revealing space in spatial externalities edge effect externalities and spatial incentives abstract this paper analyzes the spatial incentives created by distance dependent negative spatial externalities titled edge effect externalities it illustrates standard externality results in a spatial context and derives several new results while the externality creates an incentive for a recipient to distance himself from the externality generating land use this distance is too small from a social standpoint rationalizing buffer zones imposed by regulatory authorities further the market rental rate of land for the externality recipient is higher than socially optimal resulting in a potential barrier to entry for the impacted land use finally although the recipient understands and can geographically avoid externality damage standard market failure occurs results are demonstrated using graphical and land rent interpretations of familiar aspatial general equilibrium conditions the paper thus strives to provide a more thorough exposition of the spatial impacts of this class of externalities than provided elsewhere in the literature

the geography of market failure edge effect externalities and the location and production patterns of organic farming abstract perceptions of increasing land scarcity and negative impacts of chemical based agriculture have led to increasing concern regarding the sustainability of food systems incompatible production processes among farming systems may lead to spatial conflicts and production losses between neighboring farms and the magnitude of such losses may depend not only on the scale of each activity but also on patterns of land use such conflicts can be classified as edge effect externalities spatial externalities whose marginal impacts decrease as distance from the border generating the negative impact increases this paper tests the hypothesis that edge effect externalities have influenced the location and production patterns of certified organic farms using data from california central valley certified organic farmers using concepts from landscape ecology and spatial statistics we investigate difference in parcel geometry and surrounding land uses between organic and non organic parcels using a generalized method of moments gmm spatially autoregressive econometric model we demonstrate that both parcel geometry and surrounding land uses influence the probability of a given parcel being certified organic we conclude with suggestions for policies to encourage development of organic farming regions

information and the market for lemons this paper revisits akerlofs 1970 classic adverse selection market and asks the following question do greater information asymmetries reduce the gains from trade perhaps surprisingly the answer is no better information on the selling side worsens the buyers curse thus lowering demand but may shift supply as well whether trade increases or decreases depends on the relative sizes of these effects a characteization is given on the other hand improving the buyers information i e making private information public unambiguously improves trade so long as market demand is downward sloping

interest rate policy debt and indeterminacy with distortionary taxation abstract the interest rate setting policy of the central bank influences the amount of funds the government must raise to pay the interest on its existing debt with distortionary taxation fiscal adjustments feed back on the model s endogenous variables the conditions under which interest rate and tax policies are compatible with a uniquely determined stable equilibrium are derived for an optimizing sticky price model if the fiscal government continuously balances its budget active interest rate policy easily leads to indeterminacy if there is a positive steady state stock of public debt when short run deficits are allowed active interest rate policy and determinacy are compatible unless the tax rate is too strongly increasing in response to changes in debt the real interest rate or output

the influence of fomc member characteristics on the monetary policy decision making process abstract this paper provides new empirical evidence on a monetary policy committee with heterogeneous members whose decisions affect the efficacy of monetary policy it thereby provides a link between the literature on monetary policy committees and central bank monetary policy implementation through monetary rules using a novel dataset of the idiosyncratic characteristics of fomc members over the period from august 1979 to february 2014 the empirical findings show that characteristics such as education age and to a lesser extent work experience are not important in understanding the fomc decision making process instead the results point to the importance of time spent within the federal reserve system tenure on the fomc itself and the influence of the chair in shaping the decision making process the results are expected to have implications for the capacity of economic agents as well as various markets in the economy to more readily interpret public monetary policy information that reaches them this makes the monetary policy decision process less noisy and thus enhances the capability of agents and markets to attach the correct weight to this information

depletable externalities and pigouvian taxation abstract in their book baumol and oates the theory of environmental policy externalities public outlays and the quality of life prentice hall englewood cliffs n j 1975 argue that whether an externality is depletable private or undepletable public is the key characteristic in determining the optimal pricing pattern they argue that unlike the undepletable case a negative depletable externality requires not only a charge or tax on the generator of the externality but a payment or compensation to the victim in order to achieve pareto optimality it is shown that the key characteristic determining whether compensation of victims is required for efficiency is not the depletability of the externality but whether the victim can costlessly control or limit the amount of the damaging substance received

the design of monetary and fiscal policy a global perspective abstract we study the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies we show that the presence of capital is indeed another independent source of local and global multiplicities even under active policies that yield local determinacy we also show how a very similar mechanism generates multiplicities in models with bonds and distortionary taxation we then explore the design of monetary policies that avoid multiple equilibria we show that interest rate policies that respond to the output gap while potentially a source of significant inefficiencies may be effective in preventing multiple equilibria and costly oscillatory equilibrium dynamics

balanced budget rules distortionary taxes and aggregate instability a traditional argument against a balanced budget fiscal policy rule is that it amplifies business cycles by stimulating aggregate demand during booms via tax cuts and higher public expenditures and by reducing demand during recessions through a corresponding fiscal contraction this paper suggests an additional source of instability that may arise from this type of fiscal policy rule it shows that within the standard neoclassical growth model a balanced budget rule can make expectations of higher tax rates self fulfilling if the fiscal authority relies heavily on changes in labor income taxes to eliminate short run fiscal imbalances calibrated versions of the model show that indeterminacy occurs for income tax rates that are empirically plausible for the u s economy and other group of seven countries

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

indicator variables for optimal policy the optimal weights on indicators in models with partial information about the state of the economy and forward looking variables are derived and interpreted both for equilibria under discretion and under commitment an example of optimal monetary policy with a partially observable potential output and a forward looking indicator is examined the optimal response to the optimal estimate of potential output displays certainty equivalence whereas the optimal response to the imperfect observation of output depends on the noise in this observation

spreading versus concentrating damages environmental policy in the presence of nonconvexities abstract this paper examines the role of nonconvexities in externality control from a policy perspective nonconvexities can arise from a number of sources and can significantly alter the optimal solution to an externality problem for instance it may be socially desirable to concentrate externality damages in one area and prohibit them in another rather than spread the effects of the externality across a number of sites if this solution is optimal a pollution tax will not achieve the social optimum but a system of marketable permits will

economic spillovers in spatial harvest behavior abstract there has been a strong push within natural resource management to incorporate spatial structure into management regimes however discussions surrounding the appropriate designs of spatial management have largely been conceptual this paper develops a spatial econometric model of fishing location choice using non confidential data from the great barrier reef coral trout commercial fishery harvest location decisions are modeled as a function of spatial patterns of expected economic returns the preferred spatially dependent econometric model is shown to outperform ordinary least squares and fixed effects models in out of sample forecasting estimates from the spatial model reveal spatial spillover effects in fleet harvest location behavior in particular harvest activity at any given site is equally sensitive to same site economic returns and surrounding site economic returns the econometric results are illustrated using a fee based policy simulation results suggest non spatial management is characterized by two inefficiencies first heterogeneity between sites is averaged resulting a fee that is too high or too low across space second fees that are too high or too low affect the fishing effort in nearby locations

urban growth controls transitional dynamics of development fees and growth boundaries abstract this paper investigates how development fees and urban growth boundaries affect urban development when the short run construction supply function is upward sloped i e convex development costs whereas the policies are equivalent in the traditional static model dynamic analysis reveals important differences out of the steady state in particular the development fee that is efficient in the steady state is also dynamically efficient in contrast the long run efficient urban growth boundary generates inefficiently fast development out of the steady state the results are robust with or without location rents and perfect or myopic foresight assumptions

fiscal and monetary rules for a currency union abstract this paper addresses the optimal joint conduct of fiscal and monetary policy in a two country model of a currency union with staggered price setting and distortionary taxes a tractable linear quadratic approximation permits a representation of the optimal policy plan in terms of targeting rules in the optimal equilibrium monetary policy should achieve aggregate price stability following a flexible inflation targeting rule fiscal policy should stabilize idiosyncratic shocks allowing for permanent variations of government debt but should abstain from creating inflationary expectations at the union level simple policy rules can approximate the optimal commitment benchmark through a mix of strict inflation targeting and flexible budget rules conversely the welfare costs of balanced budget rules are at least one order of magnitude higher than conventional estimates of the costs of business cycle fluctuactions

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

supplying information to facilitate price discrimination the authors examine the incentive of a seller to allow potential buyers to acquire private information about their tastes for the seller s product improved private information for buyers enables the seller to segment the market and charge higher prices to high value buyers however improved information can also provide rents to buyers in a variety of settings this tradeoff is optimally resolved at one of two extremes either buyers are supplied with the best available knowledge of their tastes or no information is supplied by the seller copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the advantage of flexible targeting rules this paper investigates the consequences of debt stabilization for inflation targeting if the fiscal authority holds constant the real value of debt at maturity under strict inflation targeting the equilibrium dynamics are indeterminate for a wide range of parameters and steady state fiscal stances flexible targeting rules that include a concern for stabilization of the output gap can restore determinacy of the equilibrium flexible inflation targeting appears to be more robust than flexible debt targeting to alternative parameterizations the fiscal authority can prevent indeterminacy under strict targeting rules by committing to hold constant debt net of interest rate spending

landscape preferences and patterns of residential development abstract i analyze a model of residential location choice where people derive utility from their proximity to open space when people have such landscape preferences then 1 equilibrium residential development is mixed with undeveloped land 2 equilibrium land price gradients depend sensitively on how land markets are organized are not generally monotonic and may or may not reflect the value of open space and 3 dynamic equilibria generally have the property that more remote areas are developed before more central areas finally when compared to optimal development equilibrium development houses too many residents too close together and remote areas are developed too soon these results imply that equilibrium development may not be sprawling enough and that policies to encourage infill development are not welfare improving

the laffer curve revisited abstract laffer curves for the us the eu 14 and individual european countries are compared using a neoclassical growth model featuring constant frisch elasticity cfe preferences new tax rate data is provided the us can maximally increase tax revenues by 30 with labor taxes and 6 with capital taxes we obtain 8 and 1 for the eu 14 there 54 of a labor tax cut and 79 of a capital tax cut are self financing the consumption tax laffer curve does not peak endogenous growth and human capital accumulation affect the results quantitatively household heterogeneity may not be important while transition matters greatly

the value of private information in monopoly we investigate a basic question about a monopoly with incomplete information when does the seller have an incentive to allow potential buyers to acquire more private information about their tastes for the seller s product under plausible conditions such as log concave density of willingness to pay and convex marginal cost the seller prefers that the paying customers be well informed as a group but be left in the dark regarding their individual tastes

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

evaluation of price policy in the presence of water theft mathematical programming models of representative farms are commonly used to evaluate policies such as input subsidies and output price supports on canals in india upstream farmers routinely use more irrigation water than allotted in such circumstances the programming model should encompass farmers locational heterogeneity here a representative watercourse with thirty farms is calibrated to the eight crops fifteen irrigation turns yield responses to water and seepage in maharashtra not only does water theft increase the social cost of price policies but the policies increased inducement to theft by upstream farmers leaves those downstream with less water and lower incomes

land use and zoning in an urban economy zoning statutes are a nearly ubiquitous phenomenon in urban america allen manvel in his report to the national commission on urban problems p 31 estimated that 90 percent of the cities and towns in the united states with a population of over 5 000 had some kind of zoning statute in 1967 in addition 51 of the 52 largest cities possessed such ordinances in spite of this ubiquity and in spite of the recent public controversy concerning the legality of suburban exclusionary zoning the modern economics literature on the institution is amazingly sparse there have been some significant contributions in recent years notably those by otto davis martin bailey davis and andrew whinston and john crecine davis and robert jackson however i think it is fair to say that economists have barely scratched the surface of what seems to me to be a very complex subject in particular there has been very little progress made in the task of incorporating zoning or land use parameters into the kinds of micro economic models that economists are accustomed to deal with the contrast with another urban economic institution the property taxis rather striking in this respect the basic objective of this paper will be to attempt to fill this gap the first section introduces a simple model of an urban space economy with a manufacturing and residential sector having constructed this model i will show how a change in the allocation of land between the two sectors affects the spatial pattern of land rents the size of the urban labor force and the wage rate the second section of the paper will then be devoted to a discussion of the appropriateness and implications of a land allocation policy which maximizes aggregate land rent