how should control theory be used to calculate a time consistent government policy we study different solutions to a simple one dimensional linear quadratic game with a large number of private agents and a government a time consistent solution is defined as a solution to the hamilton jacobi bellman equation i e as a policy for which the government has noprecommitment capability this solution is compared to a policy where the government has an instantaneous pre commitment i e an equilibrium in which the government has a period by period leadership in both cases we show how control theory should be applied to calculate the equilibrium and how to relate these equilibria to the differential game literature

debt overhang credit rationing and investment abstract this paper evaluates the effect of foreign debt on investment in a heavily indebted country using numerical simulations of a simple rational expectations growth model two particular effects are distinguished first the effect due to debt overhang of past accumulated debts and second the effect of credit rationing or inability to obtain new financing the results from the simulations indicate that credit rationing may be a powerful disincentive to investment this suggests that in order to maximize the impact on productive investment debt reduction plans need to be accompanied by additional foreign lending

the sources of sovereign risk a calibration based on levy stochastic processes abstract governments choose to issue risky or riskless debt depending on the nature of the stochastic process of output we use brownian motion and poisson shocks a modeling method in the literature on corporate default known as levy processes to approximate a decomposition of the output process into a smooth and a jump component using an eaton and gersovitz 1981 model of debt repudiation we show that the brownian part explains the counter cyclical behavior of the current account and the poisson part explains the risk of default thus enabling our model to account for key stylized facts regarding sovereign risk

regional insurance and migration a dynamic model of migration is developed to study whether labor mobility can hedge people against region specific shocks making private or public insurance redundant the model adopts a novel timing for migration which is argued to be the time frame suitable for analyzing risk sharing issues it also innovates on the existing literature by solving individual migration through convexification of the set of actions the results show that the role of migration as an insurance mechanism is small labor mobility cannot fully remove income differentials between regions it is also shown that a fiscal stabilization scheme is in general optimal moreover any pure risk sharing mechanism has no influence on migration flows

debt relief and adjustment effort in a multi period model abstract this paper shows that if the period following the granting of debt relief is taken into account debt relief increases adjustment effort investment irrespective of whether there is an initial debt overhang or not

demand pull technology push and government led incentives for non incremental technical change abstract rising expectations about future demand for new technologies increase the incentives for investments in innovation by enlarging payoffs to successful innovations how well does this notion of demand pull apply to non incremental technological change when demand is largely attributable to actions by governments in this case inventors of the most important inventions did not respond positively to strong demand pull policies filing of highly cited patents declined precipitously just as demand for wind power created a multi billion dollar market three explanations for this apparent inconsistency with the demand pull hypothesis played a role 1 the rapid convergence on a single dominant design limited the market opportunity for non incremental technical improvements 2 even though the policies implemented were stringent enough to stimulate demand uncertainty in their longevity dampened the incentives for inventions that were likely to take several years to pay off and 3 alternative explanations such as declining r d funding and weakening presidential engagement on energy appear to have been important

how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s the new deal during the 1930s was arguably the largest peace time expansion in federal government activity in american history until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of new deal programs over the past decade scholars have developed new panel databases for counties cities and states and then used panel data methods on them to examine the impact of new deal spending and lending policies for the major new deal programs in most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy many of the studies also use instrumental variable methods to control for endogeneity the studies find that public works and relief spending had state income multipliers of around one increased consumption activity attracted internal migration reduced crime rates and lowered several types of mortality the farm programs typically aided large farm owners but eliminated opportunities for share croppers tenants and farm workers the home owners loan corporation s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers the reconstruction finance corporation s loans to banks and railroads appear to have had little positive impact although the banks were aided when the rfc took ownership stakes

changing sunshine analyzing the dynamics of solar electricity policies in the global context abstract although solar costs have been dropping in recent years solar power is still more expensive than conventional and other renewable energy options and in most applications solar power still needs continuing government policy support however the need to achieve multiple objectives and ensure sufficient political support for solar power makes it difficult for policy makers to design an optimal solar power policy the dynamic and uncertain nature of the solar industry combined with the constraints imposed by broader economic political and social conditions further complicates the task of policy making in this paper we present a framework to critically analyze the objectives behind different country policies how factors such as macro economic conditions and development paradigms affect the policy outcomes and finally how these outcomes affect the overall cost reduction of solar energy we find that while the extent of cost reduction through creation of large demand remains to be seen it is essential for governments to provide adequate support for leapfrog rd d and exploit real comparative advantages across countries for effective solar cost reduction policy makers need to optimally design their policies by balancing national objectives and paying capacity with the global objective of solar power cost reduction in order to realize its full potential

the debt overhang and the disincentive to invest abstract this paper is an attempt to explore the debt overhang hypothesis by an empirical examination of the investment experience of 13 severely indebted countries it begins with a discussion of the disincentive effect of debt overhang which is linked to some aspects of the adjustment measures that these countries are undergoing viz devaluation and reduction in public sector deficits this is followed by empirical analysis which demonstrates that first in countries with a debt overhang external debt captures many of the effects of other explanatory variables that traditionally explain investment second through 1971 1991 the relationship between external debt and investment is consistently a negative one however the first half of the period has strong time influences that exercise a positive influence on investment in the second half of the period time effects turn negative too thus explaining the fall in investment levels observed after 1982

the analysis of committee power an application to senate voting on the minimum wage a widely noted empirical regularity of congressional behavior is that standing committees exert disproportionate influence on congressional choices the observed phenomenon has a number of labels committee influence committee power and from the parent chamber s perspective deference to committees and a large body of theoretical and empirical research has sought to determine when and why it exists this paper takes as given only the weakest form the observation namely that committee power exists sometimes it does not directly address the questions of when and why committee power exists although much of the relevant literature is reviewed rather it focuses on a prerequisite to the resolution of disputes about committee power how can committee power be assessed empirically section i reviews three classes of explanations and identifies obstacles to convincing empirical tests of the accounts section ii introduces an econometric approach for analyzing committee power section iii applies the technique to a sequence of votes on minimum wage legislation in the senate in 1977 section iv extends the technique to multi dimensional choice spaces section v is a discussion and summary

sovereign debt and its restructuring framework in the eurozone debt is a particularly serious macroeconomic problem in the eurozone public debt ratios are high by international historical standards with no immediate prospect of a significant reduction private corporate and household debt ratios are either flat or rising banks remain fragile and impose a contingent liability on the public purse the most stressed economies have not had the option of renewing economic growth through exchange rate depreciation and a boost to exports thus fiscal austerity has been their principal instrument to achieve debt reduction but since austerity also hurts growth the debt to gdp ratios have barely budged persistent low growth has also created deflationary tendencies which further raise the challenge of debt reduction

financial determinants of domestic investment in sub saharan africa evidence from panel data abstract this study investigates the effects of financial development on domestic investment in a sample of 30 sub saharan african countries it is based on a dynamic serial correlation investment model including various indicators of financial development controlling for country specific fixed effects and nonfinancial factors of investment the results indicate a positive relationship between domestic investment total investment and private investment and various indicators of financial development higher financial development leads to higher future levels of investment implying a potent long run effect of financial development on domestic investment the findings imply that financial development can stimulate economic growth through capital accumulation

evaluating renewable energy based rural electrification program in western china emerging problems and possible scenarios renewable energy technologies offer an economically viable and environmentally suitable scenario towards addressing energy requirements for rural livelihoods china s renewable energy rural electrification program initiated in 2001 is an effort to employ renewable energy technologies on a large scale for rural electrification the program has been designed with several stages this paper firstly offers an analysis of the problems encountered during the progress of this rural electrification program using data obtained from field survey of representative areas in western china where the first stage of the program was implemented the paper then explores feasible solutions in order to address existing rural energy issues and provide long term reliable energy service for remote communities in support of future course of development of renewable energy application for rural energy demands policy recommendations are provided

borders and business cycles abstract we document that business cycles of u s census regions are substantially more synchronized than those of european countries data from regions within european countries confirm a european border effect within country correlations are substantially larger than cross country correlations these results continue to hold after controlling for exogenous factors such as distance and size we consider the role of four factors that have received attention in the debate about emu sectoral specialization the level of trade monetary policy and fiscal policy we find that the lower level of trade between european countries explains most of the observed border effect

sovereign debt structural adjustment and conditionality abstract the lack of a proper enforcement mechanism for sovereign debt generates a commitment failure as a result a sovereign may seek to improve its position in debt renegotiations and thus evade its debt obligations by reducing exports conditionality seeks to provide a solution to the incentive problem by addressing the commitment failure formalizing this argument we show that conditionality helps the repayment of sovereign debt in certain circumstances it can eliminate debt overhang especially when it is coupled with concessionary lending of sufficient magnitude it is however unable to restore first best when it is anticipated by lenders conditionality may get international financial institutions and sovereign debtors into a trap where the debt overhang persist debt rescheduling takes place periodically and conditionality continues indefinitely

uncertainty economic reforms and private investment in the middle east and north africa during the 1980s and the 1990s private investment in the middle east and north africa mena has on average shown a decreasing or stagnant trend this contrasts with the situation of the asian economies where private investment has always been more dynamic in this paper it is empirically shown for a panel of 39 developing economies among which four mena countries that in addition to the traditional determinants of investment such as the growth anticipations and the real interest rate government policies explain mena s low investment rate insufficient structural reforms which have most of the time led to poor financial development and deficient trade openness have been a crucial factor for the deficit in private capital formation the economic uncertainties of the region have represented another factor of the firm s decisions not to invest these uncertainties have consisted of the external debt burden and various measures of volatility

european monetary unification a tour d horizon this article takes stock of the literature and debate over european monetary unification in contrast to other papers where it is argued that the issues and prospects remain shrouded in uncertainty i argue that in a number of important areas a reasonable degree of consensus now exists as the result of a decade of scholarship the subsequent stock taking concentrates on areas where significant questions remain starting with the implications of surrendering the exchange rate and an independent national monetary policy as instruments of adjustment the conduct of fiscal policy under the excessive deficit procedure and the stability pact and how quickly the european union is likely to develop an eu wide system of fiscal federalism to accompany its monetary union turning from fiscal to monetary issues i ask whether the european central bank ecb will be as inflation averse as the bundesbank what exchange rate policy the ecb will pursue and whether the euro will be a leading reserve currency i conclude with what may be the most contentious issue of all namely whether europe s monetary union could collapse after it begins

who can adjust to the euro this study estimates potential exchange rate variation among 26 european countries during 1992 1998 as a proxy for the potential magnitude of adjustment they face to euro block membership using the instrumental variable iv method applying least squares cross section regression analysis based on optimal currency area theory a currency union among belgium denmark france germany ireland malta the netherlands and slovenia is found to entail a relatively light burden of adjustment for its members the current membership of other countries in the euro block is potentially very demanding on their societies in the long term this study also compares currency boards and independent central banks as alternative monetary frameworks for disinflation policies based on a pooled time series cross section dataset of the same countries and years currency boards are found to be more effective in reducing inflation in all countries except belgium balancing emu s credibility gains against its adjustment costs finland greece italy portugal and spain seem like unstable members of the euro block for all new eu member states except the czech republic malta slovenia and slovakia the advice is to stay out of the euro block until their economies are liberalised and flexible enough to withstand major adjustments and their societal interest groups supportive enough of these adjustments

the economic impacts of minimum wage laws a new look at an old question this article uses a radically different methodology to address the question of the impact of minimum wage laws on employment and earnings the methodology uses the adult wage structure which exists prior to a change in the federal minimum wage to identify the members of the subminimum wage population this allows the parameterization of the disemployment effects of the minimum wage amendment on the subminimum population and the spillover employment effects on the above minimum population the members of the subminimum population are found to experience considerably reduced employment probabilities and annual hours worked conditional on employment some evidence of above minimum spillover effects is also found the paper evaluates the impact of the minimum on the earnings distribution and concludes that the burden of the minimum wage falls most severely on females this effect on adult females is surprisingly neutral with respect to race the greatest beneficiaries of the minimum among the adult populati

large external debt and slow domestic growth a theoretical analysis abstract this paper analyzes the optimal rescheduling strategy of lenders whose claims on a country show a discount on the secondary markets the paper shows that lenders should proceed as follows they should split the debt into two components a performing and a nonperforming part they should act as if the debt amounted to the performing part and scale down how much money the borrower should service on that part only as a result it is shown that the efficient servicing of the debt crowds in investment the paper relates this result to the debt overhang argument according to which too large a nominal claim may reduce investment and the market value of the debt

low investment and large ldc debt in the 1980s this paper aims at disentangling the correlation between ldc debt and investment in the 1980s the author shows that a large debt was not an unconditional predictor of low investment in the 1980s nor was investment abnormally low when compared to a financial autarky rate calculated in the text he does find however that the actual service of the debt crowded out investment for the rescheduling countries he shows that 1 percent of gdp paid abroad reduced domestic investment by 0 3 percent of gdp this is identical to the correlation between investment and foreign finance observed in the 1960s copyright 1993 by american economic association

the effects of logrolling on congressional voting the theoretical public choice literature suggests that vote trading is an important determinant of congressional voting behavior yet empirical voting models do not allow for vote trading these models recognize that observed ideology may influence legislative behavior but do not correct for unobserved ideology this study devises new tests for logrolling and ideology the empirical model controls for logroll agreements and unobserved ideological interest via the correlation of unobserved variables the results reflect the presence of vote trading coalitions on some votes but not on others the results cast doubt on the importance of personal ideological interests of legislators copyright 1992 by american economic association

to give or to forgive aid versus debt relief is generalized debt relief an effective development strategy or should assistance be tailored to countries characteristics to answer this question the authors build a simple model in which recipient governments reveal their creditworthiness if donors offer them to choose between aid and debt relief since offering such a menu is costly it is preferred by donors only when the cost of assistance is low and the probability that an indebted country is creditworthy is high enough for lower probabilities and higher costs of assistance donors prefer a policy of only debt relief very limited aid is the preferred policy only for high costs of assistance and low probabilities that the government is creditworthy

debt relief investment and growth from 1989 to 2004 the donor community provided approximately 400 billion in debt relief to developing countries in an attempt to promote growth and reduce poverty using a sample of 118 developing countries this paper empirically assesses the impact of debt relief on growth via 1 resources made available for investment from reduced debt service payments and 2 improved incentives to invest from a reduced debt stock although the results show no general evidence of a growth effect from debt relief the study provides certain evidence that it promotes investment and thereby growth in countries not classified as hipcs

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

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

multilateral indexed loans and debt sustainability we evaluate the benefits and costs of indexing multilateral loans to variables related to developing countries ability to pay i e whether a reform of multilateral lending is feasible and eco nomically justified the analysis covers 40 international development association ida countries from 1990 to 2010 and focuses on three types of debt gdp indexed loans export indexed loans infla tion indexed loans denominated in local currency the insurance that indexed debt might offer against macroeconomic shocks depends on the conditional covariances of gdp growth real exchange rate depreciation and net exports that we estimate as the covariances of the forecast errors obtained from a vector autoregression var model the analysis shows that both gdp indexed loans and inflation indexed local currency loans would help to stabilize the debt ratio of the majority of ida countries in our sample however the adverse policy incentives created by local currency debt tends to favour gdp indexed debt the cost of indexation would be small the estimation of a capital asset pricing model capm suggests that loans indexed to gdp could be introduced at current interest rates since the estimated risk premium is less than 1 per cent any additional risk for multilateral lenders would be more than offset by a lower frequency of debt crises

debt relief and governance quality in developing countries summary in this paper we empirically discuss whether or not debt relief has been economically rational in the past 15 years from analyzing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s furthermore even the actual debt burden of highly indebted poor countries was not crucial in deciding whether or not debt forgiveness was granted rather debt relief followed a strong path dependence those countries whose debt had been forgiven in the first half of the 1990s were also granted debt forgiveness in the second half of the decade however this allocation pattern changed at the beginning of the 21st century when path dependence diminished and some dimensions of governance quality were taken into account by donor countries

pricing and hedging gdp linked bonds in incomplete markets abstract we model the super replication of payoffs linked to a country s gdp as a stochastic linear program on a discrete time and state space scenario tree to price gdp linked bonds as a byproduct of the model we obtain a hedging portfolio using linear programming duality we compute also the risk premium the model applies to coupon indexed and principal indexed bonds and allows the analysis of bonds with different design parameters coupon target gdp growth rate and maturity we calibrate for uk and us instruments and carry out sensitivity analysis of prices and risk premia to the risk factors and bond design parameters we also compare coupon indexed and principal indexed bonds further results with calibrated instruments for germany italy and south africa shed light on a policy question whether the risk premia of these bonds make them beneficial for sovereigns our findings affirm that designs are possible for both coupon indexed and principal indexed bonds that can benefit a sovereign with an advantage for coupon indexed bonds this finding is robust but a nuanced reading is needed due to the many inter related risk factors and design parameters that affect prices and premia

the relationship between turkey s foreign debt and economic growth an asymmetric causality analysis tackling foreign debt that arises as a result of limited and ineffective use of resources is an item that remains on the agenda particularly for developing countries in this study we examine the

imf conditionality as a screening device a theoretical model is developed in which adoption of an imf programme signals a country s productivity it is assumed that there are two types of country one with a high return on investment and the other with a low return the country s type is known only to itself in the presence of a debt overhang the high productivity country may choose not to undertake the investment despite it being socially efficient to do so in this case the creditor would like to offer the country some debt reduction but the low productivity type will also benefit from the debt reduction this problem can be avoided if the country has sufficient resources to engage in a debt buyback in order to gain the debt relief only the high productivity type would be prepared to sacrifice current resources for the debt reduction and thus a separation of the types is achieved this is similar to an argument found in acharya and diwan 1993 we argue however that it is unlikely that a heavily indebted country will have sufficient resources for a buyback if the country is credit constrained an alternative screening mechanism is to undertake an imf programme in return for debt reduction and possibly an imf loan this mechanism can be the equilibrium outcome even if the programme creates only disutility for the country s policy makers

cost and co2 reductions of solar photovoltaic power generation in china perspectives for 2020 abstract to improve the understanding of the cost and benefit of photovoltaic pv power generation in china we analyze the per kwh cost fossil energy replacement and level of co2 mitigation as well as the cost per unit of reduced co2 of pv power generation in 2020 at the province level three potential pv systems are examined large scale pv lspv building integrated pv bipv and distributed pv systems used in remote rural areas which have very low capacities the results show that in 2020 pv power generation could save 17 4 mtce fossil energy and 46 5 tg co2 compared with 600 mwe coal fired supercritical units also in 2020 the costs of solar electricity could be reduced by approximately 60 as compared to 2010 but would still be 11 74 higher than the current grid prices the pv electricity costs vary significantly among provinces in the economically developed eastern provinces the pv electricity mainly bipv is 0 67 0 86 rmb kwh this rate is close to grid parity owing to high grid prices but the co2 mitigation cost is high 456 693 rmb mg co2 the pv electricity mainly lspv in solar resource rich western provinces has lower cost 0 45 0 75 rmb kwh and lower co2 mitigation cost 172 419 rmb mg co2 but is farther from grid parity due to the low local grid price from a cost effective perspective lspv in the west provinces should be the first priority in pv deployment strategies and should receive strong financial support from the government this study provides a quantitative province specific analysis of pv power generation which can be used to support various pv subsidy policies

federal fiscal constitutions risk sharing and redistribution the paper studies the political and economic determinants of regional public transfers specifically it focuses on how such transfers are shaped by alternative fiscal constitutions where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments realistic restrictions on fiscal instruments introduce a tradeoff between risk sharing and redistribution different constitutions produce very different results in particular a federal social insurance scheme chosen by voting provides overinsurance whereas an intergovernmental transfer scheme chosen by bargaining provides underinsurance

ida grants and hipc debt cancellation their effectiveness and impact on ida resources abstract ida is in trouble the world bank s long term plans presume that ida will need all the loan repayments currently scheduled just to keep its program from shrinking in future decades yet the ida grant and hipc debt reduction programs are cutting the flow of repayments foreshadowing major future cuts in ida aid unless the donor countries agree on a plan to offset those costs poor countries will suffer meanwhile the efficiency and effectiveness of the grant and debt cancellation programs have been seriously questioned these programs are evaluated and changes in the bank s future plans for ida are proposed

borders and nominal exchange rates in risk sharing models of risk sharing predict that relative consumption growth rates are positively related to changes in real exchange rates we investigate this hypothesis using a new multicountry and multiregional data set within countries we find evidence for risk sharing episodes of high relative regional consumption growth are associated with regional real exchange rate depreciation across countries however the association is reversed relative consumption and real exchange rates are negatively correlated we define this reversal as a border effect we find the border effect and show that it accounts for over half of the deviations from full risk sharing since cross border real exchange rates involve different currencies it is natural to ask how much of the border effect is accounted for by movements in exchange rates our measures indicate that a large part of the border effect comes from nominal exchange rate fluctuations we develop a simple open economy model that is consistent with the importance of nominal exchange rate variability in accounting for deviations from cross country risk sharing

redistribution and risk sharing in italy learning from the past abstractredistribution and risk sharing in italy learning from the past regional studies this paper investigates the role of public policies in italy by assessing both the redistribution and the risk sharing functions of interregional net fiscal flows in the long run its comparative approach allows one to contrast results obtained for two periods characterized by diverse regional policy and dynamics of regional convergence although based on a specific example the evidence supports more general conclusions when assessing the regional redistributive and risk sharing power of national fiscal policies many different factors related to the existing policy regime should be accounted for particularly the distribution of government spending between current expenditure and public investment

regional non adjustment and fiscal policy asymmetric shocks regional non adjustment and fiscal policy how will countries handle idiosyncratic macroeconomic shocks under the single currency since the regional adjustment patterns currently prevailing within european currency unions are likely to prevail at the national level under the single currency looking at the ways in which european countries react to internally asymmetric shocks today provides a good preview for the answer to that question in this paper we compare the usa with germany italy and the uk and with canada which is closer to europe than the usa in its labour market and fiscal institutions europe s and to some extent canada s model of regional response differs from that of the usa changes in regional real exchange rates are small in all countries outside of the usa however there is more reliance on interregional transfer payments less on labour migration and the pace of regional adjustment appears to be slower if emu aims at the same degree of economic and social cohesion that its constituent nations enjoy today this suggests that its members may find it hard to resist the eventual extension of existing eu mechanisms of income redistribution a transfer union we propose an alternative strategy based on a relaxed stability pact further strictures against central eu borrowing labour market and fiscal reform and the issuance by individual member states of debt indexed to nominal gdp maurice obstfeld and giovanni peri

solar energy markets economics and policies abstract solar energy has experienced phenomenal growth in recent years due to both technological improvements resulting in cost reductions and government policies supportive of renewable energy development and utilization this study analyzes the technical economic and policy aspects of solar energy development and deployment while the cost of solar energy has declined rapidly in the recent past it still remains much higher than the cost of conventional energy technologies like other renewable energy technologies solar energy benefits from fiscal and regulatory incentives including tax credits and exemptions feed in tariff preferential interest rates renewable portfolio standards and voluntary green power programs in many countries the emerging carbon credit markets are expected to provide additional incentives to solar energy deployment however the scale of incentives provided by the existing carbon market instruments such as the clean development mechanism of the kyoto protocol is limited despite the huge technical potential the development and large scale deployment of solar energy technologies world wide still has to overcome a number of technical financial regulatory and institutional barriers the continuation of policy supports might be necessary for several decades to maintain and enhance the growth of solar energy in both developed and developing countries

learning to love the government trade unions and late adoption of the minimum wage one counterintuitive variation in wage setting regulation is that countries with the highest labor standards and strongest labor movements are among the least likely to set a statutory minimum wage this the author argues is due largely to trade union opposition trade unions oppose the minimum wage when they face minimal low wage competition which is affected by the political institutions regulating industrial action collective agreements and employment as well as by the skill and wage levels of their members when political institutions effectively regulate low wage competition unions oppose the minimum wage when political institutions are less favorable toward unions there may be a cleavage between high and low wage unions in their minimum wage preferences the argument is illustrated with case studies of the uk germany and sweden the author demonstrates how the regulation of low wage competition affects unions minimum wage preferences by exploiting the following labor market institutional shocks the conservatives labor law reforms in the uk the hartz labor market reforms in germany and the european court of justice s laval ruling in sweden the importance of union preferences for minimum wage adoption is also shown by how trade union confederation preferences influenced the position of the labour party in the uk and the social democratic party in germany

economic and social security in the twenty first century with attention to europe a partly heuristic attempt at exploring long run policies aimed at a second best compromise between ex ante risk sharing efficiency and ex post productive efficiency wage subsidies for low skilled workers financed by taxes on high wages are advocated together with improved risk sharing between capital and labour between generations and between the countries belonging to emu the scope of the advocated policies is limited by considerations of moral hazard time consistency and fiscal competition also estimates of some key economic parameters remain very imprecise several avenues of further research are identified

subnational fiscal balance interregional redistribution and risk sharing in italy abstractthis paper provides new estimates of redistribution and risk sharing across regional territories accomplished by the italian public sector for the first time subnational governments fisc

the political economy of the fair labor standards act of 1938 this paper examines the congressional passage of the american minimum wage law the fair labor standards act of 1938 voting on the act is modeled as a function of the concentration of the constituencies for minimum wage legislation north south differentials and legislator ideology it is shown that the house radically altered the final content of the bill abandoning a proposed wages and hours board with discretionary powers to determine minimum wages in favor of a flat rate following the objections of several interest groups north south divisions over the bill had little influence over congressional voting and the influence of constituent groups increased relative to legislators ideology as the bill became an important election issue

u s energy research and development declining investment increasing need and the feasibility of expansion investment in energy research and development in the u s is declining despite calls for an enhancement of the nation s capacity for innovation to address environmental geopolitical and macroeconomic concerns we examine investments in research and development in the energy sector and observe broad based declines in funding since the mid 1990s the large reductions in investment by the private sector should be a particular area of concern for policy makers multiple measures of patenting activity reveal widespread declines in innovative activity that are correlated with research and development r d investment notably in the environmentally significant wind and solar areas trends in venture capital investment and fuel cell innovation are two promising cases that run counter to the overall trends in the sector we draw on prior work on the optimal level of energy r d to identify a range of values which would be adequate to address energy related concerns comparing simple scenarios based on this range to past public r d programs and industry investment data indicates that a five to ten fold increase in energy r d investment is both warranted and feasible

foreign debt instability an analysis of national saving and domestic investment responses to foreign debt accumulation in 28 developing countries abstract i specify and estimate a foreign debt model that exploits the balance of payments identity current account national saving domestic investment foreign debt can affect both saving and investment behavior in this model if an increase in foreigndebt reduces investment by more than it reduces saving or raises investment by less than it raises saving the current account will eventually be brought into a steady state equilibrium with a sustainable ratio of foreign debt to gnp in such case the debt crisis is more illusory than real for the country sample analyzed here however the buildup of government and government guaranteed foreign debt appears to have produced perverse private sector responses an increase in this type of foreign debt reduces saving by more than it reduces investment hence the current account deficit worsens over time as such foreign debt accumulates dynamic simulations identify only government policy that it raises national saving as an effective way of improving the current account the consequent real depreciation in the exchange rate may increase exporrts and reduce imports sufficiently to cause a current account surplus surprisingly export promotion policies alone seem unlikely to produce any substantial improvement in the current account

emu enlargement stabilization costs and insurance mechanisms this paper considers the determinants of the macroeconomic costs of joining emu for the new eu member sates and compares them with those of the emu members specifically we investigate the business cycle correlation between the candidate s economy and that of the euro area as a whole and the ability of insurance mechanisms and fiscal policies to smooth income fluctuations the results suggest that emu membership would not be costly for some countries cyprus hungary and malta but for other countries it could have relevant costs at least in the short run for some of these countries business cycles are not yet well synchronized with the euro area s business cycle and risk sharing mechanisms do not provide enough insurance against shocks

sovereign default and the sustainability risk premium effect abstract we analyze the joint determination of interest rate risk and debt sustainability for governments with fiscal imbalances because higher interest rates imply increased debt services they worsen the government s financial situation and increase the probability of sovereign default thus higher interest rates eventually lead to a decrease in the real demand for government bonds which imposes an additional constraint on government debt sustainability

financing vs forgiving a debt overhang abstract this paper examines the tradeoffs facing creditors of a country whose debt is large enough that the country cannot attract voluntary new lending if the country is unable to meet its debt service requirements out of current income the creditors have two choices they can finance the country lending at an expected loss in the hope that the country will eventually be able to repay its debt after all or they can forgive reducing the debt level to one that the country can repay the post 1983 debt strategy of the imf and the us has relied on financing but many current calls for debt reform call for forgiveness instead the paper shows that the choice between financing and forgiveness represents a tradeoff financing gives the creditors an option value if the country turns out to do relatively well creditors will not have written down their claims unnecessarily however the burden of debt distorts the country s incentives since the benefits of good performance go largely to creditors rather than itself the paper also shows that the tradeoff itself can be improved if both financing and forgiveness are made contingent on states of nature that the country cannot affect such as oil prices world interest rates etc

stabilising economic growth through risk sharing macro instruments the risk sharing principles of islamic finance have ironically been studied and used extensively outside the muslim world the development of early european city states was founded on the risk sharing principle the risk sharing financing helped these city states to develop their infrastructure and rule the scientific and economic landscape of the west the western financial system of today still carries traces of risk sharing in the form of venture capital financing albeit the primary focus has diverted to risk shifting based debt financing over the past decades much effort and research has gone into establishing a viable set of islamic financial institutions most muslim nations are heavily indebted with high reliance on multilateral financing primarily based on high interest rates this vicious cycle of interest rates and debt has stunted the growth of these nations and worsened the conditions of the masses this research brings to the forefront the concept of an equity in nature gdp linked paper which allows for enhanced risk sharing based sovereign financing it aims to present empirical proof of the stability this instrument offers in economic growth for a large sample of developing economies comprising bulk of islamic countries while analysing the empirical work a strong favourable argument for this instrument is derived for its benefits in stability through this study we endeavour to initiate a thought provoking and practical discussion for further development of these instruments for the betterment of developing countries

trend analysis of energy and climate policy environment comparative electricity production and consumption benchmark analyses of china euro area european union and united states abstract this study conducts a reality check on the electricity production and electricity consumption trends in china in the u s and in the euro area and in the eu most of our analyses cover years 1961 2011 the data is based on the world bank s database with supplementary iea database 2013 in this article we perform various trend analyses which are linked to electricity production and consumption developments these regions are major players in global climate change and climate policy our trend analyses indicate in many ways that china is now a global trend setter in climate change and climate policy upwards sloping trends were evident in the chinese energy economy however u s and the eu are still very important players trend analyses of this article indicate that the structures of electricity production and energy mixes are changing our benchmarking studies indicate that the role of renewables is increasing in electricity production and the role of oil based electricity production has drastically decreased the golden age of nuclear energy in electricity production seems to be over at least turning points can be found in trend developments empirical trade off analyses of the study verified conventional research results about high linear correlation coefficients regression models between electricity production and gdp as well as between population and gpd in all regions correlation coefficients measure the strength of association between two variables what was interesting is that our comparative analyses revealed some remarkable differences in linear regression equation coefficients one of them was that the coefficient between population and electricity production is much lower in china than in the u s or in the eu second finding was that the coefficient of the regression model describing linear relationship between gdp and electricity production is highest in china in comparison to the other regions

debt levels debt composition and sovereign spreads in emerging and advanced economies this paper studies the relationship between sovereign spreads and the interaction between debt composition and debt levels in advanced and emerging market countries it finds that in emerging market countries there is a significant correlation between spreads and debt levels this correlation however is not statistically significant in countries where most public debt is denominated in local currency in advanced economies the magnitude of the correlation between debt levels and spreads is about one fifth of the corresponding correlation for emerging market economies in eurozone countries however the correlation between spreads and debt ratios is similar to that of emerging market countries the paper also shows that the financial crisis amplified the relationship between spreads and debt levels within the eurozone but had no effect on the relationship between spreads and debt in stand alone countries finally the paper shows that the relationship between debt levels and spreads is amplified by the presence of large net foreign liabilities this amplifying effect of net foreign liabilities is larger in the eurozone than in stand alone advanced economies the paper concludes that debt composition matters and corroborates the original sin hypothesis that rather than being a mere reflection of institutional weakness the presence of foreign currency debt increases financial fragility and leads to suboptimal macroeconomic policies copyright 2013 oxford university press

curse or blessing has the impact of debt relief lived up to expectations a review of the effects of the multilateral debt relief initiatives for low income countries as the multilateral debt relief initiatives draw to a close this article reviews the impacts of debt relief to low income countries lics building on both the theoretical and empirical literature

does a federal country need federal transfers when it has labour mobility sequeira t n and lopes a f does a federal country need federal transfers when it has labour mobility regional studies this work empirically tests optimum currency area theory for members of a given monetary union the united states the united states is recognized as a country where labour mobility between states is high this paper jointly assesses the consequences of having federal transfers and labour mobility in terms of the states cyclical output it is concluded that federal transfers undoubtedly contribute to increase cyclical output however out migration may increase or decrease cyclical output depending on certain conditions as federal transfers proved to be much more important than migration the answer to the question in the paper s title is yes sequeira t n et lopes a f un pays federal a t il besoin des transferts federaux quand il est deja dote de la mobilite du travail regional studies cet article cherche a tester empiriquement la theorie des zones monetaires optimale

domestic taxes and the external debt laffer curve this paper highlights the role of the domestic tax system in determining the economic consequences of an external debt overhang the analysis indicates that fairly strong and probably unrealistic assumptions about the domestic tax system are needed to argue that the investment disincentives associated with the debt overlhang are large enough to place a country on the wrong side of the debt laffer curve a simple taxation scheme is specified and it is shown that a country can be on the wrong side of its debt laffer curve only if it is on the wrong side of its tax laffer curve

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

emu and the regional impact of monetary policy rodriguez fuentes c j and dow s c 2003 emu and the regional impact of monetary policy reg studies 37 969 980 in this paper we focus on a topic which has been attracting renewed interest because of monetary unification in europe the regional dimension of national monetary policies most of the debate over the regional implications of the euro has been developed within the optimum currency area framework according to this theory european monetary policy would have regional effects when the countries of the euro zone had such structural differences as to produce asymmetric shocks these asymmetrical effects could only be offset by labour mobility and wage price flexibility however we argue here that in addition european monetary policy may have more general regional effects including in particular by producing a higher instability in the pattern of credit availability for some peripheral regions this latter possibility and the forces underlying it are explored here both at the theoreti

voter influence and big policy change the positive political economy of the new deal what conditions cause major policy changes under representative government this article addresses that question by providing a theoretically grounded analysis of a massive policy change the new deal it explains how the economic problems of the early 1930s initiated changes on several dimensions of policy federal spending labor market regulation and civil rights the article concludes by considering the broader lessons learned from the political economy of the new deal

the analysis on photovoltaic electricity generation status potential and policies of the leading countries in solar energy abstract energy which is the main agenda of our world is crucially important for the people many countries frequently held meetings and discussions with energy agenda these countries are working to balance the energy demand and supply for finding the solution are researched researches should be attempted to present a more efficient way to use energy as well as renewable energy resources effectively photovoltaic energy power systems take place as the most dominant source among renewable energy technologies the most important reason is that it is unlimited and clean energy of the solar power systems many studies show that photovoltaic power systems will have an important share in the electricity of the future in this study to generate electricity from solar energy using photovoltaic systems have a leading position in some european countries united states of america china and japan s current status and future policies will be analyzed in various comments were made

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

hours of work and the fair labor standards act a study of retail and wholesale trade 1938 1950 when the fair labor standards act was first implemented a 5 reduction in the length of the standard workweek reduced by at least 18 the proportion of men and women working more than 40 hours per week this analysis based on monthly time series data from 1935 41 bls surveys and individual level data from the 1940 and 1950 censuses shows that the act s impact was larger in the south where the proportion of men and women working over 40 hours fell by 23 and 43 respectively than in the north because of much lower pre act wages in the south than in the north the minimum wage provisions of the act were much more binding in the south southern employers were less able than northern employers to adjust straight time wages in response to the act s overtime provisions

going green trade specialisation dynamics in the solar photovoltaic sector abstract the present study aims at providing a comprehensive analysis of trade flows and the domestic value creation of the major solar photovoltaic industry at the world level solar technologies convert light and heat from the sun into useful energy the use of the sun s energy can not only reduce the consumption of conventional fuels thus reducing the emission of detrimental greenhouse gases but it can also enable a gain in enhanced fuel and energy security along with lessening costs in addition green technologies and industries can promote economic growth and international competitiveness and can offer new business and employment opportunities it becomes therefore extremely important to deeply explore the dynamics of the solar photovoltaic sector specifically the present work analyses the main global trends of this sector and sketches the key players on the world market including producers installers and top traders based on an analysis of trade flows at the 6 digit level the international specialisation patterns are investigated and the role of various market and trade drivers including subsidies in the uptake of solar technologies is identified and examined

fostering a renewable energy technology industry an international comparison of wind industry policy support mechanisms this article examines the importance of national and sub national policies in supporting the development of successful global wind turbine manufacturing companies we explore the motivations behind establishing a local wind power industry and the paths that different countries have taken to develop indigenous large wind turbine manufacturing industries within their borders this is done through a cross country comparison of the policy support mechanisms that have been employed to directly and indirectly promote wind technology manufacturing in 12 countries we find that in many instances there is a clear relationship between a manufacturer s success in its home country market and its eventual success in the global wind power market whether new wind turbine manufacturing entrants are able to succeed will likely depend in part on the utilization of their turbines in their own domestic market which in turn will be influenced by the annual size and stability of that market consequently policies that support a sizable stable market for wind power in conjunction with policies that specifically provide incentives for wind power technology to be manufactured locally are most likely to result in the establishment of an internationally competitive wind industry

does the ecb act as a lender of last resort during the subprime lending crisis evidence from monetary policy reaction models abstract we investigate whether the ecb aligns its monetary policy with financial crisis risk in emu member countries we find that since the outbreak of the subprime crisis the ecb has significantly increased net lending and reduced interest rates when banking and sovereign debt crisis risk in vulnerable emu countries greece ireland italy portugal and spain increases while no significant effect is identified for the pre crisis period and relatively tranquil emu countries austria belgium france germany and the netherlands these findings suggest that the ecb acts as a lender of last resort for vulnerable emu countries

fiscal devolution and dependency public spending devolution in practice is widely seen as more appropriate for addressing varied political aspirations within state boundaries than is tax devolution a drawback is that devolved public spending may be subject to irresistible upward pressure as illustrated by formula drift of the united kingdom devolved administrations by crowding out the private sector such public spending can exacerbate the problem it was originally intended to alleviate when taxpayers do not value increases in government output at least as highly as the private goods and services they must forgo to finance them then the public sector is too large this article estimates a three sector hecksher ohlin model of the economy with the greatest relative rise of the public spending ratio in the united kingdom wales simulation of the model shows a net gain in employment from a 1 cut in income tax matched by a corresponding reduction in government spending this result is consistent with the current level of intergovernme

revisiting the bi directional causality between debt and growth evidence from linear and nonlinear tests abstract we revisit the bi directional causality between public debt and the rate of gdp growth for 10 emu countries alongside the us uk and japan over sample periods spanning from 1970 up to 2014 whilst accounting for the nonlinear properties of both the individual time series and their relation in both directions our results indicate that the causal relation between debt and growth in either direction is weak at best for most of the countries in our sample we find no robust evidence of a long run causal effect using bi variate granger causality tests bi directional causality is detected only for austria while for france luxembourg and portugal causality runs solely from debt to growth but the estimated effects are very small in finland spain and italy granger causality from growth to debt in the former two and debt to growth in italy appears to be present in the short run our findings cannot be taken as evidence that a high level of public indebtedness is not risky for the economy or as invalidating hypotheses postulating effects in either direction in the relation between debt and growth

regional redistribution and stabilization by the center in canada france the uk and the us abstract this paper re examines earlier estimates of regional redistribution and stabilization through the central government budget in the us and produces new estimates of this redistribution and stabilization in the us canada france and the uk the new estimates rest on panel data econometrics and an adherence to certain accounting principles that have occasionally been violated in the past as a result of the accounting the peak estimates for the us and canada in the earlier literature are never attained regional stabilization of personal income through the central government budget emerges as close to 20 in the us france and the uk but only 10 to 14 in canada in case of gross product instead of personal income accounting regional stabilization is closer to 10 in the us as regards france and the uk the use of panel data econometrics proves essential

are asset price guarantees useful for preventing sudden stops a quantitative investigation of the globalization hazard moral hazard tradeoff abstract an implication of the globalization hazard hypothesis is that sudden stops caused by global financial frictions could be prevented by offering foreign investors price guarantees on emerging markets assets these guarantees create a tradeoff however because they weaken globalization hazard while creating international moral hazard we study this tradeoff using a quantitative equilibrium asset pricing model without guarantees margin calls and trading costs cause sudden stops driven by a fisherian deflation price guarantees prevent this deflation by propping up foreign demand for assets the effectiveness of price guarantees their distortions on asset markets and their welfare implications depend critically on whether the guarantees are contingent on debt levels and on the price elasticity of foreign demand for domestic assets

federal fiscal transfer rules in monetary unions abstract this paper considers simple rules for federal fiscal transfers that automatically redistribute funds among member states of a monetary union to counteract adverse idiosyncratic shocks the transfer rules target regional differences in nominal gdp consumption spending labor income and fiscal deficits targeting regional fiscal deficits is the only rule that reduces consumption fluctuations and that promotes interregional consumption risk sharing but the overall welfare effect is negative in contrast targeting regional differences in labor income yields the largest welfare gains but it also yields the largest fluctuations in consumption and real gdp it is demonstrated that the welfare gains primarily stem from reducing the allocative inefficiency of input factors caused by nominal rigidities the optimal transfer rule essentially implies a combination of consumption spending and labor income targeting and it primarily targets the allocative inefficiency of factor inputs at the cost of lower interregional consumption risk sharing

fiscal federalism and monetary unions a quantitative assessment abstract in this paper i provide a quantitative analysis of three different forms of fiscal federalism in monetary unions fully decentralized regional fiscal authorities as the benchmark fiscal equalization with nominal tax revenue sharing and a common central fiscal authority i assess the capability of the different arrangements to stabilize regional consumption output and employment over the business cycle i also study the implications for interregional income consumption risk sharing and welfare from this analysis the following results emerge first a central fiscal authority stabilizes consumption fluctuations and increases the scope of interregional income and consumption risk sharing second fiscal equalization destabilizes consumption fluctuations and also reduces the scope of interregional income and consumption risk smoothing third a central fiscal authority leads to welfare gains whereas fiscal equalization leads to welfare losses