a model of entry exit decisions and capacity choice under demand uncertainty abstract many investment decisions of agribusiness firms such as when to invest in an emerging market or whether to expand the capacity of the firm involve irreversible investment and uncertainty about demand cost or competition this paper uses an option value model to examine the factors affecting an agribusiness firm s decision whether and how much to invest in an emerging market under demand uncertainty demand uncertainty and irreversibility of investment make investment less desirable than the net present value npv rule indicates the inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later the active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive there is a greater distance between the entry and exit thresholds under the option value approach than under the npv rule due to demand uncertainty the results have implications for agribusiness decision making

co firing coal with wood pellets for u s electricity generation a real options analysis abstract in contrast to eu u s electric utilities are not employing the bioenergy technology of co firing wood pellets with coal this difference in employment patterns is explored within a real options analysis roa for possible u s utilization of wood pellets considering fuel price series from 2009 to 2014 for analysis these series are divided into two sub periods based on different market conditions infancy 2009 2011 and substitution 2012 2014 roa indicates co firing wood pellets with coal is feasible considering adoption during wood pellets infancy under low discount rates and long power plant lifespans a portfolio effect of employing multiple fuels underlies this result however co firing is not currently economically feasible the different adoption decisions are likely a consequence of recent cheap and abundant u s natural gas for co fired wood pellets to be feasible government incentives and or a market increase in natural gas prices appear necessary

some nonlinear tax effects on asset values and investment decisions under uncertainty abstract tax system nonlinearities are often ignored but with uncertainty may have important implications for the magnitude and direction of tax effects this paper studies a particular nonlinear tax rule the policy subsidizes asset values but may discourage some investments and encourage earlier shutdown of some projects the marginal effective tax rate varies with project risk furthermore a corporate cash flow tax can encourage investment due to interactions with the nonlinear policy the paper also presents a general statement of the stochastic equilibrium valuation method which can be used to analyze other nonlinear taxes numerical examples demonstrate computational feasibility

economic hysteresis in hog production german hog production only responds in a very limited way to price fluctuations in the pork market the hog production concentrates on a few regions though it is not bound to special natural conditions such as soil quality furthermore the volume of production does not vary over time relatively high market risks sunk costs and the flexibility of the decision maker to defer investments characterize decision problems in hog production thus the real option approach is chosen to explain the inertia in production capacity by the use of panel data of specialized hog farms from the german farm accountancy data network an empirical investment model is estimated formally the model has the structure of a generalized ordered probit model this approach allows to test for economic hysteresis in the adjustment of hog production capacity the results confirm that uncertainty and flexibility widen the optimal range of inaction

borrowing from the imf the policy implications of recent empirical research abstract at a time when the future of the international monetary fund is being widely debated a number of relevant and important studies have been published which advance our knowledge of the factors which determine borrowing from the fund there has been little attempt however to put this recent empirical research into context or to extract from it appropriate policy conclusions while dissent remains over some issues there is an emerging consensus on others which provides a firm empirical foundation for policy formulation unfortunately the policy stance adopted by the g7 is in many ways at odds with much of the recent empirical research

a three gap model of foreign transfers and the gdp growth rate in developing countries abstract a simplified macroeconomic framework is developed for the fiscal gap which is considered to be an important stumbling block for adjustment with growth in highly indebted developing countries distinctive characteristics of a fiscally constrained economy are compared with those of economies constrained either by the availability of savings or foreign exchange tentative implications for external conditionality accompanying debt relief measures are derived

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

environmental policy uncertainty and marketable permit systems the dutch phosphate quota program tradable permits are generally considered as an efficient instrument to regulate pollution by individual producers however uncertainty about changes in or possible discontinuation of the program could make individual farmers reluctant to invest in tradable permits this article uses the option approach to derive a theoretical model that shows the impact of policy uncertainty on investment in tradable quota the empirical assessment provides weak evidence for the existence of option values due to policy uncertainty for phosphate quota in swine production in the netherlands

african economic development in a comparative perspective conventional explanations of poor african economic performance generally fail to pay adequate attention to causal mechanisms of growth decline and stagnation many african countries experienced investment booms after independence but in contrast to east asian newly industrialising economies these were not sustained owing to failure to establish a virtuous growth circle involving complementary increases in savings and exports structural adjustment programmes dismantled stat mediated mechanisms of accumulation without putting viable alternatives in place and failed to tackle the structural constraints which impede productivity growth in agriculture a new policy approach drawing on the experience of both post colonial and adjustment periods is necessary copyright 2001 by oxford university press

economics postcolonial theory and the problem of culture institutional analysis and hybridity postcolonial theory has not yet made an impact in economics this may be explained by the different treatment of culture in each field in postcolonial theory culture serves as a central analytical category in economics despite increased attention in recent history general approaches to culture continue to underestimate its role in economic behaviour and decision making borrowing some insights from postcolonial theory this paper calls for further attention to culture in economics it is argued that such a turn improves current understanding of contemporary economic phenomena and allows subaltern cultures currently theorised as less developed to equally participate in the global construction of social meaning and economic well being it is further argued that incorporating the postcolonial idea of hybridity into the institutional economic approach holds the most promise for theorising contemporary postcolonial economies this argument is illustrated by examining some hybrid economic patterns within africa copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

investment in site specific crop management under uncertainty implications for nitrogen pollution control and environmental policy this paper applies an option pricing model to analyze the impact of uncertainty about output prices and expectations of declining fixed costs on the optimal timing of investment in site specific crop management sscm it also analyzes the extent to which the level of spatial variability in soil conditions can mitigate the value of waiting to invest in sscm and influence the optimal timing of adoption and create a preference for custom hiring rather than owner purchase of equipment numerical simulations show that while the net present value npv rule predicts that immediate adoption is profitable under most of the soil conditions considered here recognition of the option value of investment indicates that it is preferable to delay investment in sscm for at least 3 years unless average soil quality is high and the variability in soil quality and fertility is high the use of the option value approach reveals that the value of waiting to invest in sscm raises the cost share subsidy rates required to induce immediate adoption above the levels indicated by the npv rule

the political impact of economic crisis in latin america in the 1980s research on the political implications of economic conditions is separated into two relatively distinct bodies of literature i bridge the theoretical gap between them by examining the effects of economic crisis on electoral outcomes in latin america from 1982 to 1990 an analysis of 21 competitive elections indicates that crisis conditions undermine support for incumbents and provoke high levels of electoral volatility but without necessarily fostering the growth of political extremism or the exhaustion of elite consensus associated with the breakdown of democracy the results also suggest that the relationship between economic conditions and electoral instability is mediated by party system structure rather than democratic age paradoxically the findings buttress prior research on electoral outcomes in the comparatively stable and homogeneous organization for economic cooperation and development oecd nations while undercutting theoretical frameworks elaborated with specific reference to the breakdown and consolidation of third world democracy

technology choice under changing peanut policies the effect of marketing quotas and price supports on technology adoption are examined for peanut production in the southeastern united states using a real options model of investment with output price and yield uncertainty the optimal choice of peanut production technology dryland versus irrigated in the southeast is shown to depend on price supports and how they change the manner in which price supports change will have an effect on the choice and rates of abandonment or adoption of production technologies

investments in african agricultural research abstract over the past three decades africa s public agricultural research systems have changed in substantive ways the total number of researchers increased fourfold the dependency on expatriate researchers significantly declined while the education levels of national researchers improved initially the growth in research staff was matched by growth in expenditures but since the late 1970s real research spending has stagnated in addition loans and grants from donor agencies now account for a sizeable share of total funding for many african agricultural research systems many of the developments of the past decade in personnel expenditures and sources of support for public sector research and development r d in africa are not sustainable spending per scientist has declined continuously during the past 30 years most dramatically during the 1980s resources are spread increasingly thin over a growing group of researchers which has negative effects on the efficiency and effectiveness of agricultural research in africa

comparative economic voting britain france germany italy likelihood of a vote for the incumbent coalition in contrast personal economic circumstances no matter how measured demonstrate nonexistent to weak effects on vote choice overall economic conditions emerge as a relatively important vote determinant when a more properly specified general multi equation model of the vote is estimated economics shows itself to be as powerful as traditional factors used to explain the western european vote in particular economic variables exceed the impact of partisan identification in britain and roughly equal it in germany moreover the economic variables exercise more influence than the social cleavages of class and religion everywhere except italy

the vp function a survey of the literature on vote and popularity functions after 25 years vp functions explain the support for the government at votes and polls by economic and political variables most studies analyze macro time series we also cover studies of individual voters socio economic groups and regional cross sections the theory starts from the responsibil ity hypothesis voters hold the government responsible for economic conditions it works in two party block systems but not else voters in most countries are found to be sociotropic egotropic voting also occurs voters myopia is well established voting is retrospective as expectations are static it costs the average government almost 2 of the vote to rule

multi stage product development with exploration value enhancing preemptive and innovation options abstract we provide a real options framework for the analysis of product development that incorporates research and exploration actions product attribute value enhancing actions with uncertain outcome as well as preemption and innovation options we derive two stage analytic formulas and propose a general multi period solution using a numerical lattice approach our analysis reveals that exploration actions are more important when the project is out or at the money near zero npv and less important for high project values in a multi stage setting exploration actions are important even for in the money projects when follow on actions exist that can enhance the expected value of the project with path dependency early actions are more valuable since they enhance the impact or reduce the cost of subsequent actions preemptive controls affecting rare event jump frequency and innovations that introduce positive jumps are more valuable for firms with higher frequency of competitive threats involving low volatility

death rates life expentancy and china s economic reforms a critique of a k sen abstract sen s recent work has emphasized the ineffectiveness of economic growth in achieving fundamentally important human ends here his influential propositions concerning post mao china are assessed factors affecting mortality rates and life expectancy in china since the mid 1970s are discussed in section 2 in section 3 it is shown that contrary to his claims post mao china achieved a widespread decline in death rates an improvement in life expectancy and a reduction in the number of people living in absolute poverty the poorest rural households were not excluded from the benefits of rapid growth of output after the reforms

the vp function revisited a survey of the literature on vote and popularity functions after over 40 years nannestad and paldam public choice 79 213 245 1994 published herein an extremely influential review of the literature linking economics and elections what they called the vp functions in that work they offered a number of conclusions in proposition form about the state of the evidence in this field we present the key ones 16 in all and assess the extent to which they continue to hold in light of the new evidence about what has come to be known as economic voting as shall be shown nannestad and paldam were prescient in their early establishment of many of the principal results explaining how the economy moves the vote choice

monte carlo valuation of american options through computation of the optimal exercise frontier this paper introduces a monte carlo simulation method for pricing multidimensional american options based on the computation of the optimal exercise frontier we consider bermudan options that can be exercised at a finite number of times and compute the optimal exercise frontier recursively we show that for every date of possible exercise any single point of the optimal exercise frontier is a fixed point of a simple algorithm once the frontier is computed we use plain vanilla monte carlo simulation to price the option and obtain a low biased estimator we illustrate the method with applications to several types of options

demand for redistribution individuals responses to economic setbacks although economic circumstances have been argued to be a major determining factor of attitudes to redistribution there is little well identied evidence at the individual level utilizing a unique dataset with detailed individual information provides new and convincing evidence on the link between economic circumstances and demand for redistribution in the form of benefits and support the swedishnational election studies are constructed as a rotating survey panel which makes it possible to estimate the causal effect of economic changes the empirical analysis shows that individuals who experience a job loss become considerably more supportive of redistribution yet attitudes to redistribution return to their initiallevel as economic prospects improve suggesting that the effect is only temporary despite the fact that a job loss also changes attitudes to the political parties theprobability to vote for the left wing is not affected

irrigation technology adoption and its implication for water conservation in the texas high plains a real options approach water shortage has been a significant issue for several decades in the texas high plains agriculture has been identified as the main activity contributing to this shortage to address this issue many efforts have been focused on the possible adoption of sophisticated irrigation systems with high levels of water application efficiency in this study the entry and exit thresholds for the low energy precision application lepa system are analyzed simultaneously in cotton farming in the texas high plains using a real options approach the results show that the lepa system is profitable only when cotton price is set above 1 59 kg the exit entry threshold is consistently low high over a range of values for parameter changes including investment cost exit cost variable cost risk adjusted discount rate and volatility rate so it is unlikely that farmers with irrigation systems in place would leave them easily this implies that to attain the goal of saving water lubbock county needs to focus on convincing current farmers to replace old irrigation systems with new ones

the political economy of industrial policy in korea the article aims to provide some additional empirical support and theoretical consolidation for the emerging alternative interpretation of the korean developmental experience which emphasizes the role of the state after briefly reviewing some mainstream interpretations it presents a detailed account of state intervention in korea where it is revealed that industrial policy played the central role then it explains how the korean state was able to avoid some of the obvious dangers of such a policy which is often associated with economic failures in developing countries it then explores the basis of state power in korea which provided a background for such an outcome copyright 1993 by oxford university press

statistical tragedy in africa evaluating the data base for african economic development measurement is increasingly at the centre of debates in african economic development some remarkable upward revisions of gdp which are signs of statistical systems improving caused the declaration of a statistical tragedy in africa this special issue evaluates the database for african economic development with articles on the quality of the data on gdp health and education poverty labour agriculture and income distribution

investment under uncertainty and dynamic adjustment in the finnish pork industry bykyosti s pietola and robert j myersmay 1998paper prepared for a selected paper session at the annual meeting of the american agriculturaleconomics association salt lake city utah august 1998 this research was financed jointly byagricultural economics research institute in finland the academy of finland and the finnishcultural foundation we also knowledge the michigan agricultural experiment station for itssupport of this research authors are agricultural economist agricultural economics research institute helsinki finland and associate professor department of agricultural economics michigan state university eastlansing copyright 1998 by kyosti s pietola and robert j myers all rights reserved readers may makeverbatim copies of this document for non commercial purposes by any means provided that thiscopyright notice appears on all such copies

social incidence and economic costs of carbon limits a computable general equilibrium analysis for switzerland this paper discusses both distributional and allocational effects of limiting carbon dioxide emissions in a small and open economy it starts from the assumption that switzerland attempts to stabilize its greenhouse gas emissions over the next 25 years and evaluates costs and benefits of the respective reduction program from a methodological viewpoint this paper illustrates how a computable general equilibrium approach can be adopted for identifying economic effects of cutting greenhouse gas emissions on the national level from a political economy point of view it considers the social incidence of a greenhouse policy it shows in particular that public acceptance can be increased and economic costs of greenhouse policies can be reduced if carbon taxes are accompanied by revenue redistribution

elections economic outcomes and policy choices in canada 1870 2015 in this paper we examine the relationship between economic and electoral outcomes in canada since confederation 1867 and the role that economic policy has played in influencing this relationship

the hidden costs of renewables promotion the case of crop based biogas abstract this paper finds that specific characteristics of bioenergy investments namely long times to build relatively high variable costs and the managerial ability of corrective actions during the project help bioenergy producers to respond to market uncertainties this effect is shown to compromise the economic effectiveness of bioenergy policies the paper compares the effectiveness of financial and regulatory incentive programs aiming to stimulate production of crop based biogas a stylized stochastic real options based investment model is developed to analyze the investment behavior of biogas producers under alternative policies the model is solved by a numerical approach combining stochastic simulations and the genetic algorithm technique unless bioenergy schemes account for structural characteristics of the bioenergy industry they will tend to encourage investments in unused production capacities this would cause additional welfare costs and benefit mainly crop producers

general equilibrium effects of environmental policy a cge modeling approach estimation of emission control cost functions is often carried out in a partial equilibrium framework i e under the assumption that emission control measures have negligible effects on input and output prices in this paper a computable general equilibrium model is used for simulation of the impact on factor prices and resource allocation of reductions of so infx sup no infx su and co2 emissions thus the model includes markets for tradable emission permits and the equilibrium prices of permits reflect the marginal costs of emission control the results suggest that major emission reductions are likely to have general equilibrium effects and thus that emission control cost functions that fail to take these effects into account may give a distorted picture of the economic impact of emission control

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

a real options analysis of coffee planting in vietnam vietnam grew from an insignificant to the world s second largest coffee producer during the 1990s to understand this growth this article examines vietnamese coffee growers investment decisions using real options theory the study finds that producers with variable costs of 19 cents lb and total cost of 29 3 cents lb would enter coffee production at a coffee price of 47 cents lb and exit at a coffee price of 14 cents lb most vietnamese growers appear to be sufficiently efficient to continue producing coffee even at relatively depressed price levels

who says it s the economy cross national and cross individual variation in the salience of economic performance theories of government approval usually assume that voters care about economic outcomes this assumption frequently does not hold data from the comparative study of electoral systems demonstrate that although the economy is often the most important issue in an election its place on the issue agenda varies across individuals and electoral contexts the economy is more likely to dominate other issue concerns under conditions of economic recession volatility and economic underdevelopment moreover at the individual level the salience of economic performance rises with unemployment and economic vulnerability governance crises related to corruption and human rights reduce attention to the economy as do large scale terrorist attacks if the economy is not perceived as important its effect on government approval is strongly mitigated thus variations in the economy s salience need to be further incorporated into studies linking economic and political outcomes

option pricing when the underlying asset earns a below equilibrium rate of return a note in their classic paper black and scholes 2 present two derivations of the european call option pricing formula the first which we will refer to as the replication derivation relies on the fact that the returns from the option can be replicated by holding a continuously revised position in the underlying asset and bonds this implies that if an option is not priced according to the blackscholes formula there is a sure profit to be made by some combination of either short or long sales of the option and underlying asset this argument is seemingly independent of considerations relating to capital market equilibrium the second derivation which we will call the equilibrium derivation evolves from the requirement that the option earn an expected rate of return commensurate with the risk involved in holding the option as an asset this note considers the pricing of a call option on an asset which earns an expected rate of return lower than that necessary to induce investors to hold it we show in this case that even if the replication strategy is feasible it is inefficient a consequence of this is that the correct option pricing formula is different than the black scholes formula unlike the black scholes formula our formula requires as an input the difference between the expected rate of return on the underlying asset and that expected rate of return which would be required to induce holding of the asset other papers have made a similar point constantinides 3 and cox et al 4 have argued that in equilibrium the prices of traded contingent claims must satisfy a partial differential equation which is identical to the black scholes partial differential equation only when the underlying asset pays no dividends and earns a rate of return sufficient to induce holding of the asset more recently ingersoll 5 has noted that commodities often pay a nonpecuniary service yield the value of which must be taken into account in deriving the option price none of these authors however explain why the black scholes formula is sometimes inappropriate the purpose of this note is to demonstrate why the black scholes formula needs modification even if replication is feasible we provide an intuitive derivation of the correct formula and discuss why divergences of the equilibrium price from the black scholes formula do not result in arbitrage opportunities

on the accuracy of economic observations do sub saharan trade statistics mean anything matching exporters freight on board fob trade statistics with the corresponding importers cost inventory and freight cif data this paper studies the quality of official information on trade between 36 african countries the author found the disparities in data so great as to make the official trade statistics almost useless for most empirical and policy studies he concluded that a statistics on matching exports and imports vary so much that the data cannot be used to assess the level of trade between african countries b the data are probably equally useless for assessing the direction of trade since the countries that exporters report as the destination of trade often fail to report corresponding imports c the data are inadequate for determining the composition of trade because countries report on different levels of detail and d large persistent apparent differences in trends in intra african trade may simply reflect different degrees of accuracy in country trade data finally the fact that reported fob exports often exceed the corresponding reported imports suggests either that smuggling is widespread or that importers are intentionally underinvoicing because of high african tariffs or quotas

the planting real option in cash rent valuation after entering into a farmland cash rent contract in the fall a tenant farmer has flexibility over the spring crop choice and the input application level failure to account for these options will bias estimates of what farmers should pay to rent land applying monte carlo simulation methods this study investigates the option values for these choices a multivariate gaussian copula mgc is employed to account for dependence among yields and prices results show that the average cash rent valuation for the real option approach is 33 6 higher than that for the conventional net present value npv method in which the input intensity option is 0 9 crop planting sequence is shown to impact the real option value

argentina growth resumption sustainability and environment abstract this paper analyzes the sustainability of the current growth process in argentina taking into account macroeconomic consistency and environmental constraints the economy appears to be generating an unsustainable current account deficit and a relative price distortion in favor of nontradables impeding a needed increase in exports resolution of the main environmental problems would absorb around 10 of savings over the next 10 years the saving scarcity suggests that a gradualist policy giving priority to the urban environment should be implemented

peasants or bankers the american electorate and the u s economy t he usual model of electoral reaction to economic conditions assumes the retrospective economic voter who bases expectations solely on recent economic performance or personal economic experience voter as peasant a second model assumes a sophisticated economic voter who incorporates new information about the future into personal economic expectations voter as banker using the components both retrospective and prospective of the index of consumer sentiment ics as intervening variables between economic conditions and approval we find that the prospective component fully accounts for the presidential approval time series with aggregate consumer expectations about long term business conditions in the approval equation neither the usual economic indicators not the other ics components matter moreover short term changes in consumer expectations respond more to current forecasts than to the current economy the qualitative result is a rational expectations outcome the electorate anticipates the economic future and rewards or punishes the president for economic events before they happen economics moves political behavior with hard times administrations lose support with good times they gain it we know this to be true but when we ask how by what processes the political translation of economic experience occurs the an

attribution error in economic voting evidence from trade shocks this article exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990 to 2009 we find that voters on average exhibit a strong tendency to oust the incumbent governments during an economic downturn regardless of whether the recession is home grown or merely imported from trading partners however we find important heterogeneity in the extent of attribution error a split sample analysis shows that countries with more experienced voters more educated voters and possibly more informed voters all conditions that have been shown to mitigate other voter agency problems do better in distinguishing imported from domestic growth jel e3 e6

presidential approval and macroeconomic conditions evidence from a nonlinear model abstractcontrary to previous empirical studies that find a linear link between economic conditions and presidential approval this study argues for and finds a nonlinear relationship a threshold regression is used to assess potential nonlinear relationships between macroeconomic variables and presidential popularity a quarterly data analysis for the 1960q1 2012q2 time period reveals that domestic factors prevail in shaping presidential approval most compelling is evidence of a threshold relationship involving economic conditions when unemployment is slightly over 7 its decline impacts significantly and favourably on presidential approval an effect that virtually disappears below the threshold value change in consumer sentiment affects presidential approval in a limited way while inflation shows no association at all these results combine to encourage further investigation of nonlinear processes in the nexus of economics and politics

voting and the economic cycle sophisticated voters assess incumbent competence by filtering out economic cycles which they do not like from trend growth which they do naive voters on the other hand respond only to raw economic growth this implies that voting in the aggregate should respond asymmetrically to the economic cycle upswings are rewarded by the naive but punished by the sophisticated downswings are punished by all voters using an established dataset of over 400 general elections we find that the incumbent vote share a responds differently to trend growth than to the cycle b does not respond significantly to positive variation in the economic cycle and c responds significantly and negatively to negative realizations in the economic cycle in contrast to standard formulations of the grievance asymmetry this asymmetric vote response is found to be independent of trend growth

the diffusion of clean technologies a review with suggestions for future diffusion analysis abstract this article gives an overview of the literature on clean technology diffusion followed by suggestions for future analysis findings from diffusion analysis are presented in the form of 10 stylised facts helping the reader to see the forest for the trees the overall conclusion is that the diffusion of clean technology same as the diffusion of normal innovations is governed by endogenous mechanism epidemic learning and learning economies and by exogenous mechanisms policy is important for clean technology diffusion but other factors are important too the characteristics of the clean technology absorptive capacities of potential adopters and the age structure of capital it is often overlooked that companies have a choice they can choose between an end of pipe solution a process change adaptation and a change of process substitution this means that the diffusion and evolution of one clean technology will be at the expense of the diffusion of another clean technology something overlooked in studies on clean technology diffusion further research is needed on the influence of public policy on clean technology choice expectations about learning economies and prices adjustment costs network externalities and complementary innovations on clean technology adoption choices

technology adoption decisions under irreversibility and uncertainty an ex ante appproach empirical results demonstrate that uncertainty about costs and requirements for environmental compliance is an important determinant of dairy producers investment behavior ex ante forecasting of how uncertainty and irreversibility are likely to affect producers responsiveness to agricultural technologies has implications for the design of environmental policies simulation modeling methods are described the empirical analysis focuses on texas producers propensity to adopt free stall dairy housing free stall investments offer advantages for both productivity augmentation and pollution abatement yet uncertainty and irreversibility are obstacles to adoption implications of this ex ante paradigm for policy design and implementation are discussed

economic development and environmental policy in turkey an institutionalist critique turkey has had a prolonged exemplary experience with economic development in this paper we will trace the emergence of an environmental concern within development planning in turkey after a brief theoretical discussion on rival frameworks it is our contention that whereas economic policies are planned to meet certain goals environmental policies are formulated after observing the results of these economic policies and only in a fragmented manner what is needed is an alternative comprehensive policy based on a theoretical framework in tune with karl polanyi gunnar myrdal william kapp and nicholas georgescu roegen in order to uplift the analysis and policy design to a comprehensive level copyright oxford university press

the environmental consequences of stagnation in nicaragua abstract a decade of war and revolution under the sandinistas caused macroeconomic chaos but may have been indirectly beneficial to the environment now the country is a ward of the international financial community with foreign debt at almost six times gdp and few policy options the chamorro government elected in 1990 has reduced the role of government and restored the price system as the principal means of resource allocation and income distribution a three gap model is used to show that environmental deterioration is likely to accelerate as a result of pursuing neoliberal policies the analysis is based on a distinction between intensive and extensive environmental decay

dissatisfied democrats or retrospective voters economic hardship political institutions and voting behavior in latin america this article examines recent trends in latin american voting behavior and casts them in terms of sincere economic and strategic electoral concerns it argues that thanks to years of economic adversity latin americans have developed long sophisticated economic memories although this has resulted in rising frustration with democratic government according to recent opinion polls it has not always led voters to punish all parties responsible for hardship at election time a panel study of the region s presidential systems demonstrates that citizens punish incumbents by voting for established nonincumbents when electoral laws reduce opportunities available to small parties in the systems even if nonincumbents have also been blamed for hard economic times more permissive electoral systems in contrast encourage citizens to reject all parties responsible for economic decline the analysis demonstrates how economic and electoral concerns interact to affect voting behavior political accountability an

emission permit banking pollution abatement and production inventory control of the firm abstract in this paper we present a dynamic model modified with emission permit banking and pollution abatement and investigate the effect of emission permit banking and pollution abatement on the production inventory strategy of the firm after introducing emission permit banking and pollution abatement the cost function consists of the inventory holding and production costs the cost of investment in abatement capital goods and the emission procurement selling cost furthermore the inventory holding costs are linear production costs are non decreasing and convex functions of the production level and the costs of investment in abatement capital goods are increasing and convex functions of the investment level we compare the optimal production inventory strategy before emission permit banking and pollution abatement and thereafter the mathematical investigation is based on the arrow karlin model

stabilization and its discontents argentina s economic restructuring in the 1990s abstract this paper assesses the argentine stabilization and market reform strategies since 1989 we argue that argentina may be penned in by its own success exchange rate targeting quelled inflation but the resulting real appreciation has limited export and employment growth microeconomic reforms raised efficiency but have threatened income distribution and hence political stability exclusive styles of policy making helped enact reform but have led to corruption and policy insensitivity and contributed to rising social discontent we close by suggesting how a second generation of reforms could tackle these issues and spread the proceeds of reform to a wider segment of the argentine public

hysteresis and the shortage of agricultural labor fruit and vegetable growers often allege a shortage of agricultural workers but in a review of the h2a nonimmigrant guestworker program the general accounting office claims that no such shortage exists the apparent shortage may be due to workers that are in the labor force but do not choose to take agricultural jobs according to real options theory when nonagricultural jobs are uncertain workers require added incentive to invest in sectoral migration estimates of an arbitrage model in monthly washington state wage data show the labor shortage probability to be far greater than the probability of a surplus

corn ethanol plant investment a real options case study the objective of this article is to describe an investment decision using net present value and real options a case study describes the data and the corn ethanol industry so students can study a cooperative s decision of whether or not to invest in a new corn ethanol plant in 2015 nebraska an extensive set of information accompanies this case including spreadsheets with data computer software code lesson plans for teaching real options and net present value and an extensive teaching note

dilemmas of structural adjustment and environmental policies under instability post 1980 turkey abstract the turkish structural adjustment since 1980 has been associated with chronic instability since the late 1980s the weaknesses in the fiscal system and the premature external liberalization emerge as the main factors hindering the passage toward stable growth enforced and erratic distributional changes and relative stagnation of capital accumulation have undermined the growth potential of the economy further it is demonstrated that existing market structures may negate environmental policies based on market incentives these observations as well as those on the interactions of the market system and the environment create strong arguments in favor of an active state

are there spatial spillovers in the adoption of clean technology the case of organic dairy farming this paper examines spatial spillovers associated with the adoption of organic dairy farming we hypothesize that neighboring farmers can help to reduce the uncertainty of organic conversion by lowering the fixed costs of learning about the organic system a spatially explicit 10 year panel dataset of more than 1 900 dairy farms in southwestern wisconsin is used as input into a reduced form econometric model of the decision to convert to organic production using an identification strategy that exploits the panel aspect of the micro dataset we find evidence that the presence of neighboring organic dairy farms affects the conversion decision

limits to alternative forms of capitalization the case of anatolian holding companies summary since the late 1960s alternative forms of capitalization have emerged in the absence of an effective capital markets regime in turkey we can see these alternative forms in the failed attempts to create anatolian holding companies through the direct investment of small savings this article shows how anatolian holding companies became victims of poor institutional and regulatory regimes and how the lack of institutions to promote impersonal trust in the economy in turn permitted widespread abuses we identify populist politics lax oversight and social norms that incorporated gambling as three interlinked reasons which hindered the genesis and development of viable capital market reform and regulatory institutions in turkey 2003 elsevier ltd all rights reserved

inequality and party support positional economic voting or a new dimension of valence economic growth helps governments get re elected but does growth as a valence issue exhaust the possibilities for the economic vote this paper shows via an examination of 318 elections in esta

optimal timing of technology adoption abstract in a dynamic programming framework this paper investigates the optimal timing of technology adoption by a competitive firm when technology choice is irreversible and the firm faces a stochastic innovation process with uncertainties about both the speed of the arrival and the degree of improvement of new technologies a numerical example illustrates how the optimal timing decision is affected by changes in parameter values reflecting market conditions the firm s initial technological attributes and the characteristics of the stochastic innovation process some of these effects turn out to be in sharp contrast to common intuition contrasting the optimal decision rule derived here with the rule obtained under the net present value shows that the former implies a slower pace of adoption than implied by the latter the optimal decision rule is generalized for the case of multiple technology switches and it is shown that for all the switching decisions except the last one the optimal rule satisfies the net present value criterion

economics and elections revisited the economics and elections connection has been heavily investigated although mostly through single country studies the first comparative survey based research on economic voting by lewis beck

investment decisions in hog finishing an application of the real options approach in this paper option pricing theory is applied to an investment problem in hog production a stochastic simulation model capable of pricing american type options is developed this is achieved by recursive calculation of the exercise frontier the model is used to determine the investment trigger and the disinvestment trigger for a pig fattening barn under german market conditions it turns out that the investment trigger taking into account the value of waiting in an uncertain environment can be considerably higher compared to classical investment criteria such as the net present value this offers an explanation as to why farmers are indeed reluctant to invest in hog production another finding is the sensitivity of the option prices with respect to the stochastic process that is assumed for revenues and variable costs of the production activity

the world bank and the environment the world development report 1992 abstract despite its biases toward market friendliness the world bank s latest world development report on the whole gives a sympathetic review of the environmental difficulties confronting developing countries the bank s preferred market based policies however will not be able to resolve these problems fully and it is by no means certain that funding for required investments and development of new technologies will be at hand

investment under uncertainty does competition matter abstract empirical applications of real options models in competitive environments implicitly exploit the optimality of myopic planning in a seminal paper leahy j v 1993 investment in competitive equilibrium the optimality of myopic behavior quarterly journal of economics 108 1105 1133 shows that the optimal investment strategy of a myopic planner who ignores market entries and exits of competitors as well as the resulting price effects constitutes a market equilibrium under rather general conditions as a result the calculation of optimal investment strategies is simplified considerably because competition does not have to be taken into account in this paper however we demonstrate by using simulation experiments that myopic planning may lead to non optimal investment strategies this is due to the fact that it is difficult or even impossible to specify the correct or equivalent price process for the myopic investor using real world data we quantify the degree of suboptimality and propose measures to reduce the error

economics party and the vote causality issues and panel data conventional wisdom argues that national economic perceptions generally have an important impact on the vote choice in democracies recently a revisionist view has arisen contending that this link regularly observed in election surveys is mostly spurious according to the argument partisanship distorts economic perception thereby substantially exaggerating the real vote connection these causality issues have not been much investigated empirically despite their critical importance utilizing primarily american and secondarily british and canadian election panel surveys we confront directly questions of the time dynamic and independent variable exogeneity we find after all economics clearly matters for the vote indeed once these causality concerns are properly taken into account the impact of economic perceptions emerges as larger than previously thought as well the actual impact of partisanship is clearly reduced

assessing adjustment in africa abstract in 1994 the world bank issued a report on structural adjustment adjustment in africa in which it was argued that orthodox macroeconomic management represented the road to economic recovery for the sub saharan countries this article demonstrates that with its heavy emphasis upon macroeconomic policy bank policy shifts from structural adjustment to stabilization second the statistical evidence presented by the bank is analyzed and shown to be neither convincing nor internally consistent finally an alternative approach to adjustment stabilization is proposed and subjected to statistical testing

the ecological fallacy revisited aggregate versus individual level findings on economics and elections and sociotropic voting several aggregate level studies have found a relationship between macroeconomic conditions and election outcomes operating in intuitively plausible directions more recent survey based studies however have been unable to detect any comparable relationship operating at the individual voter level this persistent discrepancy is puzzling one recently proposed explanation for it is that voters actually behave in an altruistic or sociotropic fashion responding to economic events only as they affect the general welfare rather than in terms of self interested pocketbook considerations it is argued here that the discrepancies between the macro and micro level studies are a statistical artifact arising from the fact that observable changes in individual welfare actually consist of two unobservable components a government induced and politically relevant component and an exogenous component caused by life cycle and other politically irrelevant factors it is shown that because of this individual level cross sectional estimates of the effects of welfare changes on voting are badly biased and are essentially unrelated to the true values of the behavioral parameters of interest they will generally be considerable underestimates and may even be of the wrong sign an aggregate level time series analysis on the other hand will often yield reasonably good if somewhat attenuated estimates of the underlying individual level effects of interest thus in this case individual behavior is best investigated with aggregate rather than individual level data it is also shown that the evidence for sociotropic voting is artifactual in the sense that the various findings and evidence which ostensibly show sociotropic behavior are all perfectly compatible with the null hypothesis of self interested pocketbook voting

a global compact to end poverty brian snowdon presents the text of a two hour interview conducted with jeffrey d sachs of columbia university a wide ranging discussion relating to professor sachs s work over the past thirty years on macroeconomic stabilisation the economics of transition and several important issues in the field of international economic development first snowdon provides some background to the debate relating to professor sachs s most recent work that has helped focus international attention on the growth tragedy of sub saharan africa this key humanitarian issue has received enormous coverage in the media throughout 2005 and has been highlighted in particular at the g8 meetings in gleneagles and worldwide live 8 concerts in july 2005 and the un world summit in september

editorial the revival of the liberal creed the imf and the world bank in a globalized economy abstract this editorial reviews problems arising from the popular washington consensus economic package as economies become more globalized and the reasons why they occur suggestions for improving the performance of the institutions behind the policies the world bank and international monetary fund are provided

the relation between forward prices and futures prices abstract this paper consolidates the results of some recent work on the relation between forward prices and futures prices it develops a number of propositions characterizing the two prices these propositions contain several testable implications about the difference between forward and futures prices many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets even though they are not in themselves asset prices the paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors

can real option values explain apparent storage at a loss since decisions to sell grain are irreversible waiting to sell grain can have a real option value this real option value may explain why producers appear to store too long a new seasonal mean reversion model is estimated that allows prices to be a random walk with drift within a season but mean reverting across crop years unless prices are extremely low selling before mean reversion begins is optimal thus the real option value of waiting does not explain why some producers seem to store at a loss in the latter part of crop years

the case for a real options approach to ex ante cost benefit analyses of agricultural research projects the united states agency for international development usaid like many other development agencies and donors increasingly emphasizes evidence based programming this requires assessments of project performance at all stages of implementation comprising ex ante impact assessment monitoring and evaluation and ex post attribution of outcomes ex ante impact assessment in particular involves performing cost benefit analysis cba to determine the expected net present value enpv of the project in question unfortunately the traditional enpv approach has proven inadequate for dealing with uncertainty in the timing of investments and flexibility in future decision making this is especially relevant for research and development r d projects which require several stages of product development and multiple rounds of testing prior to releasing final products as a consequence the real options approach to cba has increasingly been used to evaluate private sector r d projects this paper advocates for the adoption of the real options approach in the evaluation of public investments in agricultural research and illustrates its practical utility with an assessment conducted by usaid to determine the economic viability of a proposed project to develop improved varieties of critical food security crops in uganda

returns on investments in energy saving technologies under energy price uncertainty in dutch greenhouse horticulture conventional net presentvalue calculations evaluating the profitabilityof investments in energy saving technologies indutch horticultural outlays predict a muchhigher rate of adoption of these technologiesthan is actually observed this paper tries toexplain this gap by applying a real optionsframework hurdle rates for investments in twotypes of energy saving technology are estimatedusing simulated future revenue streams givenuncertainty regarding energy prices and energytax policies hurdle rates found in this wayare on average about 1 76 times the hurdlerates that result from net present valuecalculations furthermore this paper tests thepredictive value of the theory by estimating alogit model this model relates the incidenceof having invested in an energy savingtechnology to the difference between the returnon investment and the hurdle rate thepredictive power turns out to be encouraging as the statistical tests indicate that higherhurdle rates tend to reduce rates of technologyadoption

africa s economic performance limitations of the current consensus historical and micro survey evidence as well as the standard data from international organizations support less pessimistic conclusions on africa s development performance than those reached by many social scientists the changes that have benefited women over the last four decades are highlighted a discussion of growth in agricultural production follows however the complexity and the brutality of processes of social and economic change in sub saharan african economies are also stressed the theoretical implications of these complexities have not been adequately analyzed by world bank economists the bank s recent efforts to reassess its policies are therefore unlikely to achieve the results anticipated

is gm soybean cultivation in argentina sustainable this paper explores the long term sustainability of argentina s specialization in genetically modified soybean cultivation it is conceived as an evidence based assessment of the most relevant economic social and environmental implications of the soybeanization of argentinian agriculture we combine 2 sources of primary and secondary quantitative data the national agricultural census and farm level data from a field survey carried out in 2 provinces of the argentinian pampas our results suggest a major conflict between the success of the soybeanization of argentinian agriculture measured in terms of production and profit records and the social economic and environmental sustainability of this new model of production gm soybean package adoption has increased farm productivity and has reduced the costs per unit produced the resulting dramatic increase in profits constituted a strong incentive to extend the scale of production the development of companies comprising actors from both agricultural and non agricultural sectors constituted a good way to extend the scale of production but this technological innovation in agriculture has been the source of numerous criticisms it is widely held among argentinian researchers in particular that soybean expansion has increased land inequality and displaced labor however overall we find a mixed empirical picture of changing land distribution patterns and labor displacement resulting from the soybean expansion the environmental implications of agricultural biotechnology are alarming and the long term sustainability of gm crops can seriously be questioned in a context where gm soybean production has become one of the strategic components of argentina s economy as well as in the country s international positioning our results suggest that it is highly unlikely that the government will implement policies against this precious crop and its by products however promoting sustainable agricultural growth has become not only desirable but necessary

malthus controverted the role of capital and technology in growth and environment recovery in kenya abstract investment in technological improvements coupled with management innovations and skills are commonly held to lead to growth rates which outpace population growth although this applies to both industry and agriculture anderson 1990 typical farm surveys in developing countries neglect to analyze fixed investments or the quality of management this paper provides a nonmathematical case study and model from kenya of the way in which investments in technological change and especially in land improvement have enabled rural incomes per capita to grow substantially with improved environmental conservation through the interactions of increased population density improved information and market opportunities population density and investment are shown to be critical interrelated factors investments require maintenance expenditures these are included in social cost benefit analysis but it is not always realized that labor on maintenance may have a rising opportunity cost which farmers take into account when selecting technologies although the major part of expenditures are made and managed by farmers government investments to stimulate and complement them are required as on the farm this requires wise management of recurrent and maintenance costs if the benefits of investment are to be lasting