entrepreneurship and income inequality in southern ethiopia this article uses inequality decomposition techniques in order to analyze the consequences of entrepreneurial activities to household income inequality in southern ethiopia a uniform increase in entrepreneurial income reduces per capita household income inequality this implies that encouraging rural entrepreneurship may be favorable for both income growth and income distribution such policies could be particularly successful if directed at the low income low wealth and relatively uneducated segments of the society

intersectoral transfer growth and inequality in rural ecuador abstract in this paper we study intersectoral transfer and its impact on the distribution of income in ecuador we find that income shares between farm and nonfarm activities are roughly equal on average although the rich in rural areas typically receive a greater share of income from nonfarm sources thus decomposing inequality by income source reveals that a rise in nonfarm incomes increases inequality drawing on a new method to estimate local level distributional outcomes growth of the high productivity nonfarm sector is observed to have a strong and positive association with average consumption and inequality growth of the low productivity nonfarm sector is associated with little change in either average income or income inequality irrespective of subsector growth of the nonfarm sector is associated with a substantial fall in poverty

who suffers the penalty a panel data analysis of earnings gaps in vietnam in spite of its predominant economic weight in developing countries little is known about the informal sector earnings structure compared to that of the formal sector taking advantage of the rich vhlss dataset in vietnam in particular its three wave panel data 2002 2004 2006 we assess the magnitude of various formal informal earnings gaps while addressing heterogeneity at three different levels the worker the job wage employment vs self employment and the earnings distribution we estimate fixed effects and quantile regressions to control for unobserved individual characteristics our results suggest that the informal sector earnings gap highly depends on the workers job status and on their relative position in the earnings distribution penalties may in some cases turn into premiums by comparing our results with studies in other developing countries we draw conclusions highlighting vietnam s labour market specificity

energy as a factor of production and entropy as a pollution indicator in macroeconomic modelling abstract fluctuating energy prices and the environment s limited capacity for absorbing pollution constitute significant uncertainties for future industrial evolution solving a set of differential equations and using the simplex algorithm in linear programming we look into the questions how changing energy inputs and prices have affected industrial growth in the past and how the energy system can be optimized so that pollution becomes minimum in the future we obtain production functions which depend linearly on energy and exponentially on the ratios of labor capital and energy capital they describe well the growth of output in west germany and the u s a during the last two decades and the responses to theenergy price explosions energy conservation was an important response element the most optimistic possible savings of primary energy by heat exchangers heat pumps and cogeneration at the present fixed energy demand profiles are computed to be 54 in the netherlands 36 in west germany and 59 in japan a pollution indicator entropy production is proposed and incorporated in a model of enviromental constraints on industrial growth

thermodynamic constraints on optimal depletion of copper and aluminum in the united states a dynamic model of substitution and technical change abstract the paper proposes a methodology to integrate concepts from thermodynamics into economic models of optimal natural resource use and to empirically determine relationships between changes in thermodynamic states of materials and the use of high quality energy sources the integration is aimed at an assessment of technologies substitution and technical change based on economic concepts that do justice to fundamental physical constraints a model of natural resource use and production has been developed that combines econometric time series analysis with dynamic modeling techniques the model explicitly includes thermodynamic constraints on i the process of separating minerals from crude ore ii smelting processes iii substitution among inputs and iv endogenous technical change in mining smelting and refining based on empirical information the model has been simulated to assess outer limits of feasible resource savings in copper and bauxite mining smelting and refining in the united states conclusions are drawn for the evaluation of products and effluents from mining smelting and refining operations with regard to changes in the physical resource base and environmental quality

optimal tariff equilibria with customs unions the authors construct a model of customs unions in which countries charge optimal tariffs customs unions internalize the externality that exists whenever two countries import the same good also customs unions make several countries into one large unit with more market power big customs unions can improve their members welfare relative to the free trade the authors model of customs unions separates the effects of tariff reduction from the effects of policy coordination the movement from nash equilibrium to a free trade association improves global resource allocations moving from a free trade association to a full customs union has ambiguous resource allocation effects

a reexamination of the role of thermodynamics for environmental economics abstract as the discussion about the role of thermodynamics in environmental economics has not led to a conclusion yet a more fundamental approach seems to be necessary which also takes into consideration the relationship between economics and the natural sciences in general to this end value theory is chosen as a starting point because it is the centerpiece of every economic theory it is shown that neoclassical environmental economics suffers from serious deficiencies because of its value concept heedlessly copied from classical mechanics thermodynamics can be expected to be helpful to redress these defects because the economy can be thought of as a dissipative structure dependent on its environment the obvious way to integrate thermodynamics consists in the formulation of thermodynamic constraints to complement neoclassical environmental economics but this approach remains unsatisfactory because the neoclassical mechanical hardcore is incompatible with the entropy law and its implications evidently the neoclassical paradigm and its value concept have to be given up but the alternative of the energy theory of value must be rejected because its determinism cannot be reconciled with the richness of human behaviour as thermodynamic analogies offer no solution either there is a dilemma between the necessity and the apparent impossibility of adequately integrating thermodynamic concepts it turns out that a normative inconsistency is responsible which is due to the demand for intergenerational justice therefore the integration of thermodynamics into environmental economics hinges on a meta economic value decision if sustainability is adopted as the guiding principle the insights of thermodynamics call for a macro economic environmental policy setting absolute limits to the economy but this macro policy is incompatible with neoclassical economics so that a social reconstruction of economics based on a social theory of value becomes necessary in sum thermodynamics is important for environmental economics besides fulfilling a general heuristic function it also fulfils a decisive conceptual and an analytical function insofar as it helps to justify sustainability and to operationalize macro economic environmental policy

on the life cycle metaphor where ecology and economics diverge abstract there is an attractive analogy between nature and industry based on the similarity of natural functions and certain industrial activities for instance animals ingest eat and digest food finally there are metabolic wastes firms are analogous to organisms in several respects insofar as they consume material resources process digest them and produce output products and excrete wastes firms like organisms also compete with each other for resources curiously enough one of the apparent differences between natural and man made systems is actually not one like the industrial system the natural system does not recycle everything however there are at least four real and important differences between the biosphere ecology and the technosphere economy first there is no primary producer in the economic system analogous to what photosynthesizers play in the biosphere inputs to the economy are mostly natural resources capital services and labor second in the economic system output is a heterogeneous mix of manufactured products and services labor in economics is an input but not an output the economic system recycles much less than the ecological system but utilizes a far greater suite of elements in the biosphere there are no products as such growth is tantamount to accumulation of embodied solar exergy in the form of cellulose sugars lipids and proteins the biosphere produces only wastes and more of itself plus dead matter third in the biosphere there are no markets there is no medium of exchange like money and there is nothing analogous to paid labor exchanges are involuntary i e by predation parasitism or theft fourth evolution in nature is driven by differentiation by random mutations of the genome and darwinian selection based on reproductive success in economics differentiation is based on discovery invention and innovation by intelligent economic agents and selection is based on competition at the individual or firm level either way the economic system is not closely analogous to an ecosystem attempts to use ecological concepts in an economic context are often misleading and unjustified the paper discusses the implications of the eco eco mismatch for resource accounting and life cycle analysis

the economics of climate change impacts a la stern novel and nuanced or rhetorically restricted abstract the stern report conducts an estimation of greenhouse gas control costs weighed against the benefits of avoiding damages at the global scale as i show stern and colleagues are aware of the limits to cba although they chose to ignore the considerable literature on the subject the many contributions by ecological economists and especially work specific to the enhanced greenhouse effect various problems are raised or mentioned in the report including strong uncertainty incommensurability plural values non utilitarian ethics rights distributional inequity poverty and treatment of future generations how then can this report acknowledging so many of those aspects of climate change that render cba an unsuitable tool for generating policy recommendations go ahead to conduct a global cba and make policy recommendations i explain how issues are suppressed and sidelined in a careful and methodical manner with the pretence they have been addressed by state of the art solutions meanwhile the authors maintain allegiance to an economic orthodoxy which perpetuates the dominant political myth that traditional economic growth can be both sustained and answer all our problems besides perpetuating myths this diverts attention away from alternative approaches away from ethical debates over harming the innocent the poor and future generations and away from the fundamental changes needed to tackle the very real and serious problems current economic systems pose for environmental systems

wage labour activities by agricultural households in nicaragua this article considers wage labour activities by agricultural households in nicaragua it analyses the role of 1 comparative advantage as determined by individual and household characteristics and 2 agricultural conditions and market imperfections in shaping wage labour supply an econometric specification is developed which allows for random household specific effects results reveal that non agricultural wage work is largely determined by comparative advantages whereas agricultural wage work is used to deal with a number of agricultural conditions and market imperfections

regional labor market integration shadow wages and poverty in vietnam poor workers suffer from low returns to their most abundant resource labor in this paper we show that labor market integration strongly affects these returns for poor workers in vietnam using seven representative household surveys it is shown that while regional labor markets have become increasingly integrated over the period 1993 2010 considering market wages of workers in wage employment there remains a strong lack of integration considering shadow wages of workers in farm self employment shadow wages have been increasing as a proportion of market wages during 1993 2010 but they remain only 22 28 of rural market wages by 2010 using a decomposition technique it is shown that the lack of integration between the farm self employment segment with various segments of wage employment regional urban versus rural non farm household versus other enterprises explains primarily the gap in returns to labor between poor and non poor workers these findings show that labor market integration studies should not only focus on observed market wages but also on shadow wages in order to understand the relationship between labor market integration and the returns to labor

household entrepreneurship and social networks panel data evidence from vietnam en utilisant un panel de microentreprises familiales au vietnam cet article met en relation le reseau social des entrepreneurs et de leur menage avec la performance de la microentreprise familiale nous abordons deux questions connexes la premiere examine la possibilite d effets differencies de l emploi des membres de la famille par rapport a des travailleurs recrutes sur le marche du travail sur la performance de la microentreprise une deuxieme question aborde les effets respectifs des differentes dimensions des reseaux sociaux sur l efficience technique de la microentreprise l hypothese testee est que au dela du canal de la productivite du travail les entrepreneurs qui sont confrontes a un environnement social defavorable pourraient produire moins efficacement et realiser une valeur ajoutee plus faible que ce qui pourrait etre possible avec la meme quantite de ressources nous montrons qu il existe en effet un differentiel de productivite entre le travail familial et le travail recrute sur le marche et nos resultats attestent de la presence d effets defavorables du reseau social pour certains menages gerant une microentreprise nous soulignons aussi l importance des reseaux professionnels pour la reussite de l entreprenariat familial

jevons paradox revisited the evidence for backfire from improved energy efficiency beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed

energy money and pollution abstract this paper explores general equilibrium consumption choices and interest rate determination in a deterministic two period model in which the production side explicitly describes the thermodynamic process unavoidably connected with production as argued by georgescu roegen a simple energy based production process is modeled which is not in a stationary state the resulting production function is time dependent in neoclassical general equilibrium the thermodynamic implication of the production process i e the production of waste will not be taken into account by decision making agents for welfare optimality the resulting externality needs to be corrected by a social planner or through the use of environmental related taxation however it is shown that imposing energy as a medium of exchange money in the same economy makes agents energy conscious and decreases the externality associated with entropic waste through a market mechanism without the need for intervention in the limit case in which production occurs in thermodynamic equilibrium no entropic waste is produced and the model collapses to the nested neoclassical model a contribution of the proposed approach is the determination of energy money prices in general equilibrium despite the fact that energy does not enter the agents utility function and therefore has no direct value money prices and interest rate can be fully characterized in the model due precisely to the production technology adopted in this competitive equilibrium the market interest rate will be greater than the real interest rate the change in the numeraire and medium of exchange used affects the economy due to the non stationarity of the production process but has no effect in the limit case in which the productive process reaches a steady state

the extraction of natural resources the role of thermodynamic efficiency abstract the modelling of production in microeconomics has been the subject of heated debate the controversial issues include the substitutability between production inputs the role of time and the economic consequences of irreversibility in the production process a case in point is the use of cobb douglas type production functions which completely ignore the physical process underlying the production of a good we examine these issues in the context of the production of a basic commodity such as copper or aluminium we model the extraction and the refinement of a valuable substance which is mixed with waste material in a way which is fully consistent with the physical constraints of the process the resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used we analyze the equilibrium pricing of a commodity extracted in an irreversible way we force consumers to purchase goods using energy as the means of payment and force the firm to account in terms of energy the resulting market provides the firm with a form of reversibility of its use of energy under an energy numeraire energy resources will naturally be used in a more parsimonious way

rural nonfarm employment and incomes in the himalayas abstract nonfarm activities generate on average about 60 of rural households incomes in the himalayas this article analyzes the determinants of participation in nonfarm activities and of nonfarm incomes across rural households a unique data set collected in the himalayan region of india allows us to deal with the heterogeneity of rural nonfarm activities by using aggregations into categories that are useful both analytically and for policy purposes we conduct an empirical inquiry that reveals that education plays a major role in accessing more remunerative nonfarm employment other household assets and characteristics such as land social status and geographical location also play a role

energy efficiency and the slump in labour productivity in the usa energy consumption is included in an aggregate cobb douglas production function for the usa the data suggest that energy conservation has not reduced the growth rate for real gnp by more than 0 3 percentage points and that less than one fifth of the overall slump in labour productivity since 1973 should be attributed to higher energy prices

jagdish bhagwati pravin krishna and arvind panagariya eds trading blocs alternative approaches to analyzing preferential trading agreements

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

can bilateral trade agreements help induce free trade there has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade this paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations we ask a very simple question does the fact that trading blocs can form bilateral trade agreements make free trade less likely to occur the answer is that it depends on the size distribution of the trading blocs if there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs in this case bilateral trade agreements facilitate the attainment of free trade not allowing customs unions leads to more not less protection if trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely these results suggest that a policy that inhibits the formation of trading blocs may be harmful we also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are

nonfarm employment and rural welfare evidence from the himalayas the potential importance of nonfarm employment for the welfare of rural households has long been recognized but whether the nonfarm sector offers prospects for improving the welfare of the rural poor remains a contentious issue we examine distributional and well being effects of nonfarm employment of rural households in the himalayas we account for heterogeneity of nonfarm employment and estimate a system of structural equations to better understand the causal linkages between nonfarm employment and household well being the results confirm that disaggregating nonfarm employment activities matters for understanding the relationship between nonfarm employment and rural welfare while low return nonfarm employment is associated with lower income inequality high return nonfarm activities have a disequalizing effect on the distribution of household incomes we also find that the ability to engage in high return nonfarm activities is associated with higher economic well being poor households on the other hand tend to rely on low return activities that do not contribute to improved well being

rural nonagricultural activities in development theory and application abstract this paper focusses on the potentially important role of rural nonagricultural activity in the development process using the hymer resnick z goods model as a point of departure we first show that its pessimistic conclusions are based on rather restrictive assumptions as applied to the colonial period we relax these assumptions indicating the theoretical possibility of a substantially more positive scenario for that period subsequently we analyze the role of z goods traditional and nontraditional in the post independence era again distinguishing between archetypal pessimistic and optimistic cases finally the comparative historical experience of the philippines and taiwan is brought to bear to illustrate the argument empirically

rural nonfarm activities and poverty in the brazilian northeast abstract this paper combines two complementary data sets to present a disaggregated spatial profile of poverty in the brazilian northeast and to investigate the importance of nonagricultural activities for its rural dwellers we present both univariate and multivariate profiles of nonagricultural employment and discuss its determinants while the main occupational difference between the rural poor and the rural nonpoor in brazil seems to be the greater reliance of the former on paid agricultural employment vis a vis own cultivation rather than access to nonagricultural activities the evidence nevertheless suggests that diversification into this growing sector provides both an important complement to the budgets of the poor and possibly a self insurance mechanism against negative shocks despite the substantial heterogeneity of the sector two general findings are robust returns to education are comparatively high and location in relation to urban areas is an important determinant of both employment and earnings in rural nonagricultural activities

the changing role of non farm household enterprises in vietnam summary in this paper we study the importance of the non farm household enterprise nfhe sector in vietnam we do find that nfhes increase income and reduce between household inequality however the role of the nfhe sector has been diminishing especially in urban areas and the nfhes have been affected by trade liberalization in the period 1993 2002 in terms of policy this suggests that there is increasing scope for targeting nfhe sector policies at those nfhes that are in the best position to benefit from the new opportunities in the liberalizing environment

long term trends in resource exergy consumption and useful work supplies in the uk 1900 to 2000 abstract our aim is to explain historical economic growth in the uk economy by introducing an empirical measure for useful work derived from natural resource energy inputs into an augmented production function to do this we estimate the long term 1900 2000 trends in resource exergy supply and conversion to useful work in the united kingdom the exergy resources considered included domestic consumption of coal crude oil and petroleum products natural gas nuclear and renewable resources including biomass all flows of exergy were allocated to an end use such as providing heat light transport human and animal work and electrical power for each end use we estimated a time dependent efficiency of conversion from exergy to useful work the 3 factor production function of capital labour and useful work is able to reproduce the historic trajectory of economic growth without recourse to any exogenous assumptions of technological progress or total factor productivity the results indicate that useful work derived from natural resource exergy is an important factor of production

household strategies and rural livelihood diversification this article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries with particular reference to sub saharan africa livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living the determinants and effects of diversification in the areas of poverty income distribution farm output and gender are examined some policy inferences are summarised the conclusion is reached that removal of constraints to and expansion of opportunities for diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards

from microscopic to macroscopic theories entropic aspects of ecological and economic processes abstract the paper discusses the relevance of thermodynamics and related theories to ecological economics it is argued that it is not useful to apply the entropy term directly to economic processes physical entropy terms defined on a microscopic level for isolated systems are quite far from economic and ecological reality only theories that deal with the development of open systems far from thermodynamics equilibrium provide the important link between entropy and evolution towards higher complexity major new impulses for ecological economics come especially from evolutionary ecological theories these quite recent theoretical approaches incorporate the knowledge of far from equilibrium thermodynamics and explain dynamic changes in ecosystems on a macroscopic level from a thermodynamic perspective thermodynamic approaches provide a heuristic base for the analysis of economy environment interactions important implications of these approaches concern time irreversibility ecological efficiency and the interdependencies of environmental problems and evolution

what is ecological economics ecological economics addresses the relationships between ecosystems and economic systems in the broadest sense these relationships are the locus of many of our most pressing current problems i e sustainability acid rain global warming species extinction wealth distribution but they are not well covered by any existing discipline environmental and resource economics as it is currently practiced covers only the application of neoclassical economics to environmental and resource problems ecology as it is cur rently practiced sometimes deals with human impacts on ecosystems but the more common tendency is to stick to natural systems ecological economics aims to extend these modest areas of overlap it will include neoclassical environmental economics and ecological impact studies as sub sets but will also encourage new ways of thinking about the linkages between ecological and economic systems we have chosen the name ecological economics for this area of study because it implies a broad ecological interdisciplinary and holistic view of the problem of studying and managing our world the earth from space cover of the journal reflects this global holistic perspective we did not intend to imply with the ordering of the two words in the title that the journal is mainly an economics journal it is intended to be a new approach to both ecology and economics that recognizes the need to make economics more cognizant of ecological impacts and dependencies the need to make ecology more sensitive to economic forces incentives and constraints and the need to treat integrated economic ecologic systems with a common but diverse set of conceptual and analytical tools there was much discussion of other possible names such as economic ecology or ecology and economics or some conjoining of the two words that to me end up being confusing tongue twisters like ecolnomics or econology but ecological economics seemed to get closest to the mean ing we desired while still being evocative to the uninitiated