co2 emissions energy consumption and economic growth in china a panel data analysis this paper examines the causal relationships between carbon dioxide emissions energy consumption and real economic output using panel cointegration and panel vector error correction modeling techniques based on the panel data for 28 provinces in china over the period 1995 2007 our empirical results show that co2 emissions energy consumption and economic growth have appeared to be cointegrated moreover there exists bidirectional causality between co2 emissions and energy consumption and also between energy consumption and economic growth it has also been found that energy consumption and economic growth are the long run causes for co2 emissions and co2 emissions and economic growth are the long run causes for energy consumption the results indicate that china s co2 emissions will not decrease in a long period of time and reducing co2 emissions may handicap china s economic growth to some degree some policy implications of the empirical results have finally been proposed

s based taxation under default risk abstract this article studies the characteristics of a s based tax system under default risk in particular we show that its neutrality properties depend on whether debt is protected or unprotected in the former case this system is neutral in the latter case where default timing is optimally chosen by shareholders the s based system is neutral with respect to real decisions only if the firm s and the lender s tax rate are equal however the shareholders decision to default is always distorted

from physical to human capital accumulation inequality and the process of development this paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development it argues that the positive impact of inequality on the growth process was reversed in this process in early stages of the industrial revolution when physical capital accumulation was the prime source of growth inequality stimulated development by channelling resources towards individuals with a higher propensity to save as human capital emerged as a growth engine equality alleviated adverse effects of credit constraints on human capital accumulation stimulating the growth process this research develops a growth theory that captures the endogenous replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth in the transition from the industrial revolution to modern growth the proposed theory offers a unified account for the effect of income inequality on the growth process during this transition it argues that the replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth changed the qualitative impact of inequality on the process of development in the early stages of the industrial revolution when physical capital accumulation was the prime source of economic growth inequality enhanced the process of development by channelling resources towards individuals whose marginal propensity to save is higher in the later stages of the transition to modern growth as human capital emerged as a prime engine of economic growth equality alleviated the adverse effect of credit constraints on human capital accumulation and stimulated the growth process the proposed theory unifies two fundamental approaches regarding the effect of income distribution on the process of development the classical approach and the credit market imperfection approach 1 the classical approach was originated by smith 1776 and was further interpreted and developed by keynes 1920 lewis 1954 kaldor 1957 and bourguignon 1981 according to this approach saving rates are an increasing function of wealth and inequality therefore channels resources towards individuals whose marginal propensity to save 1 the socio political economy approach provides an alternative mechanism equality diminishes the tendency for socio political instability or distortionary redistribution and hence it stimulates investment and economic growth see the comprehensive survey of benabou 1996b

partisan competition growth and the franchise we present an argument for changes in the franchise in which an elite split along economic interests uses the suffrage to influence implemented policies through the influence of these policies on the character of industrialization we analyze the effects of franchise changes on economic growth we identify in the social structure of society an explanation for the connection between enfranchisement and growth when 1 there exists an economic conflict among the elite 2 landed classes are not politically strong and 3 there exists a critical mass of industrial workers we observe both growth and democratization the lack of conditions 1 or 2 resolves in stagnant autocracies while the absence of condition 3 drives growth deterring democratic expansions we provide historical support for our argument by analyzing the experience of eleven countries

exploring the effects of energy consumption on output per worker a study of albania bulgaria hungary and romania in this article we explore the long run cointegration between output capital and energy consumption in per worker terms for albania bulgaria hungary and romania we use the augmented solow 1956 model and the ardl bounds procedure pesaran et al 2001 to examine the short run and long run effects of energy and capital on output in per worker terms we also conduct causality test using the toda and yamamoto 1995 non causality procedure our results show the existence of long run cointegration between output per worker and energy per worker for all the four countries we find that energy per worker have a dynamic short run positive effect in albania 0 37 bulgaria 0 25 hungary 0 36 and romania 0 68 and a long run positive effect in bulgaria 0 32 and romania 0 63 which duly indicate that energy consumption has a momentous long run effect in these two countries the causality results indicate a unidirectional causation from output per worker to energy per worker for all the four countries and from capital per worker to energy per worker for albania and romania consequently a balance between effective energy consumption and sound energy conservation policies are likely to support economic growth in the four countries

the logic of political violence this paper offers a unified approach for studying political violence whether it emerges as repression or civil war we formulate a model where an incumbent or opposition can use violence to maintain or acquire power to study which political and economic factors drive one sided or two sided violence repression or civil war the model predicts a hierarchy of violence states from peace via repression to civil war and suggests a natural empirical approach exploiting only within country variation in the data we show that violence is associated with shocks that can affect wages and aid as in the theory these effects are only present where political institutions are non cohesive

inequality democracy and the protection of property rights motivated by the observed relevance of institutional quality such as strong property rights for economic performance this research considers the emergence of property rights protection as a political outcome it argues that the support for such protection is greater the more equal income distribution and the smaller political bias when these conditions initially hold the politically influential rich elite may prefer to relinquish its power through democratisation in order to commit future policy makers to the enforcement of property rights thus ensuring larger investment and faster growth along the transition path in a very unequal economy however such democratisation will not take place

a biophysical analysis of the energy real gdp ratio implications for substitution and technical change abstract this paper quantifies the factors that caused the energy real gdp ratio to change during the post war period in france the federal republic of germany japan and the united kingdom econometric results indicate that changes in the types of fuel used changes in the energy consumed by the household sector changes in the types of goods and services produced and changes in energy prices account for most of the variation in this ratio price elasticities estimated from these results are lower than those estimated by neoclassical economists and indicate that the system boundaries used by neoclassical economists overestimate the amount of energy saved by substitution analysis of the error term from the regression results indicates that energy saving technical change has had little effect on the amount of energy used to support economic activity

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

the evolution of modern educational systems technical vs general education distributional conflict and growth abstract we study the evolution of an educational system founded on a hierarchical differentiation between vocational and general education with vocational playing an inferior role in the society the dynamics are best summarized by the ratio of the fraction of the population in vocational to that in general education which we interpret as a measure of the degree of stratification of the society we show that this ratio first rises and then declines with the level of development displaying an inverted u shape which reflects the complex interaction between economic and political forces including aggregate income growth wealth inequality and political participation

why did the elites extend the suffrage democracy and the scope of government with an application to britain s age of reform a new rationale is presented for why an elite may want to expand the franchise even in the absence of threats to the established order expanding the franchise can turn politicians away from particularistic politics based on ad personam redistribution within the elite and foster competition based on programs with diffuse benefits if these programs are valuable a majority of the elite votes in favor of an extension of the franchise despite the absence of a threat from the disenfranchised we argue that the evolution of public spending and of political competition in nineteenth century britain is consistent with our model i introduction at the beginning of the nineteenth century in most countries narrow elites had a disproportionate influence on public affairs even in england where parliament was an influential institution suffrage was mostly the privilege of the wealthy and some members of parliament were elected in boroughs with as few as 100 voters while cities such as manchester did not have any representative a century later most western countries had universal male suffrage with female suffrage to arrive shortly thereafter what brought about this democratic revolution in many cases the elites were forced out of power after violent revolutions however there are important examples such as england where democratization took the form of gradual extensions of the suffrage and these were accompanied by little overt violence it is the peculiar pride of england that the record of social and political reform is to be found on the statute book not in the annals of revolution cheyney 1931 p vii such peaceful democratizations are difficult to rationalize within the benchmark political economic models in those models extending the franchise dilutes the elite s power to influence policy and results

from rent seeking to human capital a model where resource shocks cause transitions from stagnation to growth we present a growth model where agents divide time between rent seeking in the form of resource competition and working in a human capital sector the latter is interpreted as trade or manufacturing rent seeking exerts negative externalities on the productivity of human capital adding shocks in the form of fluctuations in the size of the contested resource the model can replicate a long phase with stagnant incomes and high levels of rent seeking interrupted by small failed growth spurts eventually followed by a permanent transition to a sustained growth path where rent seeking vanishes in the limit the model also generates a rise and fall of the so called natural resource curse before the takeoff an increase in the size of the contested resource has a positive effect on incomes shortly after the takeoff the effect is negative and on the balanced growth path the growth rate of per capita income is independent of resource shocks les auteurs presentent un modele de croissance ou les agents divisent leur temps entre la chasse aux rentes sous la forme de concurrence pour la ressource existante et le travail productif dans le secteur du capital humain cette derniere activite peut se faire dans le commerce ou le secteur manufacturier la chasse aux rentes a des effets externes negatifs sur la productivite du capital humain si l on injecte des chocs prenant la forme de fluctuations dans la taille de la ressource contestee le modele peut generer une longue periode durant laquelle les revenus stagnent et le niveau de chasse aux rentes est eleve periode interrompue par des petits sursauts de croissance qui tournent court et suivie eventuellement par une transition permanente a un sentier de croissance soutenue ou a la limite les activites de chasse aux rentes disparaissent le modele genere aussi l apparition et la disparition de la malediction des ressources naturelles avant que la croissance prenne son envol un accroissement de la taille de la ressource contestee a un effet positif sur les revenus peu apres le decollage l effet est negatif et sur le sentier de croissance equilibree le taux de croissance des revenus per capita est independant des chocs sur la ressource

a general proposition on the design of a neutral business tax abstract a simple and general means of levying a business tax that is neutral in the sense that it does not affect the firm s decisions at the margin is discussed in particular we analyze the effect of a business tax of our design on the investment decision of the firm the well known imputed income and immediate write off methods of levying a neutral business tax are found to be special cases of our general tax design the implication of our results is that a neutral pure profits tax can be levied without the informational difficulties of the imputed income method or the cash flow disadvantages of the immediate write off method

why did universities precede primary schools a political economy model of educational change universities were rst established in europe around the twelfth century while primary schools did not appear until the nineteenth this paper accounts for this phenomenon using a political economy model of educational change on who are educated the elite or the masses and what is taught general or speci c vocational education a key assumption is that

on the design of a neutral business tax under uncertainty this paper extends the results of boadway and bruce journal of public economics 1984 24 231 239 and fane journal of public economics 1987 33 95 105 to describe a tax on business profits which is neutral with respect to investment and wind up decisions and default outcomes under uncertainty and bankruptcy risk the tax base allows deductions for depreciation and the cost of finance but requires knowledge of neither true economic depreciation nor the firm s required rate of return we show that the tax must treat taxable profits and losses symmetrically and that the tax rate must be a known constant even in the special case when the tax base coincides with the economic rent earned in each period

the coevolution of economic and political development from monarchy to democracy this article establishes a unified political economy model to analyze the democratization process from monarchy to oligarchy and to democracy in the context of dynamic economic development as the predominant source of wealth evolves from land to physical capital and finally to human capital the relative economic and hence coercive power of land owners capitalists and workers shifts accordingly inducing the transition of the political system where political power is expanded from landlords to capitalists and finally to workers a smooth transition through political compromise facilitates efficient allocation of savings in physical capital followed by efficient investment in human capital

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

natural gas consumption and economic growth are we ready to natural gas price liberalization in iran this paper examines the relationship between natural gas consumption and economic growth in iran within a multivariate production model we also investigate the effects of natural gas price on its consumption and economic growth using a demand side model the paper employs bounds test approach to level relationship over the period of 1972 007 we find evidence of bidirectional positive relationship between natural gas consumption and economic growth in short run and long run based on the production model the findings also suggest that real gdp growth and natural gas have positive and negative impacts on gross fixed capital formation respectively employment however was found to have negative but insignificant impact on gross fixed capital formation moreover the estimation results of demand side model suggest that natural gas price has negative and significant impact on natural gas consumption only in the long run though there is insignificant impact on economic growth these results imply that the iranian government s decision for natural gas price liberalization has the adverse effects on economic growth and policy makers should be cautious in doing this policy

occupational choice and the spirit of capitalism the british industrial revolution triggered a socioeconomic transformation whereby the landowning aristocracy was replaced by industrial capitalists rising from the middle classes as the economically dominant group we propose a theory of preference formation under financial market imperfections that can account for this pattern parents shape their children s preferences in response to economic incentives middle class families in occupations requiring effort skill and experience develop patience and a work ethic whereas upper class families relying on rental income cultivate a refined taste for leisure these class specific attitudes which are rooted in the nature of preindustrial professions become key determinants of success once industrialization transforms the economic landscape i introduction the industrial revolution was more than capital accumulation and growth it also set off a social and political transformation that redefined hierarchies in society and reshaped the distribution of income and wealth before the onset of industrialization in eighteenth century britain wealth and political power were associated with the possession of land over the course of the nineteenth century a new class of entrepreneurs and businessmen emerged as the economic elite for the most part the members of this class rose from humble beginnings and had their social origins in the urban middle classes the landed elite was left behind and eventually lost its political and economic predominance many observers of the time linked this reversal in economic fortunes to differences in values attitudes and ultimately preferences across social classes there are countless examples both in scholarly and in fictional writing of portrayals of members of the landowning class as averse to work unwilling to save ill disposed tocommercialactivity andunabletoconsidermoneyassomething

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

princes and merchants european city growth before the industrial revolution as measured by the pace of city growth in western europe from 1000 to 1800 absolutist monarchs stunted the growth of commerce and industry a region ruled by an absolutist prince saw its total urban population shrink by one hundred thousand people per century relative to a region without absolutist government this might be explained by higher rates of taxation under revenue maximizing absolutist governments than under nonabsolutist governments which care more about general economic prosperity and less about state revenue

energy consumption and economic growth in the next 11 countries the bootstrapped autoregressive metric causality approach abstract departing from previous literature using bootstrapped autoregressive metric causality approach which is more robust against non stationarity and break problems than lag augmented tests this study analyzes causal relation between economic growth and energy consumption in the next 11 countries estimating a trivariate model consisting of gdp per capita energy consumption per capita and gross capital formation it was found that the neutrality hypothesis is valid for all of the countries except for turkey these findings imply that energy conservation oriented policies should be implemented in bangladesh egypt indonesia iran korea mexico pakistan and philippines in the case of turkey a unidirectional causal nexus was found from energy consumption to economic growth since the growth hypothesis is valid energy conservation policy poses an obstacle for economic growth in turkey

das human kapital a theory of the demise of the class structure this paper suggests that the demise of the capitalists workers class structure was a socio economic transformation orchestrated by the capitalists in reaction to the increasing importance of human capital in sustaining their profit rates physical capital accumulation in the process of industrialization enhanced the importance of human capital in production and generated incentives for capitalists to support the provision of public education for the masses triggering the demise of the existing class structure the implications of the theory are consistent with the voting patterns on england s education reform of 1902

exploring the relationship between energy use and economic growth with bivariate models new evidence from g 7 countries abstract there is a rapidly growing literature on the interaction between energy use and economic development with many analysts drawing policy conclusions on the basis of granger causality tests that involve only an energy and an economic variable this paper attempts to demonstrate empirically that such studies although useful for certain applications may be of limited use for policy purposes after outlining theoretical and methodological issues associated with such approaches i apply bivariate energy economy causality tests for canada france germany italy japan the united kingdom and the united states using aggregate and sectoral data and three different modern econometric methods the results which are often contradictory or economically implausible illustrate explicitly that one should be cautious when drawing policy implications with the aid of bivariate causality tests on small samples i therefore underline the importance of utilizing as large sample sizes as possible and using multivariate models which are closer to economic theory accommodate several mechanisms and causality channels and provide a better representation of real world interactions between energy use and economic growth

economic growth energy conservation and emissions reduction a comparative analysis based on panel data for 8 asian pacific countries this study was conducted to evaluate the causality between energy consumption gdp growth and carbon emissions for eight asia pacific countries from 1971 to 2005 using the panel data the results indicate that there are long run equilibrium relationships between these variables additionally causality from energy consumption to co2 emissions was observed generally but there were some opposite relationships also parameter estimations of the panel data model indicate that there are great differences in the carbon emissions the efficiencies of energy use carbon emissions of unit gdp and unit energy consumption between developed and developing countries the base carbon emissions per capita energy consumption and efficiency of energy use in developing countries are far lower than in developed countries however the co2 emissions per unit of energy use is higher although developing countries may reduce their co2 emission per unit energy use total energy consumption will rise rapidly with economic development thus developing countries must determine how to undergo economic growth while conserving energy and reducing emissions to respond to global climate change it is necessary to develop innovative technology for energy use transform the energy structure and conduct the clean development mechanism

energy consumption in china and underlying factors in a changing landscape empirical evidence since the reform period abstract in recent decades the phenomenal growth in the chinese economy has created increasing energy consumption this is the first study analysing energy consumption in china considering economic social and political dimensions of globalisation along with the effects from trade and financial sectors the time period covers the full trajectory since the start of economic reform until recent times in this respect we use the konjunkturforschungsstelle kof globalisation index to explore the dynamic link between economic growth financial development trade and various dimensions of globalisation and energy consumption modern time series econometric techniques are used in establishing stationarity long run dynamics and causality of the series the findings suggest that globalisation decreases energy consumption in the short run but increases it in the long run however the effect of financial development on energy consumption in china is opposite to the globalisation effect on energy consumption granger causality reveals a feedback effect between economic globalisation and financial development globalisation in china can only reduce energy consumption if china develops its financial sector to a greater extent in future china should invest in its financial sector and low carbon energy alternatives to achieve sustainable development prevention of energy shortfalls and cleaner environment would assist in bridging the gap both from social and political aspects to ensure china benefits significantly with high economic growth in this asian century

economic growth and environmental degradation the environmental kuznets curve and sustainable development abstract in this paper we critically examine the concept of the environmental kuznets curve ekc it proposes that there is an inverted u shape relation between environmental degradation and income per capita so that eventually growth reduces the environmental impact of economic activity the concept is dependent on a model of the economy in which there is no feedback from the quality of the environment to production possibilities and in which trade has a neutral effect on environmental degradation the actual violation of these assumptions gives rise to fundamental problems in estimating the parameters of an ekc the paper identifies other econometric problems with estimates of the ekc and reviews a number of empirical studies the inference from some such ekc estimates that further development will reduce environmental degradation is dependent on the assumption that world per capita income is normally distributed when in fact median income is far below mean income we carry out simulations combining ekc estimates from the literature with world bank forecasts for economic growth for individual countries aggregating over countries to derive the global impact within the horizon of the bank s forecast 2025 global emissions of so 2 continue to increase forest loss stabilizes before the end of the period but tropical deforestation continues at a constant rate throughout the period

energy and economic growth in the usa a multivariate approach abstract this paper examines the causal relationship between gdp and energy use for the period 1947 90 in the usa the relationship between energy use and economic growth has been examined by both biophysical and neoclassical economists in particular several studies have tested for the presence of a causal relationship in the granger sense between energy use and economic growth however these tests do not allow a direct test of the relative explanatory powers of the neoclassical and biophysical models a multivariate adaptation of the test vector autoregression var does allow such a test a var of gdp energy use capital stock and employment is estimated and granger tests for causal relationships between the variables are carried out although there is no evidence that gross energy use granger causes gdp a measure of final energy use adjusted for changing fuel composition does granger cause gdp

effects of energy consumption on per worker output a study of kenya and south africa the paper investigates the long run cointegration relationship and energy elasticities for kenya and south africa over the periods 1978 2009 and 1971 2009 respectively using the ardl procedure developed by pesaran et al 2001 with recomputed critical bounds from narayan 2005 and the solow 1956 framework extended by rao 2010 we also conduct the toda and yamamoto 1995 test for granger non causality the regression results show that short run and long run energy elasticities are 0 50 and 1 71 respectively for kenya and 0 17 and 0 34 respectively for south africa the causality results indicate a unidirectional granger causality running from capital per worker and energy per capita to output per worker for both countries moreover in kenya we detect a strong unidirectional causality a on output from joint consideration of capital stock and energy and b on capital stock from joint consideration of energy and output in south africa the joint causations are neutral hence while energy and capital stock spurs growth in both countries kenya has a greater potential to harness growth and capital productivity via joint consideration of energy with capital and output respectively

the long term impacts of air pollution control policy historical links between municipal actions and industrial energy efficiency in kawasaki city japan abstract under the pressures of rapid industrialization and urbanization many asian countries are facing the challenge of reducing air pollution and co 2 emissions simultaneously while maintaining their economic growth under such a circumstance a growing attention is focused on successful implementation of co benefit policies that are designed to reduce both air pollutants and co 2 emissions however the concept of co benefit policies must be developed further in order to identify its quantitative and qualitative validity which can be assessed using a reliable methodology for the estimation of co benefits and through clarification of the importance of this approach for stakeholders in urban environmental policy making based on a systematic review of co benefit research and air pollution control policies in japan we investigated the local air pollution control policy in kawasaki city one of the industrial centers of japan and confirmed that it has contributed both to the sharp decline of atmospheric sulfur dioxide so 2 levels and to energy efficiency improvements in local industries our results suggest that preventive actions and local scale compliance enforcement tools that are uniquely designed and act as a form of agreement between government and individual firms could contribute significantly to successful implementation of co benefit policies in the long term we conclude our paper with a discussion of linkages between low carbon technology innovations and policy designs that could further nurture co benefits

the relationship between energy and gnp further results this paper reexamines the casuality between gnp and energy consumption by using updated us data for the period 1947 1979 as a secondary contribution we investigate the causal relationship between energy consumption and employment applying sims technique we find no causal relationship between gnp and energy consumption we find further that there is a slight unidirectional flow running from employment to energy consumption economic interpretations of the empirical results are also presented

energy efficiency and the slump in labour productivity in the usa energy consumption is included in an aggregate cobb douglas production function for the usa the data suggest that energy conservation has not reduced the growth rate for real gnp by more than 0 3 percentage points and that less than one fifth of the overall slump in labour productivity since 1973 should be attributed to higher energy prices

energy growth conundrum in energy exporting and importing countries evidence from heterogeneous panel methods robust to cross sectional dependence abstract this article uses the panel methods for energy exporting and importing countries that discuss the heterogeneity and cross sectional dependence in investigating the linkages between energy consumption and economic growth the findings of the study suggest that the energy consumption is an important input not only in the energy importing but also in energy exporting countries furthermore the results of the present paper suggest that the policy options should be different for the different countries in the back drop of heterogeneous slope coefficients

generalised r based and s based taxes under uncertainty this paper considers the relationship between two general neutral business tax structures which we label the firm tax and the shareholder tax the well known r based and s based cash flow taxes analysed by meade 1978 are special cases of these two taxes we demonstrate the neutrality of both taxes in the presence of uncertainty and characterise the tax rules required in the event of default and wind up our analysis provides the first proof of the neutrality of the s based cash flow tax and the allowance for corporate equity ace corporation tax under uncertainty we also discuss implementation and tax avoidance issues

option pricing when the underlying asset earns a below equilibrium rate of return a note in their classic paper black and scholes 2 present two derivations of the european call option pricing formula the first which we will refer to as the replication derivation relies on the fact that the returns from the option can be replicated by holding a continuously revised position in the underlying asset and bonds this implies that if an option is not priced according to the blackscholes formula there is a sure profit to be made by some combination of either short or long sales of the option and underlying asset this argument is seemingly independent of considerations relating to capital market equilibrium the second derivation which we will call the equilibrium derivation evolves from the requirement that the option earn an expected rate of return commensurate with the risk involved in holding the option as an asset this note considers the pricing of a call option on an asset which earns an expected rate of return lower than that necessary to induce investors to hold it we show in this case that even if the replication strategy is feasible it is inefficient a consequence of this is that the correct option pricing formula is different than the black scholes formula unlike the black scholes formula our formula requires as an input the difference between the expected rate of return on the underlying asset and that expected rate of return which would be required to induce holding of the asset other papers have made a similar point constantinides 3 and cox et al 4 have argued that in equilibrium the prices of traded contingent claims must satisfy a partial differential equation which is identical to the black scholes partial differential equation only when the underlying asset pays no dividends and earns a rate of return sufficient to induce holding of the asset more recently ingersoll 5 has noted that commodities often pay a nonpecuniary service yield the value of which must be taken into account in deriving the option price none of these authors however explain why the black scholes formula is sometimes inappropriate the purpose of this note is to demonstrate why the black scholes formula needs modification even if replication is feasible we provide an intuitive derivation of the correct formula and discuss why divergences of the equilibrium price from the black scholes formula do not result in arbitrage opportunities

comparative democracy the economic development thesis in comparative politics an established finding that economic development fosters democratic performance has recently come under challenge we counter this challenge with a dynamic pooled time series analysis of a major but neglected data set from 131 nations the final generalized least squares autoregressive moving averages estimates n 2 096 appear robust and indicate strong economic development effects dependent in part on the nation s position in the world system for the first time rather hard evidence is offered on the causal relationship between economics and democracy according to granger tests economic development causes democracy but democracy does not cause economic development overall the various tests would seem to advance sharply the modeling of democratic performance

institutional ecological economics abstract new institutional economics and its forerunners have we argue made important contributions to the evolving agenda of ecological economics the conceptualisation of environmental problems as instances of interdependence and the acknowledgement of positive transaction costs are key insights into the nature of environmental problems we also discuss how plurality of behavioural motivations and limited cognitive capacity have important implications for environmental decision making and its analysis we show how evolutionary and collective action theories offer complementary takes on the choice and change of environmental governance institutions and how the concept of social capital can enrich analyses of environmental governance we conclude that an emerging institutional ecological economics has the greatest relative advantage in analysing the design implementation and effectiveness of environmental governance solutions

income and emission a panel data based cointegration analysis this paper presents the results of an investigation of the causality issue of incomeemission relationship based on time series econometric techniques of unit root test cointegration and related error correction model for a panel data set here the nature of causality between per capita co2 emission pcco2 and per capita gdp pcgdp has been examined using a cross country panel data set covering 88 countries for the period 1960 90 using the panel unit root test procedure of im et al 1997 ips we have found that the hypothesis of unit root i e non stationarity of the time series of pcgdp and pcco2 can not be rejected for individual country groups as both the variables are found to follow i 1 process we next have performed the panel data co integration test and finally we have estimated the ecm for these country groups for which significant income emission cointegration was obtained to explore the nature of dynamics implicit in the given panel data set our findings suggest that there is more or less a bi directional causal relationship between income pcgdp and co2 emission pcco2 for africa central america america as a whole eastern europe western europe europe as a whole and the world as a whole that means the movement of the one variable directly affects the other variable through a feedback system thus the policy makers should be cautious to make proper decision about the control of emission level

does high income promote democracy the authors construct a statistical model with which to test whether the regularity that democracy is more commonly found among wealthy countries stems from a democratizing effect of high income or is due entirely to other factors such as the historical context various features of the institutional setting and simultaneity with the process of leadership change even after correcting for these many other influences the democratizing effect of income remains as a statistically significant factor promoting the emergence of democratic political institutions the authors go on to find that leaders risks of losing power rise during their time in office and that these risks are higher in more democratic countries the authors confirm the finding by burkhart and lewis beck that the democracy promoting effect of income is stronger among the european countries they suggest that high income has a more powerful democratizing effect among the southern european countries because it interacts with pressure from major trading partners to democratize this suggests a revaluation of policies designed to foster the replacement of authoritarian regimes by democratic ones through free trade

energy and economic growth grounding our understanding in physical reality this article attempts to summarise the complex wide ranging and unresolved debate within the economics literature on the possibility of decoupling economic growth from energy use it explores the difference between neo classical and ecological economic worldviews and highlights how the ecological economic approach attempts to ground its analysis within the physical limits implied by the laws of thermodynamics once these laws are accounted for the possibility of decoupling economic growth from energy use seems more limited than neo classical economics implies analysis of empirical evidence also demonstrates that observed improvements in gdp energy use ratios in the usa are better explained by shifts towards higher quality fuels than by improvements in the energy efficiency of technologies this implies a need to focus on decarbonising energy supply furthermore where energy efficiency improvements are attempted they must be considered within the context of a possible rebound effect which implies that net economy wide energy savings from energy efficiency improvements may not be as large as the energy saved directly from the efficiency improvement itself both decarbonising energy supply and improving energy efficiency require the rapid development and deployment of new and existing low carbon technologies this review therefore concludes by briefly outlining areas of economic thought that have emerged as a result of engagement between economists and experts from other disciplines they include ecological evolutionary and institutional economics all of which can make policy relevant contributions to achieving a transition to a low carbon economy

is democracy more expropriative than dictatorship tocquevillian wisdom revisited abstract we reexamine the incentive effect of political democracy on the tax rate by defining a political regime over two dimensions the extent of the franchise and the extent that the redistribution of tax revenues is biased towards the rich standard tocquevillian models assume that even if there is limited franchise there is no redistribution bias from this it follows that democracy is more expropriative than oligarchy because a poorer median voter opts for higher taxes introducing the realistic assumption of a redistribution bias we find a countervailing effect democratization decreases exploitation by the rich on the disenfranchised poor since tax revenues are redistributed over a larger base the median voter may gain less from redistributive taxation we call this the olson effect

the dragon awakens innovation competition and transition in the energy strategy of the people s republic of china 1949 2017 abstract based on a mix of original archival research and an extensive literature review this article assesses the history of the people s republic of china s national energy policies since 1949 we divide this history into six phases emergence 1949 1957 socialist construction 1958 1965 turbulence 1966 1978 reform 1979 2000 contestation 2001 2014 and transition 2015 present over the whole history of more than sixty years china s energy production and consumption grew at a surprising speed while energy intensity exhibited early fluctuations and a subsequent gradual decrease after the turbulence phase in tracing this history the article offers new historical and policy insights into the world s largest developing country and a theoretical contribution to the role of the state in shaping economy and society through energy policy the article lastly offers an in depth exploration of how command and control style administrative intervention and low levels of market liquidity have had a prophylactic effect on innovation and competition

breaks and trends in oecd countries energy gdp ratios this paper uses the econometrics of endogenous structural breaks to examine changes in energy intensity trends for oecd countries over 1960 2009 nearly all oecd countries currently have significant negatively trending energy gdp ratios but for several countries those negative trends are recent and two countries have recent significant positive trends for several countries energy intensity had a significant positive trend followed by a break and then a significant negative trend those break dates however appear to have little to do with level of development gdp per capita alternatively the volatile energy prices of the 1970s and early 1980s played a role in many of the countries that experienced inverted v breaks these findings have implications for future modeling and forecasting of energy consumption as well as for the role of energy price policy in developed and developing countries

the impact of economic development on democracy any account of the social and economic conditions of democracy must come to terms with the central finding of the cross national statistical research a sturdy though not perfect association between economic development and democracy to tackle these questions of causation we adopted a strategy of analytic induction based on comparative historical research our program of comparative historical research confirmed the conclusion of the cross national statistical analyses of the correlates of political democracy the level of economic development is causally related to the development of political democracy however the underlying reason for the connection in our view is that capitalist development transforms the class structure enlarging the working and middle classes and facilitating their self organization thus making it more difficult for elites to exclude them politically simultaneously development weakens the landed upper class democracy s most consistent opponent

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

parental altruism and inter vivos transfers theory and evidence this paper uses psid data on the extended family to test whether inter vivos transfers from parents to children are motivated by altruism specifically the paper tests whether an increase by one dollar in the income of parents actively making transfers to a child coupled with a one dollar reduction in that child s income results in the parents increasing their transfer to the child by one dollar this restriction on parental and child transfer income derivatives is derived for the standard altruism model augmented to include uncertainty and liquidity constraints these additional elements pin down the timing of inter vivos transfers the method used to estimate income transfer derivatives takes into account unobserved heterogeneity across families in the degree of altruism the findings strongly reject the altruism hypothesis redistributing one dollar from a recipient child to donor parents leads to less than a 13 cent increase in the parents transfer to the child far less than the one dollar increas

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

modelling demand for crude oil products in spain this paper develops an econometric model for the five most important crude oil products demand in spain the aim is the estimation of a range of elasticities of such demands that would serve as the basis for an applied general equilibrium model used for forecasting energy demand in a broader framework the main distinctive features of the system with respect to previous literature are i it takes advantage of monthly information coming from very different information sources and ii multivariate unobserved components uc models are implemented allowing for a separate analysis of long and short run relations uc models decompose time series into a number of unobserved though economic meaningful components mainly trend seasonal and irregular a module is added to such structure to take into account the influence of exogenous variables necessary to compute price cross and income elasticities since all models implemented are multivariate in nature the demand components are allowed to interact among them through the system noises similar to a seemingly unrelated equations model the results show unambiguously that the main factor driving demand is real income with prices having little impact on energy consumption

economic backwardness in political perspective government policies and institutions shape economic incentives and via this channel have a first order impact on economic development why then do many societies adopt policies that discourage investment and maintain institutions that cause economic backwardness perhaps politically powerful groups elites are not in favor of economic growth but why it would appear that economic growth would provide more resources for these groups to take over or tax increasing their economic returns so why don t powerful groups always support economic development in this paper we develop a theory of inefficient government policies and institutions all else equal politically powerful groups would welcome superior institutions and technologies but in practice all else is not equal because superior institutions and technologies may reduce their political power and make it more likely that they will be replaced at the center of our theory is therefore the idea that changes in institutions or the introduction of new technologies often create turbulence eroding the political advantages and future economic rents of incumbent elites alternatively new technologies may enrich competing groups increasing their threat to incumbents these considerations make politically powerful groups fear losing power and oppose economic and political change even when such change will benefit society as a whole to understand the mechanism at work and its potential applications consider a concrete example industrialization in the nineteenth century bairoch 1982 estimates that between 1830 and 1913 world manufacturing output increased by a factor of 5 see table 1 panel a nevertheless this process was highly uneven across regions and countries bairoch also calculates that over the same period manufacturing output in developed countries europe and north america increasedbyafactorofover10 whereasitdeclinedinthe third world among developed countries there were

environmental support energy security and economic growth in japan this study investigates the resource consumption of japanese society since 1979 and its subsequent effects on the economic output of the nation and the environment in order to quantify resource appropriation and trends in production and consumption the concept of emergy synthesis is employed our results show a significant increase in the total amount of emergy consumed by 66 9 between 1979 and 2003 which comes hand in hand with an increase in the level of environmental stress by 93 7 quantified as the environmental loading ratio on the other hand the emergy required to produce 1 usd of economic output has been gradually decreasing which denotes an increase in the efficiency of the conversion of natural capital into economic output what is most interesting though is the growing dependence of the japanese economy on imported emergy increasingly from developing nations that severely affects the potential for unhindered economic growth this can prove to be a big barrier that could affect the resource security of the japanese economy and render it susceptible to risks associated with access to natural resources which in turn can jeopardise its long term economic sustainability

the greenhouse effect the fallacies in the energy efficiency solution abstract the view that widespread improvements in energy efficiency can by themselves do anything to halt the build up of greenhouse gases around the globe is fundamentally unsound it is based on the same fallacies that underlie the claim that energy savings from improving efficiency can substitute for new energy supply the paper by keepin and kats1 claiming that per tonne of coal not burned improvements in energy efficiency are more cost effective than substituting nuclear for coal fired power is therefore an irrelevancy as far as this debate is concerned reductions is energy intensity of output that are not damaging to the economy are associated with increases not decreases in energy demand at the macroeconomic level even within the boundaries of their own flawed approach their attempt2 to refute the critique of their thesis made by jones3 was little more than misdirected grape shot with no discernable connected thread of argument

swords or plowshares a theory of the security of claims to property this paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities the model emphasizes the distinction between offensive weapons which are the instruments of predation and fortifications which provide defense against predation the analysis of this model shows how the equilibrium security of claims to property is determined the analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure we also analyze the complex relation between economic welfare and the security of claims to property we find for example that a relatively poor agent could be better off in an equilibrium with less secure claims to property

energy conservation and sustainable economic growth the case of latin america and the caribbean this study examines the causal relationships among energy consumption economic growth and carbon dioxide emissions in twenty countries from latin america and the caribbean region the methodology includes the use of phillips and perron pp tests a cointegration model with vector error correction modeling vecm and vector autoregression var with granger causality the study concludes that of the twenty countries analyzed only in four of them will it be possible to implement energy conservation polices without affecting their economic growth four others are not able to consider an energy conservation policy with economic growth and the other twelve should focus on their economic growth before adopting any conservation policies energy efficiency was found in this region especially in the countries which have both cointegration and short term equilibrium

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

energy consumption and economic growth evidence from china at both aggregated and disaggregated levels using a neo classical aggregate production model where capital labor and energy are treated as separate inputs this paper tests for the existence and direction of causality between output growth and energy use in china at both aggregated total energy and disaggregated levels as coal oil and electricity consumption using the johansen cointegration technique the empirical findings indicate that there exists long run cointegration among output labor capital and energy use in china at both aggregated and all three disaggregated levels then using a vec specification the short run dynamics of the interested variables are tested indicating that there exists granger causality running from electricity and oil consumption to gdp but does not exist granger causality running from coal and total energy consumption to gdp on the other hand short run granger causality exists from gdp to total energy coal and oil consumption but does not exist from gdp to electricity consumption we thus propose policy suggestions to solve the energy and sustainable development dilemma in china as enhancing energy supply security and guaranteeing energy supply especially in the short run to provide adequate electric power supply and set up national strategic oil reserve enhancing energy efficiency to save energy diversifying energy sources energetically exploiting renewable energy and drawing out corresponding policies and measures and finally in the long run transforming development pattern and cut reliance on resource and energy dependent industries

co2 emissions in australia economic and non economic drivers in the long run abstractaustralia has sustained a relatively high economic growth rate since the 1980s compared to other developed countries per capita co2 emissions tend to be highest amongst oecd countries creating new challenges to cut back emissions towards international standards this research explores the long run dynamics of co2 emissions economic and population growth along with the effects of globalization tested as contributing factors we find economic growth is not emission intensive in australia while energy consumption is emissions intensive second in an environment of increasing population our findings suggest australia needs to be energy efficient at the household level creating appropriate infrastructure for sustainable population growth high population growth and open migration policy can be detrimental in reducing co2 emissions finally we establish globalized environment has been conducive in combating emissions in this respect we establish the beneficial effect of economic globalization

are causal relationships sensitive to causality tests 1987 are causal relationships sensitive to causality tests applied economics vol 19 no 4 pp 459 465

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model