optimal taxation and finite horizon abstract within the blanchard blanchard o 1985 debt deficits and finite horizons journal of political economy 93 2 223 247 model we determine optimal capital and labor income taxation we discuss the conditions for non zero capital income taxation in the long term we make explicit the conditions for time consistent capital income taxation we clarify the role of finite horizon regarding second best optimal taxation

market price behavior of wholesale electricity products texas abstract applying a regression based approach to a newly developed sample of over 60 000 hourly observations for 01 01 2011 12 30 2017 we answer the question what moves the day ahead market dam prices for energy and ancillary services as and the real time market rtm price for energy in the electric reliability council of texas ercot our answer comprises the following findings that capture the interdependence of ercot s energy and as products 1 the dam energy price increases with the day ahead forecasts of natural gas price system load and as requirements but declines with nuclear and wind generation s forecasts 2 the as prices increase with the dam energy price and the as procurement forecasts but decline with the as offer forecasts and 3 the rtm energy price increases with the dam energy price but diverges from the dam energy price due to forecasting errors related to the dam energy price s fundamental drivers these findings imply that texas can reduce the prices for day ahead energy day ahead as and real time energy via wind generation development and demand side management further texas can improve its electricity trading efficiency by improving ercot s forecast accuracy to narrow the rtm energy price s divergence from the dam energy price

on the electrical two part tariff the brazilian perspective this paper discusses in terms of brazil s situation the use of a nonlinear pricing approach in the application of a two part tariff to electricity distribution networks the principles that uphold charging access and usage are to optimize energy systems that are based on a generation technology mix such a pricing approach is used in brazil where the generation mix is mainly hydro generation this study shows that in a case like brazil s a two part tariff may be used as a tool for network optimization the paper presents a design for a two part tariff for a distribution system with varying consumer behavior to validate the discussion we offer a numerical example finally remarks are given concerning pricing access and usage for low voltage level consumers

electricity portfolio management optimal peak off peak allocations electricity purchasers manage a portfolio of contracts in order to purchase the expected future electricity consumption profile of a company or a pool of clients this paper proposes a mean variance framework to address the concept of structuring the portfolio and focuses on how to optimally allocate positions in peak and off peak forward contracts it is shown that the optimal allocations are based on the difference in risk premiums per unit of day ahead risk as a measure of relative costs of hedging risk in the day ahead markets the outcomes of the model are then applied to show i that it is typically not optimal to hedge a baseload consumption profile with a baseload forward contract and ii that under reasonable assumptions risk taking by the purchaser is rewarded by lower expected costs

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

the dynamics of health in the british household panel survey this paper considers the dynamics of a categorical indicator of self assessed health using eight waves 1991 1998 of the british household panel survey bhps our analysis has three focal points the relative contributions of state dependence and heterogeneity in explaining the dynamics of health the existence and consequences of health related sample attrition and the investigation of the effects of measures of socioeconomic status with a particular focus on educational attainment and income to investigate these issues we use dynamic panel ordered probit models there is clear evidence of health related attrition in the data but this does not distort the estimates of state dependence and of the socioeconomic gradient in health the models show strong positive state dependence and heterogeneity accounts for around 30 of the unexplained variation in health copyright 2004 john wiley sons ltd

optimal taxation in life cycle economies abstract we use a very standard life cycle growth model in which individuals have a labor leisure choice in each period of their lives to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income the intuition for our result is straightforward in a life cycle model the individual s optimal consumption work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual s lifetime one way to achieve this goal is to use capital and labor income taxes that vary with age if tax rates cannot be conditioned on age a nonzero tax on capital income is also optimal as it can imperfectly mimic age conditioned consumption and labor income tax rates journal of economic literature classification numbers e62 h21

the decline in male labor force participation comment in an article in thisjournal parsons 1980a analyzes the doubling in the rate of nonparticipation in the labor force of older men since 1946 using cross sectional data from the national longitudinal survey parnes et al 1970 in an index function model of the labor force participation decision he tests the assertion that the withdrawal of older males is attributable to the rapid expansion of alternatives to work provided by the social security disability insurance ssdi program he reports an elasticity of nonparticipation with respect to the replacement rate of ssdi benefits of 631 and concludes that the recent decline in labor force participation can be largely explained by the increased generosity of social welfare transfers particularly social security disability payments p 130 the magnitude of parsons s estimate and its impact on the public debate over disability transfer policy require careful scrutiny of its basis in section i we describe parsons s econometric model and construction of variables in section ii we provide a critique in section iii we test the robustness of parsons s elasticity estimate by presenting alternative estimates based on corrections and extensions of his basic model section iv concludes

portfolio optimization using mixture design of experiments scheduling trades within electricity markets abstract deregulation of the electricity sector has given rise to several approaches to defining optimal portfolios of energy contracts financial tools requiring substantial adjustments are usually used to determine risk and return this article presents a novel approach to adjusting the conditional value at risk cvar metric to the mix of contracts on the energy markets the approach uses mixture design of experiments mde in this kind of experimental strategy the design factors are treated as proportions in a mixture system considered quite adequate for treating portfolios in general instead of using traditional linear programming the concept of desirability function is here used to combine the multi response nonlinear objective functions for mean with the variance of a specific portfolio obtained through mde the maximization of the desirability function is implied in the portfolio optimization generating an efficient recruitment frontier this approach offers three main contributions it includes risk aversion in the optimization routine it assesses interaction between contracts and it lessens the computational effort required to solve the constrained nonlinear optimization problem a case study based on the brazilian energy market is used to illustrate the proposal the numerical results verify the proposal s adequacy

predicting price spikes in electricity markets using a regime switching model with time varying parameters this paper shows that a stochastic regime switching model can represent the volatile behavior of wholesale electricity prices associated with price spikes effectively the structure of the model is very flexible because the mean prices in the two regimes and the two transition probabilities are functions of the load and or the implicit reserve margin using price data from the single settlement market in pjm may 1999 to may 2000 the results show that the estimated switching probability from the low to the high regime predicts price spikes well if the reserve margin is measured accurately

hourly electricity prices in day ahead markets this paper focuses on the characteristics of hourly electricity prices in day ahead markets in these markets quotes for day ahead delivery of electricity are submitted simultaneously for all hours in the next day the same information set is used for quoting all hours of the day the dynamics of hourly electricity prices does not behave as a time series process instead these prices should be treated as a panel in which the prices of 24 cross sectional hours vary from day to day this paper introduces a panel model for hourly electricity prices in day ahead markets and examines their characteristics the results show that hourly electricity prices exhibit hourly specific mean reversion and that they oscillate around an hourly specific mean price level furthermore a block structured cross sectional correlation pattern between the hours is apparent

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

effects of short and long term unemployment on health satisfaction evidence from german data the purpose of this study is to analyse the effects of short and long term unemployment on health satisfaction the data source used for the analysis is the german socio economic panel gsoep which given its longitudinal structure allows one to better overcome the problem of endogeneity three different models are used in order to assess the effect of short and long term unemployment and reemployment on health satisfaction the results show that short term unemployment has only a significant and negative effect for men while for women short term unemployment does not have a significant effect on health satisfaction being unemployed for a long period has a significant and negative effect for both men and women finally it can be also concluded from the empirical analysis that reemployment has a significant and positive effect on health satisfaction for both unemployed men and women independent of how long individuals have been unemployed

investment planning in electricity production under co2 price uncertainty the electricity markets have undergone significant changes during the last years on the one hand the market deregulation has increased significantly the uncertainty on future electricity prices on the other hand the kyoto protocol and the establishment of emission restrictions as well as the development of emission trading systems has added another expense stream for conventional fuel electricity producers and a potential income stream for renewable electricity producers the emission allowance prices are another source of uncertainty for electricity producers the scope of this work is to investigate the effect that various scenarios for emission allowance price evolution may have on the orders for new electricity generation technologies and therefore on the future electricity generation mix of greece the renewable energy generation targets are taken into consideration as a constraint of the system and the learning rates of the various technologies are included in the calculations the national electricity generation system is modelled for long term analysis and an optimisation method is applied in order to come up with the optimal generating mix that minimises electricity generation cost while satisfying the national emissions reduction targets and incorporating the uncertainty of emission allowance prices in addition an investigation is made to identify if a point should be expected when renewable energy will be more profitable than conventional fuel electricity generation the work is interesting for investment planning in the electricity market as it may provide directions on which technologies are most probable to dominate the market in the future and therefore are of interest to be included in the future power portfolios of related investors

measuring the effect of disability on labor force participation this paper estimates the effect of disability on labor force participation by using symptoms or diseases as instruments in a simultaneous equations model of endogenous reported disability and labor force participation the results show that each measure of disability explains a significant amount of variation in labor force participation though the two are not perfect substitutes there is only weak evidence of endogeneity of the disability variables for cases where there is evidence of endogeneity the bias it causes has the opposite effect of that hypothesized in the literatute i e stress causes health to deteriorate with labor force participation furthermore it has only insignificant effects on the coefficients for other variables

portfolio applications in electricity markets review private investor and manager perspective trends abstract the private sector plays a major role in the expansion and operation of power systems in most countries especially those running liberalized electricity markets policymakers have the task of inducing private agents through their regulatory designs to make decisions that point toward social welfare maximization conversely it is a task of private agents to protect themselves against the risks of the sector including regulatory risks international fuel price uncertainty climate change policies natural resource availability electricity demand uncertainty co2 clearance prices etc instead of hiding all of these risks within the total project costs and losing competitiveness private agents can use diversification as a strategy to deal with them this paper presents a review of the main applications voids and challenges of portfolio optimization for two key agents of the private sector investors and managers the problem of the investor is to design a technology portfolio to invest in that maximizes its expected returns and limits risks while the manager has to design a portfolio of financial physical instruments long term contracts futures etc to sell buy electricity and hedge against price risks we have found two fundamental issues in the literature the first and most important is excessive confidence in historical data and statistical analysis for predicting future price behavior for a changing future in detriment of more structural analysis structural analysis can include particularities of modern power systems such as future transmission changes congestion operational constraints ramps new entrants new technologies and new demand grow patterns that cannot be taken into account by simply analyzing price historical values the second is the omission of renewable complementarities which is a proven characteristic of dispersed renewable plants that may have important risk mitigation effects although it has largely been ignored in portfolio analysis due to insufficient data modeling limitations and computational complexity

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

setting up standard power options to hedge price quantity risk in a competitive electricity market the colombian case this paper applies the conceptual framework applied in the work of oum et al to hedge retailers against price quantity fluctuations in spot electricity markets and extends it to power generators in order to design suitable power options with optimal strike prices from a market maker s perspective these options are then used to hedge agents against price and quantity fluctuations by maximizing a static expected utility problem an infinite collection of derivatives exotic option emerges as the solution of both price and quantity hedging this exotic option is approximated with a portfolio composed by bonds forward futures contracts and a fixed number of put and call options employing a plausible replicating strategy the theoretical framework is tested within the context of the colombian power market and is applied to month ahead and quarterly ahead hedging during on peak hours the proposal addresses major problems such as lack of liquidity and anonymity of the current bilateral electricity trading scheme in colombia

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

health and wage a simultaneous equation model with multiple discrete indicators in this article we propose all econometric approach for estimating the simultaneouls effects of health and wages in a structural equations framework in the theoretical works of grossmana 1972a 1972b health is viewed as anl elldogen1oulsly determined capital stock the demand for health should rise with the wage rate as the rate of return to health investment increases with wage onl the other hand better health should raise market productivity and hence wages since health capital is an abstract theoretical concept it can hardly be measured quantitatively however most population surveys include various health indicators these indicators are usually discrete variables in the empirical work of grossman and benham 1974 these qualitative indicators are treated as continuous variables and two stage least squares estimation techniques are used this specification raises various econometric problems see e g goldberger 1964 pp 248 255 domencich and mcfadden 1975 and nerlove and press 1973 a satisfactory specification should take into account the discrete nature of the indicators our specification generalizes the dummy variables simultaneous equations system of heckman 1978 the measurement models of joreskog and goldberger 1975 and is closely related to the models of muthe n 1976 1979 muthen studies full information maximum likelihood procedures for estimation except for very simple cases this does not generally yield feasible or tractable procedures in this article we introduce a tractable procedure for statistical estimation and testing this specification and the estimation procedure is then applied to study the joint dependence of health and wages another departure of our approach from others is that we will test and correct the possible incompatibility of the various health capital indicators in the population surveys one may have subjective health indicators such as self evaluation of health which may reflect different populations perception of health we propose a statistical procedure for testing measurement compatibility and if required for correcting this problem this article is divided into two parts initially we describe the model specification estimation and statistical tests in a general simultaneous equation model with multiple discrete indicators in the second part of the paper we consider specification of a simultaneous equation model for health and wages the model

merit order effects of renewable energy and price divergence in california s day ahead and real time electricity markets abstract we answer two policy questions 1 what are the estimated merit order effects of renewable energy in the california independent system operator s caiso s day ahead market dam and real time market rtm and 2 what causes the hourly dam and rtm prices to systematically diverge the first question is timely and relevant because if the merit order effect estimates are small california s renewable energy development is of limited help in cutting electricity consumers bills but also has a lesser adverse impact on the state s investment incentive for natural gas fired generation the second question is related to the efficient market hypothesis under which the hourly rtm and dam prices tend to converge using a sample of about 21 000 hourly observations of caiso market prices and their fundamental drivers during 12 12 2012 04 30 2015 we document statistically significant estimates p value 0 01 for the dam and rtm merit order effects this finding lends support to california s adopted procurement process to provide sufficient investment incentives for natural gas fired generation we document that the rtm dam price divergence partly depends on the casio s day ahead forecast errors for system loads and renewable energy this finding suggests that improving the performance of the caiso s day ahead forecasts can enhance trading efficiency in california s dam and rtm electricity markets

insuring unit failures in electricity markets an electric energy producer participates in futures markets in the hope of hedging the risk of trading in the pool however this producer is required to supply the energy associated with all its signed forward contracts even if some of its units are forced out due to unexpected failures in this case the producer must purchase some of the energy needed to meet its futures market commitments in the pool which may result in high losses if the pool prices happen to be higher than the forward contract prices to mitigate these losses the producer can take out insurance against the forced outages of its units using a stochastic programming model this paper analyzes the convenience of signing an insurance against unit failure by an electric energy producer and its impact on forward contracting decisions results from a realistic case study are provided and analyzed

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

time of use based electricity cost of manufacturing systems modeling and monotonicity analysis traditionally manufacturing enterprises pay flat rates for each kilowatt hour kwh of electricity consumed newly available electric tariffs that charge both energy consumption in kwh and peak demand in kilowatts i e kw with varying time of use tou rates have started to gain popularity in this paper the per product electricity cost as a function of manufacturing system parameters and the tou rates is modeled the contributions of both electricity energy consumption and peak demand are combined to formulate the electricity cost of manufacturing systems with multiple machines and buffers new knowledge of the effects of various modeling parameters on the electricity cost is acquired through monotonicity analysis the formulated model is utilized to answer the following two questions facing manufacturers with the availability of tou rates in mind is switching from the flat rates to the tou rates economically sound what changes can be made on electric use routines to take advantage of the tou rates the findings based on case studies show that with appropriate adjustment of production routines a significant saving of up to 24 8 of the per product electricity cost can be achieved by adopting the tou rates

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

hedging size risk theory and application to the us gas market abstract many corporate commitments exhibit a combined financial exposure to both market prices and idiosyncratic size components e g volume load or business turnover we design a customized contract to optimally mitigate the risk of joint fluctuations in price and size terms the hedge is sought out among contingent claims written on price and any quoted index that is statistically dependent on commitment size closed form solutions are derived for the optimal custom hedge pay off and for the asset holdings of two market strategies one based on price linked forwards the other based on price linked and index linked forwards analytical hedges are obtained using a stylized lognormal market model detailed comparative statics provide a thorough analysis of optimal hedging pay off functions performance assessment is conducted in the context of the us gas market and a prototypical urban region results suggest that hedging through suitable custom claims written on price and an additional index significantly outperforms standard price based as well as mixed price index forward hedging alternatives our optimal custom hedge could be adopted as a benchmark for the relative assessment of any risk management solution

the early retirement decision new empirical evidence on the influence of health many studies have examined the influence of health on retirement but there may be problems with the various health measures used a major criticism of the most frequently used variables is that they may reflect ex post rationalizations of retirement in this paper i examine a variety of health variables focusing directly on the health measurement issue as it relates to retirement research new measures of health are developed with individual self evaluations of health status unlike most previous findings the empirical results suggest that economic variables play a more important role than health in retirement decisions

insuring consumption against illness one of the most sizable and least predictable shocks to economic opportunities in developing countries is major illness we investigate the extent to which families are able to insure consumption against major illness using a unique panel data set from indonesia that combines excellent measures of health status with consumption information we find that there are significant economic costs associated with major illness and that there is very imperfect insurance of consumption over illness episodes these estimates suggest that public disability insurance or subsidies for medical care may improve welfare by providing consumption insurance

the long run consumption effects of earnings shocks although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings no previous research has linked these permanent earnings shocks to the

energy planning and modern portfolio theory a review abstract modern portfolio theory mpt stands as a widely accepted methodology to meet the challenges associated with the definition of energy planning for a particular territory or region energy planning is thus framed as an investment selection problem mpt is characterized by having a wider capacity and conceptual richness than the other previously used methodologies such as the individual least cost alternative the portfolio approach is based on solving for an objective function that seeks to minimize either the cost or the risk of the portfolio subject to different constraints considering that real electricity generation assets can be defined in terms of cost or return and economic risk for each alternative technology the relevant portfolios are the result of solving the optimization model to determine the efficient cost risk frontier the work presented here consists of an exhaustive review of the literature in relation to the application of mpt methodology to the field of energy planning and electricity production a new classification is proposed from a financial perspective of the selection of investments from the preceding studies it delves deeper into the explanation of the limits to the methodology and into the concept of risk which is key from both a financial and an energy perspective the main methodological contributions found in the literature are examined that are aimed at improving the capacity of the model and adjusting it to the reality of the electricity market finally conclusions are provided from the works analyzed in terms of renewable technologies and the policy implications derived from them in most studies a preference has been shown for the inclusion of renewable technologies in the efficient portfolios however in order to implement the decision to increase the share of renewable technologies greater flexibility in the interconnection capacity between states and in storage capacity is needed

health and wages panel data estimates considering selection and endogeneity this paper complements previous studies on the effects of health on wages by addressing the problems of unobserved heterogeneity sample selection and endogeneity in one comprehensive framework using data from the german socio economic panel gsoep we find the health variable to suffer from measurement error and a number of tests provide evidence that selection corrections are necessary good health leads to higher wages for men while there appears to be no significant effect for women contingent on the method of estimation healthy males are estimated to earn between 1 3 and 7 8 more than those in poor health

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item

chronic diseases and labour force participation in australia we examine the impact of several chronic diseases on the probability of labour force participation using data from the australian national health surveys an endogenous multivariate probit model is used to account for the potential endogeneity of the incidence of chronic conditions such as diabetes cardiovascular diseases and mental illnesses the cross equation correlations are significant rejecting the exogeneity of the chronic illnesses marginal effects of exogenous socio demographic and lifestyle variables are estimated through their direct effects on labour market participation and indirect effects via the chronic diseases the treatment effects of chronic diseases on labour force participation are estimated via conditional probabilities using five dimensional normal distributions the estimated effects differ by gender and age groups although computationally more demanding these treatment effects are compared with results from a univariate model treating the chronic conditions exogenous and the structural effects from the multivariate probit model both significantly overestimate the effects