long live the doge death as a term limit on venetian chief executives can an electorate use the projected life expectancy of a lifetime appointed chief executive to enforce binding informal term limits informal term limits based on the life expectancy of a chief executive candidate at election would enable an electorate to exercise discretion in adjusting tenure lengths to minimize expected turnover and tenure length costs while also providing a strictly binding term limit death we provide a detailed historical case study of venice from 1172 to 1797 when the ruling patricians utilized informal term limits on their chief executive the doge relying on the projected life expectancy of ducal candidates

political instability and savings in less developed countries evidence from sub saharan africa a four equation model is used to investigate the effects of political instability pi on the savings rate in sub saharan africa utilising a comprehensive measure of pi we find that political instability has a deleterious effect on the savings rate both directly and indirectly through a reduction in investment and economic growth the negative effects of pi on savings rate occurs contemporaneously as well as with a lag we also find that economic growth has a stabilising effect on the political system and that not accounting for these effects through a simultaneous equations model results in biased coefficient estimates these relationships are robust with respect to model specification the implication of our results is that economic factors alone cannot explain the development process in less developed countries

political instability and debt maturity i introduction political instability has been blamed for many poor macroeconomic outcomes such as high inflation unemployment low growth and large debts for example alesina 1989 shows that political instability is positively related to okun s misery index inflation plus unemployment for twenty industrialized countries grilli masciandaro and tabellini 1991 find that the oecd countries with the highest debt gdp ratios also tend to be those with the most unstable political systems barro 1991 shows for a sample of ninety eight industrialized and developing countries that political instability is inversely related to growth 1 kwasi fosu 1992 shows that political instability adversely affects economic growth by reducing the availability of factors of production in sub saharan african countries 2 finally cukierman edwards and tabellini 1992 illustrate a positive relationship between political instability and seigniorage for a sample of seventy nine countries 3 4 i examine yet another negative consequence of political instability because political instability generates inflation uncertainty that causes the yield curve to steepen such instability increases the cost and reduces the average maturity of debt a relatively short average debt maturity may be undesirable as the cost of future debt service becomes highly uncertain when debt is refinanced frequently 5 this paper examines the relationship between political instability i e uncertainty about who will be in power next period and polarization i e the difference between the orientations of the active political parties and the maturity composition of the public debt the analysis borrows from the partisan theory of economic policy first popularized by hibbs 1977 1987 and then extended to incorporate rational expectations by alesina 1987 and alesina and sachs 1988 partisan theorists argue that as different political parties have different preferences over trade offs between inflation and tin employment these two variables tend to be systematically related to the political orientation of the party in power 6 the consequence of such partisan effects is that electoral uncertainty generates inflation uncertainty which will be greater the more polarized the political system i illustrate that as inflation uncertainty makes it difficult to predict inflation in the future risk averse lenders require greater compensation to lend for long periods the more uncertain inflation is thus since political instability and polarization together translate into inflation uncertainty we should observe steeper term structures in countries with more unstable and polarized political systems as a steep term structure implies a high marginal cost of financing debt with long maturity bonds a cost minimizing fiscal authority in a highly unstable and polarized political system should find it optimal to have a relatively low average debt maturity in other words political instability and polarization should be inversely related to average debt maturity however in spite of a shorter average debt maturity the minimum expected cost of servicing debt will still be greater the more unstable and polarized the political system to my knowledge there has been no study of the relationship between political instability polarization and debt maturity in the academic literature yet the relationship is worthy of analysis for if political instability and polarization can be shown to reduce average debt maturity and increase the cost of debt finance then yet another argument can be made for insulating monetary policy from the political process 7 by credibly separating monetary and fiscal decisions policymakers can prevent such partisan effects from adversely affecting the expected cost and maturity of debt finally the real costs of inflation uncertainty in terms of lost output are by now well documented 8 it is therefore important to identify the causes of such uncertainty in order to abate it

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

ex post efficient permit markets a detailed analysis this paper provides a detailed analysis of ex post efficient permit markets after a short review of institutional designs that can achieve ex post efficiency under uncertainty and asymmetric information we analyze the effects of an ex post efficient regulation on the expected costs of the regulated firms on their investment behavior and on the incentives for strategic behavior on imperfectly competitive permit markets also we inquire about the budget effects of the regulation our results show that ex post efficient permit markets have considerable benefits beside the direct increase in expected social welfare

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

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

assessing the effect of public policy on worker absenteeism we analyze the effect of economic incentives on worker absenteeism using panel data on work absence for 1990 and 1991 with a sample of 1 396 swedish blue collar workers during this period sweden implemented major reforms of both its national income replacement program for short term sickness and income taxes both affected the worker s cost of missing work our econometric model allows for state dependent dynamic behavior and control for unobserved heterogeneity the latter proves to be an important consideration we find that the cost of being absent significantly affects work absence behavior

livestock emissions regulation with unknown damages and strategic technology adoption livestock emissions have been identified as a contributor to greenhouse gas build up yet have remained unregulated in the us a game theoretic model in the style of tarui and polasky 2005 was analysed where the dairy industry strategically chooses to abate air emissions with technology adoption and herd size decisions while a regulator chooses a tax rate on emissions to satisfy the desires of competing interest groups this model allows the effects of potential air emission regulation on the dairy industry to be evaluated results demonstrate that dairy farms react to the increased cost of air regulation by decreasing herd size rather than investing in air emission abatement technology in the short run this suggests that incentives may need to be put in place to induce adoption in emissions abatement technology at the livestock level in the long run

political instability and economic growth in developing economies some specification empirics abstract the paper empirically explores the specification of the relationship between political instability pi and economic growth using data on different events of coups d etat in sub saharan africa it finds that when a principal component of the various pi events is employed in an augmented production function basic specification tests are met however specifying pi using the separate events such as successful coups results in a potentially misspecified relationship reduced model fit and underestimation of the adverse pi effect

incentives of carbon dioxide regulation for investment in low carbon electricity technologies in texas abstract this paper compares the incentives a carbon dioxide emissions price creates for investment in low carbon dioxide emitting technologies in the electricity sector we consider the extent to which operational differences across generation technologies particularly nuclear wind and solar photovoltaic create differences in the incentives for new investment which is measured by the operating profits of a potential entrant first astylized model of an electricity system demonstrates that the composition of the existing generation system may cause electricity prices to increase by different amounts over time when a carbon dioxide price is imposed differences in operation across technologies therefore translate to differences in the operating profits of a potential entrant then a detailed simulation model is used to consider a hypothetical carbon dioxide price of 10 50 per metric ton for the electric reliability council of texas ercot market the simulations show that for the range of prices considered the increase in electricity prices is positively correlated with output from a typical wind unit but the correlation is much weaker for nuclear and photovoltaic consequently a carbon dioxide price creates much stronger investment incentives for wind than for nuclear or photovoltaic technologies in the texas market

ecological thresholds a survey abstract the existence of ecological discontinuities and thresholds has been recognised by ecological economics as a key feature to take into account in the study of environment economy interactions this paper reviews some theoretical developments and empirical studies dealing with ecological phenomena involving non linear dynamics the literature about this issue reveals that there is abundant evidence of discontinuities and threshold effects as the consequence of human perturbations on ecological systems however due to the complexities involved the predictive capacity of ecology is limited and large uncertainties still remain

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

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

dynamic incentives of environmental regulations the effects of alternative policy instruments on technology diffusion abstract we develop a framework for comparing empirically the effects of alternative environmental policy instruments on the diffusion of new technology market based and command and control approaches can he quantitatively compared by estimating the economic penalty that firms through their actions reveal to be associated with violation of standards in the context of concerns about global climate change we empirically examine the likely effects of pigouvian taxes technology adoption subsidies and technology standards we employ state level data on the diffusion of thermal insulation in new home construction comparing the effects of energy prices insulation cost and building codes

absenteeism efficiency wages and shirking we investigate the absence behaviour of workers when there is asymmetric information regarding worker health an individual s health is assumed to be private information to that individual and only observable to a third party at cost our aim is to complement the existing largely empirical studies of absence behaviour which have tended to treat the phenomenon exclusively as a labour supply decision on the part of workers cf allen 1981 barmby and treble 1991 barmby orme and treble 1991 and dunn and youngblood 1986 our approach is to draw out the interactive aspects of the employment relationship we assume that workers are ex ante uncertain as to their state of health and supply labour on the basis of an all or nothing utility maximising decision taken once a realisation of this state has been received utility is a function of income leisure and health and workers value leisure more the sicker they are firms are able to exert some control over individual behaviour by monitoring workers and threatening to fire shirkers that is workers absenting themselves with unacceptable sickness our model highlights an efficiency wage effect through which wages may be used as a method of absence control in particular the optimal response of the firm to an increase in the cost of monitoring is to discourage shirking by raising wages furthermore to the extent that

who pays for industrial pollution abatement the distributional impact of industrial pollution abatement is measured for the years 1973 and 1977 the findings indicate that in 1977 1 09 of income or 0 510 of personal consumption expenditures of the lowest income class paid indirectly for abatement costs implicit in purchased goods for the highest income class the corresponding figures were 0 218 and 0 423 respectively in addition abatement costs per dollar of output are presented for representative industries

designing climate mitigation policy this us paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs damage valuation policy instrument choice technological innovation and international climate policy the authors begin with the broadest issue of how high assessments suggest the near and medium term price on greenhouse gases would need to be both under cost effective stabilization of global climate and under net benefit maximization or pigouvian emissions pricing the remainder of the paper focuses on the appropriate scope of regulation issues in policy instrument choice complementary technology policy and international policy architectures

earnings unemployment and the allocation of time over time since an individual s labour market history can be described by a markov chain in state space it is possible to calculate the steady states it is natural to interpret the steady state proportion in unemployment for a group of identical workers as the natural rate of unemployment for this group i e it is the expected proportion that would be employed if the environment were to remain constant it is shown how the natural rate of unemployment is different for different groups the model is estimated using data from a large u s income maintenance experiment the predictions of the model with some exceptions bear up well to confrontation by data the empirical findings also accord well with existing evidence on cross section studies of labour supply we find that labour force participation rates implied by the estimated models are positively related to earnings for all age sex and race groups as expected we demonstrate that the elasticities of the unemployment rates for all groups with respect to expected wage rates are negative and large in absolute value in the case of adults while the role of the wage in allocation of time is not novel the existing neoclassical labour literature uses static labour supply models to interpret participation rate studies

investment in risky r d programs in the face of climate uncertainty we analyze how the socially optimal technology rd and that uncertainty in damages interacts with uncertainty in the returns to rd and r d that reduces the emissions to output ratio and argue that this is a good representation of r d into fossil fuel technologies for r d programs into non carbon technologies optimal investment is higher in riskier programs our empirical model indicates that the optimal investment in a risky program is about 3 1 2 times larger than in a program with certain returns for r d programs aimed at reducing emissions in fossil fuel based technologies our results show that qualitatively investment is higher in less risky programs under most uncertain damage scenarios our empirical model shows however that the risk profile of fossil fuel based r d programs generally has little quantitative impact on optimal investment the exception is that when the probability of a catastrophe inducing full abatement is very high investment is about twice as high in risky programs compared to programs with certain returns

the effects on sick leave of changes in the sickness insurance system to get a more complete picture of how labor supply is affected by economic incentives the effects on absenteeism should be taken into account in particular absenteeism due to sick leave can be considerable we examine whether the level of sick leave compensation affects sick leave behavior using long time series data 1955 99 for sweden with numerous changes of the compensation level we generally find strong effects reforms implying more generous compensation for sick leave tend to be associated with permanent increases in sick leave and vice versa these findings are reinforced in a panel study covering the 1983 91 period

on the timing of climate agreements a central issue in climate policy is the question whether long term targets for greenhouse gas emissions should be adopted this paper analyzes strategic effects related to the timing of such commitments using a two country model we identify a redistributive effect that undermines long term cooperation when countries are asymmetric and side payments are unavailable the effect enables countries to shift rents strategically via their r d efforts under delayed cooperation in contrast a complementarity effect stabilizes long term cooperation because early commitments in abatement induce countries to invest more in low carbon technologies and create additional knowledge spillovers contrasting both effects we endogenize the timing of climate agreements

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

sick of being unemployed interactions between unemployment and sickness insurance this paper examines the incentive effects of interactions between unemployment insurance ui and sickness insurance si two important components of sweden s social insurance system the main topic is how the sickness report rate among the unemployed is affected by i the limit of 300 workdays for ui benefits and ii the difference in maximum compensation between ui and si benefits results obtained by duration analysis suggest that sick reports increase as the ui benefit expiration date approaches there is also evidence of an incentive effect on the sick report rate because si offers higher compensation than ui

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

sickness absence an international comparison this paper shows how internationally and intertemporally consistent information on sickness absence can be constructed from labour force surveys and describes some important features of data that we have generated using the luxembourg employment study we also analyse sickness absence rates by age gender and other socio economic characteristics of workers these relationships prove to be similar across countries with widely differing mean rates of absence in this dataset workers with longer tenure tend to have higher absence rates even when age is controlled for absence is also positively correlated with higher usual hours of work we show how internationally and intertemporally consistent information on sickness absence can be constructed from labour force surveys lfs and describe some important features of data that we have generated using the luxembourg employment study les such data fill an important gap in available information about absence since they have the potential to provide answers to a number of issues that remain unresolved in its study there is now substantial evidence going back to the work of the industrial fatigue research board in the 1920s and 1930s i that sickness absence is not purely a response to a medical condition workers who have access to compensation payments are more likely to be absent than those without buzzard and shaw 1952 the higher the rate of compensation the more absences workers are likely to take buzzard and shaw 1952 furthermore the higher the rate of compensation the longer absences are likely to be barmby et al 1991 the analysis of sickness absence is placed firmly in the agenda of economics by the idea that sickness absence rates are the consequence of choices that can be mediated by financial and other incentives the provision and level of sickpay is typically determined at two levels by negotiation between firms and their workforces and by government regulation interfirm variations in absence and their correlates are not well understood coles and treble 1996 have argued that the marginal cost of an absence is partially in the control of firms and can be usefully seen as driven by the nature of the technology adopted these theoretical arguments remain largely unexplored empirically but the ability to compare similar industries across different countries is likely to be revealing this paper was drafted during a visit to ceps instead in the summer of 1999 the research was funded by a grant of the european commission under the tmr programme access to large scale facilities hosted by iriss c i at ceps instead in differdange luxembourg we are also grateful for support from the leverhulme foundation through a grant to the institute for labour research at the university of essex and to colleagues at the ilr for their constructive comments acknowledgements to les data providers are given at the end of the paper we would also like to thank paul alkemade elena bardasi and pascal garin for their help any remaining errors are our own and the views expressed herein are not necessarily those of ceps instead 1 see for example vernon and bedford 1928

worker absenteeism in search equilibrium in this paper we introduce a general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state absenteeism is driven by random shocks to the value of leisure that are private information to the workers firms maximize profits while recognizing that the compensation package may affect the queue of job applicants and the absence rate the analysis provides results concerning the effects of social insurance benefits and other determinants of workers and firms behavior the normative analysis identifies externalities associated with firm provided sick pay and examines the welfare implications of alternative policies

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

economic growth in africa abstract this paper draws on the recent endogenous growth methodology to study the factors behind differences in per capita growth rates across africa the results indicate that various economic factors including initial conditions investment population growth trade orientation inflation financial development and the growth of the government sector contribute significantly to economic growth in addition to economic variables we find the degree of political freedom to be a significant contributor to economic growth finally we find some evidence that economic growth by the members of the cfa franc zone has not fared well in comparison to other african countries