are emissions permits regressive grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders consequently they can be highly regressive even if the poor do not have large budget shares for polluting goods using an analytical model this paper estimates the burden of emissions permits borne by different income groups under control of power plant emissions of carbon so2 and nox we also compare the burden borne by poor households under permits with that under emissions taxes performance standards technology mandates and input taxes and we show how the social costs of policies differ from efficiency costs when society has aversion to inequality

an experimental test on retirement decisions i introduction the reform of social security systems is now one of the main issues on the economic policy agenda of most industrialized countries it is widely considered that unless serious changes take place the aging of the population implying a rise in the number of retirees relative to that of workers will threaten the viability of pay as you go public pension systems in the long run this threat is being reinforced by the progressive reduction in the retirement age of the working population the central reforms that are being proposed to neutralize these future financing problems are the raising of the contribution rate the decreasing of pension benefits or and the delay of the retirement age with reference to this latter reform as blondal and scarpetta 1998 state a direct way to encourage people to work longer would be to raise the pensionable age but delaying the retirement age may not be very popular according to recent surveys most workers claim that they are happy with the current retirement age see cremer and pestieau 2003 this may help to explain why reforms on the legal retirement age have currently become a very delicate matter for governments 1 on the other hand pension systems in virtually all organization for economic cooperation and development oecd countries in the mid 1990s made it financially unattractive to work after the age of 55 see gruber and wise 1997 or blondal and scarpetta 1998 indeed the general consensus in the theoretical literature related to social security and retirement decisions is that pension systems create enormous incentives to leave the labor force early 2 therefore increasing the retirement age as a tool to improve the financial problems of public pensions systems faces two sensitive problems the opposition of workers to a delay in the standard retirement age and the disincentives to continuous work being embedded in the pension system the large decline in labor force participation is attributed to the specific fact that to keep on working implies a reduction in the present value of total pension benefits the terms old age pension wealth and implicit tax on postponing retirement have been frequently used to illustrate these disincentives in the pension system the old age pension wealth is the discounted value of expected pension benefits minus the discounted cost of obtaining such benefits after the earliest age at which pensions can be accessed working for an extra year may imply changes in this pension wealth by foregoing 1 yr of pensions paying contributions for an additional year and maybe increasing the pension benefits per year therefore if the costs of postponing retirement are higher than the gains then it is considered that the pension system is implicitly taxing to prolong the working period that is the drop in pension wealth acts as an implicit tax on income from continued work and as such is a clear incentive to retire early actually reforms aiming to increase the effective retirement age to improve the financial problems of public pensions systems have mainly focused on the reduction of this implicit tax on prolonging the working period it is also considered that when the increase in pension benefits is exactly offset by the higher cost in terms of contributions and forgone pensions the pension system is not distorting the retirement decision that is the pension systems that are marginally actuarially fair will not distort individual decisions concerning retirement age and consequently they are defined as neutral systems for this reason the main economic policy measures move in the direction of strengthening the link between lifetime contributions and pension benefits 3 indeed this reform is one of the policy conclusions of maintaining prosperity in an ageing society oecd 2000 the most appropriate reform would be to allow people to retire at the age of their own choice and to adjust pension level so that the pension system is neutral on average

capital accumulation and the characteristics of private intergenerational transfers many recent studies of the process of family accumulation in general and household response to social security in particular have revealed growing dissatisfaction with the life cycle theory of saving see for example barro 1978 kotlikoff 1979 darby 1979 kotlikoff and summers 1981 kurz 1981 blinder gordon and wise 1981 david and menchik 1982 leimer and lesnoy 1982 an alternative to the life cycle hypothesis is expressed by defining the preference of each family over its own consumption as well as the welfare of the generations that follow thus each family consists of an infinite chain of generations who have interdependent preferences and for this reason we shall call it the inter generational hypothesis it was recently used by barro 1974 1978 to attack the conclusions of the life cycle hypothesis our purpose in this paper is to start the long road of studying the structure of the private inter generational transfer system with the aim of providing additional tests of the two competing hypotheses

estimating the general equilibrium benefits of large changes in spatially delineated public goods the purpose of this article is to report a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality we estimate the parameters of a locational equilibrium model and compute equilibria for alternative scenarios characterizing the availability of public goods within a system of communities welfare measures take into consideration the adjustments of households in equilibrium to nonmarginal changes in public goods the framework is used to analyze willingness to pay for reductions in ozone concentrations in southern california between 1990 and 1995

who wins from emissions trading evidence from california researchers and environmental policy advocates have raised questions regarding the distributional impacts of emissions trading programs a k a cap and trade while previous research has been careful to identify the causal effect of emissions trading on emissions reductions fowlie et al in am econ rev 102 2 965 993 2012 hereafter fhm we argue that existing estimates of differential impacts on demographic groups have relied on unrealistic assumptions regarding pollution dispersion in this paper we estimate the emissions reduction due to the reclaim cap and trade program in southern california following the identification strategy of fhm but we relax the assumption of uniform dispersion surrounding point sources we model the transport of effluents using a state of the science dispersion model to determine the areas impacted by emissions from each source importantly conditional on race and ethnicity we find that higher income areas receive larger reductions in pollution under cap and trade furthermore conditional on income or poverty rates we find that blacks benefit while hispanics lose relative to whites under reclaim

does hazardous waste matter evidence from the housing market and the superfund program this paper uses the housing market to develop estimates of the local welfare impacts of superfund sponsored cleanups of hazardous waste sites we show that if consumers value the cleanups then the hedonic model predicts that they will lead to increases in local housing prices and new home construction as well as the migration of individuals that place a high value on environmental quality to the areas near the improved sites we compare housing market outcomes in the areas surrounding the first 400 hazardous waste sites chosen for superfund cleanups to the areas surrounding the 290 sites that narrowly missed qualifying for these cleanups we find that superfund cleanups are associated with economically small and statistically insignificant changes in residential property values property rental rates housing supply total population and types of individuals living near the sites these findings are robust to a series of specification checks including the application of a regression discontinuity design based on knowledge of the selection rule overall the preferred estimates suggest that the local benefits of superfund cleanups are small and appear to be substantially lower than the 43 million mean cost of superfund cleanups

finite duration of unemployment insurance reservation wages and participation in the job market abstract this paper extends the theoretical analysis of the effects of unemployment insurance on the decisions of unemployed workers regarding employment and participation in the labour market it uses a job search model that considers jobs with uncertain duration and unemployment benefits that are paid only during a finite number of periods after becoming unemployed separating the incentive and disincentive effects of unemployment insurance the analysis permits us to study the impacts of several changes in the scheme of unemployment insurance on the reservation wages of unemployed workers and on their decisions relative to participation in the job market

an econometric analysis of reservation wages this paper describes an analysis of survey data on unemployed people who reported their asking wage and the wage they expected to earn we show that if agents behavior is described by the standard optimal job search model one can use these data to deduce structural parameters rather than estimate them and we report our deductions from two surveys 1 of british unemployed people

taxation and the tiebout model the differential effects of head taxes taxes on land rents and property taxes on the theory of state and local public finance is the seminal paper by charles tiebout 1956 tiebout constructed a multijurisdictional model in which independent local governments offer a wide variety of expenditure and tax policies and perfectly mobile consumers reveal their preferences for local public goods through their choice of residential community he argued that under such circumstances local public service provision would be efficient the tiebout model has formed the basis of a vast number of subsequent articles in the state and local public finance literature and has also been very influential in urban and regional economics the efficiency properties of various tiebout type models of local public good provision have been examined and the role of politics in these models has been debated at length in this literature of more direct relevance to this paper however is the fact that although tiebout had little to say directly about taxation simply assuming the existence of head taxes subsequent analyses have used adaptations of this model to examine the effects of local head taxes land taxes and property taxes it is the literature on the efficiency and distributional effects of alternative local taxes that is the subject of this survey 1

the effect of unemployment insurance on the riskiness of occupational choice abstract this paper examines the effect of unemployment insurance on the riskiness of occupational choice by postulating a model of job search in which job offers have two characteristics their wage and their security of tenure two versions are considered a general case in which the unemployment benefit is earnings related and a special case in which the benefit is of a flat rate form of particular interest in the paper is the individual s desired trade off between wage and security of tenure and how this trade off is affected by the type of insurance scheme in operation perhaps surprisingly we find that an earnings related scheme encourages risk taking behaviour by the poor and risk avoiding behaviour by the rich in contrast a flat rate scheme neither encourages nor discourages risk taking

the distributional effects of pollution regulations do renters fully pay for cleaner air abstract changes in housing prices play an important role in determining the incidence of environmental regulations if the increase in value due to changes in environmental amenities is fully passed forward in the form of higher rental prices renters may receive no net benefit from the regulations to estimate the pass through of the value of an environmental amenity i exploit the reduction in suspended particulate matter pm 10 due to the 1990 clean air act amendments caaa using instrumental variables at varying levels of spatial aggregation i find that the 1990 caaa led to a significant increase in rents but the estimated percentage effect is about half as large as that of owner occupied housing values little of this difference is driven by income differences between renters and homeowners when stratifying by income and comparing the effect of the 1990 caaa on housing values and rents point estimates suggest that half of the increase in value is passed on to renters in the form of higher rents this suggests that pass through may be incomplete but landowners still capture much of the value of the air quality regulations

who benefits from environmental regulation evidence from the clean air act amendments abstract using geographically disaggregated data and exploiting an instrumental variable strategy we show that contrary to conventional wisdom the benefits of the 1990 clean air act amendments caaa were progressive the caaa created incentives for local regulators to target the initially dirtiest areas for cleanup creating heterogeneity in the incidence of air quality improvements that favored lower income households based on house price appreciation households in the lowest quintile of the income distribution received annual benefits from the program equal to 0 3 of their income on average during the 1990s over twice as much as those in the highest quintile

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

wind electricity subsidies a windfall for landowners evidence from a feed in tariff in germany abstract subsidies for renewable energy sources are increasing around the globe and amounted to more than 100 billion euro in 2013 this study aims to answer whether the subsidies only ensure that green electricity plants are profitable or whether other market participant as for example landowners benefit from the subsidy in the form of windfall gains as well to identify the causal effect of the subsidies we investigate the impact of the introduction of a price guarantee in the form of a feed in tariff for wind electricity in germany on land prices we employ two different approaches both approaches exploit quasi experimental variation in wind strength across 260 non urban counties in combination with the introduction of the subsidies based on a difference in differences design we find that land prices increased by roughly 1100 euro in high wind areas after the introduction of the subsidy further using an instrumental variable estimator we document that around 18 of expected wind turbine profits are capitalized into land prices finally we show that wind turbine subsidies account for 4 of overall agricultural income in 2007

the economic effects of social security toward a reconciliation of theory and measurement abstract in this paper we argue that actuarial valuation of social security benefit streams is theoretically inconsistent with the assumption of pure life cycle motives instead we show that the simple discounted value of future benefits ignoring the possibility of death is often a good approximation to the relevant concept of value this observation motivates a re examination of existing empirical evidence concerning the economic effects of social security we focus our attention on studies of distributional equity and personal saving behavior in both cases we argue that the use of simple rather than actuarial discounting of survival contingent income streams produces results that differ dramatically from previous findings specifically estimates based on actuarial valuation may overstate the importance of redistribution between and within generations and may understate the depressive effect of social security on personal wealth accumulation by a factor of three or more

the effect of power plants on local housing values and rents abstract this paper uses restricted census microdata to examine housing values and rents for neighborhoods in the united states where power plants were opened during the 1990s compared to neighborhoods with similar housing and demographic characteristics neighborhoods within 2 miles of plants experienced 3 7 decreases in housing values and rents with some evidence of larger decreases within 1 mile and for large capacity plants in addition there is evidence of taste based sorting with neighborhoods near plants associated with modest but statistically significant decreases in mean household income educational attainment and the proportion owner occupied

saving and the life cycle a cohort analysis abstract this paper examines the life cycle hypothesis with reference to japanese employees the study is based on panel data created from successive cross section data which is expected to give better results than past studies the sample was categorized by many elements one important result is that empirical testing of saving and the life cycle is crucially dependent upon the samples it is found that the majority of japanese employees have not accumulated wealth enough to assure consumption during retirement the paper however did not reject a hump shaped course of wealth accumulation under the assumption of myopic behavior

unemployment benefits and unemployment rates revisited a general equilibrium job search model the impact of unemployment insurance systems on employment behaviour and its subsequent repercussions upon the unemployment rates is the subject of this paper generally unemployment can be viewed as the result of factors which are either external or internal to the labour market the external factors such as the level of aggregate product demand and its impact on the size of the labour market have been the chief concern of many studies of unemployment by contrast the possible impact of the internal structure of the labour market on its own size that is the employment impact of the labour turnover process has been a relatively neglected area of study here we concentrate mainly on the impact of the unemployment insurance system on search behaviour and its subsequent impact on the level of unemployment the type of unemployment we are concerned with is that affected by the duration of unemployed search and the expected duration of the resulting employment contracts rather than the unemployment generated by lack of product demand a common theoretical result in the literature is that higher unemployment insurance payments along with other factors affecting search behaviour may make unemployment less burdensome consequently reducing the incentive of the unemployed to take up employment an observable outcome of such phenomena can be that an increase in the average duration of unemployment spells follows a rise in the unemployment

is mandatory retirement overrated evidence from the 1970s in this paper we argue that mandatory retirement is only one aspect of a much broader system that influences an individual s retirement decision we look at responses over time to variations in mandatory retirement rules faced by a sample of private sector workers aged 62 64 in 1973 this is done within a model that specifically includes the economic incentives present in social security and pension systems we find that the impact of a mandatory retirement rule on work is considerably smaller than a simple comparison of those with and without mandatory retirement would imply

amenity benefits and the optimal allocation of land agricultural land often yields sig nificant amenity benefits that may not be re flected in the prevailing allocation of land be tween agricultural and nonagricultural uses this paper introduces a simple supply demand model that incorporates these benefits in the de termination of optimal land allocation three stage least squares and county level data are used to estimate the supply and demand param eters these estimates confirm the plausibility of the conceptual model results from the con tingent valuation literature illustrate the extent of underallocation of land to agriculture due to existing institutional conditions some correc tive measures and their distributional effects are discussed and quantified jel q24

search models and applied labor economics individual effects in a nonlinear model explicit treatment of heterogeneity in the empirical job search model this paper extends the empirical version of a job search model to permit heterogeneity in the location of wage offer distributions population variance in wage offers is decomposed into variance due to heterogeneity and variance facing each individual heterogeneity is found to be an important source of offer variance in the population the amount of pure wage offer dispersion facing individuals is found to contribute little to population variance

the effects of pensions on household wealth a reevaluation of theory and evidence this paper examines the extent to which households offset pension wealth with reductions in other wealth systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign new empirical estimates that do not correct for the biases generate little offset between pensions and other wealth estimates that correct for the biases show substantially more offset a smaller impact of pensions on overall saving than in most previous studies the estimates also indicate that the effects of pensions on wealth vary significantly across households

saving social security and uncertainty since alteration of the saving behavior of the present working generation may have such a significant impact on capital stock growth some concern has arisen about the effect of the social security system on saving behavior in response to this concern numerous empirical and theoretical analyses have been forthcoming most of the theoretical analyses either in the form of overlapping generations models 9 11 or simpler life cycle models 6 15 have indicated that unless specific parameter values utility functions and in some cases production functions are chosen the effect of a social security system on saving is indeterminate for example kurz 11 has shown that the introduction of a simple pay as you go social security system in an overlapping generations model in which individuals do not have a leisure choice will not have a predictable effect on the steady state level of the capital stock unless parameter values and the form of the production function are known similarly in life cycle models that include a leisure choice the effect of social security is difficult to determine although feldstein 6 shows that when the leisure choice is suppressed in such a model a social security system will have a negative impact on saving this indeterminacy has not been completely resolved by empirical work although the bulk of evidence 7 8 10 12 tends to support the view that social security has depressed saving in the past unfortunately with the exception of the work of sheshinski and weiss 16 little of the theoretical analysis deals with the effect on saving behavior of participants who are faced with uncertainty about future prices wages and social security benefits sheshinski and weiss have shown that in an overlapping generations model with uncertain lifetimes the effect of increasing the role of social security through balanced increases in benefits and contributions will actually lead to an increase in saving their analysis however does not include a leisure choice nor does it deal with other forms of uncertainty facing participants consequently we still lack more complete answers to the following basic questions will the introduction of a social security program in the presence of uncertainty

the impact of public pensions on personal retirement saving in canada some evidence from cross section data during recent years much attention has been focused on the question of whether or not public retirement income systems have an adverse effect on personal saving the concern has been expressed in a number of countries that if there is any reduction in saving it could result in a lower rate of capital accumulation and as a consequence slower productivity growth unfortunately the theoretical literature on the subject is inconclusive within the framework of a life cycle model where saving and retirement decisions are made jointly the overall effect of public pensions is ambiguous depending on the relative strengths of the wealth replacement effect and the induced retirement effect 9 10 the former effect reduces saving while the latter tends to increase it the issue is further complicated by the possibility that individuals might attempt to vitiate what the public pension system does through offsetting changes in private intergenerational transfers in the form of bequests 1 14 it would appear therefore that only empirical evidence can determine the extent to which public pensions affect personal saving whereas in the united states a great deal of research much of it with conflicting results has been devoted to shedding further light on this very important issue in canada the subject has been somewhat neglected what little evidence there is however lends little support to the popular view that public pension programs such as old age security oas and the canada pension plan cpp have had a negative effect on saving boyle and murray in their recent study conclude from time series regressions that canada s public pension plans have had no visible effect on household savings behaviour 2 467

a discrete choice equilibrium approach to valuing large environmental changes abstract this study develops a discrete choice locational equilibrium model to evaluate the benefits of the air quality improvements that occurred in the los angeles area following the 1990 clean air act amendments caaa the discrete choice equilibrium approach accounts for the fact that air quality improvements brought about by the 1990 caaa will change housing choices and prices the study also provides new evidence for the distributional welfare impacts of the 1990 caaa in the los angeles area findings suggest that the air quality improvements that occurred in the los angeles area between 1990 and 2000 provided substantial general equilibrium benefits to households the analysis reveals noticeable differences between partial and general equilibrium welfare gains demonstrating that ignoring equilibrium effects will likely misrepresent the benefits of large environmental changes in addition we find that the equilibrium welfare impacts of the 1990 caaa in the los angeles area varied significantly across income groups