comparison of forecast performance for homogeneous heterogeneous and shrinkage estimators some empirical evidence from us electricity and natural gas consumption abstract maddala et al journal of business and economic statistics 15 1997 90 obtained short run and long run elasticities of energy demand for each of 49 us states over the period 1970 1990 they showed that heterogeneous time series estimates for each state yield inaccurate signs for the coefficients while panel data estimates are not valid because the hypothesis of homogeneity of the coefficients was rejected their preferred estimates are those obtained using the shrinkage estimator this paper contrasts the out of sample forecast performance of heterogeneous panel and shrinkage estimators using the maddala et al journal of business and economic statistics 15 1997 90 electricity and natural gas data sets our results show that the homogeneous panel data estimates give the best out of sample forecasts

limited liability and incentive contracting with ex ante action choices abstract this article examines a principal agent model of financial contracting in which a risk neutral entrepreneur agent makes an unobservable ex ante effort choice while employing the investment funds of a risk neutral investor principal the key innovation is that the investment contract is subject to statutory liability limits given these liability limits two settings are considered one in which the investor payoff function is also constrained to be monotonically nondecreasing in firm profit and another in which no such monotonic contract constraint is imposed in the former case a standard debt contract is shown to emerge and a first best effort choice is not achieved in the latter setting the optimum is characterized by a live or die payoff function and a first best effort level may or may not be realized

bounds testing approach to analyzing the environment kuznets curve hypothesis with structural beaks the role of biomass energy consumption in the united states abstract this paper re examines the specification of the environmental kuznets curve ekc for the us economy by accounting for the presence of a major renewable energy source and trade openness over the period 1960 2016 biomass energy consumption and trade openness as well as oil prices are considered as additional determinants of economic growth and consequentially of co 2 emissions the bounds testing approach to cointegration is used to examine the long run relationship between the variables in the presence of structural breaks the causal relationship between the variables is investigated by applying the vecm granger causality test and accommodating structural breaks the results confirm the presence of cointegration between the variables moreover the relationship between economic growth and co 2 emissions is not only inverted u shaped but also n shaped in the presence of structural breaks and biomass biomass energy consumption lowers co 2 emissions exports imports and trade openness are also environment friendly the causality analysis underscores a feedback effect between biomass energy consumption and co 2 emissions economic growth still granger causes co 2 emissions in this new setup

optimal monetary policy in a small open economy with home bias we analyze optimal monetary policy in a small open economy characterized by home bias in consumption peculiar to our framework is the application of a ramseytype analysis to a model of the recent open economy new keynesian literature we show that home bias in consumption is a su cient condition for inducing the monetary policy maker of an open economy to deviate from a strategy of strict markup stabilization and contemplate some optimal degree of exchange rate stabilization we focus on the optimal setting of policy both in the case of rms setting prices one period in advance and in a gradual fashion subject to adjustment costs while the rst setup allows us to analytically highlight home bias as an independent source of equilibrium

when should we worry about inflation at what level should inflation be a concern from a growth perspective high and rising levels of inflation as in 2006 2008 raise concerns that inflation if uncontained can undermine growth on the other hand higher levels of inflation can create more space for using monetary policy to reduce nominal and real interest rates during financial crises a nonlinear growth regression for 165 countries over 1960 2007 shows that for developing countries inflation above 10 percent quickly hurts growth for advanced economies there is no specific threshold in the medium term higher inflation hurts growth for any initial level of inflation suggesting that there is a real cost to maintaining higher inflation as a buffer

what measure of inflation should a developing country central bank target in closed or open economy models with complete markets targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium we analyze this result in the context of developing economies where a large proportion of households are credit constrained and the share of food expenditures in total consumption expenditures is high we develop an open economy model with incomplete financial markets to show that headline inflation targeting improves welfare outcomes we also compute the optimal price index which includes a positive weight on food prices but unlike headline inflation assigns zero weight to import prices

analyzing the impact factors of energy related co2 emissions in china what can spatial panel regressions tell us abstract china produces a huge amount of co2 emissions that need to be reduced to comply with international commitments identifying the driving factors is critical for achieving mitigation targets and transiting toward a low carbon economy in china this study is one of the first few attempts to apply panel data and spatial econometrics models to analyze the spatial dependence of province level co2 emission intensity and the economic drivers of such emissions first we conducted a systematical review of the development of spatial econometrics second we generated a panel data set about energy and socioeconomic development of 30 provinces and municipalities in china from 2005 to 2012 next we chose the most appropriate model to explain the predominant factors of energy related co2 emissions based on a series of tests of the spatial econometrics models the results suggested that technology improvement adjustment of industrial and energy structures and environmentally friendly behaviors and patterns of consumption of habitants play an important role in co2 emissions mitigation the results also revealed that co2 emissions had strong spatial spillover effects which indicate that policies adopted in one province will affect policy making in neighboring provinces implying that provinces need take combined action to balance climate change mitigation and economic policy goals

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

regional green development level and its spatial relationship under the constraints of haze in china abstract this paper includes the new constraints of haze in the environmental efficiency research framework and the sbm undesirable and malmquist exponential models are used to measure and analyse the evolution characteristics and regional differences of regional green environmental efficiency of china and applied china s regional panel data and a spatial dubin model to deeply explore the impact of environmental regulation openness urbanisation industrial structure and technological innovation on regional green environmental efficiency the result show that under the constraints of smog the regional green environment efficiency of china is different with each area and shows strong spatial dependence and spatial differentiation the overall spatial distribution of the east middle northeast west gradient is decreasing environmental regulation had a major impact on the green environment efficiency of the region and demonstrated an inverted n type relationship the degree of openness urbanisation industrial structure and technological innovation play an active role in promoting regional green sustainable development economic growth corporate ownership structure fiscal policy and foreign investment dependence have hindered the progress of regional green sustainable development to a certain extent

monetary policy and food inflation in south africa a quantile regression analysis abstract although optimal monetary policy stabilizes food inflation theoretically empirical studies remain limited not only in the context of volumes and the estimation approaches but are focused on selected advanced and emerging countries to the neglect of africa where poverty and dominance of food in the consumption basket are more pronounced we provide empirical evidence in the context of south africa using quantile regressions rising food prices are destabilized even further by restrictive monetary policy a finding that has ramifications for inflation targeting especially given that a quarter of the country s population is food poor

estimation of short run and long run elasticities of energy demand from panel data using shrinkage estimators this article discusses the problem of obtaining short run and long run elasticities of energy demand for each of 49 states in the united states using data for 21 years estimation using the time series data by each state gave several wrong signs for the coefficients estimation using pooled data was not valid because the hypothesis of homogeneity of the coefficients was rejected shrinkage estimators gave more reasonable results the article presents in a unified framework the classical empirical bayes and bayes approaches for deriving these estimators

credible monetary policy in an infinite horizon model recursive approaches abstract this paper develops recursive methods to study optimal and time consistent policy in dynamic models we analyze a version of calvo s 1978 monetary model and show that its time consistent outcomes can be completely characterized as the largest fixed point of either of two operators recursive application of these operators provides a computing algorithm which always converges to the set of time consistent outcomes finally we obtain valuable information about the nature of time consistent outcomes it is discovered in particular that all such outcomes are markovian the methods obtained are intuitive and should be useful for many applications journal of economic literatureclassification numbers e61 e52 c61

optimal security design and dynamic capital structure in a continuous time agency model we derive the optimal dynamic contract in a continuous time principal agent setting and implement it with a capital structure credit line long term debt and equity over which the agent controls the payout policy while the project s volatility and liquidation cost have little impact on the firm s total debt capacity they increase the use of credit versus debt leverage is nonstationary and declines with past profitability the firm may hold a compensating cash balance while borrowing at a higher rate through the credit line surprisingly the usual conflicts between debt and equity asset substitution strategic default need not arise in this paper we consider a dynamic contracting environment in which a riskneutral agent or entrepreneur with limited resources manages an investment activity while the investment is profitable it is also risky and in the short run it can generate arbitrarily large operating losses the agent will need outside financial support to cover such losses and continue the project the difficulty is that while the probability distribution of the cash flows is publicly known the agent may distort these cash flows by taking a hidden action that leads to a private benefit specifically the agent may i conceal and divert cash flows for his own consumption and or ii stop providing costly effort which would reduce the mean of the cash flows therefore from the perspective of the principal or investors that fund the project there is the concern that a low cash flow realization may be a result of the agent s actions rather than the project s fundamentals to provide the agent with appropriate incentives investors control the agent s wage and may also withdraw their financial support for the project and force its early termination we seek to characterize an optimal contract in this framework and relate it to the firm s choice of capital structure we develop a method to solve for the optimal contract given the incentive constraints in a continuous time setting and study the properties of the credit line debt and equity that implement the contract as in the discrete time model of demarzo and fishman 2003 the continuous time setting offers several peter m demarzo is from stanford university and yuliy sannikov is from u c berkeley we

heterogeneity and tests of risk sharing how well do people share risk standard risk sharing regressions assume that any variation in households risk preferences is uncorrelated with variation in the cyclicality of income i combine administrative and survey data to show that this assumption is questionable risk tolerant workers hold jobs in which earnings carry more aggregate risk the correlation makes risk sharing regressions in the previous literature too pessimistic i derive techniques that eliminate the bias apply them to u s data and find that the effect of idiosyncratic income shocks on consumption is practically small and statistically difficult to distinguish from zero

shaping the relationship between economic development and carbon dioxide emissions at the local level evidence from spatial econometric models the debate over the correlation between economic growth and environmental pollution has attracted a great deal of attention from academic researchers and policy makers in recent years there has been excessive use of spatial econometric models and too much emphasis on statistical procedures in empirical studies in this study we contribute to the existing literature by conducting a more rigorous analysis of the relationship between economic growth and hbox co 2 emissions in chinese cities using spatial durbin models our results show that hbox co 2 emissions increase monotonically in relation to economic growth at the city level and that the driving effects of economic growth are slightly smaller in central china than in eastern and western china in addition to economic growth industry s share of the economy is a major driver of hbox co 2 emissions while technological improvement measured by energy intensity per unit of gross domestic product gdp and the effectiveness of environmental governance flatten the shape of the environmental kuznets curve we provide evidence of local spillover effects of explanatory variables on hbox co 2 emissions economic competition as well as technological diffusion are found to exist in chinese cities in relation to hbox co 2 emissions we also find carbon leakage between cities only if the per capita gdp of a given city is less than 493 in 2010 constant dollars results hold when robustness checks are performed policy makers should carefully consider regional differences and the inherent spatial interactions between factors when formulating carbon reduction policies

monetary policy and welfare in a small open economy this paper analyzes optimal monetary policy in a small open economy featuring monopolistic competition and nominal rigidities it shows that the utility based loss function for this economy can be written as a quadratic expression of domestic inflation output gap and real exchange rate the presence of an internal monopolistic distortion and a terms of trade externality drives optimal policy away from domestic inflation targeting and affects the optimal level of exchange rate volatility when domestic and foreign goods are close substitutes for each other the optimal policy rule implies lower real exchange rate volatility than a domestic inflation targeting regime the reverse is true when the elasticity of substitution between goods is low

decoupling analysis and environmental kuznets curve modelling of provincial level co2 emissions and economic growth in china a case study abstract guangdong is one of the most representative provinces of china in terms of reflecting how the provincial level co2 emissions dynamically evolve with economic development during the process of industrialisation and urbanisation the present study combines decoupling analysis with environmental kuznets curve ekc modelling to systematically explore the interactions between co2 emissions and economic growth in guangdong from the short to long terms aiming to provide the referential significance of low carbon development to other chinese provinces empirical results indicate that co2 economy interactions in guangdong dynamically changed with time performing an effect of expansive weak decoupling during 1995 2014 and having a potential to achieve a strong decoupling in the long run the decoupling states of various sectors and their contributions to the provincial overall decoupling differed greatly and varied by time and household and service sectors played increasingly important roles overall the decoupling effect of provincial co2 emissions is distinctly affected by the stage of industrialisation and urbanisation renewable energy utilisation as well as low carbon technical progress therefore promoting co2 economy decoupling at the provincial level should be specific to the feature and development reality of various provinces

timing of effort and reward three sided moral hazard in a continuous time model this paper studies a three sided moral hazard problem with one agent exerting up front effort and two agents exerting ongoing effort in a continuous time model the agents efforts jointly affect the probability of survival and thus the expected cash flow of the project in the optimal contract the timing of payments reflects the timing of effort payments for up front effort precede payments for ongoing effort several patterns are possible for the cash allocation between the two agents with ongoing effort in one case where the two agents face equally severe moral hazard they share the cash flow equally at each point of time in another case where the two agents have different severities of moral hazard their payments are sequential in a more general case the two agents with ongoing effort first receive the cash flow alternately with an increasing frequency of switches and then divide the cash flow at each point of time this study provides a framework for understanding a broad set of business contracting issues the characteristics suggested in the optimal contract help us analyze the causes of business failure such as the recent debacle of mortgage backed securities

world food prices and monetary policy abstract how should monetary policy respond to large fluctuations in world food prices we study this question in an open economy model in which imported food has a larger weight in domestic consumption than abroad and international risk sharing can be imperfect a key novelty is that the real exchange rate and the terms of trade can move in opposite directions in response to world food price shocks this exacerbates the policy trade off between stabilizing output prices vis a vis the real exchange rate to an extent that depends on risk sharing and the price elasticity of exports we characterize implications for dynamics optimal monetary policy and the relative performance of practical monetary rules while cpi targeting and expected cpi targeting can dominate ppi targeting if international risk sharing is perfect even seemingly mild departures from the latter make ppi targeting a winner

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

designing targeting rules for international monetary policy cooperation this study analyzes a two country dynamic general equilibrium model with nominal rigidities monopolistic competition and producer currency pricing a quadratic approximation to the utility of the consumers is derived and assumed as the policy objective function of the policymakers it is shown that only under special conditions there are no gains from cooperation and moreover that the paths of the exchange rate and prices in the constrained efficient solution depend on the kind of disturbance that affects the economy it might be the case either for fixed or floating exchange rates despite this result simple targeting rules that involve only targets for the growth of output and for both domestic gdp and cpi inflation rates can replicate the cooperative allocation

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

spatial effects of economic performance on the carbon intensity of human well being the environmental kuznets curve in chinese provinces abstract this study analyzes the interdependent relationship between economic development and environmental and human well being in china we evaluate panel data of the carbon intensity of human well being ciwb to measure environmental sustainability and human well being for 30 chinese provinces from 1995 to 2016 we then employ a spatial model to test the environmental kuznets curve the ciwb is an important indicator that incorporates the environmental social and economic dimensions of sustainability the coefficients of gdp squared gdp and cubic gdp are 1 043 0 123 and 0 0045 respectively indicating that the relationship between ciwb and economic growth is an inverted n shape in other words as gdp increases from low to high the ciwb first decreases then increases for a long period until it reaches a turning point and declines thereafter gdp per capita at the two turning points are 850 yuan and 110 000 yuan respectively in the long run economic growth is expected to have a positive effect on sustainable development however currently environmental policies are needed to offset unintended environmental harm analysis of spatial evolution and multiplier spatial effects show that spatial disparity and clustering exist simultaneously this suggests that overall planning for the big picture and cooperative development between adjacent provinces could help to handle regional environmental problems

spillover effects of economic globalization on co2 emissions a spatial panel approach abstract this paper investigates the spatial effects of economic globalization on co2 emissions in a panel of 83 countries over the period 1985 2013 we apply the spatial panel method to address the problems of spatial dependency and the spillover effect among neighboring countries first the estimation results verify the existence of the spatial correlations in co2 emissions across nations second we find that the indirect effect of economic globalization on co2 emissions is so significantly negative to overcome the positive direct effect which implies a negative and significant total effect so our results suggest that being surrounded by highly globalized countries has a positive effect on the environmental quality finally we also find strong evidence for the inverted u shaped ekc relationship between co2 emissions and income

financing and advising optimal financial contracts with venture capitalists this paper analyses the joint provision of effort by an entrepreneur and by an advisor to improve the productivity of an investment project without moral hazard it is optimal that both exert effort with moral hazard if the entrepreneur s effort is more efficient less costly than the advisor s effort the latter is not hired if she does not provide funds outside financing arises endogenously this explains why investors like venture capitalists are value enhancing the level of outside financing determines whether common stocks or convertible bonds should be issued in response to incentives

double sided moral hazard and the nature of share contracts contractual arrangements involving revenue profit sharing are often based on fairly simple often linear rules in addition in many contexts these contracts are not finely adjusted to the particular circumstances of individual agents or markets nor do they vary over time to the extent current theories based on optimal contracting suggest they should we develop a simple model of such revenue or profit sharing arrangements based on double sided moral hazard and show that this model can account for many of these stylized facts more specifically the model shows that linear contracts can be optimal and that benefits from customizing terms can in some cases be quite limited if not zero

revisiting environmental kuznets curves through the energy price lens abstract the goal of this paper is to provide new insights to elucidate the inconclusive results from the environmental kuznets curve ekc empirical literature for the first time in empirical literature an econometric analysis includes the relative prices for several energy sources the paper provides strong evidence on the relevance of energy prices to co 2 emissions accordingly one reason for the lack of agreement in the ekc literature may be the absence of energy prices in empirical exercises the presence of relative energy price changes in the econometric specification confirms a monotonic and positive relationship between co 2 and gross domestic product gdp therefore we may conclude that there is a decoupling process but without reaching any turning point on that relationship the policy implications are straightforward direct climate action by policy makers is required to break the positive relationship between co 2 and gdp that conclusion has been reinforced by the reduction of energy prices since the middle of 2014 otherwise the trend in energy prices may reverse the relative decarbonisation processes accounted for in recent years in major developed countries

warranties durability and maintenance two sided moral hazard in a continuous time model double moral hazard in continuous time generates the familiar warranty pattern with full coverage for an initial block of time the more complete the warranty the better the producer s durability incentives and the worse the consumer s maintenance incentives using continuous time highlights the need for some warranty bound to avoid reaching the first best as an unreasonable limit early in the paper an exogenous bound is used while later the bound arises endogenously from the possibility of abuse and repair a quadratic example shows that the warranty s duration depends on the relative severity of the two moral hazard problems

the practice of econometrics classic and contemporary provides hands on experience of econometrics with estimation and inference each chapter begins with a discussion of economic theory underlying the application

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

optimal contracts in a continuous time delegated portfolio management problem this article studies the contracting problem between an individual investor and a professional portfolio manager in a continuous time principal agent framework optimal contracts are obtained in closed form these contracts are of a symmetric form and suggest that a portfolio manager should receive a fixed fee a fraction of the total assets under management plus a bonus or a penalty depending upon the portfolio s excess return relative to a benchmark portfolio the appropriate benchmark portfolio is an active index that contains risky assets where the number of shares invested in each asset can vary over time rather than a passive index in which the number of shares invested in each asset remains constant over time fund managers compensation schemes in a delegated portfolio management setting have been of special interest to both academics and practitioners academic interest stems in part from the rapid growth of managed funds over the last two decades gompers and metrick 1998 report that by december 1996 mutual funds pension funds and other financial intermediaries held discretional control over more than half of the u s equity market it is thus of importance to study the impact of institutional trading on asset prices and to integrate into one model both asset pricing and delegated portfolio management compensation as advocated by brennan 1993 allen and santomero 1997 and allen 2001 it is also important to understand the relationship between a manager s trading strategies and his implicit incentives or career concerns see e g brown harlow and starks 1996 brown goetzmann and park 1997 chevalier and ellison 1999 and chen and pennacchi 2000 these concerns include internal promotion from a small to a large fund higher outside offers and the flow of money through the fund under management 1 the importance of fund manager compensation is also underscored by congressional passage in 1970 of the amendment to

a continuous time version of the principal agent problem this paper describes a new continuous time principal agent model in which the output is a diffusion process with drift determined by the agent s unobserved effort the risk averse agent receives consumption continuously the optimal contract based on the agent s continuation value as a state variable is computed by a new method using a differential equation during employment the output path stochastically drives the agent s continuation value until it reaches a point that triggers retirement quitting replacement or promotion the paper explores how the dynamics of the agent s wages and effort as well as the optimal mix of short term and long term incentives depend on the contractual environment the understanding of dynamic incentives is central in economics how do companies motivate their workers through piece rates bonuses and promotions how is income inequality connected with productivity investment and economic growth how do financial contracts and capital structure give incentives to the managers of a corporation the methods and results of this paper provide important insights to many such questions this paper introduces a continuous time principal agent model that focuses on the dynamic properties of optimal incentive provision we identify factors that make the agent s wages increase or decrease over time we examine the degree to which current and future outcomes motivate the agent we provide conditions under which the agent eventually reaches retirement in the optimal contract we also investigate how the costs of creating incentives and the dynamic properties of the optimal contract depend on the contractual environment the agent s outside options the difficulty of replacing the agent and the opportunities for promotion our new dynamic insights are possible due to the technical advantages of continuous time methods over the traditional discrete time ones continuous time leads to a much simpler computational procedure to find the optimal contract by solving an ordinary differential equation this equation highlights the factors that determine optimal consumption and effort the dynamics of the agent s career path are naturally described by the drift and volatility of the agent s pay offs the geometry of solutions to the differential equation allows for easy comparisons to see how the agent s wages effort and incentives depend on the contractual environment finally continuous time highlights many essential features of the optimal contract including the agent s eventual retirement in our benchmark model a risk averse agent is tied to a risk neutral principal forever after employment starts the agent influences output by his continuous unobservable effort input the principal sees only the output a brownian motion with a drift that depends on the agent s effort the agent dislikes effort and enjoys consumption we assume that the agent s utility function has the income effect that is as the agent s income increases it becomes costlier to compensate him for the effort also we assume that the agent s utility of consumption is bounded from below

linearity with project selection and controllable diffusion rate in continuous time principal agent problems i extend holmstrom and milgrom s model by allowing the agent to control privately or publicly the diffusion rate process and show that the optimal contract is still linear i discuss the conditions under which conflicts over the choice of diffusion rate do and do not arise as an application i examine project selection problems of a firm conflicts between the manager and investors arise because giving the manager too much incentive to work to increase the profit from ongoing operations can induce him to be too conservative in project selection possibly resulting in optimal contracts with low sensitivities

a spatial panel data approach to estimating u s state level energy emissions we take advantage of a long panel data set to estimate the relationship between u s state level carbon dioxide co2 emissions economic activity and other factors we specify a reduced form energy demand model to account for energy consumption activities that drive energy related emissions we contribute to the literature by exploring several spatial panel data models to account for spatial dependence between states estimation results and rigorous diagnostic analysis suggest that 1 economic distance plays a role in intra and inter state co2 emissions and 2 there are statistically significant positive economic spillovers and negative price spillovers to state level emissions