claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

are macroeconomic policies better in curbing air pollution than environmental policies a dsge approach with carbon dependent fiscal and monetary policies abstract the environmental impacts of macroeconomic policies and their interaction with climate policies are under researched in the existing literature this paper compares the effectiveness of standard macroeconomic tools fiscal and monetary policies with carbon taxation in curbing air pollution by using an environmental dynamic stochastic general equilibrium e dsge model we show how government expenditure interest rate and carbon tax rate should vary over time in order to stabilize carbon emission levels we find that i while all the aforementioned policies could stabilize carbon emissions their underlying mechanisms are different fiscal monetary and carbon tax policies uniquely and respectively lead to a reduction in abatement effort income tax revenue and general price level ii with economic expansions driven by total factor productivity tfp shocks fiscal policy is the only policy that could maintain the emission levels and simultaneously improve household welfare in term of consumption and labor iii regarding the interaction between carbon and macroeconomic policies carbon taxation should complement monetary policy while it should not respond to fiscal policy

emissions cap or emissions tax a multi sector business cycle analysis abstract we develop a multi sector business cycle model to analyze stochastic implications of reducing co 2 emissions with carbon permits or with carbon taxes in the presence of multiple sources of macroeconomic uncertainty the model is calibrated to reflect the u s experience as in previous studies using a single sector version of our model we find that the cap regime generates lower volatility of real variables than the tax regime but the latter may be preferable from the welfare perspective still our multi sector analysis points to the importance of the origin of the shocks in the ranking of the two instruments and to the desirability of going beyond a single sector analysis in evaluating their merits we find no significant difference between the cap and the tax regimes when shocks come from non energy sectors in contrast the cap has lower volatility but higher welfare costs than the tax for the shocks to energy production

labour supply estimation and public policy abstract economists devote considerable energies towards refining their econometric techniques to overcome difficulties connected with conducting empirical research despite advances in technique it is not clear whether further refinement in this direction is worthwhile for policy purposes it may be that no further amount of statistical adjustment of inadequate data will increase understanding and that better data is simply necessary to add to our knowledge but rarely is sufficient credit paid to new forms of data in short econometric technique is emphasized to the neglect of data innovation as if new data were merely lying about waiting for an ingenious suggestion for use this paper surveys advances of the last twenty five years in estimating labour supply for policy purposes with a view towards appreciating the relative contribution of both improvements in econometric technique as well as developments of new data after briefly detailing the key parameters which economists have sought to estimate we describe the early first generation research circa 1970 which is plagued by problems of unobservable variables measurement errors truncation and selectivity bias and non linear budget constraints second generation research constitute attempts to resolve one or more of these difficulties and the respective contribution of econometric technique and new data is acknowledged and assessed including the contribution of data generated by large scale social experiments in which participants are randomly assigned to different guaranteed income plans and their labour supply behaviour measured

on the impacts of anticipated carbon policies a dynamic stochastic general equilibrium model approach abstract this paper examines the environmental and welfare impacts of pre announced carbon policies using an environmental dynamic stochastic general equilibrium e dsge model we find that pre announcing a rise in the carbon tax rate could reduce co2 emissions but would decrease output and investment during the interim period between the announcement and implementation dates pre announcing an increase in the carbon tax rate from 1 to 5 1 and 3 years in advance could reduce the quarterly aggregate consumption by 0 081 and 0 114 respectively compared to carbon taxation pre announcing a tightening carbon intensity target could reduce co2 emissions even more while pre announcing a tightening carbon capacity target under a cap and trade regime has no such co2 reduction effect in a welfare analysis we show that an unanticipated rise in the carbon tax rate is more preferable to the 1 year 2 year and 3 year ahead announcements the intensity regime produces a greater welfare than the cap and trade regime which is in turn better than the carbon taxation regime

assessing the case for social experiments rs ecent academic debates pit two alternative approaches to policy evaluation against one another the first is the experimental approach based on the random assignment of accepted program applicants to a recipient or treatment group and a non recipient or control group the second is the nonexperimental or econometric approach that uses a variety of microdata sources statistical methods and behavioral models to compare the outcomes of participants in social programs with those of nonparticipants the central question addressed in this paper is whether or not randomized social experiments aid in securing answers to basic questions about the evaluation of social programs there are many distinct and complementary approaches to the study of the impact of public policy including full general equilibrium analysis of policy impacts tinbergen 1956 auerbach and kotlikoff 1987 shoven and whalley 1992 kydland and prescott 1991 and less ambitious partial equilibrium microeconomic structural research programs such as those designed to estimate the impact of taxes on labor supply both approaches offer answers to many interesting counterfactual policy questions but their credibility rests critically on the quality of the empirical input used to generate their answers

the probability of dependence on public assistance despite almost incessant discussion of welfare reform see levy 1978 and department of health and social security 1978 traditional systems of income support and their associated problems remain largely intact the most intractable difficulty has been the conflict between the desire to reduce costs by concentrating benefits on the poorest families and the desire to preserve work incentives by not withdrawing benefits too rapidly if a recipient family starts earning hanoch and honig 1978 show that the incentive effect of income support schemes is theoretically ambiguous levy 1979 investigates the labour supply issue empirically this paper looks at the whole issue of welfare dependency using data on american families receiving benefits under the largest scheme of public assistance aid to families with dependent children afdc we concentrate on an important group of poor families those without fathers and examine in particular the following issues a the effectiveness of afdc in selecting the very poorest families for the largest benefits b the extent to which the number of recipients is influenced by the generosity of benefits and the implicit tax on earnings c the extent to which recipients take advantage of the opportunity to supplement benefits with earnings d whether the implicit tax on earnings discourages families from working e whether the disproportionate share of blacks among recipients reflects a difference in attitudes about work and welfare between blacks and whites or whether it is explained by the adverse circumstances of blacks four different levels of dependence are considered none partial i e benefits less than earnings substantial i e benefits more than earnings and total the probability of each level of dependence is taken as a function of family characteristics including earning potential and of the characteristics of the afdc system section i describes a theory of family behaviour based on the assumption that observed differences in the behaviour of apparently identical families reflect an underlying distribution of unobserved differences section ii discusses the statistical method used to estimate the probabilities a straightforward generalization of logit analysis section iii presents and interprets the statistical results and section iv summarizes our answers to the five issues posed above two comments on the choice and use of the data should be made before proceeding the choice of data for 1967 was influenced not only by the availability of two surveys the survey of economic opportunity and a survey of afdc recipients but also by the fact that 1967 was the last year in which afdc was a relatively pure scheme subsequent legislation imposed constraints on the extent to which states could withdraw benefits as recipients incomes rose more recently the explosion in the size of the food stamp programme still very small in

asymmetric effects of the business cycle on carbon dioxide emissions abstract long term carbon dioxide emissions forecasts rely on the assumption that the economic growth rate is constant over long time horizons and exclude the business cycle thereby ignoring a fundamental component of the macroeconomy this paper considers how the business cycle affects emissions forecasts and shows the implicit assumption in current forecasts that the elasticity of emissions is constant with respect to gdp is wrong in the united states emissions fall more sharply when gdp declines than they rise when gdp increases this is partly due to a decrease in industrial energy intensity as gdp declines a simulation shows that accounting for the business cycle results in 5 lower cumulative emissions through 2050 relative to the baseline forecast

can training and employment subsidies combat european unemployment active policy evaluation problems methods and results european countries with poorly performing labour markets and labour market institutions conducive to high unemployment also feature considerable expenditures on active labour market policy and such policies are emphasized by the european union s employment strategy however the practice of these programmes evaluation is much less well developed in europe than in the united states we outline key issues facing such evaluation and offer a review and formal assessment of european evaluation studies over the last three decades we find that programme effects are very heterogeneous across types of interventions and target groups that training and job search assistance can be effective and that the young among the unemployed are typically difficult to assist jochen kluve and christoph m schmidt

collaborative optimal carbon tax rate under economic and energy price shocks a dynamic stochastic general equilibrium model approach abstract existing literature on climate policy analysis in an international environmental agreement does not condition the optimal policy on the economic conditions of the countries this paper constructs a two country environmental dynamic stochastic general equilibrium e dsge model to compare the optimal carbon tax rates between countries in noncooperative and cooperative scenarios in the presence of different economic shocks compared to those in the cooperative scenario countries without cooperation would have an optimal carbon tax rate that increases less in response to a positive home country total factor productivity tfp shock and decreases more in response to a positive energy price shock further in the noncooperative scenario the carbon tax rate decreases in response to the foreign country tfp shock but to a lesser extent than that in the cooperative scenario countries cooperation does not necessarily lead to a lower emissions stock it decreases only in response to positive home and foreign country tfp shocks and it increases in response to a positive energy price shock

an analysis of the impact of ceta programs on participants earnings this paper provides estimates of the impact of ceta programs on participants postprogram earnings using matched comparison groups developed from a nearestneighbor matching technique our basic results indicate that ceta has a negative and statistically significant earnings impact for adult men and a modest but not statistically significant positive earnings impact for adult women this pattern however is quite sensitive to whether individuals without recent labor market attachment are included in the comparison group and to how close to the date of enrollment preprogram earnings are measured

the efficiency of demand oriented housing programs generalizing from experimental findings typical production oriented housing programs offer potential recipients a highly limited set of previously unattainable commodity bundles from the household s viewpoint such programs have been highly inefficient from society s viewpoint such housing programs are generally horizontally inequitable and inefficient given that housing programs are not likely to be fully cashed out and incorporated into general income maintenance could housing programs be restructured to increase their efficiency this paper examines this question results indicate that demand oriented housing programs are substantially more efficient than are production oriented programs in fact in the aggregate the former programs approach unrestricted cash payments in their transfer efficiency

iceland s natural experiment in supply side economics the move to a pay as you earn income tax system in iceland in 1987 1988 made income earned in 1987 tax free using a sample of 9 274 individuals for the years 1986 1987 and 1988 we calculate the labour supply response of this change and find that total labour supply rose by 6 7 in 1987 over the average of 1986 and 1988 when we correct for entry in 1988 this consists of an 8 6 increase in weeks supplied by those already in the labour market in 1986 and a 1 9 decline due to entry exit the elasticity of weeks worked to the rise in after tax wages was 0 41 for men and 0 11 for women while the participation rate of women increased somewhat in our sample participation by men fell this abstract was borrowed from another version of this item

economic response to a guaranteed annual income experience from canada and the united states this article reviews research from the five income maintenance experiments in canada and the united states after sketching the historical and political context of the experiments we compare their designs and discuss some important analytic difficulties our primary focus is the work incentive issue both nonstructural estimates of the experimental effects and elasticity estimates of structural labor supply functions we provide initial estimates of nonstructural and structural models for the canadian experiment we discuss more briefly some non work response findings associated with a guaranteed annual income and offer some personal comments on social experimentation and the policy process

the effects of income maintenance on work schooling and non market activities of youth abstracct this paper examines the effects of family participation in an income maintenance program on the school work and leisure choices of youth a joint probability model of school and work outcomes is estimated using data from the seattle and denver income maintenance experiments among youth age 16 to 21 we find the experimental treatment to be associated with a large reduction in the probability of working this reduction is offset at least in part by an increase in school attendance so the net effect on leisure time is apparently quite small

the welfare cost of business cycles revisited finite lives and cyclical variation in idiosyncratic risk abstract this paper investigates the welfare costs of business cycles in a heterogeneous agent overlapping generations economy which is distinguished by idiosyncratic labor market risk aggregate variation arises both in terms of aggregate productivity shocks and countercyclical variation in the volatility of idiosyncratic shocks based on both aggregate data and microeconomic data from the panel study on income dynamics we find the welfare benefits of eliminating aggregate variation to be large an order of magnitude larger than those originally documented by lucas 1987 the key difference is countercyclical variation in idiosycratic risk which both amplifies the welfare cost of aggregate productivity shocks and imposes a cost of its own the magnitude of these effects increases non linearly in risk aversion our results therefore are consistent with the increasingly popular notion that distributional effects are an important aspect of understanding the welfare cost of business cycles

evaluating welfare reform waivers under section 1115 beginning in 1962 section 1115 of the social security act allowed the u s secretary of health and human services to waive specific provisions of the act within individual states allowing them to implement welfare experiments or demonstration projects to reduce welfare recipiency ease transitions into the labor market for welfare clients or otherwise advance the objectives of the aid to families with dependent children afdc program the period between 1987 and 1996 was an especially active time for welfare reform waiver applications each section 1115 waiver application required a plan for evaluating the effects of the proposed changes in the afdc program this period of active welfare reform and experimentation accompanied by a rigorous evaluation component held the promise of an unparalleled opportunity to examine and document the effects of proposed welfare reform measures in this paper we review the section 1115 welfare reform and evaluation activity conducted by states during the bush and clinton administrations ending in august 1996 when the personal responsibility and work opportunity reconciliation act was passed by congress we base the review on publicly available data from the u s department of health and human services and on interviews we conducted with both state project managers and evaluators from each of the 44 states that had received section 1115 welfare reform waivers between 1992 and the passage of the 1996 welfare reform act

optimal emissions tax rates under habit formation and social comparisons abstract the existing climate models ignore the behavioral anomalies of households and conclude that the optimal environmental tax rate should comove with business cycles however this assumption has received extensive criticism recently to this end this paper studies the optimal emissions tax rate when households are bounded rational in particular we calculate the optimal climate policy in a dynamic stochastic general equilibrium dsge model that features households with habit formation internal habits and social comparisons external habits compared to the benchmark model without consumption externality the social comparisons model amplifies consumption volatility but produces a similar response of pollutant emissions in the presence of the three types of economic shocks considered in contrast the habit formation model decreases the volatility of both consumption and pollutant emissions in contrast to the previous result that the optimal emissions tax rate should be procyclical we find that the social comparisons model largely mitigates the procyclicality of optimal emissions tax rates and the optimal emissions tax rates under the habit formation model remain constant in response to all the economic shocks considered

designing an eu energy and climate policy portfolio for 2030 implications of overlapping regulation under different levels of electricity demand abstract the european union s current climate and energy policy has to operate under an ex ante unforeseen economic crisis as a consequence prices for carbon emission allowances in the eu emissions trading system collapsed however this price collapse may be amplified by the interaction of a carbon emission cap with supplementary policy targets such as minimum shares for renewables in the power sector the static interaction between climate and renewable policies has been discussed extensively this paper extends this debate by analysing the efficiency and effectiveness of a policy portfolio containing a cap and trade scheme and a target for a minimum renewable share in different states of aggregate electricity demand making use of a simple partial equilibrium model of the power sector we identify an asymmetric interaction of emissions trading and renewable quotas with respect to different states of aggregate electricity demand the results imply that unintended consequences of the policy interaction may be particularly severe and costly when aggregate electricity demand is low and that carbon prices are more sensitive to changes in economic activity if they are applied in combination with renewable energy targets our analysis of the policy interaction focuses on the eu yet the conclusions may also be of relevance for fast growing emerging economies like china

social employment of welfare recipients in belgium an evaluation in belgium welfare agencies receive a subsidy to employ welfare recipients for a period sufficiently long to entitle them to unemployment benefits we investigate the effect of this programme on the exit rate from welfare we propose a grouping iv estimator of the programme effect that eliminates selection bias the estimator is consistent even if the selection into the programme depends on the average unobserved characteristics of welfare recipients in a region and in a welfare duration interval without correction for selectivity we find that the programme reduces welfare dependence but after correction this conclusion is reversed

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

ghg emissions control and monetary policy this paper examines the optimal environmental and monetary policy mix in a new keynesian model embodying pollutant emissions abatement technology and environmental damage the optimal response of the economy to productivity shocks is shown to depend crucially on the instruments policy makers have available the intensity of the distortions they have to address i e imperfect competition costly price adjustment and negative environmental externality and the way they interact

environmental policy and macroeconomic dynamics in a new keynesian model this paper studies the dynamic behavior of an economy under different environmental policy regimes in a new keynesian model with nominal and real uncertainty we find the following results i an emissions cap policy is likely to dampen macroeconomic fluctuations ii staggered price adjustment alters significantly the performance of the environmental policy regime put in place iii the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction

social status and economic performance a survey abstract this survey combines ideas and results from sociology and economics recognizing that economic decisions are often shaped by social concerns and influences based on the sociological literature we define social status and describe its measurement we then describe the role of social status in economic analysis of saving and consumption wages and economic growth we review recent work on status determination in equilibrium including evolutionary models we conclude with some remarks on the need for further interaction between sociology and economics

environmental expenditure spillovers evidence from an estimated multi area dsge model abstract this article constructs and estimates a multi area dynamic stochastic general equilibrium model with a spatial simultaneous equation taking beijing tianjin hebei region in china as an example we explain the dynamic effect of environmental expenditure shock and its spillover effects environmental expenditure has an obvious crowding out effect on consumption and investment in local area but has some positive influences on the economy of external regions over the business cycle environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters however environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area one interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area

a comparison of the labor supply findings from the four negative income tax experiments between 1968 and 1982 the united states federal government sponsored four negative income tax experiments this paper provides a set of consensus estimates of the labor supply responses to these experiments it is found that despite the wide range of treatments and evaluation methodologies the results are remarkably consistent on average husbands reduced labor supply by about the equivalent of two weeks of full time employment wives and single female heads reduced labor supply by about the equivalent of three weeks of full time employment youth reduced labor supply by about the equivalent of four weeks of full time employment estimated income and substitution effects are quite similar to those obtained from nonexperimental studies

the impact of ceta programs on earnings a review of the literature this paper reviews and assesses evaluations of the comprehensive employment and training act ceta programs most of the studies found that the programs raised earnings by 200 to 600 annually in current dollars the programs were found to be more effective for women than men and public service employment and on the job training were generally found to be more effective activities than classroom training and work experience in spite of the broad overall agreement the studies differed significantly in many of their specific impact findings the nonexperimental nature of the data required the studies to make specific assumptions about selection procedures used to determine which individuals received training and the results are sensitive to the specific measures adopted data limitation and the inability to adequately test the validity of selection processes assumed make it impossible to determine which studies modeled the process correctly

the welfare costs of moderate inflations in the recent past the view that a little bit of inflation was good for the economy was widely held the phillips curve in its earlier incarnations implied that moderate inflation was worth tolerating because it would permit lower unemployment this justification for tolerating inflation has long since been abandoned by economists and policymakers because both theory and experience showed it to be false nevertheless one legacy of this era seems to be a fairly widespread tolerance for moderate inflation recently there has been much discussion of removing this inflationary bias by passing legislation that would require the federal reserve to target zero inflation in this paper we examine some of the consequences of achieving that goal we appraise the revenue and welfare costs of policies designed to reduce moderate inflation rates to zero much has been written about why government policies may have an inflationary bias in this paper we don t address the issue of what motivates governments to inflate implicit in our analysis however is the notion that one important motive for inflation is the revenue raising potential of the inflation tax it would be difficult to argue that the inflation tax constitutes an important revenue source for the united states one indirect and very imperfect measure of this would be contributions by the federal lleserve to the treasury in recent years those rebates have amounted to

making inferences from controlled income maintenance experiments nationally this paper addresses a question whose answer is essential for interpreting the results of such experiments if an experiment of limited duration is conducted under ideal conditions what can be inferred from the experimental results about behavior in a world where nit is adopted permanently by ideal conditions we mean that a individuals or households 2 in the experiment are conventional utility maximizers given the structure of the experiment and b the experiment is sufficiently well designed to permit the differential responses of individuals to be identified 3 the

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

does parents money matter abstract this paper asks whether parents income per se has a positive impact on children s abilities previous research has established that income is positively correlated across generations this does not prove that parents money matters however since income is presumably correlated with ability this paper estimates the impact of parents income by focusing on income variation due to factors union industry and job loss that arguably represent luck i find that changes in parents income due to luck have a negligible impact on children s human capital for most families although parents money does matter for families whose father has low education

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

examining the economic and environmental effects of emissions policies in china a bayesian dsge model abstract the purpose of this study is to build an energy emissions economy dynamic stochastic general equilibrium model to examine the economic and environmental effects of the carbon tax and carbon intensity target the model is calibrated to china s economy the results show that both the carbon tax and carbon intensity target policies have a negative effect on china s economy and environment however the carbon tax exerts more negative effects on the economy and environment than the carbon intensity target moreover the carbon tax shock lasts shorter than the carbon intensity target shock the findings additionally indicate that the effects of the increase in the productivity of energy sectors are greater than those of the increase in the productivity of other sectors thanks to the low carbon technology shock china s carbon dioxide emissions will reduce and output will increase taken together this study highlights the key policy implications associated with the results

a 4 stated dice quantitatively addressing uncertainty effects in climate change we introduce a version of the dice 2007 model designed for uncertainty analysis dice is a wide spread deterministic integrated assessment model of climate change climate change long term economic development and their interactions are highly uncertain the quantitative analysis of optimal mitigation policy under uncertainty requires a recursive dynamic programming implementation of integrated assessment models such implementations are subject to the curse of dimensionality every increase in the dimension of the state space is paid for by a combination of exponentially increasing processor time lower quality of the value or policy function approximations and reductions of the uncertainty domain the paper promotes a state reduced recursive dynamic programming implementation of the dice 2007 model we achieve the reduction by simplifying the carbon cycle and the temperature delay equations we compare our model s performance and that of the dice model to the scientific aogcm models emulated by magicc 6 0 and find that our simplified model performs equally well as the original dice model our implementation solves the infinite planning horizon problem in an arbitrary time step the paper is the first to carefully analyze the quality of the value function approximation using two different types of basis functions and systematically varying the dimension of the basis we present the closed form continuous time approximation to the exogenous discretely and inductively defined processes in dice and we present a numerically more efficient re normalized bellman equation that in addition can disentangle risk attitude from the propensity to smooth consumption over time

which policy is more effective carbon reduction in all industries or in high energy consuming industries from dual perspectives of welfare effects and economic effects abstract carbon emission reduction policy is the main method to curb carbon emissions and tackle climate change however few studies have investigated the effectiveness of carbon emission reduction polices from the welfare and economic perspectives this study establishes a dynamic general equilibrium model with input output structure and compares the effects of emission reduction in all industries and in high energy consuming industries the main conclusions are that carbon emission reduction constraints for all industries have more significant negative impacts on consumption and social welfare compared to emission reduction constraints for high energy consuming industries to be more precisely carbon emission reduction in high energy consuming industries has comparative advantages in maintaining social welfare stability regarding economic effects compared with the carbon emission reduction in high energy consuming industries carbon emission reduction in all industries leads to a larger decline in total output and outputs of most industries however the role of carbon emission reduction in all industries is more significant in promoting employment the carbon emission reduction policies of all industries and high energy consuming industries have strengths in economic effects respectively the findings could provide references for the government to take appropriate measures to promote carbon emission reduction and economic growth

dynamic regulation design without payments the importance of timing abstract we consider a two period model of optimal regulation of a firm subject to marginal compliance cost shocks the regulator faces an asymmetric information problem the firm knows current compliance costs but the regulator does not both the regulator and the firm are uncertain about future costs in our basic framework the regulator may not offer payments to the firm we show that the regulator can vary the strength of regulation over time to induce the firm to reveal its costs and increase welfare in the optimal mechanism the regulator offers stronger weaker regulation in the first period and weaker stronger regulation in the second period if the firm reports low high compliance costs in the first period low cost firms expect compliance costs to rise in the future and thus prefer weaker regulation in the second period high cost firms expect costs to fall in the future and thus prefer regulation which becomes stricter over time thus the regulator offers the low high cost firms slightly weaker stronger regulation in the second period in exchange for much stronger weaker regulation in the first period thereby timing the regulation if the regulator can make payments then the optimal mechanism to some degree times the regulation as long as a positive marginal cost of funds exists if the marginal cost of funds is high enough then under the optimal mechanism the regulator will not use payments and use our timing mechanism exclusively

business cycles and emission trading with banking abstract we propose an emission cap adjustment policy for an emission trading system ets that allows banking of allowances for later use and faces business cycle uncertainty the forward looking banking decisions cause a commitment problem with respect to regulator s next period allowance supply decision we tackle the commitment problem by focusing on the markov equilibrium of the policy the equilibrium policy has a surprisingly simple structure combining features from both price and quantity instruments the regulator s ability to choose a new cap for each period does not render banking obsolete but on the contrary makes banking an integral part of the equilibrium policy using data from the eu ets to calibrate the model we solve the markov equilibrium policy for the case of carbon emissions regulation and compare markov policies with and without the possibility to bank allowances a counterfactual analysis of the eu ets during the period of 2009 2013 shows that the optimal markov policy would have led to a steadier allowance price level and a stricter emission regulation than what was actually observed in the eu ets

estimating the effect of job training programs using longitudinal data ashenfelter s findings reconsidered this paper is an examination of how autoregressive earnings models commonly used to evaluate job training programs can produce badly biased estimates of both the magnitude and the temporal pattern of program impacts ashenfelter s results are used to illustrate this point and a new more appropriate model is used to reanalyze his data of particular importance is the finding that the decay in ashenfelter s estimated training effect for men was produced by a time varying bias in his model

optimal dynamic carbon taxes in a climate economy model with distortionary fiscal policy how should carbon be taxed as a part of fiscal policy the literature on optimal carbon pricing often abstracts from other taxes however when governments raise revenues with distortionary taxes carbon levies have fiscal impacts while they raise revenues directly they may shrink the bases of other taxes e g by decreasing employment this article theoretically characterizes and then quantifies optimal carbon taxes in a dynamic general equilibrium climate economy model with distortionary fiscal policy first this article establishes a novel theoretical relationship between the optimal taxation of carbon and of capital income this link arises because carbon emissions destroy natural capital they accumulate in the atmosphere and decrease future output consequently this article shows how the standard logic against capital income taxes extends to distortions on environmental capital investments second this article characterizes optimal climate policy in sub optimal fiscal settings where income taxes are constrained to remain at their observed levels third this article presents a detailed calibration that builds on the seminal dice approach but adds features essential for a setting with distortionary taxes such as a differentiation between climate change production impacts e g on agriculture and direct utility impacts e g on biodiversity existence value the central quantitative finding is that optimal carbon tax schedules are 8 24 lower when there are distortionary taxes compared to the setting with lump sum taxes considered in the literature

a comparison of the effect of welfare programme features on welfare participation one and two parent families the effect of welfare programme characteristics on the decision to enter the welfare system is modelled as a binary discrete choice latent variable model dependent upon an underlying index function the two chief classes of welfare beneficiaries in the us welfare system are analysed two parent families and single female headed families the data set is a large recent non experimental multiyear cross sectional pooled data set derived from the us census bureaus current population survey behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory newly estimated comprehensive descriptive statistics of the entire welfare system for both single female household heads and married couples with children are employed to characterize the welfare system statistically significant estimates of substantial magnitude are obtained for the impacts on welfare participation for the welfare guarantee level the effective tax rate on earned income and the effec

mapping the international flows of ghg emissions within a more feasible consumption based framework abstract during the last two decades the scientific literature has focused on the allocation of emissions embodied in international trade by implementing accounting procedures based on consumer oriented perspective while the multi regional input output analysis has been accepted by the scientific community as an alternative to the ipcc accounting some concerns arise from the feasibility and the actual implementation of this methodology in this paper we apply a simplified framework recently introduced by caro et al 2014a called nci national carbon intensity method and estimate the total co2 emissions due to consumption in 175 countries during the period 2008 2012 with a focus on the mediterranean area we estimate co2 emissions embodied in trade assigning emission responsibility on the basis of each country s demand globally in 2012 8129 mt co2 emissions were related to goods produced in one country and consumed outside its boundaries a relevant example is the export from china to consumers located in the usa japan and germany a focus on the mediterranean area that resulted as a net importer of co2 embodied in traded goods identifies the export of emissions from italy and spain to france and from libya and algeria to italy as the dominant flows the nci method provides a realistic picture of emissions due to consumption that differs from high resolution multi regional input output database by less than 10 the method can be largely adopted as a more feasible preliminary step towards consumption based emission accounting and responsibility assignment

emissions targets and the real business cycle intensity targets versus caps or taxes for reducing greenhouse gas emissions intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps for the same expected emissions however the economic responses to unexpected productivity shocks differ using a real business cycle model we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint an emissions tax leads to the same expected outcomes as a cap but with greater volatility certainty equivalent intensity targets maintain higher levels of labor capital and output than other policies with lower expected costs and no more volatility than with no policy

work and welfare lessons on employment programs he nation s social welfare policy reflects an ongoing effort to balance sometimes competing objectives alleviating poverty and promoting self sufficiency in a manner consistent with underlying public values about the primacy of the family and the importance of work concern has been growing that the welfare system has not been doing this very well and welfare reform once again moved towards the top of the policy agenda resulting in passage of the family support act of 1988 fsa that the bill was passed is evidence of broad agreement about elements of the problem and its solution that it was passed amidst acrimony and with relatively modest provisions reflects continuing disagreement about the fundamental objectives of reform this paper discusses what economists know about the potential of one central component of the new legislation the effort to transform welfare from a means tested entitlement into a reciprocal obligation in which getting a welfare check would carry with it a requirement to look for and accept a job or to participate in activities that prepare people for work it sets the context for this discussion by briefly outlining why this approach to reform gained support and by summarizing major policy and program alternatives

are classical experiments needed for manpower policy the critical element that distinguishes classical experiments from all other modes of analysis is the random assignment of treatment to enrollees in a study this paper examines the major methodological advantages of random assignment for the purpose of estimating the effectiveness of current manpower policy it also reviews the claimed methodological and ethical objections to experiments the main valid objection to an experiment is neither methodological nor ethical it is the experiment s cost in relation to that of nonexperimental methods of analysis the authors argue that the offsetting gain from experimentation is the inherent reliability of experimental estimates of treatment effects the paper offers a simple framework for deciding whether the improved reliability of treatment effect estimates is worth the added cost of experimentation it concludes with an assessment of the actual value of experiments for evaluating current manpower policies

does a recession call for less stringent environmental policy a partial equilibrium second best analysis this paper analyses second best optimal environmental policy responses to real and financial shocks in a two period partial equilibrium model with heterogeneous firms an environmental externality and credit constraints we show that to alleviate credit constraints and encourage investment the second best optimal emission tax falls short of marginal emission damages the optimal response to shocks depends on how the shock affects the size of the environmental and credit market failures and the effectiveness of the tax in alleviating these market failures under mildly restrictive assumptions on functional forms the optimal response to a persistent negative productivity shock or a tightening of credit is to reduce the emission tax our results are informative for how climate change policy should optimally change with the business cycle

student work placements in small firms do they pay off or shift tastes we present a model of training investments and employment outcomes in this model training may enhance trainees tastes for particular types of career taste shift and or shift their wage offer distributions pay off an empirical analysis is conducted with a unique data set of uk graduates these data contain information on students career tastes before small firm placements as well as their employment outcomes after graduation analysis of these data indicates that the placements provide a pay off among highly employable graduates who face certain disadvantages in the labour market conversely individuals who expressed a taste for small firm careers before placements are more likely to take up small firm employment after placements suggesting these individuals experience enhanced opportunities for their preferred career however individuals with pre placement large firm preferences have no greater likelihood of entering small firms employment after placements indicating there is no fundamental effect on career tastes

pure rank preferences and variation in risk taking behavior abstract assuming that an individual s rank in the wealth distribution is the only factor determining the individual s wellbeing we analyze the individual s risk preferences in relation to gaining or losing rank rather than the individual s risk preferences towards gaining or losing absolute wealth we show that in this characterization of preferences a high ranked individual is more willing than a low ranked individual to take risks that can provide him with a rise in rank relative risk aversion with respect to rank in the wealth distribution is a decreasing function of rank this result is robust to incorporating the level of absolute wealth in the individual s utility function

effective tax rates and guarantees in the afdc program 1967 1982 estimates of effective tax rates on earned and unearned income and estimates of effective guarantees in the afdc program by state are provided for the period 1967 1982 the results indicate that effective real guarantees fell every year from 1967 to 1981 but stabilized in 1982 effective tax rates on unearned income rose steadily from 1967 to 1981 and took a particularly large additional jump in 1982 effective tax rates on earned income fell after 1967 but then gradually rose throughout the 1970s until 1982 when they took a much larger jump thus guarantees fell and tax rates rose over the 1970s as tight budgets forced states to restrict benefits and in the early 1980s tax rates were pushed even higher by federal legislation

entry and exit transitions in a government transfer program the case of aid to families with dependent children this study analyzes determinants of entry and exit transitions in the aid to families with dependent children program using data from the panel study of income dynamics the principal findings are that state controlled policy parameters such as the afdc guarantee the payment received when earnings are zero and the entry income limit the income level at which families become eligible for afdc payments have a significant but asymmetric impact on these transitions in addition evidence on the relationship between wages and such transitions tends to support efforts at reducing welfare dependency through programs which raise wages

are targeted wage subsidies harmful evidence from a wage voucher experiment this paper presents the results of a controlled experiment designed to test the effectiveness of a targeted wage subsidy program such programs are intended to increase the employment of target group workers by offering employers reimbursement for part of those workers wages in the dayton ohio experiment however job seekers given experimental vouchers identifying them to employers as eligible for a generous wage subsidy were significantly less likely to find employment than were job seekers without vouchers the author speculates that the vouchers had a stigmatizing effect and provided a screening device with which employers discriminated against economically disadvantaged workers

labour supply impacts of effective welfare programme parameters a reanalysis we quantify the impact of effective welfare programme parameters on the labour supply of single female household heads the primary group of welfare recipients in the usa our panel of data is derived from the us census bureau s current population survey for the years 1979 to 1990 inclusive behavioural impacts from a range of economic variables are consistent in sign with predictions made by economic theory we find that effective welfare gurantee levels and the effective tax rate on earned income both significantly decrease labour supply the marginal effects of these welfare programme parameters are economically small a us 1000 increase in the expected welfare guarantee level reduces annual labour supply by about 36 hours a 10 percentage point increase in the effective tax rate on earned income reduces annual labour supply by about 7 5 hours

child support welfare dependency and poverty female headed families have among the highest poverty rates of any major demographic group in the united states the purpose of this paperis to investigate empirically the effectiveness of current child support enforcement policies and to determine their role in reducing poverty and welfare dependency a special supplement to the april 1982 current population survey provides the data for the analysis the results indicate that child support enforce ment may represent an effective means for re ducing welfare program costs but isunlikely to have a dramatic effect on either welfare de pendency or poverty copyright 1986 by american economic association

labor supply and tax rates comment in a recent paper in this review 1983 james gwartney and richard stroup g s take issue with what they assert is the widespread view p 447 that because changes in tax rates have a theoretically indeterminate effect on individual labor supply the impact of changing tax rates is also indeterminate at the aggregate level gwartney and stroup suggest for example that if the initial output of public goods is optimal and the government cuts taxes and expenditures by equal amounts the forgone public goods would be valued as highly as the private goods that individuals purchase with their increase in disposable income hence aggregate real income would not rise but remain at its pre tax cut level gwartney and stroup state that under these circumstances a tax cut s impact on aggregate labor supply would not be indeterminate but labor inducing because in the aggregate there is no income effect only a positive substitution effect 1 gwartney and stroup illustrate this point by examining the aggregate labor supply effects of an increase in transfer payments financed by an exactly offsetting increase in income taxes they argue that if the transfer payments are income conditioned this policy would decrease net wage rates for transfer recipients as well as for taxpayers thereby producing work reducing substitution effects for all members of society on the other hand the aggregate change in disposable income in the economy would be zero since by design the expansion in transfers is exactly offset by the increase in taxes they conclude that unless recipients and taxpayers respond differently to a given change in disposable income the income effect of the tax transfer program will leave both the aggregate supply of labor and consumption of leisure unchanged but of course the substitution effect will still be present unambiguously it will induce individuals to work less although how much less is strictly an empirical issue p 450 in this comment we demonstrate that the g s tax transfer illustration and the policy implications drawn from it are highly misleading we first show that the g s conclusions about the relationship between tax rates and labor supply are based upon strong assumptions about the degree of homogeneity in the population and that without these assumptions their conclusions are not guaranteed to hold we then use microsimulation techniques to challenge the impression given by the g s paper that more redistribution must necessarily imply a reduction in the labor supply and output of the economy

the labor supply response of twenty year families in the denver income maintenance experiment this paper presents results of an analysis of the labor supply response of 20 year families in the denver income maintenance experiment the results indicate that 20 year husbands and wives do not reduce their labor supply relative to control families while 20 year single female heads of families reduce their labor supply by about the same amount as similar families on the 3and 5 year programs the results suggest that the limited duration of the 3and 5 year experiments may not have caused major biases in the estimated treatment effects although the imprecise estimates resulting from the small sample sizes of the 20 year experiment greatly qualify this conclusion

essays in social experimentation what experiments are needed for manpower policy experiments where prospective participants are randomly assigned into experimental and control groups are often regarded as the ideal approach to evaluation of manpower policies this examination shows that such experimental designs can yield misleading and incomplete information about program impacts in cases where program effects vary among individuals when individual heterogeneity is present such designs at best provide unbiased estimates of average program effects not of marginal effects the latter are often more important for policy than the former this paper proposes alternative experimental designs that permit estimation of the marginal as well as average program impacts

on the welfare cost of economic fluctuations in developing countries macroeconomic fluctuations are much stronger in developing countries than in the united states yet while a large literature debates the welfare cost of economic fluctuations in the united states it remains an open question how large that cost is in developing countries using several models we provide such a measure we find that the welfare cost of consumption volatility per se is far from trivial and averages a substantial multiple of the corresponding u s estimate moreover in many poor countries the welfare gain from eliminating volatility may in fact exceed the welfare gain from an additional percentage point of growth forever

research on a single policy or policy mix in carbon emissions reduction abstract existing literature on the optimal type of carbon mitigation policy and whether it is better to apply a policy mix instead of a single policy is still unclear this paper assesses the policy effectiveness under exogenous shocks by applying a dynamic stochastic general equilibrium dsge model comparing the differences between the carbon mitigation and economic impacts of a policy mix versus a single policy carbon tax or carbon trading scheme the results showed that energy demand is rigid in response to technological shocks therefore there is no significant difference for the energy consumption related carbon emissions in response to the technological progress under three different policy scenarios a carbon tax scenario i a carbon trading scheme scenario ii and a carbon policy mix scenario iii overall carbon emissions policy has a negative impact on the economy compared to the other two policies a carbon trading scheme has a relatively slight impact on the economy a mandatory carbon price would have a more significant impact than would a market based carbon price the policy mix formed by a carbon tax and a carbon trading is comprehensive in terms of both price flexibility and coverage scope

the role of stocks and shocks concepts in the debate over price versus quantity recent literature showed that the choice between a price or quantity control depends in part on the dynamic structure of cost uncertainty temporary shocks to abatement cost favors the use of a price control while permanent shocks favor a quantity control unfortunately the importance of this assumption to the optimal choice has not yet received wide attention among economists we analyze the regulatory sproblem in an alternative setting and reproduce these results our contribution is the simplicity of the model and the accessibility of the results which reinforce the critical role played by the assumed structure of uncertainty

the impact of training on employment assessing a norwegian labour market programme by estimating a censored regression model it is found that unemployed adults taking part in labor market training increase their subsequent employment within a twelve month response period the employment effects vary with the duration of training and from one field of training to another in general short courses five ten weeks and long courses more than thirty weeks perform better than semilong courses using nonexperimental data and single equation estimation methods the question of unobserved heterogeneity and selection bias arises including a variant of heckman s lambda in the model reduces the estimated employment effect of training thus indicating a positive selection to training copyright 1994 by the editors of the scandinavian journal of economics

optimal climate change mitigation under long term growth uncertainty stochastic integrated assessment and analytic findings abstract economic growth over the coming centuries is one of the major determinants of today s optimal greenhouse gas mitigation policy at the same time long run economic growth is highly uncertain this paper is the first to evaluate optimal mitigation policy under long term growth uncertainty in a stochastic integrated assessment model of climate change the sign and magnitude of the impact depend on preference characteristics and on how damages scale with production we explain the different mechanisms driving optimal mitigation under certain growth under uncertain technological progress in the discounted expected utility model and under uncertain technological progress in a more comprehensive asset pricing model based on epstein zin weil preferences in the latter framework the dominating uncertainty impact has the opposite sign of a deterministic growth impact the sign switch results from an endogenous pessimism weighting all of our numeric scenarios use a dice based assessment model and find a higher optimal carbon tax than the deterministic dice base case calibration

a model for analyzing youth labor market policies this article formulates a general equilibrium model for analyzing the youth labor market at the heart of the model is an interplay between a labor force with heterogeneous ability levels and a minimum wage restriction ability affects performance on skilled jobs and to a lesser extent on unskilled jobs workers are less productive as youths than as adults the model is applied to rationalize several results from available studies and to analyze the effects of three representative policies a youth subminimum wage subsidies paid to firms that hire youths and subsidies that offset the costs of on the job training

changes in the wage structure family income and children s education abstract we exploit the changes in the distribution of family income to estimate the effect of parental resources on college education our strategy exploits the fact that families at the bottom of the income distribution were much poorer in the 1990s than they were in the 1970s while the opposite is true for families in the top quartile of the distribution our estimates suggest large effects of family income on enrollments for example we find that a 10 percent increase in family income is associated with a 1 4 percent increase in the probability of attending a four year college

status the distribution of wealth private and social attitudes to risk this paper supposes an individual cares about his her own wealth not only directly but also via the relative standing that this wealth induces the implications for risk taking are investigated in particular such a model provides a natural explanation of the concave convex concave utility described by friedman and savage however there are a number of key differences between the present model and any model based on own wealth alone for example an equilibrium wealth distribution here may have a middle class further the status interaction involves an externality and an equilibrium wealth distribution may be pareto inefficient but also about the implied relative standing in the distribution of wealth has a long but checkered history an early exponent of such ideas was of course veblen 1899 it is indeed a notion which most economists reject albeit usually without explicit comment a notable and articulate exception however is frank 1985 for example see also the references frank cites on pp 33 34 it is however a notion with substantial intuitive appeal and it seems useful to ascertain its consequences before coming to a final judgement as to its merits the present paper is concerned with deriving the consequences of such valuation of status for risk taking what seems to be the sharpest possible model is adopted here this assumes that what is essentially ordinal rank in the wealth distribution enters von neumann morgenstern utility as an argument in addi tion to wealth itself thus higher wealth increases utility not only directly but also indirectly via higher status in the interests of both simplicity and drama it is typically assumed here that all individuals have identical utility functions which are concave in wealth but convex in status section 2 discusses how the model provides a natural explanation of the fundamental phenomenon addressed by friedman and savage 1948 that individuals may simultaneously purchase insurance and participate in lotteries although each individual here has a utility function which is concave in wealth itself utility can nevertheless be convex in wealth over some range when the indirect effect via status is included this effect is enhanced by the convexity of utility in status but will follow in any case if increasing wealth entails moving up in status much more rapidly than losing wealth entails moving down it is shown

allocation of co2 emissions permits a general equilibrium analysis of policy instruments what are the effects of different ways of allocating co2 emissions permits under a tradable permit scheme numerical simulations show that using the permit revenue to lower existing taxes implies by far the lowest welfare cost but also a large reduction in employment in energy intensive sectors and substantial stranded costs grandfathering the permits compensates owners for losses on stranded investments but comes at a welfare cost and does not mitigate the adjustment imposed on the economy finally distributing the permits according to market shares reduces the degree of sectoral adjustment but also comes at a high welfare cost

output based allocation of emissions permits for mitigating tax and trade interactions the allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account we compare different rules for allocating carbon allowances within sectors lumpsum grandfathering output based allocation oba auctioning and among sectors historical emissions or value added shares the output subsidies implicit in oba mitigate tax interactions unlike grand fathering oba with sectoral distributions based on value added is similar to revenue recycling with auctioning oba based on historical emissions supports heavier polluters more effectively counter acting carbon leakage but at higher welfare costs less energy intensive sectors are also sensitive to allocation rules

hidden regimes and the demand for carbon dioxide from motor gasoline abstract perhaps the most tactile source of anthropogenic carbon dioxide co2 emissions stem from vehicle use because consumers are well aware of their price and quantity decisions it is likely that consumer demand for co2 emissions from motor gasoline are quite responsive to the overall state of the economy using a structurally identified markov switching demand model i find that co2 emissions respond asymmetrically to changes in income and the price of gasoline in expansionary and contracting states of the economy the findings of this paper indicate that flexible policy instruments have the potential to mitigate undue burden on consumers and producers compared to their static counterparts