using loopholes to reveal the marginal cost of regulation the case of fuel economy standards estimating the cost of regulation is difficult firms sometimes reveal costs indirectly however when they exploit loopholes to avoid regulation we apply this insight to fuel economy standards for automobiles these standards feature a loophole that gives automakers a bonus when they equip a vehicle with flexible fuel capacity profitmaximizing automakers will equate the marginal cost of compliance using the loophole which is observable with the unobservable costs of strategies that genuinely improve fuel economy based on this insight we estimate that tightening standards by one mile per gallon would have cost automakers just 9 27 per vehicle in recent years jel l51 l62 q48

minimum wage competition between local governments in china abstractthe theory of fiscal and regulatory competition between jurisdictions is more advanced than its empirical testing this is particularly true of labour regulation in general and minimum wag

tax base effects and fiscal externalities of local capital taxation evidence from a panel of german jurisdictions abstract this paper provides empirical evidence on the tax base effects of local capital taxation using a large panel of german municipalities it tests whether both the local tax rate and the tax rate in adjacent jurisdictions affect the local tax base the results obtained from a spatial gmm approach confirm a strong negative impact of the local tax rate whereas the average tax rate of neighboring municipalities proves insignificant only if interacted with the relative population size of neighbors a significant positive impact is found indicating that externalities from taxing decisions of adjacent jurisdictions are experienced only by relatively small municipalities

bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

on the endogenous allocation of decision powers in federal structures abstract this paper provides a political economy explanation of the degree of centralization in economic policy making to determine which policies are to be centralized regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies we show that the resulting degree of centralization is suboptimally low voters strategically delegate to representatives who are averse to public spending and hence prefer decentralized decisions in order to reduce their region s cost share when spillovers are asymmetric strategic delegation is stronger at the periphery than at the center

nash equilibria in models of fiscal competition abstract this paper analyzes nash equilibria in a simple model of an economy with jurisdictions engaging in fiscal competition small number nash equilibria in which tax rates are the strategic variables are shown not to coincide with nash equilibria in which public expenditure levels are the strategic variables

decentralization and international tax competition abstract this paper models tax competition between two countries that are divided into regions in the first stage of the game the strategy variable for each country is the division of a continuum of public goods between central and regional government provision in the second stage the central and regional governments choose their tax rates on capital a country s decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exists under tax competition in contrast to standard tax competition models decentralizing the provision of public goods may improve welfare

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

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

spatial patterns in local taxation tax mimicking or error mimicking this paper tests for mimicry in local tax setting by using a panel data set of the english non metropolitan districts in the 1980s when property tax rate variability across districts was highest the results confirm the presence of large and significant spatial interactions among districts even after allowing for district specific and time effects a district appears to be significantly affected by its neighbours policies a 10 increase in the local property tax rate of a district s neighbours leads to an increase of 4 5 in its own property tax rate on the other hand the absence of correlation in tax rates between lower tier district authorities and upper tier county authorities suggests that the spatial pattern in district tax rates is not simply driven by spatially auto correlated shocks

keeping up with the joneses and optimal diversification abstract peer effects have been shown to affect behavior and can generally lead to investments choices that are mean variance inefficient this paper analyzes optimal diversification with peer effects we show that if individuals have keeping up with the joneses preferences and they take their peer group reference as the market portfolio markowitz s mean variance efficiency analysis and the capm equilibrium are intact this holds for any keeping up preferences as well as heterogeneous combinations of such preferences these results also extend to the merton levy segmented market model

the incentive effect of fiscal equalization transfers on tax policy abstract a theoretical analysis considers the impact of a typical system of redistributive fiscal equalization transfers on the tax effort of local jurisdictions more specifically it shows that the marginal contribution rate i e the rate at which an increase in the tax base reduces those transfers might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax rate these predictions are tested in an empirical analysis of the tax policy of german municipalities in order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes the empirical results support the existence of an incentive effect suggesting that the high marginal contribution rates induce the municipalities to set significantly higher business tax rates compared with a situation without fiscal equalization

on multivariate tests of the capm abstract this paper evaluates the power of multivariate tests of the capital asset pricing model the results indicate that when employing an unspecified alternative hypothesis the ability of the tests to distinguish between the capm and other pricing models is poor an upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the capm are due to missing factors this upper bound explains the low power of the tests

spillover effects in local public spending abstractthis paper investigated the fiscal interactions between italian municipalities over the period 2001 11 and found a positive horizontal interdependence in spending decisions the results are robust to different specifications of the spatial neighbours and are confirmed by a natural experiment an earthquake in the abruzzo region of italy in 2009 that creates an exogenous variation in the neighbours spending furthermore there is no evidence of yardstick competition when one considers political effects while a negative relationship is found between spatial interaction and the size of the municipality thus it can be concluded that spillover effects drive the strategic interactions in spending decisions

partially overlapping time series a new model for volatility dynamics in commodity futures in commodity futures markets contracts with various delivery dates trade simultaneously applied researchers typically discard the majority of the data and form a single time series by choosing only one price observation per day this strategy precludes a full understanding of these markets and can induce complicated nonlinear dynamics in the data in this paper i introduce the partially overlapping time series pots model to model jointly all traded contracts the pots model incorporates time to delivery storability seasonality and garch effects i apply the pots model to corn futures at the chicago board of trade and the results uncover substantial inefficiency associated with delivery on corn futures the results also support two theories of commodity pricing the theory of storage and the samuelson effect copyright 2005 john wiley sons ltd

some inconvenient truths about climate change policy the distributional impacts of transportation policies abstract climate policy has favored costly measures that implicitly or explicitly subsidize lowcarbon fuels we simulate four transportation sector policies cap and trade cat ethanol subsidies a renewable fuel standard rfs and a lowcarbon fuel standard our simulations confirm that alternatives to cat are 2 5 to 4 times more costly but are amenable to adoption due to right skewed distributions of gains we analyze voting on the waxman markey wm cat bill conditional on a district s cat gains a district s rfs gains are negatively correlated with the likelihood of voting for wm our analysis supports campaign contributions as a partial mechanism

small sample tests of portfolio efficiency abstract this paper presents an eigenvalue test of the efficiency of a portfolio when there is no riskless asset complementing the test of gibbons ross and shanken 1989 besides optimal upper and lower bounds an easily implented numerical method is provided for computing the exact p value our approach makes it possible to draw statistical inferences on the efficiency of a given portfolio both in the context of the zero beta capm and with respect to other linear pricing models as an application using monthly data for every consecutive five year period from 1926 to 1986 we reject the efficiency of the crsp value weighted index for most periods

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

does federalism lead to excessively high taxes the relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital the extent to which immobile factors are taxed by the states and the strength of preferences between federal and state expenditures the vertical externality will dominate if the aggregate tax base of the federation is responsible to the state tax instrument tax interactions in federations are more complex than has often been supposed

the economics of pollution permit banking in the context of title iv of the 1990 clean air act amendments abstract this paper presents a model of the collective emission permit banking behavior of electricity generating units affected by title iv of the clean air act amendments of 1990 a rigorous treatment of the constraint that pollution permits cannot be borrowed from future allocations is introduced this approach enables an analysis of the impact of future changes in electricity demand regulations and technologies on the present permit price and emissions level the effect of uncertainty on the banking behavior is also explored

the likelihood ratio test statistic of mean variance efficiency without a riskless asset abstract the question whether a given porfolio is mean variance efficient is a basic problem of investment analysis mean variance efficiency is also the basis of the capital asset pricing model this paper presents the explicit form of the likelihood ratio test of the hypothesis that a given portfolio or a particular market index is ex ante mean variance efficient in the case where there is no riskless asset geometric relations are illustrated to provide intuition about the constrained maximum likelihood estimators and the test statistic and two simple economic interpretations of the test are given

do local government fiscal spillovers exist evidence from counties municipalities and school districts abstract numerous theories posit that the fiscal decisions of one jurisdiction influence the fiscal decisions of its neighbors the main contribution of this paper is to address empirical difficulties in testing for spillovers using a regression discontinuity design on a newly collected dataset i utilize close elections from this large dataset of local referenda in ohio to isolate the effect of exogenous increases in taxation and spending of one jurisdiction on neighbors fiscal decisions for all jurisdictional types and referenda revenue sources bonds income property and sales tax there is no evidence of spillovers and relatively small effects can be ruled out

potential performance and tests of portfolio efficiency abstract the potential performance of an asset set may be obtained by choosing the portfolio proportions to maximize the sharpe 1966 performance measure if a portfolio has a sharpe measure equivalent to the potential performance of the underlying set of assets then it is efficient multivariate statistical procedures for comparing potential performance and testing portfolio efficiency are developed and then evaluated using simulations two likelihood ratio statistics are then used to compare stock and bond indices against sets of 20 and 40 portfolios the procedures are also compared to the gibbons 1982 methodology for testing financial models

factor pricing in a finite economy abstract prior theoretical derivations of the arbitrage pricing theory apt bound an aggregate measure of the deviation of mean asset returns from that predicted by a linear pricing equation it is conceivable given this bound that some assets might be badly mispriced by the model in this paper a more intuitive derivation of the factor pricing equation is presented which describes the deviation on an asset by asset basis the deviation is shown to be small for assets in a realistic finite economy and is arbitrarily close to zero for those assets with arbitrarily small size relative to aggregate wealth it follows that the linear pricing equation provides a good approximation for the mean returns of all traded assets

spatial fiscal interactions among french municipalities within inter municipal groups based on a unique data set of french municipalities and a large number of budgetary variables we estimate the extent of spatial fiscal interaction among the 33 484 french municipalities in 2008 by accounting for inter municipal cooperation using a spatial autoregressive model with inter municipal group fixed effects we show that spatial interactions among french municipalities are inflated by correlated effects that affect similarly municipalities that cooperate together removing these confounding effects leads to considerably smaller positive spatial interactions for tax decisions and even negative ones for capital expenditures in addition we observe a clear distinction between complementary choices on current budget items and substitutable choices on capital budget items

multivariate proxies and asset pricing relations abstract a framework is developed in which inferences can be made about the validity of an equilibrium asset pricing relation even though the central aggregate in this relation is unobservable a multivariate proxy for the true market portfolio consisting of an equal weighted stock index and a long term government bond index is employed in an investigation of the sharpe lintner capm the empirical evidence suggests that we can reject the joint hypothesis that a capm is valid and b multiple correlation between the true market portfolio and proxy assets exceeds 0 7 connections to the equilibrium factor pricing literature are also explored

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

read my lips the role of information transmission in multilateral reform design abstract context specific knowledge is crucial to crafting multilateral reform programs nonetheless local knowledge often consists of unverifiable information thus the quality of countries reports depends on the conflict of interests faced by the recipient and the multilateral we compare the performance of a delegation scheme against a centralization scheme we find that recipients discretion in the choice of reforms delegation should only be increased when the countries local knowledge is strictly more important than the multilateral s information conversely a reduction in the conflict of interests may lead the multilateral in to allowing the recipient less freedom in designing reforms centralization our empirical results support these theoretical predictions

decentralisation as an incentive scheme recent changes have introduced more decentralization in a number of traditionally centralized countries 1 in the case of france it is sometimes claimed that the 1982 1983 reform of subcentral government is of historical importance although the principles of that reform are not contested any more by the new majority elected in 1986 opinions still differ on a number of policy issues some of the issues are presented in this introductory section but the main purpose of this paper is not to expose or discuss in detail the problems of decentralization in france as argued in the second part of the introductory section the theoretical framework in which the policy issues of decentralization are usually discussed by economists is somewhat unsatisfactory in particular when applied to unitary states such as britain or france the bulk of the paper is devoted to the exploration of a different approach to decentralization it is not purported however that this approach could completely replace the more traditional one consequently when in the concluding section we return briefly to the policy issues identified here this is to be read as a preliminary attempt to evaluate the relevance of the reasoning developed in the paper

fiscal competition and public debt the existing theoretical literature on fiscal competition has to a large extent ignored the role of government debt as a determinant of taxes and productive public spending we develop a simple model of fiscal competition with government borrowing if a default on government debt is no option initial debt levels play no role in fiscal competition this neutrality result is overturned when a default is possible a government that is constrained in its borrowing due to a possible default responds optimally by lowering spending on durable public infrastructure which in turn induces more aggressive tax setting a rise in exogenous firm mobility reinforces the link between legacy debt and fiscal competition our model may help explain the observation that highly indebted countries in europe have decreased corporate tax rates over proportionally our model may also be useful for evaluating decentralization reforms in which the power to tax firms is devolved to lower levels of overnments which differ in their initial debt levels

raising taxes through equalization a simple theory suggests that a common form of federal horizontal equalization grants should cause subnational governments to levy higher tax rates distorting local tax bases and so increasing federal transfers to test this i examine canadian provincial tax policies in the 1972 2002 period consistent with the theory provinces respond to expansions of equalization transfers by increasing their own tax rates i estimate that on average tax rates in grant receiving provinces were substantially and significantly higher as a consequence of the transfer formula jel classification h21 une theorie simple suggere qu une forme usuelle d octrois federaux de perequation horizontale devrait entrainer les gouvernements sub nationaux a imposer de plus hauts taux d imposition modifiant ainsi les bases de fiscalite locale et ce faisant accroissant les transferts federaux pour mettre au test cette hypothese on examine les politiques fiscales des provinces canadiennes pour la periode entre 1972 et 2002 d une maniere qui semble supporter l hypothese les provinces ont repondu a un accroissement des transferts de perequation en accroissant leur propre taux d imposition on estime que les taux moyens d imposition dans les provinces qui recoivent des transferts sont plus eleves de maniere substantielle et significative en raison de la formule de transferts

in search of yardstick competition a spatial analysis of italian municipality property tax setting this paper uses italian local government data to test for fiscal interaction arising from yardstick competition to discriminate yardstick competition from competing theories of strategic interaction we account for the incentives and constraints generated by the electoral system in particular for the presence of term limits and the size of the majorities supporting the mayors estimation of a local property tax setting equation uncovers positive spatial auto correlation in local tax rates of jurisdictions where the mayors run for re election in uncertain contests while interaction is absent where either mayors face a term limit or are backed by large majorities

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

how market efficiency and the theory of storage link corn and ethanol markets this article uses the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explores statistical evidence for the link we propose that a long run no profit condition is established in distant futures markets for ethanol corn and natural gas and then use the theory of storage to define an inter temporal equilibrium among these prices the relationship shows that under certain conditions future price expectations will influence nearby futures prices and that a short term relationship between input and output prices will exist we demonstrate validity of the theory using a structural price model and then by means of time series techniques

identifying local tax mimicking with administrative borders and a policy reform abstract this paper exploits an exogenous reform of the local fiscal equalization scheme in the german state of north rhine westphalia nrw in 2003 to identify tax mimicking by municipalities in the neighboring state of lower saxony nds the reform caused municipalities in nrw to increase their business and property tax rates i study within the difference in difference dd and the spatial lag sl frameworks whether municipalities in nds bordering nrw did react to the exogenous tax increases by nrw municipalities the dd and sl results suggest that there are no interactions in tax rates in contrast traditional sl regressions that rely on variation in neighbors demographic and political characteristics for identification provide strong evidence for immediate strategic interactions these results indicate that most of the existing literature overestimates the importance of local tax mimicking

farm acreage shocks and crop prices an svar approach to understanding the impacts of biofuels the last 10 years have seen tremendous expansion in biofuels production particularly in corn ethanol in the united states at the same time that commodity prices e g corn have experienced significant spikes while supporters claim that biofuels are renewable and carbon friendly concerns have been raised about their impacts on land use and food prices this paper analyzes how us crop prices have responded to shocks in acreage supply these shocks can be thought of as a shock to the residual supply of corn for food using a structural vector auto regression framework we examine shocks to a crop s own acreage and to total cropland this allows us to estimate the effect of dedicating cropland or non crop farmlands to biofuels feedstock production a negative shock in own acreage leads to an increase in price for soybeans and corn our calculations show that increased corn ethanol production during the boom production year 2006 2007 explains approximately 27 of the experienced corn price rise

strategic fiscal interaction across borders evidence from french and german local governments along the rhine valley abstract this article contributes to the literature on local tax interactions its novelty lies in its focus on the interactions of local governments across national borders we use panel data for the french and german municipalities in the rhine valley for the period 2000 2007 the local governments of each country influence firms overall tax burdens but the tax instruments available at the local level differ we estimate panel models that distinguish between the effects of competing municipalities belonging to the same country and belonging to the other country our empirical model shows that local jurisdictions along borders choose their business tax rates based on those of their domestic neighbors and that foreign fiscal policy does not have an impact on the local domestic tax setting behavior in these contexts

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

on correlations and inferences about mean variance efficiency a framework is presented for investigating the mean variance efficiency of an unobservable portfolio based on its correlation with a proxy portfolio a sensitivity analysis derives the highest correlation between the proxy and a portfolio that reverses the inference of a test of sharpe lintner tangency for example the maximum correlation between the value weighted nyse amex portfolio and a portfolio inferred tangent ranges from 0 76 to 0 48 we also test whether the correlation between the proxy and the tangent portfolio exceeds a given level this hypothesis is often rejected for the nyse amex proxy at a correlation of 0 7

tax incentives in fiscal federalism an integrated perspective models of fiscal federalism rarely account for the efficiency implications of intergovernmental fiscal ties for federal tax policy this paper shows that fiscal institutions such that federal tax deductibility vertical revenue sharing and fiscal equalization being common features of existing federations encourage local taxation but may discourage federal taxation furthermore the structure of public spending is skewed towards local spending we also show that when considering leviathan governments fiscal institutions reduce confiscatory taxation by the federal government the result is contrary to the cartelization hypothesis brennan and buchanan 1980 finally we characterize the efficient design of intergovernmental fiscal ties jel classification h7 hl h20

an explicit bound on individual assets deviations from apt pricing in a finite economy abstract ross s arbitrage pricing theory apt is a tractible and reasonable alternative to the mean variance model nonetheless understanding of the theory has been obscured by the complexity of the sequence economy models used for motivation by contrast we give a simple and direct derivation of the apt in a finite economy using an explicit bound on the deviations from apt prices across assets a coarse calculation shows that theoretical deviations from apt pricing are negligible in our economy

a critique of the stochastic discount factor methodology in this paper we point out that the widely used stochastic discount factor sdf methodology ignores a fully specified model for asset returns as a result it suffers from two potential problems when asset returns follow a linear factor model the first problem is that the risk premium estimate from the sdf methodology is unreliable the second problem is that the specification test under the sdf methodology has very low power in detecting misspecified models traditional methodologies typically incorporate a fully specified model for asset returns and they can perform substantially better than the sdf methodology asset pricing theories such as those of sharpe 1964 lintner 1965 black 1972 merton 1973 ross 1976 and breeden 1979 show that the expected return on a financial asset is a linear function of its covariances or betas with some systematic risk factors this implication has been tested extensively in the finance literature by the so called traditional methodologies in the traditional methodologies a data generating process is first proposed for the returns and then the restrictions imposed by an asset pricing model are tested as parametric constraints on the return generating process the approach taken by the traditional methodologies has a potential problem which is that when the proposed return generating process is misspecified the test results could be misleading therefore in applying the traditional methodologies researchers typically have to justify that the proposed data generating process provides a good description of the returns for example when the proposed return generating process is a factor model one would like the model to have high r 2 in explaining the returns on the test assets especially when the test assets are well diversified portfolios as many of the earlier theories are special cases of the stochastic discount factor sdf model recent empirical asset pricing studies have been focused on testing the pricing restrictions in terms of the sdf model rather

exit voice and mimicking behavior evidence from swiss cantons previous empirical literature hasshown that in order to overcome agencyproblems voters make inter jurisdictionalcomparisons of fiscal performance whenmaking electoral decisions incumbents therefore anticipate voters feedback by copying fiscal policy decisionsfrom neighbors this paper argues thatfiscal autonomy exit as well as directlegislation voice enrich politicalcompetition reducing thus the influence of electoral competition onfiscal decisions consequently policymimicking does not matter in circumstancesof direct legislation and fiscal autonomywhere the impact of voters on the politicalagenda is particularly strong based onpanel data between 1980 and 1998 we findencouraging evidence supporting ourtheoretical arguments

tax competition among local governments evidence from a property tax reform in finland this paper uses a finnish policy intervention to study tax competition among local governments changes in the statutory lower limits to the property tax rates are used as a source of exogenous variation to estimate the responses of municipalities to tax rates in their neighboring municipalities i do not find evidence of interdependence in property tax rates among finnish municipalities the results are in contrast to the earlier empirical literature using data from other countries that has mainly found positive interdependence in tax rates i compare the causal estimates based on the policy change to the commonly used spatial lag estimates and spatial instrumental variables estimates which are based on highly restrictive assumptions the comparisons suggest that the standard spatial econometrics methods may have a tendency to overestimate the degree of interdependence in tax rates

policy shocks and market based regulations evidence from the renewable fuel standard the renewable fuel standard mandates large increases in u s biofuel consumption and is implemented using tradable compliance credits known as rins in early 2013 rin prices soared causing the regulator to propose reducing future mandates we estimate empirically the effect of three policy shocks that reduced the expected mandates in 2013 we find that the largest of these shocks decreased the value of the fuel industry s 2013 compliance obligation by 7 billion we then study the effects of the shocks on commodity markets and the market value of publicly traded biofuel firms results show that the burden of the mandate reductions fell primarily on advanced biofuel firms and commodity markets of the marginal compliance biofuel we argue that the policy shocks reduced the incentive to invest in the technologies required to meet the future objectives of the rfs and discuss alternative policy designs to address the problems that arose in 2013

identifying supply and demand elasticities of agricultural commodities implications for the us ethanol mandate we present a new framework to identify supply elasticities of storable commodities where past shocks are used as exogenous price shifters in the agricultural context past yield shocks change inventory levels and futures prices of agricultural commodities we use our estimated elasticities to evaluate the impact of the 2009 renewable fuel standard on commodity prices quantities and food consumers surplus for the four basic staples corn rice soybeans and wheat prices increase 20 per cent if one third of commodities used to produce ethanol are recycled as feedstock with a positively skewed 95 percent confidence interval that ranges from 14 to 35 per cent jel q11 q16 q42 q48