forest dependence and income distribution in a subsistence economy evidence from india abstract we examine an area of northern india where forestry acts to ameliorate the incidence of poverty and destitution though it does not otherwise contribute significantly to the reduction of income inequality the poor would be doubly disadvantaged without common property access to forest products conservation measures entailing curtailment in the right to common access pose a dilemma this issue is explored here

war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

semi autonomous revenue authorities in sub saharan africa silver bullet or white elephant a major component of tax administration reform in sub saharan africa for the last 30 years has been the creation of semi autonomous revenue authorities saras the effects of their creation on rev

credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

uncertain regulatory timing and market dynamics abstract using a dynamic model of capacity accumulation i examine the relationship between uncertainty about the timing of a new pigouvian tax and oligopolistic competition i find that for some market structures uncertainty about the timing of the regulatory change leads firms to increase investment these results stem from the nature of the uncertainty and its interaction with firms strategic incentive to engage in capacity races they dramatize the importance of accounting for initial conditions when forecasting firms reactions to anticipated regulatory changes in addition i find that more protracted uncertainty leads to greater welfare costs

option pricing and foreign investment under political risk abstract the paper analyses asset prices in a context of uncertainty over future government policy as current policy is maintained perceived risk abates thus leading to a gradual appreciation of asset prices and a gradual decrease in their conditional variance option values computed under this process have time series and the term structure of conditional volatility which in general are downward sloping in price series without a policy reversal implied volatility from option prices will exceed actual volatility with this wedge progressively disappearing this may be viewed as the volatility analogue of the peso premium for assets subject to large infrequent price drops

changing patterns of uk poverty 1997 2004 it has been noted that the failure to meet the target set by the government for reducing the head count ratio of child poverty in britain is partly due to the success of government policy in generating economic growth apart from ignoring the argument that absolute poverty is not a meaningful idea this apology for the failure of government to meet poverty targets also misses wider problems embedded in recent trends in the household income distribution for example inequality measures sensitive to the distribution of income amongst the poor suggest that the experience of those who remained poor may have worsened

leaders followers and equity risk premiums in booms and busts abstract we study an investment problem in which two asymmetric firms face competition and the regime characterizing the economic condition follows a markov switching process we derive the value functions and investment thresholds of the leader and follower the option value of regime uncertainty is found to be quite important for the investment decision of firms we also show the relationship between the equity risk premium and the economic cycle that has not been done in previous studies which proxy economic conditions by the level of demand or other state variables

confidence building and politics in privatization some evidence from spain abstract this paper analyzes privatization on the stock market and has two main findings first sips underpricing is consistent with the confidence building hypothesis derived from political risk under asymmetric information larger initial returns occurred in the early stages of privatization which is consistent with the hypothesis that governments use underpricing to be credible privatizators second evidence gives support to the hypothesis that explicit political motives influence the design of privatization which is affected by the political majority

regulatory risk vertical integration and upstream investment abstract we investigate the impact of regulatory risk on vertical integration and upstream investment by a regulated firm that provides an essential input to downstream competitors regulatory risk reflects uncertainty about the regulator s commitment to a regulatory policy that promotes the regulated firm s noncontractible investment we show that when the regulator sets the regulatory policy after the vertical industry structure has been established some degree of regulatory risk is ex ante socially beneficial regulatory risk makes vertical integration profitable and stimulates high upstream investment at a lower social cost this occurs for moderate costs of high investment and firms small risk aversion our analysis sheds new light on some relevant empirical patterns in vertically related markets

a theory of credibility this paper presents models in which one agent must decide whether to trust another whose motives are uncertain reliability can only be communicated through actions in this context it pays for people to build a reputation based on reliable behaviour someone becomes credible by consistently providing accurate and valuable information or by performing useful services the theory provides a justification for long term arrangements without binding contracts it also describes those situations where it pays an agent to cash in on his reputation many decisions depend on trusting someone consumers must decide whether to believe advertisements banks need to judge the reliability of loan applicants and employers must decide how much responsibility to delegate to their employees this paper attempts to model situations that arise when someone is uncertain about whether to trust the people he deals with in this context reputations for reliability are valuable an agent becomes credible by consistently providing accurate valuable information or by always acting responsibly i analyse a series of simple abstract models of information transmission in the basic model there are two agents the sender s and the receiver r who are to play the game a known finite number of times at each stage both players learn the value of a parameter measuring the importance of that period s play of the game that is the value of making a correct decision and s obtains payoff relevant information s then sends a signal to r who makes a decision that affects the welfare of both players after both players learn the consequences of r s decision the process repeats at each stage r must decide what action to take in order to do that he must assess the credibility of s the difficulty arises because r is uncertain about s s preferences when play begins i model this by assuming that with positive probability s has identical preferences to r s is a friend and with positive probability s has completely opposed preferences to r s is an enemy this uncertainty creates a trade off for enemy senders at each stage providing honest information enhances s s reputation but only at the expense of foregoing an opportunity for immediate gain by duping r the possibility that s is a friend lends credibility to what he says but this credibility may also be exploited by an enemy s the principal equilibrium has the following form in the basic model where s has no control over the importance of a given play s typically conveys accurate information for the first several periods r raises the probability he places on s being friendly after receiving accurate information if he believes that an enemy would have lied to him with positive probability the more important the information the more likely an enemy will attempt to deceive r an enemy will eventually take advantage of r by misleading him when this happens the sender loses all opportunities for deception in the future i

investment in technological innovations an option pricing approach abstract this paper develops a model of the optimal investment strategy for a firm confronted with a sequence of technological innovations we incorporate many of the most important characteristics of real world technology markets for example we permit innovations to be stochastic in their arrival times and their profitability we also incorporate learning so that firms adopting current innovations become better able to benefit from future innovations the model yields four distinct investment strategies the model is then used to predict actual firm policy these implications are discussed and compared with observed firm behavior

information capacity and innovation adoption researchers of innovation adoption and diffusion often have tested the hypothesis that firms with greater capacities to gather and evaluate information should adopt sooner however the data generally do not support this hypothesis a theoretical model of innovation adoption under uncertainty is developed to show that greater information capacity implies not only faster learning which tends to reduce the expected delay until adoption but also a more stringent adoption criterion which tends to increase the expected delay the resulting ambiguity provides an explanation for the lack of empirical support for this hypothesis

long term impacts of global food crisis on production decisions evidence from farm investments in indonesia did the rise in food prices have a long term impact on agricultural production using household level panel data from seven provinces of indonesia this paper finds that the price shock created a forward looking incentive to invest which can dynamically enhance productivity in agriculture it also finds that the impact of the price shock on investment behavior differs by initial wealth in response to price increases wealthy farmers invested more in productive assets while poor farmers increased their financial savings as well as consumption price spikes relax liquidity constraints which increases investments among the richer while do so savings and consumptions among the poor possibly leading to diverging income inequality in the long run

green electricity investments environmental target and the optimal subsidy abstract we investigate the optimal investment decision in renewables under market demand uncertainty in the context of the italian strategy for renewable deployment under the eu policy the firm has to decide about the time and size of the investment we find that a higher subsidy level induces the firm to invest earlier with a smaller investment capacity this implies that a given environmental target cannot be reached by a too high too low subsidy level since this will cause the investment level to be too low too late we show that there exists an optimal intermediate subsidy level due to uncertain demand in some cases ensuring to reach the environmental target in time requires an additional conditional subsidy we propose a heuristic for policy makers stating when and how much subsidy to provide furthermore we find that in a more uncertain economic environment the subsidy adjustment to maintain the target level of investment results in the firm investing earlier which is opposite to the standard real options result

regime uncertainty and optimal investment timing abstract we construct a real options model in which a regime change is expected at a pre determined future time and study the effects of regime uncertainty on a firm s strategic investment decision taking into consideration the remaining time to the regime change and the probability of each regime state we show that just before the time of a regime change firms should act as if the worst case scenario was about to happen even if a good state is highly possible

investing without credible inter period regulations a bargaining approach with application to investments in natural resources abstract a government s lack of credibility when promising future taxation and regulation of foreign direct investment is often regarded as an obstacle to foreign investment as shown in this paper the total lack of inter period credibility may not necessarily prevent investments from taking place both the government and the investor can benefit from negotiating a series of short lived agreements in which the investor obtains a share of the revenue generated from previous investments against the undertaking of making new investments this assumes that intra period agreements are respected by the parties

investment with uncertain tax policy does random tax policy discourage investment we consider the impact of tax policy uncertainty on firm level and aggregate investment comparing investment behaviour when uncertainty is due to a shock following geometric brownian motion gbm versus when random discrete jumps in tax policy occur expectations of the likelihood of a tax policy switch have an important negative impact on the gain to delaying investment in the latter model and time to investment can fall with increasing tax policy uncertainty aggregate investment simulations indicate that capital formation is adversely affected by increases in uncertainty in the traditional gbm model but can be enhanced in the jump process model

strategic real options under asymmetric information abstract this paper studies the effect of private information on the capital allocation decisions of firms who operate under imperfect competition i analyze two interactive firms one with private information and the other without who must decide when to undertake an irreversible and uncertain investment decision traditional non strategic models of irreversible investment under uncertainty involve a single decision maker and result in an optimal period of delay before the investment is undertaken in a strategic setting firms must balance their desire to delay against competitive advantages from early investment i find that an equilibrium may not exist within the standard continuous framework when the private information is over revenues moreover when an equilibrium does exist the competitive pressures from the uninformed firm are weak this is in contrast to existing models with asymmetric information over costs where an equilibrium always exists and the competitive pressures remain strong hsu and lambrecht 2007 this work shows that the investment timing decision and thus the value of the private information is highly sensitive to the nature of incomplete information

investment under uncertainty and policy change in this paper the impact of a policy change on the investment behavior of the firm is studied in an incomplete information setting the policy change occurs when a stochastic process describing the state of the economic environment reaches a certain trigger the firm has incomplete information about the trigger and knows only its probability distribution consequently both the firm s conjecture concerning the trigger value as well as the precision of this conjecture serve as input parameters we derive the optimal investment rule maximizing the value of the firm and show that the impact of the trigger value uncertainty on the optimal investment threshold is non monotonic the threshold decreases with uncertainty for its low levels while the reverse is true if uncertainty is high furthermore we provide results concerning the valuation of the firm s investment opportunity and present some policy implications

the enduring impact of the american dust bowl short and long run adjustments to environmental catastrophe the 1930 s american dust bowl was an environmental catastrophe that greatly eroded sections of the plains analyzing new data collected to identify low medium and high erosion counties the dust bowl is estimated to have immediately substantially and persistently reduced agricultural land values and revenues during the depression and through at least the 1950 s there was limited reallocation of farmland from activities that became relatively less productive agricultural adjustments such as reallocating land from crops to livestock recovered only 14 to 28 of the initial agricultural cost the economy adjusted predominately through migration rather than through capital inows and increased industry

confidence building on euro convergence evidence from currency options we study the evolution of investor confidence in 1992 1998 over the chance of individual currencies to converge to the euro using data on currency option prices convergence risk which may reflect uncertainty over policy commitment as well as exogenous fundamentals induces a level of implied volatility in excess of actual volatility this volatility wedge should gradually decrease as confidence grows over time as convergence policy is maintained and the risk of a reversal is progressively resolved empirically we indeed find a positive volatility wedge which declines over time only for currencies involved in the euro convergence process the wedge and other convergence risk measures are correlated with both exogenous fundamentals and proxies for policy commitment uncertainty we also find that the wedge responds to policy shocks in an asymmetric fashion suggesting that policy risk is resolved at different rates after negative and positive shocks finally we estimate a regime switching model of convergence uncertainty using data on interest rates currency rates and currency option prices the results confirm the time varying and asymmetric nature of convergence risk and indicate that investors demand a risk premium for convergence risk

the distributional impacts of indonesia s financial crisis on household welfare a rapid response methodology analyzing the distributional impacts of economic crises is an ever more pressing need if policymakers are to intervene to help those most adversely affected they need to identify those who have been hurt most and estimate the magnitude of the harm they have suffered they must also respond in a timely manner this article develops a simple methodology for measuring these effects and applies it to analyze the impact of the indonesian economic crisis on household welfare using only pre crisis household information it estimates the compensating variation for indonesian households following the 1997 asian currency crisis and then explores the results with flexible nonparametric methods it finds that virtually every household was severely affected although the urban poor fared the worst the ability of poor rural households to produce food mitigated the worst consequences of the high inflation the distributional consequences are the same whether or not households are permitted to substitute toward relatively cheaper goods households with young children may have suffered disproportionately large adverse effects

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

privatization political risk and stock market development in emerging economies this paper investigates whether privatization in emerging economies has a significant indirect effect on local stock market development through the resolution of political risk we argue that a sustained privatization program represents a major political test that gradually resolves uncertainty over political commitment to a market oriented policy as well as to regulatory and private property rights we present evidence suggesting that progress in privatization is indeed correlated with improvements in perceived political risk our analysis further shows that changes in political risk in general tend to have a strong effect on local stock market development and excess returns in emerging economies we conclude that the resolution of political risk resulting from successful privatization has been an important source for the rapid growth of stock markets in emerging economies

finite project life and uncertainty effects on investment abstract this paper revisits the important result of the real options approach to investment under uncertainty which states that increased uncertainty raises the value of waiting and thus decelerates investment typically in this literature projects are assumed to be perpetual however in today s economy firms face a fast changing technology environment implying that investment projects are usually considered to have a finite life the present paper studies investment projects with finite project life and we find that in contrast with the existing theory investments may be accelerated by increased uncertainty it is shown that this particularly happens at low levels of uncertainty and when project life is short

the impact of political risk on the volatility of stock returns the case of canada this paper examines the impact of political risk in canada on the volatility of stock returns our results suggest that political news associated with the possible separation of quebec from canada plays an important role in the volatility of stock returns however our evidence indicates that investors do not require a risk premium supporting the idea that political risk is diversifiable we also show that stock return volatility varies with the degree of a firm s exposure to political risk namely the structure of assets and the extent of foreign involvement which indicates that firms most exposed to political risk bear the burden of diversification

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

food price changes and household welfare what do we learn from two different approaches the use of a marginal approach can significantly distort the predicted effects of large price variations on monetary welfare over the medium to longer term this paper aims at shedding some light

on the effect of high energy prices on investment empirical analyses of firm behaviour typically assume that there is a stable relationship between investment on the one hand and changes in the relative prices of inputs output demand and other determinants on the other hand however because of the lumpy nature and irreversibility of investments and the presence of uncertainty about future economic developments a specific percentage change in relative prices and output demand may not always lead to the same percentage change in capital stocks that means that different regimes may exist in investment behaviour we test whether such regimes exist using high quality data on eight manufacturing industries in the netherlands three different regimes can be identified that are characterized by differences in the relative input price levels and we find that if relative prices take on extreme values the propensity to adjust the scale of production to changes in demand is very low

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

precautionary saving credit constraints and irreversible investment theory and evidence from serniarid india this article investigates the extent to which poor households are discouraged from making a non divisible but profitable investment using data on irrigation wells in india we estimate the parameters of a structural model of irreversible investment results show that poor farmers fail to undertake a profitable investment that they could in principle self finance because the nondivisibility of the investment puts it out of their reach irreversibility constitutes an additional disincentive to invest simulations show that the availability of credit can dramatically increase investment in irrigation and that interest rate subsidization has little impact

reputation in a model of monetary policy with incomplete information abstract previous models of rules versus discretion are extended to include uncertainty about the policymaker s type when people observe low inflation they raise the possibility that the policymaker is committed to low inflation type 1 this enhancement of reputation gives the uncommitted policymaker type 2 an incentive to masquerade as the committed type in the equilibrium the policymaker of type 1 delivers surprisingly low inflation with corresponding costs to the economy over an extended interval the type 2 person mimics this outcome for awhile but shifts eventually to high inflation this high inflation is surprising initially but subsequently becomes anticipated

green investment under time dependent subsidy retraction risk abstract driven by ambitious targets to reduce greenhouse gas emissions many countries have introduced support schemes to accelerate investments in renewable energy however in recent years experience showed that over time retraction of support schemes becomes more likely this has a severe effect on investment behaviour in this paper we study the effect of a potential subsidy retraction of a feed in tariff fit on investment in renewable energy capacity where we explicitly account for the fact that the likelihood of policy retraction may change over time we show that the range of fits for which it is optimal to invest immediately decreases the longer a subsidy has been in place if the fit offered is too small and or the subsidy has been installed too long ago it is optimal for the firm to wait with investment until the subsidy is eventually retracted and free market conditions prove to be profitable enough furthermore we show that whether a policy maker aiming at accelerating investment prefers investors to consider retraction risk to be time dependent or not depends on how much time has passed since the subsidy has been introduced at the moment the investor considers investment for the first time

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

rising real wages mechanization and growing advantage of large farms evidence from indonesia this paper examines dynamic patterns of land use capital investments and wages in agriculture using farm panel data from indonesia the empirical analysis shows that with an increase in real wages that prevailed in both agricultural and non agricultural sectors in rural areas relatively larger farmers increased the size of operational farm land by renting in land as well as used more hired in machines through machine rental and or service providers which induces the substitution of labor by machines machines and land are complementary and consistently the inverse farm size productivity relationship tends to be reversed among relatively large holders the results support growing diminishing advantage of large small farms in the presence of rapidly rising real wages and have food security policy implications to many asian countries where real wages are rapidly rising and small farms are predominant

investment under regime uncertainty impact of competition and preemption abstract in this study we analyze the investment timing problem and introduce a model of two firms competing for investment preemption each of which knows in advance the time at which the economic condition that will have an impact on the investment changes we qualitatively show how two firms strategically optimize their investment timing taking into account competition and preemption

optimal timing of technology adoption abstract in a dynamic programming framework this paper investigates the optimal timing of technology adoption by a competitive firm when technology choice is irreversible and the firm faces a stochastic innovation process with uncertainties about both the speed of the arrival and the degree of improvement of new technologies a numerical example illustrates how the optimal timing decision is affected by changes in parameter values reflecting market conditions the firm s initial technological attributes and the characteristics of the stochastic innovation process some of these effects turn out to be in sharp contrast to common intuition contrasting the optimal decision rule derived here with the rule obtained under the net present value shows that the former implies a slower pace of adoption than implied by the latter the optimal decision rule is generalized for the case of multiple technology switches and it is shown that for all the switching decisions except the last one the optimal rule satisfies the net present value criterion

measuring welfare poverty and inequality a class of poverty measures is identified the members of which satisfy strong monotonicity and transfer conditions these measures are closely related to indices of income inequality based on the notion of a mean equivalent income a restriction on the class of admissible measures allows poverty to be interpreted in terms of the loss in mean equivalent income resulting from the fact that some people are poor copyright 1987 by royal economic society

investment under uncertainty the case of replacement investment decisions we analyze the determinants of replacement investment decisions in a contingent claims model with maintenance and operation cost uncertainty we find that the optimal time between replacements is increasing in the volatility of cost the purchase price of a new asset and the corporate tax rate and is decreasing in the systematic risk of cost the salvage value of the asset and the investment tax credit the optimal time between replacements can either increase or decrease with an increase in the depreciation rate extensions of the model to examine the effects of technological and tax policy uncertainty on replacement investment decisions give intuitive but striking results uncertainty about the arrival of a technological innovation that would decrease maintenance and operation cost results in a significant decrease in replacement investment uncertainty in a tax law change that would encourage investment decreases current investment and uncertainty in a tax law change that would discourage investment increases current investment

measuring the intensity of poverty among subpopulations applications to the united states this paper proposes an approach to measuring the intensity of poverty within a group relative to that of the population to which the group belongs a poverty intensity index is presented which is easy to interpret and satisfies a number of desirable properties the intensity of poverty among racial and residential groups in various geographical locations is measured using 1980 united states census data

political economy of dynamic resource wars abstract the political economy of exhaustible resource extraction is analysed in three contexts first if an incumbent faces a threat of being removed once and for all by a rival faction extraction becomes more voracious if the factions do not share rents equally second perennial political conflict cycles are more inefficient if constitutional cohesiveness or the partisan in office bias is large and political instability is high third resource wars are more intense if constitutional cohesiveness is weak the incumbent has a partisan in office bias reserves of resources are high the wage is low governments can be less frequently removed from office and fighting technology has less decreasing returns to scale resource depletion in such wars is more rapacious if there is more government instability the political system is less cohesive and the partisan in office bias is smaller

information revelation and strategic delay in a model of investment we model investment as an n player game with a pure informational externality each player s payoff depends only on his own action and the state of nature however because a player s action reveals his private information players wait to see what other players will do equilibrium is inefficient because delay is costly and information is imperfectly revealed we characterize the unique symmetric perfect bayesian equilibrium and study the robustness of delay which turns out to be sensitive to the reaction speed and the number of players we establish the following results i when the period length is very short the game ends very quickly and there is a form of herding or informational cascade which results in a collapse of investment ii as the period length increases the possibility of herding disappears iii as the number of players increases the rate of investment and the information flow are eventually independent of the number of players adding more players simply increases the number who delay iv in the limit the time profile of investment is extreme a period of low investment followed either by an investment surge or a collapse

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

export restrictions and price insulation during commodity price booms for individual countries variable trade barriers can be used to reduce the volatility of domestic relative to world prices if this is done by countries accounting for a large share of the market its effect is offset by increases in world price volatility this study shows the nature of the resulting collective action problem with the policy being ineffective on average in stabilizing domestic prices while increasing the volatility of the income transfers from terms of trade changes a simple approach to assessing the contribution of insulation to the price increases is developed and used with new estimates of agricultural distortions to assess its contribution to the price spikes in 1972 74 and 2006 08 for rice and wheat the analysis suggests that 45 percent of the increase in rice prices in 2006 08 and 30 percent of the increase in wheat prices was due to insulating behavior one sign of progress since 1972 74 was a substantial reduction in the extent of price insulating behavior by the industrial countries this provides little stabilizing benefit in the rice market because countries not classifying themselves at the world trade organization as developing account for only 3 percent of world rice consumption but it does offer some benefit for the wheat market where non developing countries account for 27 percent of consumption

aggregate poverty measures the way poverty is measured is important for an understanding of what has happened to poverty as well as for anti poverty policy evaluation sen s 1976 pathfinding work has motivated many researchers to focus on the way poverty should be measured a poverty measure argued by sen should satisfy certain properties or axioms and the desirability of a poverty measure should be evaluated by these axioms during the last two decades many researchers have adopted the axiomatic approach pioneered by sen to propose additional axioms and develop alternative poverty measures the objective of this survey is to provide a clarification on the extensive literature of aggregate poverty measures in this survey we first examine the desirability of each axiom the properties of each poverty measure and the interrelationships among axioms the desirability of an axiom cannot be evaluated in isolation and some combination of axioms may make it impossible to devise a satisfactory poverty measure some axioms can be implied by other axioms combined and so are not independent some others are ad hoc and are disqualified as axioms for poverty measurement based on the interactions among axioms we identify the core axioms which together have a strong implication on the functional form of a poverty measure we then review poverty measures that have appeared in the literature evaluating the interrelationships among different measures and examining the properties of each measure the axioms each measure satisfies violates are also summarized in a tabular form several good poverty measures which have not been documented by previous surveys are also included

implications of higher global food prices for poverty in low income countries in many poor countries the recent increases in prices of staple foods raise the real incomes of those selling food many of whom are relatively poor while hurting net food consumers many of whom are also relatively poor the impacts on poverty will certainly be very diverse but the average impact on poverty depends upon the balance between these two effects and can only be determined by looking at real world data results using household data for ten observations on nine low income countries show that the short run impacts of higher staple food prices on poverty differ considerably by commodity and by country but that poverty increases are much more frequent and larger than poverty reductions the recent large increases in food prices appear likely to raise overall poverty in low income countries substantially

risks and spatial connectivity evidence from food price crisis in rural indonesia abstract this paper examines the impact of the agricultural commodity price surge globally experienced in 2007 2008 and thereafter on income growth of agricultural producers and non producers using recent panel data from indonesia first during this period producers experienced significantly higher earnings and total income growth than non producers narrowing their income gap second the negative effect on non producers real incomes was smaller in spatially well connected areas where to mitigate the impact private transfers such as remittances as well as employment incomes increased among non producers in contrast government programs did not effectively cushion the income shock therefore informal insurance was more effective than formal government funded social protection programs to mitigate the crisis shock

a note on a troublesome axiom for poverty indices in a recent article in this journal clark hemming and ulph i98i henceforth chu review the recent literature on welfare indices for the measurement of poverty and propose two new such indices the axiomatic approach to the measurement of poverty which was initiated by sen 1976 has been from the very beginning plagued with difficulties with the transfer axiom and chu s paper is not altogether immune we show that one of their two indices does not satisfy the axiom and we take this opportunity to complement their review with a few remarks in particular we show that the index proposed by kakwani ig80a has the same defect let y be a non negative income vector and z the poverty line the number of people with income no larger than the poverty line is q and the total population n assuming y y2 n y gi z yi i i q are the income gaps following chu the reader is referred to their paper for the motivation let us define the equally distributed equivalent income gap as

the value of green energy under regulation uncertainty abstract we examine investments in power generation projects under policy uncertainty when the investor has the choice between two alternative technologies a gas fired plant and a wind plant increased likelihood of subsidy withdrawal reduces the payoff from and postpones investments in the wind technology simultaneously it accelerates investments in gas thereby eliminating or further postponing investments in wind capacity we show that this substitution phenomenon can be of first order importance it can have a significant impact on the timing of investment the wind premium and the probability of investing in the wind technology our results provide new insights about the scope and impact of green energy regulation

consumption risk technology adoption and poverty traps evidence from ethiopia much has been written on the determinants of input and technology adoption in agriculture with issues such as input availability knowledge and education risk preferences profitability and credit constraints receiving much attention this paper focuses on a factor that has been less well documented the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests building on an explicit model this is explored in panel data for ethiopia historical rainfall distributions are used to identify the counterfactual consumption risk controlling for unobserved household and time varying village characteristics it emerges that not just ex ante credit constraints but also the possibly low consumption outcomes when harvests fail discourage the application of fertilizer the lack of insurance causes inefficiency in production choices