for producers and traders to invest in the white maize production and marketing system this paper presents recommendations for reforming the monetized food aid program and coordinating it more effectively with emergency aid

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

empirical investigation into spatial integration without direct trade comparative analysis before and after the establishment of the ethiopian commodity exchange this paper presents a comparative analysis of the spatial price cointegration of coffee markets in ethiopia in the pre and post ethiopian commodity exchange ecx era using the autoregressive distributed lag ardl cointegration framework the study takes into consideration a market condition in which government policy restricts arbitrage coffee trade between coffee producing areas using coffee price data from 1998 2013 and applying a bounds test approach and toda yamamoto granger causality test the study finds that the establishment of ecx has strengthened regional integration rather than a national harmony between producer markets we also find evidence that since the establishment of ecx an opportunity was created for high quality coffee to dominate price formation while also allowing lower quality coffee producing areas to establish themselves the study underlines the importance of market transparency and exchange of price information between producer markets

targeting of food aid in rural ethiopia chronic need or inertia abstract this paper quantifies the factors underlying the allocations of food aid by the ethiopian government together with local and international non governmental organizations ngos both across rural regions and to households within regions we focus on reduced form specifications in which as little structure as possible is put on the decision rules because so little is known about these rules and their implementation nationally representative rural household data from ethiopia collected in 1996 are used the paper determines the extent to which food aid both free distribution and food for work is targeted to poor households and communities we also demonstrate that food aid allocations display a large degree of spatial continuity over time and are concentrated in areas that at least during the time of the survey are not the poorest the paper attempts to disentangle two competing explanations for the apparent spatial rigidity of food aid allocations that the recipient areas are chronically needy or that needs shift geographically from 1 year to the next but that fixed costs in setting up operations and in the process of identifying needs lead to a degree of inertia in the location of food aid programs over time we conclude that the evidence best fits the inertia explanation

estimating consumer willingness to pay for food quality with experimental auctions the case of yellow versus fortified maize meal in kenya biofortification of maize with provitamin a carotenoids is a new approach to the alleviation of vitamin a deficiencies in africa unfortunately these varieties are yellow or orange while consumers generally prefer white consumer willingness to pay for yellow and fortified maize was compared in experimental auctions in three regions in kenya the premium that consumers are willing pay for fortified maize 24 was higher than the discount they require to buy yellow maize 11 and in one zone consumers prefer yellow yellow color is therefore not an impossible obstacle for biofortified maize although it would clearly be easier to introduce this maize first in regions where yellow maize is currently grown

rare disasters asset prices and welfare costs a representative consumer model with epstein zin weil preferences and i i d shocks including rare disasters accords with observed equity premia and risk free rates if the coefficient of relative risk aversion equals 3 4 if the intertemporal elasticity of substitution exceeds one an increase in uncertainty lowers the price dividend ratio for equity and a rise in the expected growth rate raises this ratio calibrations indicate that society would willingly reduce gdp by around 20 percent each year to eliminate rare disasters the welfare cost from usual economic fluctuations is much smaller though still important corresponding to lowering gdp by about 1 5 percent each year

measuring future grandparents preferences for equality and relative standing individuals aversion to risk and inequality and their concern for relative standing are measured through experimental choices between hypothetical societies it is found that on average individuals are both fairly inequality averse and have a strong concern for relative income the results are used to illustrate welfare consequences based on a utilitarian swf and a modified crra utility function it is shown that the social marginal utility of income may then become negative even at income levels that are far from extreme

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

market liberalization and integration of maize markets in malawi the paper studies the extent of market integration of maize markets in malawi in order to understand how it has been affected by market liberalization several measures of integration are introduced to analyze both the comovement of prices and the price adjustment process over time monthly retail prices of maize at eight main locations over the period january 1984 to december 1991 are considered the main conclusion is that liberalization has increased market integration

identifying price linkages a review of the literature and an application to the world market of cotton this paper reviews the literature of price linkages and examines the degree to which cotton prices are linked it also tests whether such linkages have improved over the last decade it concludes that the degree of linkage has improved over the last decade while the main source of this improvement appears to be a result of short run price transmission and to a lesser extent long run co movement

benefit cost analysis of non marginal climate and energy projects conventional benefit cost analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal among the assumptions this entails is that the policy or project is small so the underlying growth rate of the economy does not change however this assumption may be inappropriate in some important circumstances including in climate change and energy policy one example is global targets for carbon emissions while another is a large renewable energy project in a small economy such as a hydropower dam this paper develops some theory on the evaluation of non marginal projects with empirical applications to climate change and energy we examine the conditions under which evaluation of a non marginal project using marginal methods may be wrong and in our empirical examples we show that both qualitative and large quantitative errors are plausible

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

how integrated are world beef markets the case of australian and u s beef markets abstract the objective of the paper is to examine market integration between australian and u s beef prices at the farmgate level if these two prices are found to be integrated then it can be alleged that australian beef prices can be used as a world price in empirical analyses and or as a reference price to measure the level of support accorded the u s beef sector co integration analysis and a time varying parameter estimation procedure based on the kalman filter model are applied the paper distinguishes between steer and cow beef segments and it uses monthly data over the 1972 1 to 1993 2 period the results indicate that australian and u s beef prices are co integrated albeit not fully and that the degree of convergence between the various price pairs has not substantially increased over time the results also suggest that australian prices can not unequivocally be adopted as a world price in empirical analyses

what drives local food prices evidence from the tanzanian maize market this study quantifies the relationship between tanzanian and external maize markets while also accounting for domestic influences it concludes that external influences on domestic prices originate from regional rather than global markets it also shows that compared to external factors domestic factors exert a greater influence on tanzanian maize markets further the mechanisms through which trade policies influence maize markets involve interactions with both external market shocks and domestic weather shocks overall it provides evidence that the intermittent imposition of export bans in tanzania has had adverse impacts on its maize markets and consequently on the development of its agrarian economy

a note on some limitations of crra utility abstract in a standard environment for choice under uncertainty with constant relative risk aversion crra the existence of expected utility is fragile with respect to changes in the distributions of random variables changes in prior information or the assumption of rational expectations

culture openness and finance abstract differences in culture proxied by differences in religion and language cannot be ignored when examining why investor protection differs across countries we show that a country s principal religion predicts the cross sectional variation in creditor rights better than a country s natural openness to international trade its language its income per capita or the origin of its legal system catholic countries protect the rights of creditors less well than protestant countries a country s natural openness to international trade mitigates the influence of religion on creditor rights culture proxies are also helpful in understanding how investor rights are enforced across countries

presidential address institutions and culture how and why does distant political and economic history shape the functioning of current institutions this paper argues that individual values and convictions about the scope of application of norms of good conduct provide the missing link evidence from a variety of sources points to two main findings first individual values consistent with generalized as opposed to limited morality are widespread in societies that were ruled by non despotic political institutions in the distant past second well functioning institutions are often observed in countries or regions where individual values are consistent with generalized morality and under different identifying assumptions this suggests a causal effect from values to institutional outcomes the paper ends with a discussion of the implications for future research jel a10 d7 e00

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

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated