corrective taxes under oligopoly with inter firm externalities pollution externalities between polluters should be taken into account in the design of corrective taxes when the externalities are substantial and or the number of polluters is large the effluent levies on these firms do not necessarily result in a deadweight loss consequently the second best tax exceeds the marginal social cost of pollution a more general rule is that the tax rate should be greater than the marginal social cost of pollution if and only if a marginal increase in the tax rate results in opposite effects on the changes of equilibrium emission level and output

rising residential rents in chinese mega cities the role of monetary policy although there have been a large number of studies carried out on fluctuations in housing prices little is known about what causes changes in residential rents which are inextricably intertwined with urban living standards this is especially noteworthy in chinese cities which are now being challenged by the housing market frenzies shift share analysis is proposed to evaluate all possible triggers of residential rent inflation in three cities during the 2001 2013 period which covers two distinct monetary policy regimes in china it is found that the recent rise in residential rent comes as a result of aggregate inflation associated with an expansionary monetary policy since the 2008 global financial crisis and an all encompassing and stable policy stance should therefore be adopted

pigouvian taxes under imperfect competition if consumption depends on emissions the paper considers environmental regulation of a consumption good and an externality which influence demand and costs in a nonseparable way under monopoly two instruments are always required for first best the pigouvian tax is more complicated than anticipated

environmental policy under oligopoly with endogenous market structure emission taxes under both fixed number oligopoly and endogenous market structure which are the most relevant market structures for policy issues are examined in the latter case and contrary to what is expected under imperfect competition the optimal tax could exceed marginal external damages which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages under endogenous market structure a scheme consisting of a license fee and a second best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages copyright 1995 by the editors of the scandinavian journal of economics

measuring the value of life saving from consumer reactions to new information abstract past studies have relied on cross section patterns of risky behavior to generate estimates of the value of life saving this approach is colored by several problems that affect the reliability of the results in potentially serious ways it is difficult to separate the risk components from the dis utility attributes of work or consumption to avoid selectivity biases and to disentangle user costs e g wearing a face mask from the risk premium paid for accepting risk to circumvent some of these difficulties this paper uses a different approach one which exploits the information about the value of risk reduction that is provided by changing consumption patterns over time brought about by changes in available information about risks this approach makes it possible to more reliably estimate the pure effects of risks on behavior and to generate unbiased distributions of the value of life saving the case of cigarette consumption over time provides an ideal setting to illustrate this methodology

content protection and transnational monopoly abstract the paper investigates how domestic content requirements imposed on a vertically integrated monopolist affect production and welfare three content schemes are investigated it is shown that a scheme can be formulated which increases the range of intermediate goods as well as the quantity of final good produced this occurs even though the firms production costs are invariably increased by content protection the scheme can also increase domestic welfare

testing hypotheses about firm behavior in the cigarette industry data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry a lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated results point to at least a moderately high level of competition and in particular allow for the rejection of the perfect cartel model this paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry

pollution control through price incentives the role of rent seeking costs in monopoly markets abstract we consider the effect of rent seeking costs on the design of an efficient pollution tax earlier work has concluded that a pollution tax levied on an otherwise unregulated monopoly should always be less than the pigouvian rate this study demonstrates that if rent seeking costs are present the appropriate discharge tax for a monopoly firm can equal or exceed the marginal damage from its pollution calculations reveal that under a wide range of conditions the ideal corrective tax for a monopoly firm is very close to the fully internalizing pigouvian tax

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

content protection and tariffs under monopoly and competition abstract this paper compares the relative efficiency of local content schemes and tariffs as alternative means of achieving certain non economic distributional objectives the efficiency comparison is made under the alternative assumptions that an intermediate good component is produced a competitively and b by a single firm the paper shows how the ranking of tariffs and content schemes i is sensitive to these assumptions and ii depends on the local content ratio and the elasticity of demand for components the possible implications of vertical integration in the production process and rent revenue seeking behaviour are also considered insofar as they affect the ranking of policies

crashes in real estate prices causes and predictability large swings in real estate prices that end in devastating crashes have been witnessed by many countries in the past two decades to curtail the damage of these crashes it is imperative that we understand their causes this study proposes a model that associates market crashes with periodically collapsing speculative bubbles unlike the conventional literature the identification of the bubble does not rely on assumptions about fundamentals but on some fingerprints of speculation these fingerprints theoretically may also serve as predictors of market crashes in practice however a number of factors may hinder the accuracy of the prediction

speculative bubble spillovers across regional housing markets in this paper we determine whether speculative bubbles in one region in the united states can lead bubbles to form in others we first apply a regime switching model to determine whether speculative bubbles existed in the u s regional residential real estate markets our findings suggest that the housing markets in five of the nine census divisions investigated were characterized by speculative bubbles we then examine the extent to which bubbles spill over between neighboring and more distant regions finding that the transmission of speculative bubbles and nonfundamentals between regions is multidirectional and does not depend on contiguity or distance

corporate equity and commercial property market bubbles periodic sharp sustained increases and then reversals in asset prices lead many to posit irrational price bubbles the general case for bubbles is that asset prices simply move too much given the future cash flows the assets are reasonably likely to produce a corollary for property is that observed mean reversion in real cash flows is not reflected in investor valuations resulting in asset values being too high when real cash flows are high and vice versa this paper summarises some evidence on large corporate equity and commercial property price movements and present arguments for and against the existence of irrational bubbles

commercial real estate and equity market bubbles are they contagious to reits this paper uses a regime switching approach to determine whether prices in the us stock direct real estate and indirect real estate markets are driven by the presence of speculative bubbles the results show significant evidence of the existence of periodically partially collapsing speculative bubbles in all three markets a multivariate bubble model is then developed and implemented to evaluate whether the stock and real estate bubbles spill over into reits the underlying stock market bubble is found to be a stronger influence on the securitised real estate market bubble than that of the property market furthermore the findings suggest a transmission of speculative bubbles from the direct real estate to the stock market although this link is not present for the returns themselves

appraisal smoothing and price discovery in real estate markets this paper reviews the literature on price determination in the private and public real estate markets in particular it discusses the processes of appraisal smoothing in the private market and of price discovery between the public and the private markets in real estate markets the absence of good quality information on price whether because of lack of trades or confidentiality has led to the widespread use of appraisals for market tracking and as the basis for performance measurement appraisers have to make an optimum assessment of value based on fundamental variables and market information including transactions and a market wide appraisal index however transaction prices are a noisy signal and it is the appraiser s role to extract the signal from the noise in an efficient manner this involves a process of optimal combination of past and current information and leads to appraisal smoothing price discovery is the process by which the opinions of market participants about the value of an asset

pigouvian taxation in tourism the paper studies the characteristics and the effects of a tax imposed by a local government on the land used to create new tourists accommodations first a dynamic policy game between a monopolist in a tourist area and a local government is considered in each period the former has to decide the size of land undergoing development whereas the latter has to choose the tax to levy on each newly developed area unit linear perfect markov strategies are derived for both the non cooperative and the public monopoly case in equilibrium a public monopoly would develop land more rapidly than a private monopoly furthermore the more the monopolist discounts the future the more the long run use of the natural resource is reduced second the properties of the tax are studied considering an oligopolistic market structure the tax alone does not lead to the socially optimal level of land use however its combined effect with another policy instrument such as a quota induces the optimal level of resource use

trading rules from forecasting the collapse of speculative bubbles for the s p 500 composite index many recent studies documented the presence of speculative bubbles defined as systematic and increasing deviations of actual prices from fundamentals in asset prices however thus far the usefulness of such models has been examined in the literature only from a statistical perspective in this paper we employ two regime switching models of periodically partially collapsing speculative bubbles and examine the risk adjusted profits of trading rules formed using inferences from them use of trading rules derived from an augmented model incorporating market volume leads to higher risk adjusted returns than those obtained employing existing models or a buy and hold strategy

the predictability of stock market regime evidence from the toronto stock exchange are stock market crashes and rallies related to deviations from the apparent fundamental share price using a switching regression framework the authors test whether apparent deviations help to predict the regime from which the next period s stock market return is drawn and the magnitude of returns in that regime they find that the probability of a collapse rises before most actual crashes likelihood ratio tests confirm that regime switches are influenced by apparent deviations copyright 1993 by mit press

social cost of the tobacco program redux economists do not often get the chance to make long run checks on their own predictions fifteen years ago the senior author johnson analyzed the welfare effects of the flue cured tobacco program as it then was operating the somewhat surprising conclusion of that study was that the program s social cost was essentially zero the fact that the united states faced a less than perfectly elastic foreign demand function produced gains to offset the usual welfare triangle loss and the rather large efficiency loss from restricting an input land rather than output at that time the author made several long run predictions a the elasticity of foreign demand would increase as foreign output increased b institutional rigidities that fostered the u s monopoly position would erode c inefficiency losses would increase all of these would put financial and political pressure on the support

economic rents under supply controls with marketable quota we analyze the distribution of economic rent between owners and renters of marketable production quotas and examine how this distribution changes with increases in marginal costs while quota owners unambiguously lose because of a marginal cost increase quota renters may gain depending on whether the marginal cost shift is divergent parallel or convergent using output and input prices county production quotas and quota rental rate data we estimate a marginal cost function for north carolina flue cured tobacco to demonstrate how wage increases affect owners and renters welfare

impact of domestic content requirement on the us tobacco and cigarette industries abstract using a log linear equilibrium displacement model we quantify the impact of the recent domestic tobacco content requirement on us cigarette manufacturing we investigate effects on us growers and manufacturers and competing tobacco imports the policy increased domestic use of us grown tobacco but induced a small negative output effect tobacco imports decreased substantially the paper also discusses the political economic incentives for us manufacturers to comply with such policies the political cooperation between us growers and manufacturers decreases the opposition of the latter to protectionist policies championed by the former

domestic content and compensatory export requirements protection of the motorvehicle industry in the philippines the motor vehicle industry in the philippines is protected by a virtual embargo on the importation of new vehicles but operates under the burden of domestic content and compensatory export requirements that protect philippine producers of automotive components this article develops a model to assess the net impact of this complicated protective regime estimates indicate substantial benefits to the assembly and components industries and losses to vehicle purchasers reform of the system to eliminate the embargo as well as the domestic content and compensatory export restraints at current tariff rates would benefit vehicle purchasers but would increase the effective rate of protection to assembly operations by decreasing prices of components reform measures to eliminate the domestic content and compensatory export requirements should be accompanied by simultaneous reductions in tariffs on assembled vehicles

pitfalls in testing for explosive bubbles in asset prices a number of studies e g robert j shiller 1981 olivier j blanchard and mark watson 1982 kenneth d west 1988 have argued that dividend and stock price data are not consistent with the market fundamentals hypothesis in which prices are given by the present discounted values of expected dividends these results have often been construed as evidence for the existence of bubbles or fads related arguments have been made with respect to gold bonds and foreign exchange a major problem with such arguments e g james hamilton and charles whiteman 1985 is that apparent evidence for bubbles can be reinterpreted in terms of market fundamentals that are unobserved by the researcher behzad t diba and herschel i grossman 1984 1988b and hamilton and whiteman 1985 have recommended the alternative strategy of testing for rational bubbles by investigating the stationarity properties of asset prices and observable fundamentals 1 in essence the argument for equities is that if stock prices are not more explosive than dividends then it can be concluded that rational bubbles are not present since they would generate an explosive component to stock prices 2 using unit root tests autocorrelation patterns and cointegration tests to implement this procedure diba and grossman 1988b p 529 state that the analysis supports the conclusion that stock prices do not contain explosive rational bubbles this paper shows that the above battery of tests is in fact unable to detect an important class of rational bubbles the point is demonstrated by constructing rational bubbles that appear to be stationary when unitroot tests are applied even though they are explosive in the relevant sense simulations show that when such bubbles are present stock prices will not appear to be more explosive than dividends on the basis of these tests even though the bubbles are substantial in magnitude and volatility the presence of rational bubbles in actual stock prices thus remains an open question