interjurisdictional spillovers decentralized policymaking and the elasticity of capital supply a key question in the fiscal federalism literature is whether decentralized policymaking in an economy with spillovers among jurisdictions leads to an efficient outcome see e g oates 1972 a striking example where this question is of particular importance is the current debate on global warming the failure of the copenhagen summit in late 2009 has shown impressively that centralized solutions to the climate change problem are hard to realize one might thus want to know whether a decentralized policy approach where each country chooses its own climate policy without coordinating it with the climate policy of other countries gives hope for an efficient policy outcome further important examples of decentralized decision making in the presence of interjurisdictional spillover effects can be found in the decentralized provision of education and infrastructure at first glance it is hardly imaginable that decentralized policymaking can ever be optimal it is not only the very existence of spillovers that causes doubt the policy instruments themselves also create policy externalities despite this presumption against the efficiency of decentralized policymaking the previous literature provides several studies in which decentralization leads to an undistorted policy choice an important example is the paper of oates and schwab 1988 who argue that the choice of capital taxes in an economy with identical jurisdictions mobile capital and local pollution may indeed be efficient in a remarkable recent paper ogawa and wildasin 2009 extend the analysis to account for transboundary pollution spillovers and asymmetric countries and still get the efficiency result in their model emissions and thus the extent of spillovers generated by a jurisdiction is proportional to capital employed in this jurisdiction the choice of capital taxes is then distorted by the jurisdictions incentives for tax competition and by the jurisdictions disregard of spillover effects but the key argument is that both distortions just neutralize each other and thereby lead to efficient capital tax rates our paper contributes to this literature and points to the important role that the elasticity of aggregate capital supply with respect to the net rate of return to capital plays for the efficiency of decentralized policymaking in accordance with the previous literature we show that under a fixed capital supply zero capital supply elasticity the decentralized policy choice is indeed optimal if the capital supply elasticity is strictly positive however capital tax rates are inefficiently low in the decentralized

trading in exhaustible resources in the presence of conversion costs a general equilibrium approach we survey the literature on the general equilibrium approach to trade in exhaustible resources and present a model in which conversion costs are incorporated and in which the usual balance of payments condition is relaxed it is found that in many cases the problem of dynamic inconsistency will arise

second best carbon taxation in the global economy the green paradox and carbon leakage revisited acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is small the fall in the world interest rate weakens this weak green paradox effect especially if intertemporal substitution is weak still social damages from greenhouse gases drop if the fall in oil supply and cumulative emissions is strong enough if the current carbon tax is set too low the second best future carbon tax is set below the first best too to mitigate adverse green paradox effects unilateral second best optimal carbon taxes exceed the first best taxes due to an import tariff component the intertemporal terms of trade effects of the future carbon tax increase current and future tariffs and those of the current tax lower the current tariff finally carbon leakage and globally altruistic and unilateral second best optimal carbon taxes if non kyoto oil importers price carbon too low are analysed in a three country model of the global economy

fuel tax incidence in developing countries the case of costa rica abstract although fuel taxes are a practical means of curbing vehicular air pollution congestion and accidents in developing countries all of which are typically major problems they are often opposed on distributional grounds yet few studies have investigated fuel tax incidence in a developing country context we use household survey data and income outcome coefficients to analyze fuel tax incidence in costa rica we find that the effect of a 10 fuel price hike through direct spending on gasoline would be progressive its effect through spending on diesel both directly and via bus transportation would be regressive mainly because poorer households rely heavily on buses and its effect through spending on goods other than fuel and bus transportation would be relatively small albeit regressive finally we find that the overall effect of a 10 fuel price hike through all types of direct and indirect spending would be neutral and the magnitude of this combined effect would be modest we conclude that distributional concerns need not rule out using fuel taxes to address pressing public health and safety problems particularly if gasoline and diesel taxes can be differentiated

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

think locally act locally spillovers spillbacks and efficient decentralized policymaking we analyze models with interjurisdictional spillovers among heterogeneous jurisdictions such as co 2 emissions that affect the global environment each jurisdiction s emissions depend upon the local stock of capital which is interjurisdictionally mobile and subject to local taxation in important cases decentralized policymaking leads to efficient resource allocation even in the complete absence of corrective interventions by higher level governments or coordination of policy through coasian bargaining in particular even when the preferences and production technologies differ among the agents the decentralized system can result in globally efficient allocation

how substitutable is natural capital one of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital this issue was raised early on in the debate on sustainability by pearce and has never really been resolved this paper is an empirical attempt to measure the degree of substitutability between different forms of capital a nested ces production function is used to allow flexibility in the estimated elasticities of substitution also within this specification natural resources and other inputs are combined in different levels of the function thus allowing for different levels of substitutability institutional and economic indicators are also incorporated in the production function estimated results show that the elasticities derived from functions involving land resources were generally around one or greater implying a fairly high degree of substitutability furthermore changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation no statistically significant relationship between income and any of the institutional indicators was found

unilateral emission cuts and carbon leakages in a dynamic north south trade model the effects of a unilateral cut in emissions are analyzed in a dynamic two country model two intermediate goods are produced one of which uses the fossil fuel these inputs are traded and combine to produce a final good the effect of a cut in fossil fuel use by a bloc e g annexure 1 countries in the kyoto protocol depends on whether the fuel is priced at marginal cost or above in the latter case a green paradox may appear the paper s contribution lies in analyzing the dynamics and trade implications of the unilateral action

can decentralized planning really achieve first best in the presence of environmental spillovers abstract it is generally accepted that decentralized policy choice in the presence of interjurisdictional spillovers is inefficient strikingly ogawa and wildasin 2009 find that in a model with heterogenous jurisdictions interjurisdictional capital flows and interjurisdictional environmental damage spillovers decentralized planning outcomes are equivalent to that under a centralized planner we first show the critical importance of two key assumptions no retirement of capital fixed environmental damages per unit of capital in obtaining this result second we consider a more general model allowing for capital retirement and abatement activities and show that the outcome of a decentralized market generally differs from the solution of a centralized planner s social welfare maximizing problem

the impact of technological change on climate protection and welfare insights from the model mind abstract avoiding dangerous climate change is likely to require policies to mitigate co2 emissions that are substantially more ambitious than those currently being considered for such policies the issue of endogenous technological change becomes important both to estimate the overall costs and to identify the intertemporally cost effective combination of mitigation options in this paper we first discuss the recent literature that evaluates the potential for endogenous technological change to reduce mitigation costs and the efforts to incorporate endogenous technological change into pre existing integrated assessment models then we formulate our own integrated assessment model the model of investment and technological development mind which allows analysis of the relationship between specific mitigation options and the costs of ambitious climate protection objectives our model reveals two important results first the incorporation of technological change in a portfolio of mitigation options can reduce the costs of climate policies substantially achieving the ambitious policy goals necessary to avoid dangerous climate change becomes feasible without significant welfare losses second the different mitigation options are of different importance in achieving climate protection goals improving energy efficiency becomes too costly as a major mitigation option in the long run in the long run fossil fuels have to be substituted by renewable energy sources because a backstop technology with the potential of learning by doing has the strongest impact on reducing the welfare losses due to climate protection furthermore carbon capturing and sequestration can allow for further reduction in the costs of climate protection and can postpone the need to transform the energy system from a fossil fuel based one to a renewables one

international trade and the environment policy reform in a polluted small open economy abstract this paper investigates sufficient conditions for welfare improving policy reforms in a small open economy facing many trade and pollution distortions we investigate and compare reform in tax regimes quota regimes and mixed regimes where some pollutants are regulated with taxes and others with quotas it is also shown that the welfare benefits of reforming pollution policy are greater in an economy with international factor mobility than in an economy not subject to such mobility

is there really a green paradox abstract in the absence of a co2 tax the anticipation of a cheaper renewable backstop increases current emissions of co2 since the date at which renewables are phased in is brought forward and more generally future emissions of co2 will decrease the effect on global warming is unclear green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit co2 emissions we establish these results by analyzing depletion of non renewable fossil fuels followed by a switch to a clean renewable backstop paying attention to timing of the switch and the amount of fossil fuels remaining unexploited we also discuss the potential for limit pricing when the non renewable resource is owned by a monopolist finally we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ thus boosting green welfare however if a market economy does not internalize global warming externalities and renewables have not kicked in yet full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare

determinacy of equilibria in dynamic models with finitely many consumers abstract we consider a production economy with a finite number of heterogeneous infinitely lived consumers we show that if the economy is smooth enough equilibria are locally unique for almost all endowments we do so by converting the infinite dimensional fixed point problem stated in terms of prices and commodities into a finite dimensional negishi problem involving individual weights in a social value function by adding artificial fixed factors to utility and production functions we can write the equilibrium conditions equating spending and income for each consumer entirely in terms of time zero factor endowments and derivatives of the social value function

habit formation in a monetary growth model abstract this paper introduces the hypothesis of habit formation in consumption in the sidrauski am econ rev papers proc 57 1967 534 model a number of results are derived 1 as in the sidrauski model money is superneutral and the friedman rule still provides the optimal quantity of money 2 the demand for money in this model is greater than in the sidrauski model 3 the money demand reflects the habit persistence related to past consumption and the rate of time preference and it is more sensitive to changes in inflation and nominal interest rates than the sidrauski model

can carbon tax eat opec s rents abstract we consider the optimal emission tax for a stock pollutant when the pollutant flow is also regulated by a resource exporting cartel we consolidate clarify and generalize a set of previous results to obtain clear isolation of the pigouvian and trade policy components of the tax because of the trade policy component the tax can shift more rents from the cartel than the pollution causes damage related costs this leads to the possibility that the pollution problem accompanied by the coordination of taxation can bring about net benefits at the expense of the cartel

climate policy under factor mobility a differentiated case for capital taxation abstract in a general equilibrium model with two periods and a finite fossil resource i analyze the non cooperative climate policies of symmetric countries that are in competition for mobile factors of production capital and fossil energy the paper shows that countries that want to slow down climate change but are also concerned about tax revenues from mobile tax bases have a rationale to supplement environmental taxes on fossil fuels with source based capital taxes or subsidies more specifically countries find it beneficial to subsidize capital in period one and tax it in period two the first period subsidy on capital facilitates a higher environmental tax by counteracting its adverse effects and increases national and global welfare in equilibrium by contrast the capital tax in period two induces inter and intratemporal distortions that lead to lower welfare the rate of resource extraction is inefficiently high in equilibrium no matter which tax portfolio is at the governments disposal furthermore unintended green paradox effects of demand side policies are shown to arise even in general equilibrium with factor mobility finally factor mobility does not necessarily lead to a higher rate of extraction and lower welfare compared to autarky

monopolistic recycling of oil revenue and intertemporal bias in oil depletion and trade this paper investigates oil depletion and trade when monopolistic oil producers also exercise monopoly power in the capital market a two period model views collusively organized oil producers with an initial trade surplus and a subsequent deficit when monopoly power in the capital market is applied to the disadvantage of borrowers less oil is initially made available to oil importers than if the interest rate had been competitively determined this depletion bias however is reversed if because of incentives for capital accumulation it is to the advantage of the oil producers to subsidize lending to the oil importers in either case the bias in oil depletion due to monopolistic recycling of oil revenue is greater the more vulnerable are oil importer s incomes to a curtailment of oil supplies 25 references

is infrastructure capital productive a dynamic heterogeneous approach this paper offers an empirical evaluation of the output contribution of infrastructure drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960 2000 and using a panel time series approach the paper estimates a long run aggregate production function relating gdp to human capital physical capital and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport power and telecommunications tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector which is taken to represent the long run production function estimation of its parameters is performed using the pooled mean group estimator which allows for unrestricted short run parameter heterogeneity across countries while imposing the testable restriction of long run parameter homogeneity the long run elasticity of output with respect to the synthetic infrastructure index ranges between 0 07 and 0 10 the estimates are highly significant both statistically and economically and robust to alternative dynamic specifications and infrastructure measures there is little evidence of long run parameter heterogeneity across countries whether heterogeneity is unconditional or conditional on their level of development population size or infrastructure endowments

why finance ministers favor carbon taxes even if they do not take climate change into account fiscal considerations may shift governmental priorities away from environmental concerns finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition we develop a multi region model of tax competition and resource extraction to assess the fiscal incentive of imposing a tax on carbon rather than on capital we explicitly model international capital and resource markets as well as intertemporal capital accumulation and resource extraction while fossil resources give rise to scarcity rents capital does not with carbon taxes the rents can be captured and invested in infrastructure which leads to higher welfare than under capital taxation this result holds even without modeling environmental damages it is robust under a variation of the behavioral assumptions of resource importers to coordinate their actions and a resource exporter s ability to counteract carbon policies further no green paradox occurs instead the carbon tax constitutes a viable green policy since it postpones extraction and reduces cumulative emissions

comparative statics and perfect foresight in infinite horizon economies does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria when there is a finite number of infinitely lived agents equilibria are generically determinate this is not true with overlapping generations of finitely lived agents we ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path in this framework there are many economies with isolated equilibria many with continua of equilibria and many with no equilibria at all with two or more goods in every period not only can the price level be indeterminate but relative prices as well furthermore such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are pareto efficient this paper considers whether infinite horizon economies have determinate perfect foresight equilibria this question is of crucial importance if instead equilibria are locally indeterminate not only are we unable to make comparative static predictions but the agents in the model are unable to determine the consequences of unanticipated shocks the idea underlying perfect foresight is that agents expectations should be the actual future sequence predicted by the model if the model does not make determinate predictions the concept of perfect foresight is meaningless we consider two extreme cases the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers an overlapping generations model both are models of stationary pure exchange economies no production including the storage of goods between periods can occur these models are unrealistic but are the easiest to study extensions of the results of this paper to models with production infinitely lived assets and mixtures of the two types of consumers are presented by muller and woodford 29 when there is a finite number of infinitely lived consumers we argue that equilibria are generically determinate this is because the effective number of equations determining equilibria is not infinite but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent generically near an equilibrium these equations are independent and exactly determine the unknowns when there are infinitely many overlapping generations this reasoning breaks down an infinite number of equations is not necessarily sufficient to determine

long run growth and welfare effects of public policies with distortionary taxation abstract in a one sector growth model with infrastructure investment we study the impact of fiscal policies on growth the government collects taxes on labor income and profits the government uses these revenues to purchase infrastructure investment provide utility enhancing government services and to provide transfer payments to the households we show that the balanced growth rate is an increasing function of the percent of government revenues that goes to infrastructure we find that the growth maximizing mix of taxes depends on the elasticity of substitution between inputs in particular with distortionary taxes the growth maximizing tax rate on capital is higher the lower the elasticity of substitution between private physical capital and public capital in addition the growth maximizing size of the government is higher when the elasticity of substitution between public and private inputs is low we also investigate welfare effects of other public expenditures as well depending on the elasticity of substitution in production the welfare implications of different public policies can be substantial

quadratic concavity and determinacy of equilibrium one of the central features of classical models of competitive markets is the generic determinacy of competitive equilibria for smooth economies with a finite number of commodities and a finite number of consumers almost all initial endowments admit only a finite number of competitive equilibria and these equilibria vary locally smoothly with endowments thus equilibrium comparative statics are locally determinate this paper establishes parallel results for economies with finitely many consumers and infinitely many commodities the most important new condition we introduce quadratic concavity rules out preferences in which goods are perfect substitutes globally locally or asymptotically our framework is sufficiently general to encompass many of the models that have proved important in the study of continuous time trading in financial markets trading over an infinite time horizon and trading of finely differentiated commodities

economics and climate change integrated assessment in a multi region world this paper develops a model that integrates the climate and the global economy an integrated assessment model with which different policy scenarios can be analyzed and compared the model is a dynamic stochastic general equilibrium setup with a continuum of regions thus it is a full stochastic general equilibrium version of rice nordhaus s pioneering multi region integrated assessment model like rice our model features traded fossil fuel but otherwise has no markets across regions there is no insurance nor any intertemporal trade across them the extreme form of market incompleteness is not fully realistic but arguably not a bad approximation of reality its major advantage is that along with a set of reasonable assumptions on preferences technology and nature it allows a closed form model solution we use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil consuming and producing regions we show that surprisingly only taxes on oil producers can improve the climate taxes on oil consumers have no effect at all the calibrated model suggests large differences in views on climate policy across regions

subglobal climate change actions and carbon leakage the implication of international capital flows abstract the climate change agreement negotiated in kyoto obliges the oecd countries to initiate the international effort of abating the anthropogenic greenhouse gas emissions in the event that such an initiative is taken the associated competitive pressures may induce significant offsetting increases in non oecd emissions a process generally known as leakage the current models used to study these competitive effects have adopted an empirically inconsistent view of the world that international capital markets are perfectly integrated to the extent that restrictions on the international mobility of capital affect regional investment decisions it might be expected that the competitive impacts drawn from these models could significantly be altered this paper addresses this issue the paper suggests that these competitive effects are not really contingent on capital flows with a regionally disaggregated dynamic model of the world economy we show a quite robust result that carbon leakage is virtually unaffected by the presence of restrictions on the mobility of international capital

taxation of economic rents economic rents have long been identified as an efficient tax base in addition the recent literature documents that rent income is highly concentrated and that rents are quickly increasing rent taxation thus seems attractive for reasons of both efficiency and equity nevertheless rent taxation remains a marginal topic in research and policy making in a systematic review of the neoclassical literature on different rent types we find that some types of rents reflect inefficiencies and should thus be minimized while others reward investments and should be supported in line with social welfare what remains for taxation are land rents one of the few true scarcity rents land rents have significant potential to improve the efficiency of the tax system we then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects the interaction of many of these effects remains unexplored which might explain policymakers hesitation in using land taxes to date

the transition to a new inflation rate in models with habit formation abstract the money in utility model is re considered to allow for habit forming preferences in which habits develop over instantaneous utility from consumption and real money holdings an increase in the inflation rate does not affect the steady state level of capital or consumption but reduces the steady state levels of real money holdings and habits the model has important off steady state dynamics

equilibrium analysis of the infinite horizon model with smooth discounted utility functions abstract the equilibrium set and the natural projection are studied within the setup of the pure exchange infinite horizon model with a finite number of infinitely lived agents utility functions belonging to the smooth discounted variety and individual endowments being variable we show that the equilibrium set has convex fibers which implies arc connectedness and more generally contractibility we also show that the sets of regular equilibria and of regular economies are open and dense for the product topology therefore it is generically true that the equilibria of infinite horizon economies with smooth discounted utility functions can be approximated by those of finite horizon truncated economies

accounting for forward rates in markets for foreign currency absteract forward and spot exchange rates between major currencies imply large standard deviations of both predictable returns from currency speculation and of the equilibrium price measure the intertemporal marginal rate of substitution representative agent theory with time additive preferences cannot account for either of these properties we show that the theory does considerably better along these dimensions when the representative agent s preferences exhibit habit persistence but that the theory fails to reproduce some of the other properties of the data in particular the strong autocorrelation of forward premiums since the advent of flexible exchange rates in the early 1970s a large body of statistical work has established that forward rates for major currencies are not optimal predictors of future spot rates relevant evidence is reported in studies by baillie lippens and mcmahon 1983 bekaert 1991 bilson 1981 boothe and longworth 1984 cumby 1988 cumby and obstfeld 1984 fama 1984 gregory and mccurdy 1984 hansen and hodrick 1983 hodrick and srivastava 1984 and korajczyk and viallet 1990 a more complete list of references is provided by hodrick 1987 these papers indicate that returns from speculation in forward and spot currency markets are predictable and that the predictable components vary considerably over time a number of alternative explanations have been offered for the predictable variation in foreign currency market excess returns kaminsky 1988 korajczyk 1985 and krasker 1980 suggest that infrequent extreme events may make returns appear predictable in small samples the so called peso problem lewis 1989 argues that rational learning following infrequent changes in the process governing equilibrium prices can explain part of the ex post predictability of currency returns froot and frankel 1989 and froot and thaler 1990 examine the hypothesis that market forecasts of future spot

carbon motivated border tax adjustments old wine in green bottles 1285 ben lockwood and john whalley we discuss emerging proposals for border tax adjustments btas to accompany commitments to reduce carbon emissions in the eu the us and other oecd economies the rationale offered for such border adjustment is that various entities such as the eu if making commitments to reduce emissions which go beyond those undertaken in other regions of the world impose added costs on domestic producers which create a competitive disadvantage for them some form of remedy is viewed as reasonable to maintain the competitiveness of domestic industries when responding to global environmental problems in this paper we argue that despite its current carbon manifestation the issue of border tax adjustments and both their rationale and their effects on trade are not new and despite the present debate which seems to overlook older literature have arisen before earlier debate on border tax adjustments occurred at the time of the adoption of the value added tax vat in the eu as a tax harmonisation target in the early 1960s but academic literature of the time showed that a change between origin and destination basis in the vat would be neutral and hence the use of a destination based tax in the eu to accompany the vat offered no trade advantage to europe here we argue that essentially the same arguments also apply for carbon motivated btas and in the current debate there seems to be a misconception between price level effects and relative price effects stemming from a bta which needs correcting we also argue that the impact of border tax adjustments should be viewed as independent of the motivation of the adjustments

rent extracting tariffs and the management of exhaustible resources this paper examines the interaction between a resource exporting and a resource importing country the exporting country must choose the optimal rate of depletion of an exhaustible resource and also must decide on the allocation of the extracted resource between exports and domestic use optimal management from a national point of view entails inefficiency from a global perspective in that too little resource is exported as the supplying country exploits its monopoly power the importing country however has an incentive to extract some of the resource rent by using a tariff although rent extraction is limited by the exporter s ability to use the resource domestically the optimal tariff is positive and induces greater overall inefficiency

market participation and sunspot equilibria we investigate the structure of competitive equilibria in an exchange economy parametrized by i endowments and ii restrictions on market participation for arbitrary regular endowments if few consumers are restricted there are no sunspot equilibria if endowments are allowed to vary while restrictions on market participation are fixed there is a generic set of preferences such that sunspot equilibria exist for a non empty subset of endowments our analysis extends to the general case of an arbitrary number of restricted consumers the results of cass and shell for the polar cases in which either i no consumers are restricted or ii all consumers are restricted

optimal saving interest rates and endogenous growth the main point of this paper is that the apparent failure of economists thus far to establish a positive empirical link between interest rates and saving does not by itself discredit the hypothesis of a direct structural relationship between the two ceteris paribus because this structural relationship may be shifting about in response to changes in exogenous variables such as tastes and technology in a way that is consistent with any type of reduced form correlation between interest rates and saving in the data this point is demonstrated within a simple model of optimal saving interest rates and economic growth the different implications of endogenous versus exogenous growth are explored in this context

on capturing oil rents with a national excise tax this paper argues that since the supply of oil in the ground is inelastic the incidence of a sales tax on oil maintained forever at a fixed rate would fall entirely on the oil suppliers in the world economy however the elasticity of supply of oil to a single country depends on that country s imports as a share of world output and on the elasticity of demand for that country the paper calculates optimal tax rates for a country as a function of these variables and estimates optimal oil tax rates for the u s for some oecd countries separately and for the u s plus the oecd collectively current u s tax rates are shown to be far below optimal values

optimal taxes on fossil fuel in general equilibrium we analyze a dynamic stochastic general equilibrium dsge model with an externality through climate change from using fossil energy our central result is a simple formula for the marginal externality damage of emissions or equivalently for the optimal carbon tax this formula which holds under quite plausible assumptions reveals that the damage is proportional to current gdp with the proportion depending only on three factors i discounting ii the expected damage elasticity how many percent of the output flow is lost from an extra unit of carbon in the atmosphere and iii the structure of carbon depreciation in the atmosphere thus the stochastic values of future output consumption and the atmospheric co2 concentration as well as the paths of technology whether endogenous or exogenous and population and so on all disappear from the formula we find that the optimal tax should be a bit higher than the median or most well known estimates in the literature we also formulate a parsimonious yet comprehensive and easily solved model allowing us to compute the optimal and market paths for the use of different sources of energy and the corresponding climate change we find coal rather than oil to be the main threat to economic welfare largely due to its abundance we also find that the costs of inaction are particularly sensitive to the assumptions regarding the substitutability of different energy sources and technological progress

trade and carbon taxes we study various scenarios for taxing emissions of carbon dioxide c02 the question is how carbon tax policies will perform given interna tional trade if countries adopt different tax rates we investigate this question quantitatively using cim earth a newly developed open source computable general equilibrium cge model since climate change is a function of global c02 emissions an efficient strategy for control ling emissions would be to impose the same price wherever they occur such an approach presents a free riding problem however because nations have an incentive not to comply while gaining the ben efits of reduced emissions elsewhere moreover because of distributive concerns and claims about

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

carbon leakage the green paradox and perfect future markets policies of lowering carbon demand may aggravate instead of alleviate climate change green paradox in a two period three country general equilibrium model with finite endowment of fossil fuel one country enforces an emissions cap in the first or second periods when that cap is tightened the extent of carbon leakage depends on the interaction of various parameters and elasticities conditions for the green paradox are specified all determinants of carbon leakage resulting from tightening the first period cap work in the opposite direction when the second period cap is tightened tightening the second period cap does not necessarily lead to the green paradox

optimal saving policy for exhaustible resource economies abstract the paper examines the optimal saving policy for a small exhaustible resource exporting economy ere that has an exhaustible asset and a reproducible capital stock it shows that both in magnitude and time profile the optimal saving policy for an ere sharply differs from a that of a nonextractive economy and b that derived from the conventional models of growth with exhaustible resources these differences arise from the specific economic features that distinguish the small resource exporting developing economies both from other developing economies and from mature industrial ones for a wide range of plausible parameter values comparisons of computed optimal saving paths with actual savings rates of selected eres suggest substantial deficiencies in their savings rates

habit formation and intertemporal substitution in individual food consumption individual food consumption data are used to examine three issues first is food consumption linked intertemporally at the individual level second does the association between current and past consumption reflect habit or heterogeneity third what do the estimates imply about the intertemporal elasticity of substitution the authors find that habit matters that controlling for heterogeneity reduces estimated habit effects and that the product of the estimated intertemporal elasticity of substitution and the risk aversion parameter is less than one these results all lead to rejection of time separable specifications of intertemporal consumption behavior copyright 1996 by mit press

evaluating change in objective ambiguous mortality probability valuing reduction in ambiguity size and risk level this article develops a valuation model to evaluate mortality probability changes under objective ambiguity where multiple mortality probabilities are exogenously given we construct the valuation model based on upalpha maxmin expected utility to evaluate the reduction in ambiguity size and risk level as well as estimate the subjects ambiguity attitude our model can bring an interesting policy implication if the subjects are ambiguity averse a reduction in ambiguity size with a constant risk level can increases welfare thus even if risk level cannot be lowered reduction in ambiguity size can also be used as a measure toward increasing welfare our model can empirically estimate this welfare change resulting from the reduction in ambiguity size to demonstrate how our model works we apply it to survey data on a public program that reduces mortality probability in accidents caused by wildlife

pareto optima welfare weights and smooth equilibrium analysis abstract the first part of this paper deals with the parameterization of the set of pareto optima by utility levels and by the welfare weights in the second part the parameterization by the welfare weights is used to establish properties of the negishi equation system associated with the finite general equilibrium model this approach yields proofs of the regularity of the no trade equilibria and of the existence of equilibria by a degree argument that are new the formulation and the proof of these properties within the setup of the negishi equation system plays a crucial role in extending these properties to the infinite horizon model with discounted utility functions

when do increasing carbon taxes accelerate global warming a note on the green paradox abstract the green paradox by hans werner sinn suggests that increasing resource taxes accelerate global warming because resource owners increase near term extraction in fear of higher future taxation in this note we show that this effect does only occur for the specific set of carbon taxes that increase at a rate higher than the effective discount rate of the resource owners we calculate a critical initial value for the carbon tax that leads to a decreased cumulative consumption over the entire infinite time horizon applying our formal findings to carbon taxes for several mitigation targets we conclude that there is a low risk of a green paradox in case the regulator implements and commits to a permanently mal adjusted tax this remaining risk can be avoided by emissions trading scheme as suggested by sinn as long as the emission caps are set appropriately and the intertemporal permit market works correctly

oil prices welfare and the trade balance the paper examines welfare effects and the trade balance response to changes in the world oil prices and interest rates for a small oil importing economy the trade balance is mainly seen as the difference between saving and investment and these are derived from intertemporal optimization it is shown that the welfare effects consist of static terms of trade effects intertemporal terms of trade effects and employment effects the trade balance deteriorates for temporary oil price increases whereas its response is ambiguous for permanent oil price increases for a fall in the world interest rate the trade balance deteriorates if the economy is a net borrower

flattening the carbon extraction path in unilateral cost effective action internalizing the global negative externality of carbon emissions requires the flattening of the extraction path of world fossil energy resources world carbon emissions we consider governments with sign unconstrained emission taxes at their disposal and seeking to prevent world emissions from exceeding some binding aggregate emission ceiling in the medium term such a ceiling policy can be carried out either in full cooperation or by a sub global climate coalition unilateral action has to cope with carbon leakage and high costs which makes a strong case for choosing a policy that implements the ceiling in a cost effective way in a two country two period general equilibrium model with a non renewable fossil energy resource we characterize the unilateral cost effective ceiling policy and compare it with its fully cooperative counterpart we show that with full cooperation there exists a cost effective ceiling policy in which only first period emissions are taxed at a rate that is uniform across countries in contrast the cost effective ceiling policy of a sub global climate coalition is characterized by emission regulation in both periods the share of the total stock of energy resources owned by the sub global climate coalition turns out to be a decisive determinant of the sign and magnitude of unilateral cost effective taxes

fiscal policy and the great recession in the euro area how much did fiscal policy contribute to euro area real gdp growth during the great recession we estimate that discretionary fiscal measures have increased annualized quarterly real gdp growth during the crisis by up to 1 6 percentage points we obtain our result by using an extended version of the european central bank s new area wide model with a rich specification of the fiscal sector a detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result

international capital markets oil producers and the green paradox a rapidly rising carbon tax leads to faster extraction of fossil fuels and accelerates global warming we analyze how general equilibrium effects operating through the international capital market affect this green paradox in a two region two period world with identical homothetic preferences and without investment the global interest rate falls and the green paradox weakens with investment or a relatively more impatient oil importing region the green paradox may be strengthened because the future oil demand function shifts downward or because the interest rate rises if the oil importing region is very much more patient than the oil exporting region the green paradox may be reversed but in our calibrated model the effects are tiny with exploration and endogenous initial oil reserves a future carbon tax lowers cumulative oil extraction in partial equilibrium if the boost to current oil extraction is weakened strengthened or reversed in general equilibrium so is the fall in cumulative extraction a partial and general equilibrium welfare analysis of a future carbon tax both for full and partial exhaustion is given the effects of stock dependent extraction costs are separately discussed in an appendix

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

unilateral climate policies incentives and effects we analyze the effect of climate policies using a two region partial equilibrium model of resource extraction the regions are heterogeneous in various aspects such as in their climate policies and resource extraction costs we obtain analytical and numerical conditions for a green paradox to occur as a consequence of a unilateral increase in carbon taxation and backstop subsidy in order to assess the welfare and climate consequences of unilateral policy changes we calibrate the model to real world parameter values we find that forming a climate coalition and introducing carbon taxation even in the absence of real climate concerns is the best course of action for the largest fossil fuel using regions

climate change policy s interactions with the tax system abstract this paper presents a range of insights from recent literature on how climate change policies and other environmental policies interact with the fiscal system it explores four issues associated with fiscal interactions first it examines how these interactions influence the prospects for a double dividend both an environmental improvement and a reduction in the costs of the tax system second it analyzes how the use of revenues from a carbon tax or from a cap and trade system involving auctioned emissions allowances influences these policies economic costs third it addresses the question whether carbon taxes or cap and trade programs represent more efficient sources of government revenue than other more traditional revenue sources such as income sales or payroll taxes finally it analyzes how fiscal interactions affect the choice between co 2 emissions pricing instruments carbon taxes and cap and trade and other climate policy instruments

growth renewables and the optimal carbon tax optimal climate policy is investigated in a ramsey growth model of the global economy with exhaustible oil reserves an infinitely elastic supply of renewables stock dependent oil extraction costs and convex climate damages four regimes can occur depending on the initial social cost of oil being larger or smaller than that of renewables and depending on the initial oil stock being large or small we also offer some policy simulations for the first and second regime which illustrate that with a lower discount rate more oil is left in situ and renewables are phased in more quickly we identify the conditions under which the optimal carbon tax rises or decreases subsidizing renewables without a carbon tax induces more oil to be left in situ and a quicker phasing in of renewables but oil is depleted more rapidly initially the net effect on global warming is ambiguous abstract from author

the exploitation of fossil fuels under the threat of global warming and carbon taxes a dynamic game approach this paper considers efficient and monopolistic extraction of non renewable energy resources when the resource consumption leads simultaneously to a stock externality global warming the case of monopolistic supply leads to a dynamic game between cartelised producers and a consumers government for this game we compute linear markov perfect strategies that are characterized by preemption of the tax at the wellhead when compared with the open loop solution unfortunately the general asymmetric two state variable model does not allow for an explicit analytical solution therefore a simplified version with one state variable neglecting depreciation of the stock of the pollutant is studied and a numerical example is presented it turns out that the simplified and analytically solved framework provides a good approximation of the initial phase of the transient behaviour but not of the long run

what have we learned from three decades of research on the productivity of public capital the last three decades have witnessed a great deal of research effort devoted to measuring the private output elasticity of public capital the wide range of available estimates have precluded any consensus so far however this paper reconciles the empirical findings of the literature by quantitatively analyzing a sample of 578 estimates collected from 68 studies for the 1983 2008 period using meta regression analysis we show how study design characteristics and publication bias can explain a large fraction of the variation across estimates we find a short run output elasticity of public capital supplied at the central government level of 0 083 which increases to 0 122 in the long run if in addition only core infrastructure at a regional local level of government is considered these estimates are almost doubled the average output elasticity of public capital amounts to 0 106 our results suggest that public capital is undersupplied in oecd economies

is public capital provision efficient abstract we examine whether public investment undertaken in australia over the last three decades satisfies conditions for intertemporal efficiency we find that the conditions are satisfied over the sample period but only after allowance for changes in the relative price of public and private capital in contrast to previous research we do not find any evidence of excessive returns to public investment rather the average real investment return for both private and public capital is estimated at about 9 per annum

optimality and consistency in a differential game with non renewable resources abstract imperfect competition amongst buyers for a non renewable resource is modeled as a stackelberg differential game the buyers may act as a cartel or behave non cooperatively in setting tariffs which the sellers take as given the buyer s optimal policy is not consistent when extraction costs depend on the stock level both optimal and consistent unit and ad valorem tariff s are analyzed when a buyers cartel uses a consistent tariff the sellers may prefer to behave as perfect competitors or a monopolist depending on the functional form of demand and cost non cooperative buyers who are constrained to act consistently are unable to extract any rent from competitive sellers