statistical efficiency of double bounded dichotomous choice contingent valuation the statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question if the first response is yes the second bid is some amount greater than the first bid while if the first response is no the second bid is some amount smaller this double bounded approach is shown to be asymptotically more efficient than the conventional singlebounded approach using data from a survey of californians regarding their willingness to pay for wetlands in the san joaquin valley we show that in a finite sample the gain in efficiency can be very substantial

semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

the public s willingness to pay for securing a reliable natural gas supply in korea with the increasing importance of natural gas ng in the energy mix the search for a reliable liquefied ng lng supply has received great attention along with energy security in korea however the current level of lng supply reliability in korea is much lower than that in other industrialized countries in order to improve the reliability of the lng supply diverse policy measures are required which come at an additional cost paid by society this study aims to investigate the public s willingness to pay wtp for improving the reliability of the lng supply by increasing the lng storage rate from the current level 11 to 20 to this end the contingent valuation cv method is applied by using national survey data of 1000 households in particular this study employs a one and one half bound oohb dichotomous choice model combined with a spike model to address the responses from the cv survey with zero wtp the annual mean wtp is estimated to be krw 9641 usd 8 68 per household expanding the value to the national population provides a value of krw 169 43 billion usd 152 55 million the results indicate that people are willing to shoulder the burden of safeguarding a reliable supply of lng

estimating the public s value of implementing the co2 emissions trading scheme in korea abstract the korean government set out the carbon dioxide co2 emissions reduction target as 30 below business as usual by 2020 the co2 emissions trading scheme ets was initiated in january 2015 to meet this target we attempt to estimate the public s value of implementing the ets for co2 emissions reduction we apply the contingent valuation cv method using the willingness to pay wtp data obtained from a national cv survey of 1000 randomly selected households the survey was conducted via in person interviews value judgments required of the respondents were within their abilities the mean wtp to achieve the stated target of co2 emissions reduction using ets is estimated to be krw 1873 usd 1 66 per household per month which is statistically significant at the 1 level the aggregate national value amounts to krw 409 2 billion usd 363 4 million per year thus even though korea has no obligations to cut emissions under the kyoto protocol the public is willing to bear a financial burden to implement the ets if its cost is less than this value implementing the ets can be socially profitable the results of this study can serve as a basis for further policy discussions and decisions

estimation using contingent valuation data from a dichotomous choice with follow up questionnaire reply abstract our original article proposed that the two yes no willingness to pay wtp responses produced by this survey format should be viewed as a pair of jointly distributed correlated discrete random variables the comparison model the conventional approach to estimation using these types of data contained a programming error correction alters the results from the comparison model but our original claim that estimation by conventional methods can produce misleading inferences if ours is the appropriate specification still stands this is especially true if negative wtp is precluded when e wtp is calculated

public s willingness to pay a premium for bioethanol in korea a contingent valuation study abstract bioethanol be a renewable energy is well known to mitigate the greenhouse gas emissions compared with conventional gasoline thus the korean government is considering the introduction of a be mandate in which the legal blend is 5 be and 95 gasoline e5 until 2020 in order to expand be use we should examine the public acceptability of the introduction which incurs a rise in the fuel price this study attempts to assess the public s willingness to pay wtp a premium for introducing the e5 program in korea to this end a contingent valuation cv survey of 1000 randomly selected consumers was conducted in 2014 across the nation we used a one and one half bound dichotomous choice question in the cv survey and applied the spike model to handle the wtp data with zeros the mean wtp a premium for the e5 per liter is estimated to be krw 290 usd 0 27 which is statistically meaningful at the 1 level this value amounts to 15 6 of the gasoline retail price in 2014 krw 1856 or usd 1 70 and can be interpreted as the external benefit of be we can conclude that gasoline consumers in korea are ready to pay a significant premium for the e5

social cost of environmental quality regulations a general equilibrium analysis the use of cost benefit analysis by federal regulatory agencies has expanded greatly in scope and sophistication unfortunately agencies continue to employ private cost rather than social cost to evaluate environmental quality regulations furthermore general equilibrium impacts and intertemporal effects of regulations are typically not included in the evaluation in this paper we estimate the social cost of environmental quality regulations mandated by the clean air and clean water acts we construct an econometric general equilibrium model of the united states to demonstrate that social cost estimates diverge sharply from private cost estimates we also demonstrate that general equilibrium impacts are significant and pervasive and that intertemporal effects of the regulations heretofore ignored are significant

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

consumer acceptance valuation of and attitudes towards genetically modified food review and implications for food policy abstract an increasing set of evidence has been reported on how consumers could potentially react to the introduction of genetically modified food studies typically contain some empirical evidence and some theoretical explanations of the data however to date limited effort has been posed on systematically reviewing the existing evidence and its implications for policy this paper contributes to the literature by bringing together the published evidence on the behavioural frameworks and evidence on the process leading to the public acceptance of genetically modified gm food and organisms gmos in doing so we employ a set of clearly defined search tools and a limited number of comprehensive key words the study attempts to gather an understanding of the published findings on the determinants of the valuation of gm food both in terms of willingness to accept and the willing to pay a premium for non gm food trust with information sources on the safety and public health and ultimate attitudes underpinning such evidence furthermore in the light of such evidence we formulate some policy strategies to deal with public uncertainly regarding to gmos and especially gm food

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

one and one half bound dichotomous choice contingent valuation to reduce the potential for response bias on the follow up bid in multiple bound discrete choice cvm questions while maintaining much of the efficiency gains of the multiple bound approach we introduce the one and one half bound oohb approach despite the fact that the oohb model uses less information than the double bound db approach efficiency gains in moving from single bound to oohb capture a large portion of the gain associated with moving from single bound to db in an analysis of survey data our oohb estimates demonstrated higher consistency with respect to the follow up data than the db estimates and were more efficient as well

price stability in open economies this paper studies the conditions under which price stability is the optimal policy in a two country open economy model with imperfect competition and price stickiness special conditions on the levels of country specific distortionary taxation and the intratemporal and intertemporal elasticities of substitution need to be satisfied these restrictions apply to both cooperative and non cooperative settings most importantly we show that cooperative and non cooperative solutions do not coincide despite market completeness and producer currency pricing in this framework our analysis suggests a role for international policy coordination

optimal bid selection for dichotomous choice contingent valuation surveys abstract this paper develops a model for optimal survey design for the dichotomous choice contingent valuation method that finds the bid amounts as well as the sample sizes corresponding to each bid the model uses an iterative procedure to select the survey design that minimizes the mean square error of the welfare measure a set of monte carlo simulations shows that the model produces significantly lower mean squared errors for the welfare estimate than the next best model produces survey design under alternative assumptions regarding the statistical distribution of the welfare measure is also addressed the model produced significantly different survey designs depending on whether the distribution was assumed to be symmetric or asymmetric

globalization and its challenges rudi was born and grew up in krefeld germany he was an undergraduate at the university of geneva and completed his ph d at the university of chicago in 1971 which is where we met he was a student of robert mundell and both the subject matter the development of the mundell fleming model and the elegance and insights of his early work reflected mundell s influence he taught at the university of rochester and at the university of chicago before accepting an offer from mit in 1975

consistent estimation of general equilibrium welfare effects a general equilibrium demand curve is appropriate for measuring the surplus changes in several markets induced by a policy intervention in one market guidelines for the identification and consistent estimation of such a demand curve are discussed specifically conditions are stated under which the dropping of prices of related goods yields a consistent estimate of the slope of the general equilibrium demand curve also a method similar to leamer s is proposed to provide consistent bounds for the general equilibrium demand slope when the slope is underidentified

the korean public s willingness to pay for expanding the use of solid refuse fuel abstract solid refuse fuel srf a solid fuel that is produced from non hazardous combustible waste can mitigate greenhouse gas emissions compared with fossil fuels the korean government plans to enhance the ratio of combustible waste converted into srf from 16 in 2014 to 100 in 2020 by increasing the number of facilities that make and use srf this paper attempts to investigate empirically the korean public s willingness to pay wtp for expanding the use of srf the wtp data were obtained from a one and one half bounded dichotomous choice contingent valuation survey of 1000 households because a considerable number of respondents 62 6 gave a zero wtp response we applied a spike model to treat the wtp data with zero observations the spike model fitted the data well considering that all the coefficient estimates are statistically significant at the 1 level the yearly mean wtp was computed as krw 2479 usd 2 17 per household for the next 10 years which is also statistically meaningful at the 1 level expanding the value to the national population gives us krw 46 4 billion usd 40 5 million per year the present value of the total public wtp amounts to krw 369 0 billion usd 322 3 million using a social discount rate of 5 5 we can conclude that korean households are ready to shoulder some of the financial burden to expand the use of srf

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

the elasticity of derived net supply and a generalized le chatelier principle the marshall 1920 hicks 1963 rules for the elasticity of derived demand for an input which demonstrate how the price elasticity of demand for the input changes as the price elasticity of demand for the product the price elasticity of supply of a competing factor the first factor s cost share and the elasticity of substitution between the two factors change have been generalized to the case where there are n inputs and one output by sato and koizumi 1970 1973 andrieu 1974 and razin 1974 have also generalized the marshall hicks rules to the case where there is one output and three inputs but one of the inputs is fixed however since most real life firms or industries produce a wide variety of products it would appear to be useful to obtain rules for the price elasticity of derived supply for an output where other output and input markets are allowed to adjust to the change in the price of the first output the recent increases in energy prices have perhaps provided a reason for renewed interest in the microeconomic determinants of industry supply in section 5 below we derive analogues to the marshall hicks sato koizumi rules in a multiple output framework in section 2 we list our assumptions on the technology and note some preliminary results from duality theory in section 3 we define the elasticity of derived net supply and we show that it will always be nonnegative in our model we also compare the elasticity of derived supply which takes into account adjustments induced by an increase in the price of the output in other input and output markets with an ordinary price elasticity of supply which holds the prices of the other inputs and outputs fixed we also compare the above two elasticities with intermediate elasticities of derived supply that are obtained by assuming that some input and output prices are fixed but others are not we find that the more markets that adjust to the price increase in the first market the smaller the elasticity of derived supply becomes in the first market we could term this an inverse le chatelier principle since it acts in a manner which is seemingly opposite to the usual le chatelier principle cf samuelson 1947 pp 36 39 which says that the more markets that we allow to adjust to the effects of a price increase in the first market the larger is the elasticity of supply in the first market however the two le chatelier principles are not really opposed as we shall see later our inverse le chatelier principle formally contains samuelson s le chatelier principle as a special case in section 4 we consider the comparative statics effects of an exogenous increase in the price of the first good on a weighted average of other prices as well as on a weighted average of changes in the industry supply of other outputs and changes in the industry demand for other inputs taking into account the general equilibrium repercussions on other markets of the increase in the price of the first good

technological change and welfare in an open economy with distortions traditional measures of technological change such as the rate of technical change are based on producer oriented prices consumer oriented welfare measures such as the hicksian variations are more appropriate measures of the ultimate benefits of technology but they require knowledge of consumer valuations of outputs and inputs and the price impacts of the technological change the general equilibrium analysis here evaluates these price impacts and shows how the welfare gain from technological change can be decomposed into the rate of technical change plus an induced price change effect plus the effect of any ad valorem price distortions that exist in the economy the graphic interpretation of these welfare effects suggests alternatives to the usual partial equilibrium social surplus measures of the gains from technological change

gaps and triangles we derive principles of optimal short run monetary policy in a real business cycles model with money and prices set in advance the optimal allocation is achieved under the friedman rule however given that policy the allocation is indeterminate we move away from the friedman rule take the interest rate path as exogenous and characterize the optimal money supply policy we identify the conditions under which it is optimal to replicate the allocation under exible prices in general sticky prices provide the planner with tools to improve upon a distorted exible prices allocation

the theory of the firm in long run equilibrium in a recent series of articles economists have investigated the comparative statics of the neoclassical firm in a competitive environment with the specific proviso that output price adjusts in response to changes in factor prices the older theory of the firm such as is found for example in paul samuelson 1947 is deficient in this regard metaphors such as short run have been used to gloss over the inconsistency of holding output price constant in the face of changing costs through changing factor prices in this paper a simple yet thorough analysis of a firm in a competitive industry i e a firm facing zero entry and adjustment cost conditions is given new results pertaining to restrictions on the behavior of such firms are offered also the length and complexity of established results is substantially reduced

how much are people willing to pay for silence a contingent valuation study despite its major importance in the urban environment the problem of noise has received little attention from environmental economists in this paper the economic value of a noise reduction programme is evaluated the chosen technique is contingent valuation using the recently proposed one and one half bound question format this new question format reduces the potential for response bias in multiple bound formats such as the double bound model while maintaining much of its efficiency through the estimations it is found that urban residents generally value noise negatively that is households are willing to pay for a noise reduction in particular it is found that households are willing to pay approximately four euros per decibel per year a further finding is that interviewees show scope sensitivity that is households display a different willingness to pay for different degrees of noise reduction most are willing to pay more for larger decreases in the level of disturbance from noise

do the ecb and the fed really need to cooperate optimal monetary policy in a two country world abstract a two country model with monopolistic competition and price stickiness is employed to investigate the implications for macroeconomic stability and the welfare properties of three international policy arrangements a cooperative b non cooperative and c monetary union i characterize the conditions under which there is scope for policy cooperation and quantify the costs of non cooperation and monetary union the non cooperative equilibrium may be suboptimal because of terms of trade spillover effects while monetary union may be suboptimal because of the sluggishness of relative prices both the costs of policy competition and of a monetary union are sensitive to the values assumed for the intertemporal and international demand elasticity and the degree of openness of the economy independently of the calibration scenario adopted the ecb has little to gain by coordinating with the fed

global implications of self oriented national monetary rules author s obstfeld maurice rogoff kenneth abstract it is well known that if international linkages are relatively small the potential gains to international monetary policy coordination are typically quite limited but what if goods and financial markets are tightly linked is it then problematic if countries unilaterally design their institutions for monetary stabilization are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination we argue that under plausible assumptions the answer is no unless risk aversion is very high lack of coordination in rule setting is a second order problem compared to the overall gains from monetary policy stabilization

a fully calibrated generalized constant elasticity of substitution programming model of agricultural supply this article provides a methodology to exactly calibrate land constrained programming models of agricultural supply against supply elasticities using generalized constant elasticity of substitution crop specific production functions we formally derive the necessary and sufficient conditions under which the model can replicate a reference allocation while displaying crop supply responses consistent with exogenous information on supply elasticities when it exists the solution to the exact calibration problem is unique subject to a caveat the proposed specification is shown to be more flexible with respect to calibration than the quadratic specification that has been used extensively in policy models based on positive mathematical programming

optimal monetary policy what we know and what we don t know in this article i examine the current state of knowledge about optimal monetary policy i distinguish between two literatures basic and applied the basic literature is explicit about the frictions that generate a positive value for money and make it socially beneficial the applied literature is not i describe the recent lessons about monetary policy that we have learned from each literature and discuss how the two distinct approaches may be usefully combined

capital reallocation and liquidity this paper studies the cyclical properties of capital reallocation and the frictions which inhibit such reallocation we show that the amount of capital reallocation and the benefits to reallocation vary at the business cycle frequency the amount of capital reallocation is procyclical in contrast the benefits to capital reallocation appear countercyclical we measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross sectional dispersion of the productivity of capital we then study a calibrated model of an economy where capital reallocation is costly and impute the cost of reallocation which is consistent with the amount of and benefits to reallocation in the data we find that the cost of reallocation needs to be substantially countercyclical to be consistent with the observed joint cyclical properties of reallocation and productivity dispersion the cyclical variation in this cost is interpreted as variation in the liquidity of capital broadly defined since physical costs are unlikely to vary countercyclically

the firm in short run industry equilibrium comment it has long been recognized that the traditional law of supply and demand valid for the isolated competitive firm need not necessarily hold when considering the individual firm within the greater context of its industry indeed a change in a certain input or output price will in general affect all input and output decisions and these reactions can be expected to trigger other price changes at the industry level in those markets where the industry faces less than infinitely elastic supply or demand the initial response of the individual firm to the original price change may thus be altered by its response to these consequent price changes and perhaps even be completely reversed in his 1982 paper ronald heiner has shown for the special yet important case of an infinitely elastic supply in all factor markets that at least the law of demand will nevertheless hold in the short run for the entire industry provided that demand for its output is normal in the usual sense of a downward sloping schedule this reassuring result is noteworthy in itself but it also commands admiration because it represents one of the few cases where an ambiguity at the micro level is resolved at the macro level by aggregation heiner goes even further in the characterization of the industry s shortrun response by saying that it will be weaker than the response that would arise if demand in the output market were infinitely elastic and conversely stronger than the response that would result if demand in the output market were entirely inelastic pp 555 56 yet in his formal analysis heiner proves a somewhat different and weaker version of this characterization by showing that the industry s short run response must be stronger than the response that would be observed if the output of every firm were fixed it is the purpose of this comment to show that heiner s intuitively more appealing original contention indeed holds and in fact characterizes the industry s short run response more precisely than the version that was actually proven at the same time and perhaps more interestingly i want to generalize heiner s findings by showing that they in essence still apply if the industry also faces in some of its input markets a less than infinitely elastic but normal supply this generalization is obviously relevant for all those industries that are the sole users or at least major users of certain inputs and hence not necessarily small in relation to the size of these input markets by generalizing heiner s notation i use a framework that allows us to deal with an arbitrary number of inputs and outputs and in particular with an arbitrary number and combination of markets in which the industry is confronted with a less than infinitely elastic demand or supply

flexible functional form estimation of willingness to pay using dichotomous choice data abstract this paper introduces fully flexible semi nonparametric methods for calculating willingness to pay wtp bounded between zero and the respondent s income for dichotomous choice contingent valuation a method to estimate median wtp using fully flexible functional forms is also presented finally the numerical illustration demonstrates the importance of considering jensen s inequality in calculating wtp with nonlinear models

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

designing targeting rules for international monetary policy cooperation this study analyzes a two country dynamic general equilibrium model with nominal rigidities monopolistic competition and producer currency pricing a quadratic approximation to the utility of the consumers is derived and assumed as the policy objective function of the policymakers it is shown that only under special conditions there are no gains from cooperation and moreover that the paths of the exchange rate and prices in the constrained efficient solution depend on the kind of disturbance that affects the economy it might be the case either for fixed or floating exchange rates despite this result simple targeting rules that involve only targets for the growth of output and for both domestic gdp and cpi inflation rates can replicate the cooperative allocation

difficulties in valuing street light improvement trust surprise and bound effects previous empirical research has demonstrated an internal inconsistency that may occur in response strategies between the first and second valuations made to closed ended contingent valuation questions one possible explanation for this bound effect is the surprise of being asked the second valuation question which may be enhanced where there is a lack of trust this paper considers the use of closed ended contingent valuation to estimate non market benefits for an improved street lighting scheme where there is a lack of trust in the agency responsible for provision the results provide confirmation that surprise is an important determinant of bound effects however efforts to reduce such bias using a prior statement of the bid range were found to be ineffective in increasing trust and reducing surprise given the importance of this area of research directions for future research are considered

the public s value for developing ocean energy technology in the republic of korea a contingent valuation study abstract ocean energy is a type of renewable energies and is considered as having a potential power of providing a substantial amount of energy although some forms of ocean energy are developed there is a need for further technological advances to better utilize ocean energy government should take observable actions to compensate for the costs of developing the technology this paper attempts to apply a contingent valuation cv method to obtaining at least a preliminary evaluation of the benefits that ensue from the development of the technology that commercializes ocean energy in the republic of korea overall the cv survey was successfully carried out to elicit the willingness to pay wtp for ocean energy the wtp was statistically significantly estimated from one and one half bounded spike model and the monthly mean wtp estimates was krw 1003 usd 0 9 per household the estimates of the annual benefits to relevant residents amounted to krw 206 4 billion usd 183 8 million

starting point bias in dichotomous choice valuation with follow up questioning abstract follow up questions are frequently used to improve the efficiency of dichotomous choice contingent valuation questionnaires however a number of authors e g 12 16 have noted a significant difference between the wtp distributions implied by initial and follow up question responses this paper investigates starting point bias as one explanation for the phenomenon we develop a model of starting point bias in the context of dichotomous choice questioning with follow up using a monte carlo simulation to illustrate the potential bias imparted to wtp estimates an application is provided based on data from a cv study in northcentral iowa

strategic monetary policy in interdependent economies gains from coordination reconsidered abstract there is a wide acceptance that gains to international monetary policy coordination are small at best and that the need of policy coordination is questionable this conclusion however follows from the underlying presumption that monetary policy is concerned with the stabilization of macroeconomic fluctuations only this paper presents a general short run monetary policy analysis within a familiar two country new open economy macroeconomics noem framework where national monetary policy involves the choice of a deterministic growth trend of money supply average inflation rate and stochastic state dependent deviations of actual money supply from the deterministic trend stabilization strategic beggar thy neighbor considerations induce the deviation of both policy choices from their socially optimal values the gains from international coordination of the average inflation rate are of first order and hence larger than the gains from the coordination of the stabilization policies which are of second order

designing transactions without framing effects in iterative question formats abstract several studies document that iterative question formats used in contingent valuation studies produce anomalies in respondent behavior that appear to threaten the validity of welfare estimates by decomposing iterative question formats into their ascending and descending sequences we show that these anomalies occur only in ascending sequences we describe the conditions under which comparable patterns of behavior are likely to be found in other iterative question formats that begin with a discrete willingness to pay question we then develop a unified explanation of these anomalies using our model of framing based on prospect theory we provide the first head to head test of rival explanations of these behavioral patterns by developing refutable hypotheses for the strategic behavior yea saying anchoring and cost expectations models finally based on our own statistically robust model we show how these anomalies can be eliminated without loss of the statistical efficiency of most iterative question formats

competitive devaluations toward a welfare based approach abstract this paper revisits the international transmission of exchange rate shocks in a multicountry economy providing a choice theoretic framework for the policy analysis of competitive devaluations as opposed to the traditional view a devaluation by one country does not necessarily have an adverse beggar thy neighbor effect on its trading partners because they can benefit from an improvement in their terms of trade furthermore a retaliatory devaluation need not be the optimal strategy for the neighbor countries as the induced terms of trade deterioration can be large enough to offset the gains from defending their export market share the concern over competitive devaluations reflected in the fund s charter and the system wide implications of changes in exchange rates still motivate fund policy recommendations a major fund concern in the asian crisis has been the fear that asian currencies would become so undervalued and current account surpluses so large as to damage the economies of other countries developing countries included this is one reason the fund has stressed the need first to stabilize and then to strengthen exchange rates in the asian countries now in crisis and for this purpose not to cut interest rates until the currency stabilizes and begins to appreciate

the need for international policy coordination what s old what s new what s yet to come the first generation of policy coordination models was introduced some 25 years ago it provided a rationale for policy coordination but the gains from coordination were generally thought to be small now a new generation of policy coordination models is emerging incorporating monopolistic competition and nominal inertia here we examine macroeconomic interdependence and the scope for policy coordination in a tractable second generation model with two countries and multiple sectors initial calibration of the model suggests that second generation models may have more scope for policy coordination than did the first d 2004 elsevier b v all rights reserved

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

procedural invariance testing of the one and one half bound dichotomous choice elicitation method the contingent valuation method for estimating willingness to pay for public goods typically adopts a single referendum question format which is relatively statistically inefficient as an alternative cooper hanemann and signorello 2002 propose the one and one half bound oohb format allowing researchers to question respondents about both a lower and higher limit on project costs thereby securing substantial gains in statistical efficiency using an experimental design we find that responses to oohb valuation questions fail crucial tests of procedural invariance we test various competing models of observed response patterns including strategic misrepresentation of standard preferences and nonstandard models of preference formation

welfare implications of equilibrium supply and demand curves in an open economy line integral theory is used to prove that in a closed economy the net domestic social welfare effects of a market distortion can be captured in the distorted market alone by using equilibrium supply and demand curves considerable confusion exists in the applied literature about the proper application of this proposition it is shown that the proposition does not generally hold for open economies it is shown that in general neither geometric areas behind equilibrium supply curves nor geometric areas behind equilibrium demand curves have any welfare significance

finding sensitivity to scope in nonmarket valuation summary data limitations frequently prevent using actual consumer behavior in determining natural resource values so stated preference methods are used whether value estimates show sensitivity to the scope of resource valued is a key test for their validity which several studies fail developing a correlated panel mixed logit model of households water quality valuations in california we show that false negatives in scope tests can result when individual preference variation and correlation are ignored and split sample comparisons are used monte carlo simulations further demonstrate potentially prevalent false rejections of scope sensitivity even when within subject comparisons of willingness to pay portray strong scope sensitivity copyright 2013 john wiley sons ltd

on market equilibrium analysis in this paper we develop the implications of competitive market equilibrium for production and household behavior when some prices are endogenously determined the properties of market equilibrium functions are explored including the effects of pricing policy a slutsky type equation relating compensated and uncompensated market equilibrium functions is derived implications for multimarket welfare analysis are presented focusing on the effects of pricing policy and technical change

learning design contingent valuation ldcv noaa guidelines preference learning and coherent arbitrariness we extend the contingent valuation cv method to test three differing conceptions of individuals preferences as either i a priori well formed or readily divined and revealed through a single dichotomous choice question as per the noaa cv guidelines k arrow r solow p r portney e e leamer r radner h schuman report of the noaa panel on contingent valuation fed reg 58 1993 4601 4614 ii learned or discovered through a process of repetition and experience j a list does market experience eliminate market anomalies q j econ 2003 41 72 c r plott rational individual behaviour in markets and social choice processes the discovered preference hypothesis in k arrow e colombatto m perleman c schmidt eds rational foundations of economic behaviour macmillan london st martin s new york 1996 pp 225 250 iii internally coherent but strongly influenced by some initial arbitrary anchor d ariely g loewenstein d prelec coherent arbitrariness stable demand curves without stable preferences q j econ 118 1 2003 73 105 findings reject both the first and last of these conceptions in favour of a model in which preferences converge towards standard expectations through a process of repetition and learning in doing so we show that such a learning design cv method overturns the stylised facts of bias and anchoring within the double bound dichotomous choice elicitation format

international dimensions of optimal monetary policy abstract this paper provides a baseline general equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms and nominal rigidities an inward looking policy of domestic price stabilization is not optimal when firms markups are exposed to currency fluctuations such a policy raises exchange rate volatility leading foreign exporters to charge higher prices vis a vis increased uncertainty in the export market as higher import prices reduce the purchasing power of domestic consumers optimal monetary rules trade off a larger domestic output gap against lower consumer prices optimal rules in a world nash equilibrium lead to less exchange rate volatility relative to both inward looking rules and discretionary policies even when the latter do not suffer from any inflationary or deflationary bias gains from international monetary cooperation are related in a non monotonic way to the degree of exchange rate pass through

the economic value of south korea s renewable energy policies rps rfs and rho a contingent valuation study abstract amid growing environmental awareness the diffusion of renewable energy has attracted greater attention from both the public and policymakers to respond to global environmental concerns the korean government implemented a renewable portfolio standard rps in the electric power sector in 2012 it plans to introduce a renewable fuel standard rfs and a renewable heat obligation rho in the transportation and heating sectors in 2015 and 2016 respectively as such this study applies the contingent valuation method to elicit the willingness of korean households to pay more for their energy bills in order to support enforcement of these three policies the analysis considers the economic values of each individual policy as well as the aggregate value at the national level respondents mean willingness to pay for rps rfs and rho are estimated as 3287 5 4432 9 and 3971 1 korean won per month respectively these are equivalent to 5 8 1 5 and 2 0 respectively of current average monthly electricity transportation and heating expenses although all three policies appear highly feasible a cautious approach is necessary given the large proportion of respondents with zero willingness to pay furthermore although the level of willingness to pay for renewable electricity in korea has increased in recent years it remains low when compared to other leading countries such as japan

the generalized composite commodity theorem and food demand estimation this article reports tests of aggregation over consumer food products and estimates of aggregate food demand elasticities evidence that food demand variables follow unit root processes leads us to build on and simplify existing tests of the generalized composite commodity theorem we compute food demand elasticities using a method of cointegration that is shown to apply to a convenient but nonlinear functional form estimates are based on consumer reported expenditure data rather than commercial disappearance data appropriately specified models of consumer demand are central to market analysis it has been established that a valid equilibrium for markets characterized by diverse firms or diverse consumer products depends on downward sloping composite demand curves heiner braulke wohlgenant or on valid indirect utility functions chavas and cox given the large number of consumer food products food demand and price analysis must be implemented at some level of product aggregation improper aggregation can lead to biased estimates of welfare loss associated with public policies biased estimates of consumer and derived demand elasticities and misleading tests of market power testing for consistent aggregation over food products and estimating aggregate consumer food demand elasticities are the subjects of this article by far the most common justification for aggregation has been separable preferences one reason for its popularity has been the lack of a viable alternative tests of the composite commodity theorem hicks leontief lewbel are always rejected because it restricts relative prices within a group to remain fixed over time on the other hand aggregation based on weak separability is often rejected diewert and wales eales and unnevehr

common currencies vs monetary independence we study the optimal monetary policy in a two country open economy model under two monetary arrangements a multiple currencies controlled by independent policy makers b common currencies with a centralized policy maker our findings suggest that i monetary policy competition leads to higher long term inflation and interest rates with large welfare losses ii the inflation bias and the consequent losses are larger when countries are unable to commit to future policies iii the welfare losses from higher long term inflation dominates the welfare costs of losing the ability to react optimally to shocks

the role of countercyclical monetary policy when firms set nominal prices in advance optimal monetary policy insulates aggregate output against shocks to demand it can do so however by following the constant money growth rule advocated by milton friedman it need not respond to the shocks in an actively countercyclical way in addition to the extent that output fluctuations are driven by shocks to supply money growth should be procyclical

trust and willingness to pay for nanotechnology food les auteurs analysent le role de la confiance dans l evaluation d une nouvelle technologie alimentaire a savoir les nanotechnologies une revue de la litterature en sciences sociales et economiques revele que de nombreux concepts de confiance sont disponibles la litterature economique suggere que la confiance peut conduire a un moindre effort des personnes quand il s agit de leur propre protection il est possible de traduire ce concept de confiance dans le cadre de la disposition a payer pour des produits alimentaires ils montrent que la disposition a payer pour la nourriture utilisant des nanotechnologies augmente avec la confiance y compris quand de nouvelles informations a propos de cette technologie sont revelees les resultats sont confirmes par des donnees de sondages en ligne realises au canada et en allemagne et des donnees experimentales provenant d allemagne

demand for farm output in a complete system of demand functions demand interrelationships for farm outputs that are theoretically consistent with consumer demand and marketing group behavior provide important linkages between retail and farm prices a conceptual model based on reduced form specifications for retail and farm prices is formulated and applied empirically to a set of eight disaggregated food commodities this approach circumvents the need for retail quantities which are frequently unavailable for disaggregated food commodities the results are consistent with theory and generally indicate significant substitution between farm and marketing inputs except for poultry derived demand elasticities are at least 40 larger compared to those derived assuming fixed proportions

some notes on trichotomous choice discrete valuation for some respondents the bid offered by the dichotomous choice format used in the discrete choice technique can in fact be the true optimum in this case the correct answer is neither yes or no but indifferent we shall show results from a trichotomous choice format and analyse whether it produces welfare measures with narrower confidence intervals than the dichotomous technique another well known problem in contingent valuation cv studies is that the volume of the good to be purchased from hypothetical markets is not in many cases defined in precise terms we show how the trichotomous choice technique can be used to test for possible vagueness in the volume of the project to be valued

bias in discrete response contingent valuation abstract the empirical literature on discrete response contingent valuation has found that seemingly innocuous changes in the statistical models estimated result in significantly different point estimates of willingness to pay this paper hypothesizes and tests several potential explanations for these results first it investigates and compares the biases inherent in single bounded and double bounded maximum likelihood estimation procedures and examines how they react to various bid designs and sample sizes then it examines the presence and identification of outliers in binary choice data and how these outliers influence estimation finally it presents an alternative approach to addressing the issue of outliers which explicitly acknowledges the possibility of upwardly biased response probabilities

a dual approach to evaluating research benefits in the presence of trade distortions we present a new approach for evaluating the welfare consequences of technical change a major feature is its ability to incorporate multiple distortions and multiple sources of technical change in interrelated markets a modified balance of trade function provides money measures of welfare change in terms of producer profits consumer expenditures and tax revenues alternative specifications of technical change are presented to capture the effects of differences in the form of technical change in an illustrative numerical example the approach is applied to a case involving two distortions and technical changes in two related markets the example shows that the approach is reasonably easy to use and that accounting correctly for price distortions can have important implications for research benefit measures

theory of the firm in short run industry equilibrium a number of economists have studied the long run input behavior eugene silberberg 1974a lowell bassett and thomas borcherding 1 970a b c c e ferguson and thomas saving and paul meyer 1967 of a competitive industry in which entry or exit continues until industry output price moves to the minimum average cost of the marginal firm in the industry however this analysis requires very strong assumptions which severely restrict diversity between firms silberberg 1974a for example assumes all firms production functions are identical except for a scale factor complementary to these long run investigations i will present a compact but thorough analysis of the short run case in which technology and the number of firms are fixed but industry output price responds to aggregate supply changes of existing firms resulting from changes in factor prices in contrast to the long run analysis no assumptions limiting interfirm diversity nor any other restrictions beyond definition of the usual neoclassical firm are needed furthermore results are obtained for industry factor demand which do not necessarily hold for individual firms when they respond to factor prices jointly with other firms in the industry this contradicts the older methodology associated with paul samuelson 1947 in which factor demand responses are derived for firms acting in isolation from each other and their isolated responses are aggregated to obtain the industry factor response for example traditional theory shows input response obeys the law of demand for isolated firms but this standard result no longer holds when a firm adjusts within a larger industry of firms whose collective output response can affect output price thus the law of demand for industry factor behavior cannot be established by aggregation of isolated firm responses however its validity does nevertheless hold in the short run in which the number of firms in the industry is constant therefore the purpose of this paper is to characterize the short run industry level factor demand implications and to show how these implications relate to the traditional theory of isolated firm behavior in addition it is briefly shown how these short run results also imply that the law of demand is likely to hold even in the long run where entry and exit from the industry can occur even for an industry of quite dissimilar firms given the well established literature of the standard neoclassical firm the main body of the paper will confine presentation to required definitions and the statement plus interpretation of the main results all proofs and derivations are reserved for the appendix

repeated dichotomous choice formats for elicitation of willingness to pay simultaneous estimation and anchoring effect repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good in this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process the model allows us to study the evolution of anchoring effects after the second dichotomous choice question estimation involves the bayesian techniques of gibbs sampling and data augmentation and the application focuses on the preservation value of a natural area the results for a data set involving up to four successive dichotomous choice questions show that restricted multiple bounded models are rejected by the data with the general model in addition willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model when taking anchoring effects into consideration it is revealed that individuals responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions nevertheless they do not have a significant effect on welfare estimates