resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

health and democracy in spite of the inexorable march of democracy around the globe just how democratic institutions a ect human well being is open to debate the evidence that democracy promotes prosperity is neither strong nor robust moreover which aspects of policy making and human well being are promoted by democracies is still a subject of debate 1 even if correlations between democracy and outcome measures can be found there is an overriding di culty of interpreting them as causal e ects whether democracy matters per se or simply serves as a proxy for societal and political development presents a di cult problem for research in this area thinkers such as lipset 1959 have argued that democracy can thrive only when conditions are right if this is correct then becoming democratic may only serve as a proxy for these hard to measure cultural and societal preconditions this paper explores these issues further by reconsidering the link between democracy and health using panel data from a cross section of countries the

nonlinear income effects in random utility models random utility models rums are used in the literature to model consumer choices from among a discrete set of alternatives and they typically impose a constant marginal utility of income on individual preferences this assumption is driven partially by the difficulty of constructing welfare estimates in models with nonlinear income effects recently mcfadden 1995 developed an algorithm for computing these welfare impacts using a monte carlo markov chain simulator for generalized extreme value variates this paper investigates the empirical consequences of nonlinear rums in the case of sportfishing modal choice while refining and contrasting the available methods for welfare estimation

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

a political economy theory of partial decentralization we revisit the classic problem of tax competition in the context of federal nations and derive a positive theory of partial decentralization a capital poor median voter chooses to use redistributive capital taxes to provide public goods the expectation of high capital taxes however results in a small capital stock which lowers returns to redistribution the median voter therefore wants to commit to a lower level of capital taxes she does so by setting a partial degree of decentralization in the constitution the equilibrium degree of decentralization balances the positive effect of tax competition on capital taxes with the loss in redistribution that results we show that the degree of decentralization is nonmonotonic in inequality increasing in the redistributive efficiency of public good provision and decreasing in capital productivity when public goods are heterogeneous in their capacity to transfer funds all voters agree that goods with high redistributive capacity should be decentralized

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

measuring welfare changes in settings with imposed quantities abstract an intuitively attractive money metric utility measure is developed which is applicable in settings where individuals receive fixed quantities of one or more goods one use of this measure is in cost benefit analyses of imposed quantity changes the approximate measures typically used are shown to be subject to relatively large approximation errors however techniques are presented which can always be used to numerically evaluate the exact welfare measure provided that one knows the uncompensated demand function s or marginal willingness to pay function s of individuals

electoral competition and local government responsiveness in brazil summary the empirical literature on the effects of competition on the supply of public goods shows controversial results at the local level the main objective of this paper is to investigate this relationship in a federalist country brazil where the political system places few barriers to the entry of competitors and local governments have the independence to establish their own public policy we show that a higher effective number of candidates running for the executive branch increase the supply of local public goods the number of student enrollments teachers and free immunizations

government strength power dispersion in governments and budget deficits in oecd countries a voting power approach we test for the influenceof government strength and dispersion ofpower among the parties of coalitiongovernments on the size of annual debtaccumulation through budget deficits inoecd countries from 1970 to 1999 government strength and power dispersion incoalition governments are measured by thebanzhaf index of voting power respectivelythe standard deviation of banzhaf indicesof coalition parties we believe that theseare better suited proxies than most of whathas been applied so far governmentstrength turns out to be insignificant however coalitions with equally strongpartners run significantly higher deficitsthan coalitions with one dominating party

fiscal federalism and economic growth this paper uses an endogenous growth model with overlapping generations to explore the connection between fiscal federalism and economic growth the analysis shows that federalism which allows public good levels to be tailored to suit the differing demands of young and old consumers who live in different jurisdictions increases the incentive to save this stronger incentive in turn leads to an increase in investment in human capital and a byproduct of this higher investment is faster economic growth

competition in the political arena and local government performance competition reduces rent extraction in private sector firms in this article we empirically assess whether it similarly disciplines politicians by evaluating local level governments performance in flanders the results indicate that electoral competition measured via the number of parties competing in elections significantly positively affects the productive efficiency of municipal policy intertemporal competition measured as the volatility of election outcomes over time has a similar but weaker positive effect these beneficial effects are mitigated by the fact that competition may lead to more fragmented governments which is shown to work against their productive efficiency overall though the beneficial effects outweigh the unfavourable ones in our sample

quantification of interdependencies between economic systems and ecosystem services an input output model applied to the seine estuary abstract the aim of this paper is to assess the possible contribution of an input output model towards two of the basic principles of the sustainability strategy of integrated coastal zone management iczm and post normal science according to these principles decision support tools should offer a holistic perspective and handle high uncertainty the difficulties in reaching sustainability are due partly to the prevailing use of narrow system boundary tools that are non holistic consequently they fail to capture important ecosystem services and ignore interdependencies between them to comply with the basic principles our method allows environmental assets to be evaluated in multiple units and integrates results from recent researches in natural sciences both enable coverage of interdependencies between ecosystem services thereby we enlarge input output modelling from the two conventional ecosystem services of sink and provisioning to the most vital ones the supporting services an application to the seine estuary addresses the impacts of maritime transportation infrastructures on nursery habitats for commercial fish the ecosystem services covered are life support and resource provisioning our results show that the restoration of a total of 73 7 km 2 of nursery areas over the period 2004 2015 would result in a stock of sole in 2015 that exceeds the business as usual scenario by 44 2 uncertainty range 35 9 69 9 in spite of high restoration costs the negative macro economic impact is very low however on the sector level a trade off results between nurseries and three economic sectors the quantification of such trade offs in our model is particularly useful to public participation in decision making

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

active and passive waste in government spending evidence from a policy experiment we propose a distinction between active and passive waste as determinants of the cost of public services active waste entails utility for the public decision maker whereas passive waste does not we analyze purchases of standardized goods by italian public bodies and exploit a policy experiment associated with a national procurement agency we find that i some public bodies pay systematically more than others for equivalent goods ii differences are correlated with governance structure iii the variation in prices is principally due to variation in passive rather than active waste and iv passive waste accounts for 83 percent of total estimated waste

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

the political economy of public goods some evidence from india we are interested in how public goods get allocated by a centralized state we use data on public goods and social structure from parliamentary constituencies in rural india to understand the allocation of these goods over the 1970s and 1980s national policies and political agendas during this period emphasized universal access to basic amenities and financed a rapid expansion in rural infrastructure we find evidence of considerable equalization in many of these facilities reflecting perhaps the importance of these commitments among the historically disadvantaged social groups those that mobilized themselves politically gained relative to the others measures of social heterogeneity that have been emphasized in the recent empirical literature on public goods are relevant but not overwhelming in their importance

an alternative test of the hedonic theory of housing markets abstract in this paper the hedonic theory of housing markets is used to generate a multinomial logit model of household behavior in an urban housing market application of hedonic theory to housing markets is by now fairly familiar and a link to multinomial logit has also been established however by emphasizing more heavily the bid price interpretation of hedonic theory this paper develops a new connection to econometric estimation that essentially involves running the usual logit equations in reverse one advantage of this approach is that the link between the logit equations and hedonic theory involves bid price rather than utility functions and this in turn permits the empirical results to be given an extremely clear interpretation furthermore in contrast to the standard logit model the extreme value distribution required to justify the estimation technique emerges endogenously as part of the analysis

targeting conservation efforts in the presence of threshold effects and ecosystem linkages abstract the prevailing federal policy of targeting conservation programs on the basis of physical criteria tends to ignore the threshold effect of conservation efforts and the correlation between alternative environmental benefits in this article we examine the extent to which conservation funds will be misallocated when threshold effects and correlated benefits are ignored we show that targeting conservation efforts based on physical criteria or political equity concerns may actually lead to the lowest possible benefits to society from conservation expenditure ignoring correlated benefits may lead not only to misallocation of conservation funds among watersheds but also to incorrect resources e g land streams being targeted for conservation the empirical analysis focuses on riparian habitat investments for salmon restoration in the pacific northwest we show that a large portion of conservation benefits would be lost when threshold effects and correlated benefits are ignored and argue that funds should be allocated so that the total value of environmental benefits is maximized not the total amount of resources protected

political determinants of budget deficits coalition effects versus minority effects this paper reexamines some recent empirical evidence on the hypothesis that institutional arrangements in the political process affect budget deficits the results of roubini and sachs 1989b are replicated and sensitivity analysis indicate that their results are robust however the main conclusion of roubini and sachs that coalition governments are less capable of budgetary discipline needs to be modified a reformulation of their variable representing political cohesion reveals that it captures the effects of minority governments rather than majority coalition governments the data support the hypothesis that it is harder to negotiate in parliament than within a government

industrial output restriction and the kyoto protocol an input output approach with application to canada the objective of this paper is to assess the economic impacts of reducing greenhouse gas emissions by decreasing industrial output in canada to a level that will meet the target set out in the kyoto protocol the study uses an ecological economic input output model combining economic components valued in monetary terms with ecologic components ghg emissions expressed in physical terms economic and greenhouse gas emissions data for canada are computed in the same sectoral disaggregation three policy scenarios are considered the first one uses the direct emission coefficients to allocate the reduction in industrial output while the other two use the direct plus indirect emission coefficients in the first two scenarios the reduction in industrial sector output is allocated uniformly across sectors while it is allocated to the 12 largest emitting industries in the last one the estimated impacts indicate that the results vary with the different allocation methods the third policy scenario allocation to the 12 largest emitting sectors is the most cost effective of the three as the impacts of the kyoto protocol reduces gross domestic product by 3 1 compared to 24 and 8 1 in the first two scenarios computed economic costs should be considered as upper bounds because the model assumes immediate adjustment to the kyoto protocol and because flexibility mechanisms are not incorporated the resulting upper bound impact of the third scenario may seem to contradict those who claim that the kyoto protocol would place an unbearable burden on the canadian economy c 2008 elsevier b v all rights reserved

political competition policy and growth theory and evidence from the us this paper develops a simple model to analyse how a lack of political competition may lead to policies that hinder economic growth we test the predictions of the model on panel data for the us states in these data we find robust evidence that lack of political competition in a state is associated with anti growth policies higher taxes lower capital spending and a reduced likelihood of using right to work laws we also document a strong link between low political competition and low income growth

estimation and control of spanish energy related co2 emissions an input output approach this article uses input output methods to obtain the energy related co2 intensities for the spanish economy in 1992 based on those intensities it yields a structural decomposition of spanish energy related co2 emissions and an estimation of the price effects of several hypothetical carbon taxes levied on fossil fuel consumption these results are related to the ongoing discussion within eu circles and member states about the consequences of carbon energy taxes and to the simulated effects of such taxes in various countries the paper also responds to the lack of reliable disaggregated data on spanish co2 emissions and to the growing awareness on the limited effectiveness of spanish climate change policies

public good provision under dictatorship and democracy the allocation of a government budget between a public good and transfers is modeled under different systems of government the relatively even distribution of political power among groups in a democracy favors spending on nonexclusive public goods the more concentrated pattern of political power in a dictatorship favors spending on transfers targeted to powerful groups the hypothesis on public good provision is examined using cross country data on public good provision and empirical indicators of political regime dictatorial governments are found to provide public schooling roads safe water public sanitation and pollution control at levels far below democracies

federal competition and economic growth abstract this paper exploits exogenous variation in the natural topography of the united states to estimate the causal impact of inter jurisdictional competition on income growth we find that doubling the number of county governments in a metropolitan area leads to a 17 increase in the average annual growth rate of earnings per employee over 1969 2006 and a 10 increase in 2006 income per employee decomposing income effects using 2000 census worker level data we find that approximately half of the effect stems from making workers more productive while the other half comes from changing the composition of the workforce and inducing workers to work more hours we also present evidence that inter jurisdictional competition leads local governments to raise more in taxes spend more and issue more debt per capita but does not help them obtain more inter governmental transfers however the additional cost from this increase in expenditures to a median wage employee is much smaller than the increase in that employee s wages due to greater inter jurisdictional competition

the countervailing effects of competition on public goods provision when bargaining inefficiencies lead to bad outcomes political competition is widely recognized as a mediator of public goods provision through its salutary effect on incumbents electoral incentives we argue that political competition additionally mediates public goods provision by reducing the efficiency of legislative bargaining these countervailing forces may produce a net negative effect in places with weak parties and low transparency typical of many young democracies we provide evidence of a robust negative relationship between political competition and local public goods using panel data from mali tests of mechanisms corroborate our interpretation of this relationship as evidence of legislative bargaining inefficiencies to explore the generalizability of these findings we analyze cross country panel data and show that political competition leads to better worse public goods provision under high low levels of party system institutionalization the paper sheds light on why political competition is only selectively beneficial and underscores the importance of considering both the electoral and legislative arenas

a consumption based approach to carbon emission accounting sectoral differences and environmental benefits in recent years there has been growing concern about the emission trade balances of countries this is due to the fact that countries with an open economy are active players in international trade trade is not only a major factor in forging a country s economic structure but contributes to the movement of embodied emissions beyond country borders this issue is especially relevant from the carbon accounting policy and domestic production perspective as it is known that the production based principle is employed in the kyoto agreement the research described herein was designed to reveal the interdependence of countries on international trade and the corresponding embodied emissions both on national and on sectoral level and to illustrate the significance of the consumption based emission accounting it is presented here to what extent a consumption based accounting would change the present system based on production based accounting and allocation the relationship of co2 emission embodied in exports and embodied in imports is analysed here international trade can blur the responsibility for the ecological effects of production and consumption and it can lengthen the link between consumption and its consequences input output models are used in the methodology as they provide an appropriate framework for climate change accounting the analysis comprises an international comparative study of four european countries germany the united kingdom the netherlands and hungary with extended trading activities and carbon emissions moving from a production based approach in climate policy to a consumption based principle and allocation approach would help to increase the efficiency of emission reductions and would force countries to rethink their trading activities in order to decrease the environmental load of production activities the results of this study show that it is important to distinguish between the two emission accounting approaches both on the global and the local level

sensitivity to exogeneity assumptions in program evaluation in many empirical studies of the effect of social programs researchers assume that conditional on a set of observed covariates assignment to the treatment is exogenous or unconfounded aka selection on observables often this assumption is not realistic and researchers are concerned about the robustness of their results to departures from it one approach e g charles manski 1990 is to entirely drop the exogeneity assumption and investigate what can be learned about treatment effects without it with unbounded outcomes and in the absence of alternative identifying assumptions there are no restrictions on the set of possible values for average treatment effects this does not mean however that all evaluations are equally sensitive to departures from the exogeneity assumption in this paper i explore an alternative approach developed by paul rosenbaum and donald rubin 1983 where the assumption of exogeneity is explicitly relaxed by allowing for a limited amount of correlation between treatment and unobserved components of the outcomes the starting point of the sensitivity analysis is the assumption that the exogeneity assumption is satisfied only conditional on an additional unobserved covariate making assumptions about the effect of the unobserved covariate on the outcome and its correlation with the treatment i trace out the set of possible values for the treatment effect of interest by considering a sufficiently large set of possible correlations with outcomes and treatment one can recover the bounds on the treatment effect derived by manski 1990 the approach here in the spirit of rosenbaum and rubin 1983 and rosenbaum 1995 is to allow only a limited amount of correlation and to judge the sensitivity of average treatment effect estimates to such correlations there are two novel features of the proposed analysis first rather than formulate the sensitivity in terms of coefficients on the unobserved covariate the sensitivity results are presented in terms of partial r values which may be easier to interpret second the partial r values of the unobserved covariates are compared to those for the observed covariates in order to facilitate judgments regarding the plausibility of values necessary to substantially change results obtained under exogeneity the proposed sensitivity analysis is conceptually related to the practice of assessing sensitivity of estimates by comparisons with results obtained by discarding one or more observed covariates james heckman and v joseph hotz 1989 rajeev dehejia and sadek wahba 1999 jeffrey smith and petra todd 2001 the attraction of the sensitivity analysis is that it is more directly relevant one is not interested in what would have happened in the absence of covariates actually observed but in biases that are the result from not observing all relevant covariates

changing industrial structure to reduce carbon dioxide emissions a chinese application abstract increasing concern about carbon dioxide co2 emission reduction demands knowledge about the production structure of an economy information on productive linkages yields insight about forward and backward emission effects associated with sectoral inputs and outputs and serves as an essential starting point to identify the optimised industrial structure under the constraint of co2 emission this paper proposes a combined linkage analysis and multi objective programming approach to identify the key co2 emission sectors and the optimised production structure with respect to emission reduction target as a demonstration the proposed approach is applied to data from china in 2007 the result shows that to reduce co2 emissions from 5707 16 to 5452 12 million tonnes china needs to change its industrial structure by focussing on industrial groups as defined by linkage characteristics which would lead to a subsequent gdp decrease of 82 59 billion yuan from a policy standpoint the analytical techniques described in this paper can provide valuable information for planners and decision makers to formulate feasible and practical industrial polices with implications for co2 emissions

is democracy good for the poor many scholars claim that democracy improves the welfare of the poor this article uses data on infant and child mortality to challenge this claim cross national studies tend to exclude from their samples nondemocratic states that have performed well this leads to the mistaken inference that nondemocracies have worse records than democracies once these and other flaws are corrected democracy has little or no effect on infant and child mortality rates democracies spend more money on education and health than nondemocracies but these benefits seem to accrue to middle and upper income groups

a goal programming model for environmental policy analysis application to spain abstract sustainable development has become an important part of international and national approaches to integrate economic environmental social and ethical considerations so that a good quality of life can be enjoyed by current and future generations for as long as possible however nowadays sustainable development is threatened by industrial pollution emissions which cause serious environmental problems due to a lack of adequate quantitative models for environmental policy analysis there is a strong need for analytical models in order to know the effects of environmental policies in the present paper a goal programming model based on an environmental input output linear programming model is developed and applied to the spanish economy the model combines relations between economic energy social and environmental effects providing valuable information for policy makers in order to define and examine the different goals that must be implemented to reach sustainability

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

energy system impacts and policy implications of the european intended nationally determined contribution and low carbon pathway to 2050 in march 2015 the european union eu submitted to the united nations framework convention on climate change unfccc the intended nationally determined contribution indc in view of the paris conference of parties cop21 the binding target of lowering domestic greenhouse gases emissions by at least 40 by 2030 compared to 1990 levels coupled with long term decarbonisation goals will have profound energy system macroeconomic and policy implications eu targets are qualitatively discussed and quantitatively assessed with the simulation of a reference and an alternative decarbonisation scenario to 2050 simulations are carried out with the technology rich primes energy system model and the gem e3 computable general equilibrium model restructuring of the eu energy system induces changes in the energy mix and production with small effects on the eu gdp 0 4 in 2030 and 1 in 2050 compared to the reference scenario energy efficiency improvements increasing penetration of renewables fuel switching towards natural gas and technical progress in process related to emissions abatement are identified as essential options to the eu indc implementation the electrification of final energy demand particularly transport electrification complemented with decarbonised power supply is found to play a critical role in the successful transition towards a low carbon economy by 2050

when managers cover their posteriors making the decisions the market wants to see the stock market has opinions as to what choices firms should make we show that concern for current share prices may lead managers to make these choices rather than those suggested by their own superior information even when arbitrarily many privately informed firms have to make a similar decision the market s prejudices may still prevail we compare the distortions that arise from share price maximization with those due to herd behavior among profit maximizing firms and show that the former results in strictly less efficient use of information

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

a bayesian approach to assessing the robustness of hedonic property value studies hedonic price models are widely employed to estimate implicit prices for bundled attributes residential property value studies dominate these applications using a representative cross sectional property value data set we employ bayesian methods to translate a range of priors in covariate selection typical of hedonic property value studies into a range of posterior estimates we also formulate priors regarding measurement error in individual covariates and compute the ranges of resulting posterior means finally we empirically demonstrate that a greater and more systematic use of prior information drawn from one s own data and from other studies can break the collinearity deadlock in this data

electoral competition globalization and subnational education spending in mexico 1999 2004 this article examines the determinants of primary education spending among 29 mexican states from 1999 to 2004 there is wide variation in spending despite expectations of policy convergence due to market forces associated with globalization and in spite of the unique potential of education spending to complement economic strategies in achieving equitable growth this study exploits significant advantages of subnational analysis in exploring political and economic variables that have been useful in explaining spending levels cross nationally consistent with these studies this article shows that greater electoral competition leads to increased spending in contrast to other work however this study finds that exposure to the global economy has distinctly mixed effects on education spending these findings thus further highlight the positive returns to higher quality democracy while underscoring the need to examine the effects of many different aspects of globalization representing a wide variety of strategies employed by governments in engaging the international economy

an empirical investigation into the performance of ellickson s random bidding model with an application to air quality valuation abstract this paper compares ellickson s random bidding model to the standard hedonic model in estimating benefits due to marginal and non marginal changes in housing attributes using data on the chicago housing market the paper shows that the benefit estimates obtained using the two models are very close in addition various categorizations based on household characteristics are tested in the case of the random bidding model the study shows that the effect of categorization on the overall benefit estimates are negligible moreover the results from the random bidding model reveal that increased income leads to greater demand for environmental quality

economic instruments for environmental regulation our knowledge about economic incentive approaches to pollution control has grown rapidly in the two decades in which they have received serious analytical attention not only have the theoretical models become more focused and the empirical work more detailed but we have now had over a decade of experience with emissions trading in the u s and emission charges in europe as the world community becomes increasingly conscious of both the need to tighten environmental controls and the local economic perils associated with tighter controls in a highly competitive global marketplace it seems a propitious time to stand back and to organize what we have learned about this practical and promising approach to pollution control that may be especially relevant to current circumstances this paper draws upon economic theory empirical studies and actual experience with implementation to provide a brief overview of some of the major lessons we have learned about two economic incentive approaches emissions tradi copyright 1990 by oxford university press

the impact of demographic change on energy use and greenhouse gas emissions in germany abstract this paper estimates the impact of demographic change on energy use and greenhouse gas emissions in germany since old people display different consumption patterns than young people an increase in the proportion of old people affects overall consumption patterns micro data from a household survey are used to identify age specific consumption patterns and to project the impact of demographic change on the structure of total consumption expenditure up to the year 2030 the resulting final demand vectors are entered into an environmental input output model which allows the calculation of sectoral production energy use and greenhouse gas emissions the model results suggest that until 2030 demographic change raises the share of methane in total greenhouse gas emissions and does not contribute to reducing energy use and greenhouse gas emissions in germany the model is also used to explore the effects of redistributing income between age groups and a policy induced switch from motor vehicle use to public transport

the choice of functional forms for hedonic price equations comment abstract rosen 13 freeman 4 halvorsen and pollakowski 6 and others have stressed that economic theory does not suggest an appropriate functional form for hedonic price functions 1 it consequently is reasonable to try several functional forms and utilize the multiple regression equation with the best performance in this spirit halvorsen and pollakowski 6 recommend using the box cox flexible functional form for hedonic analysis and measuring best performance with a goodness of fit test the box cox methodology has also been adapted in hedonic studies by goodman 5 linneman 10 blomquist and worley 1 and eberts and gronberg 3 2 the box cox is particularly suited for testing functional forms because many familiar forms such as semilog log linear and translog are subsets of the flexible box cox permitting nested hypothesis testing in this note we illustrate that the formal hypothesis testing advantage of the box cox functional form is purchased at the expense of other important goals the goal of most hedonic studies is to estimate the prices of the characteristics to measure the response to changes in the prices and or to predict future expenditures using a best fit criterion to choose functional forms does not necessarily lead to more accurate estimates of characteristic prices in fact the large number of coefficients estimated with the box cox functional form reduces the accuracy of any single coefficient which could lead to poorer estimates of specific prices second because any negative number raised to a noninteger real power is imaginary the traditional box cox functional form is not suited to any data set containing negative numbers third the box cox functional form may be inappropriate for prediction since the mean predicted value of the untransformed dependent variable need not equal the mean of the sample upon which it is estimated the predicted untransformed variable housing value will be biased the predicted untransformed dependent variable may also be imaginary fourth the nonlinear transformation results in complex estimates of slopes and elasticities which are often too cumbersome to use properly we discuss each of these drawbacks and quantify them when possible in the remainder of this note

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

what wins votes why some politicians opt out of clientelism in a context where clientelism is widespread why do some politicians choose not to condition the delivery of goods and services to citizens on individual political behavior i argue that the answer to this question lies in the heretofore unexamined electoral costs of clientelism clientelism decreases support from nonpoor constituents even while it generates votes from among the poor taking into account these costs and other factors that shape politician incentives i posit that the interaction between political competition and poverty will explain variation in clientelism i test this claim using an original measure of clientelism that assesses mayoral involvement in social policy implementation in argentine municipalities the results of statistical analysis suggest that high levels of political competition are compatible with clientelism when poverty is also high only when high competition is coupled with low rates of poverty does clientelism decline

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

political market characteristics and the provision of educational infrastructure in north india in this paper we are concerned with the provision of schools in rural north india particularly with whether such provision is determined by the demographic and economic characteristics of the region or whether local democracy also plays a role we find that the probability that a governing party loses an election has a positive effect on the provision of schooling infrastructure while the margin of victory of the governing party has a negative effect political reservation for members of the scheduled castes scs has a positive effect on schooling infrastructure in villages with a large sc population but a negative effect overall