anticipated international environmental agreements abstract consider a situation in which countries anticipate an international environmental agreement iea to be in effect sometime in the future what is the impact of the future iea on current emissions after its announcement we show that the answer to this question is ambiguous we examine four types of ieas that aim to reduce pollution stock in the environment iea type 1 sets a level of emissions iea type 2 and iea type 3 set a percentage and a uniform cut vis a vis the business as usual policy respectively iea type 4 sets the policy that maximizes future joint benefits of the signatories we show that all of these agreements reach their goal in the long run but the intended benefits of these ieas can potentially be offset by the anticipatory non cooperative response of the signatories leading to an environmental degradation in the short run which iea is preferable depends on the targeted level emissions during the phase of cooperation when this target is above a certain threshold welfare under iea type 1 is larger than under iea type 2 which is larger than under iea type 3 moreover the highest level of welfare that can be attained under iea type 1 is above the highest level of welfare achieved by any one of the other three ieas

delegating climate policy to a supranational authority a theoretical assessment abstract this paper studies the delegation of climate policy to a supranational environmental authority we develop a simple model of a world consisting of a large number of countries which derive utility from energy consumption countries suffer from global warming and local air pollution both caused by the combustion of fossil fuels and decide individually on investments in clean technologies for energy production a supranational environmental authority decides for each country on the maximally permitted amount of greenhouse gas emissions we demonstrate that the authority faces a dynamic inconsistency problem that leads to welfare losses but these losses can be kept small if the authority is endowed with an optimally designed mandate the optimal mandate penalizes the cost of local air pollution very heavily relative to the cost of global warming however delegation of climate policy faces a further difficulty as countries have a recurrent incentive to change the authority s mandate over time

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

women s discrimination in developing countries a new data set for better policies summary based on a new data set this paper develops two innovative indicators to measure gender inequalities in developing countries the indicators measure different aspects of constraints imposed on women by social institutions that is laws norms traditions and codes of conduct that exist in societies for centuries the paper finds that social institutions are the most important single factor determining women s participation in economic activities outside the household

the crucial relationship among energy commodity prices evidence from the spanish electricity market the main purpose of this article is twofold to analyze a the long term relation among the commodities prices and between spot electricity market price and commodity prices and b the short term dynamics among commodity prices and between electricity prices and commodity prices data between 2002 and 2005 from the spanish electricity market was used econometric methods were used in the analysis of the commodity spot price namely the vector autoregression model the vector error correction model and the granger causality test the co integration approach was used to analyze the long term relationship between the common stochastic trends of four fossil fuel prices one of the findings in the long term relation is that the prices of fuel and the prices of brent are intertwined though the prices of brent ten to move to reestablish the price equilibrium another finding is that the price of electricity is explained by the evolution of the natural gas series

is there a glass ceiling in sweden using 1998 data we show that the gender log wage gap in sweden increases throughout the wage distribution and accelerates in the upper tail we interpret this as a strong glass ceiling effect we use quantile regression decompositions to examine whether this pattern can be ascribed primarily to gender differences in labor market characteristics or in the rewards to those characteristics even after extensive controls for gender differences in age education both level and field sector industry and occupation we find that the glass ceiling effect we see in the raw data persists to a considerable extent

the use of quantile regressions in estimating gender wage differentials a case study of the philippines quantile regressions are used to analyse the size components and nature of the gender earnings differentials as well as the returns to education by gender in the philippines over the entire conditional distribution of earnings using data from the 1999 apis survey this approach allows more focused conclusions about the nature of gender earnings differentials incorporating the quantile regression approach to the oaxaca blinder decomposition allows the localization of gender discrimination to particular quantiles of the earnings distribution and permits more targeted policy intervention

economic analysis of coal price electricity price adjustment in china based on the cge model in recent years coal price has risen rapidly which has also brought a sharp increase in the expenditures of thermal power plants in china meantime the power production price and power retail price have not been adjusted accordingly and a large number of thermal power plants have incurred losses the power industry is a key industry in the national economy as such a thorough analysis and evaluation of the economic influence of the electricity price should be conducted before electricity price adjustment is carried out this paper analyses the influence of coal price adjustment on the electric power industry and the influence of electricity price adjustment on the macroeconomy in china based on computable general equilibrium models the conclusions are as follows 1 a coal price increase causes a rise in the cost of the electric power industry but the influence gradually descends with increase in coal price and 2 an electricity price increase has an adverse influence on the total output gross domestic product gdp and the consumer price index cpi electricity price increases have a contractionary effect on economic development and consequently electricity price policy making must consequently consider all factors to minimize their adverse influence

oil prices and the stock prices of alternative energy companies energy security issues coupled with increased concern over the natural environment are driving factors behind oil price movements while it is widely accepted that rising oil prices are good for the financial performance of alternative energy companies there has been relatively little statistical work done to measure just how sensitive the financial performance of alternative energy companies are to changes in oil prices in this paper a four variable vector autoregression model is developed and estimated in order to investigate the empirical relationship between alternative energy stock prices technology stock prices oil prices and interest rates our results show technology stock prices and oil prices each individually granger cause the stock prices of alternative energy companies simulation results show that a shock to technology stock prices has a larger impact on alternative energy stock prices than does a shock to oil prices these results should be of use to investors managers and policy makers

leadership and free riding decomposing and explaining the paradox of cooperation in international environmental agreements this paper decomposes the canonical model of international environmental agreements barrett in oxf econ pap 46 878 894 1994 into three effects externality cost effectiveness and timing the externality and timing effects are countervailing forces on abatement levels of greenhouse gases the paradox of cooperation in the three stage stackelberg game is explained by showing that when the gains to cooperation are small the timing effect dominates the externality effect and large coalitions are stable the timing effect has the greatest impact when the high benefit nations have low abatement cost the cost effectiveness effect arises from asymmetry and generates the need for an agreement with transfers the cost effectiveness effect is largest when the high benefit nations are high cost this creates a larger difference in the marginal abatement cost of the last unit of abatement in the absence of an agreement numerical examples illustrate how the parameters and effects interact to result in outcomes ranging from no to full participation

causal modeling and inference for electricity markets abstract how does dynamic price information flow among northern european electricity spot prices and prices of major electricity generation fuel sources we use time series models combined with new advances in causal inference to answer these questions applying our methods to weekly nordic and german electricity prices and oil gas and coal prices with german wind power and nordic water reservoir levels as exogenous variables we estimate a causal model for the price dynamics both for contemporaneous and lagged relationships in contemporaneous time nordic and german electricity prices are interlinked through gas prices in the long run electricity prices and british gas prices adjust themselves to establish the equilibrium price level since oil coal continental gas and eur usd are found to be weakly exogenous

a mechanism design approach to climate change agreements we take a mechanism design perspective to investigate how environmental agreements should account for multilateral externalities incentive compatibility and voluntary participation by sovereign countries the optimal mechanism involves a tradeoff between a free rider problem in the effort provision of participating countries and the necessity of inducing countries to ratify the agreement this mechanism can be approximated by a simple menu with attractive implementation and robustness properties limits on enforcement and commitment might nevertheless hinder the performance of this menu making the business as usual scenario more likely

counterfactual decomposition of changes in wage distributions using quantile regression we propose a method to decompose the changes in the wage distribution over a period of time in several factors contributing to those changes the method is based on the estimation of marginal wage distributions consistent with a conditional distribution estimated by quantile regression as well as with any hypothesized distribution for the covariates comparing the marginal distributions implied by different distributions for the covariates one is then able to perform counterfactual exercises the proposed methodology enables the identification of the sources of the increased wage inequality observed in most countries specifically it decomposes the changes in the wage distribution over a period of time into several factors contributing to those changes namely by discriminating between changes in the characteristics of the working population and changes in the returns to these characteristics we apply this methodology to portuguese data for the period 1986 1995 and find that the observed increase in educational levels contributed decisively towards greater wage inequality copyright 2005 john wiley sons ltd

oil and gas markets in the uk evidence from a cointegrating approach the paper examines the relationship between uk wholesale gas prices and the brent oil price over the period 1996 2003 in order to investigate whether oil and gas prices decoupled during this period as orthodox gas market liberalisation theory suggests tests for unit roots and cointegration are carried out and it is discovered that a long run equilibrium relationship between uk gas and oil prices exists moreover this relationship pre dates the opening of the uk mainland europe interconnector following a recursive methodology hansen h and johansen s 1999 some tests for parameter constancy in cointegrated var models econometrics journal 2 306 333 it was found that the cointegrating relationship is present throughout the sample period however the long run solutions seem to be more volatile evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas these findings do not support the assumption that gas prices and oil prices decouple

testing for common features in north american energy markets abstract using recent advances in the field of applied econometrics we explore the strength of shared trends and shared cycles between north american natural gas and crude oil markets in doing so we use daily data from january 1991 to april 2001 on spot u s henry hub natural gas and wti crude oil prices the results show that there has been decoupling of the prices of these two sources of energy as a result of oil and gas deregulation in the united states we also investigate the interconnectedness of north american natural gas markets and find that north american natural gas prices are largely defined by the u s henry hub price trends

firm value and hedging evidence from u s oil and gas producers this paper studies the hedging activities of 119 u s oil and gas producers from 1998 to 2001 and evaluates their effect on firm value theories of hedging based on market imperfections imply that hedging should increase the firm s market value mv to test this hypothesis we collect detailed information on the extent of hedging and on the valuation of oil and gas reserves we verify that hedging reduces the firm s stock price sensitivity to oil and gas prices contrary to previous studies however we find that hedging does not seem to affect mvs for this industry in a classic modigliani and miller m m world with perfect capital markets risk management should be irrelevant when there are no information asymmetries taxes or transaction costs hedging financial risk should not add value to the firm because shareholders can undo any risk management activities implemented by the firm at the same cost in practice imperfections in capital markets create a rationale for lowering the volatility of earnings through hedging conventional explanations relate to the cost of financial distress tax incentives and the underinvestment problem risk management may also add value if hedging positions in derivatives contracts carry a premium that is not commensurate with risk or if active trading activities create a profit most empirical studies on this topic focus on the relation between corporate hedging and firm characteristics and try to determine whether the behavior of firms that hedge is consistent with extant theories the empirical evidence does not support any single theory however in addition most of these empirical studies provide only indirect evidence that hedging increases firm value recently however allayannis and weston 2001 directly test the relation between firm value and the use of foreign currency derivatives using a sample of 720 large firms between 1990 and 1995 they find that the value of firms that hedge on average is higher by about 5 this hedging premium is statistically and economically significant with a median market value mv of about

majority rules and incentives a club s majority rule defines the number of members that must approve a policy proposed to replace the status quo since the majority rule thus dictates the extent to which winners must compensate losers it also determines the incentives to invest in order to become a winner of anticipated projects if the required majority is large members invest too little because of a holdup problem if it is small members invest too much in order to become a member of the majority coalition to balance these opposing forces the majority rule should increase in the project s value and the club s enforcement capacity but decrease in the heterogeneity in preferences externalities can be internalized by adjusting the rule with heterogeneity in size or initial conditions votes should be appropriately weighted or double majorities required

is there a glass ceiling over europe exploring the gender pay gap across the wages distribution using harmonised data from the european union household panel we analyse gender pay gaps by sector across the wages distribution for ten countries we find that the mean gender pay gap in the raw data typically hides large variations in the gap across the wages distribution we use quantile regression qr techniques to control for the effects of individual and job characteristics at different points of the distribution and calculate the part of the gap attributable to differing returns between men and women we find that first gender pay gaps are typically bigger at the top of the wage distribution a finding that is consistent with the existence of glass ceilings for some countries gender pay gaps are also bigger at the bottom of the wage distribution a finding that is consistent with sticky floors third the gender pay gap is typically higher at the top than the bottom end of the wage distribution suggesting that glass ceilings are more prevalent than sticky floors and that these prevail in the majority of our countries fourth the gender pay gap differs significantly across the public and the private sector wages distribution for each of our eu countries

swimming upstream floating downstream comparing women s relative wage progress in the united states and denmark applying a new decomposition method to u s psid and danish longitudinal sample data the authors compare how u s and danish gender wage gaps developed between 1983 and 1995 in denmark they find the wage gap widened because the worsening in women s relative returns to observable human capital attributes as well as in their ranking relative to men in unobserv able productive attributes more than offset their wage gains from improved observable qualifications relative to men s in the united states in contrast the gender convergence in qualifications offset adverse influences including in creasing wage dispersion throughout the labor market to result in a narrowing of the gap the largest increase in the gap in denmark was experienced by women in the top earnings decile and the largest decline in the gap in the united states affected those at the top and in the middle of the distribution

international pollution control cooperative versus noncooperative strategies abstract international pollution control involving two neighboring countries is modeled as a simple two player dynamic game each country produces a good that is consumed by domestic households production of each consumption good results in emissions of pollutants households in each country derive utility from the consumption of the domestically produced good but incur costs through the total stock of pollution stock externality in this setting we characterize cooperative as well as noncooperative pollution control strategies of the governments of the two countries that maximize the discounted stream of net benefits of a representative consumer it turns out that when the governments are restricted to use linear strategies noncooperative behavior results in overall losses for both countries if on the contrary governments use nonlinear markov perfect strategies and the discount rate is small enough a pareto efficient steady state pollution stock can be supported as a differentiable subgame perfect equilibrium thus the emergence of first best solutions cooperative outcomes does not require any institutional arrangements threats retaliation etc but can be brought about through the use of nonlinear markov perfect equilibrium strategies

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

subgame perfect cooperative agreements in a dynamic game of climate change abstract we model climate change as a dynamic game and prove existence of a unique subgame perfect nash equilibrium spne that is also markov perfect we interpret this unique spne as the business as usual bau equilibrium and show that if the countries are not sufficiently symmetric then the familiar trigger strategy equilibria may not be pareto improvements over the bau equilibrium and may even lack efficiency properties we then motivate and introduce a subgame perfect cooperative agreement as an improvement over the bau equilibrium in the sense that every country or coalition of countries is better off in every subgame irrespective of the extent of heterogeneity of the countries we characterize subgame perfect cooperative agreements and identify sufficient conditions for their existence we show that direct or indirect transfers between countries to balance the costs and benefits of controlling climate change are a necessity and not a matter of approach

nonlinear strategies in dynamic duopolistic competition with sticky prices abstract we discuss nonlinear strategies in an infinite horizon duopoly game with sticky prices where firms maximize their discounted sum of profit we construct a stationary feedback equilibrium without guessing value functions and feedback strategies that solve the hamilton jacobi equation for this purpose we study the auxiliary equation that is derived from the hamilton jacobi equation we show that the domain of the state space plays an crucial role in characterizing feedback equilibria and discuss several implications of this observation in particular we find that when the upper bound of the state space is not very high previously unknown feedback equilibria emerge

changes in the male female wage gap 1976 85 this study uses detailed information on work experience tenure and on the job training collected in the 1976 and 1985 questionnaires of the panel study of income dynamics to account for changes in wage differentials between white men and white women over these nine years decompositions of changes in the wage gap are used to illustrate the contribution of individual factors between 1976 and 1985 the wage gap between white men and women narrowed by approximately 4 percent this study finds that nearly 50 percent of this reduction was due to average changes in job tenure and other work history variables over this period

volatility behavior of oil industrial commodity and stock markets in a regime switching environment abstract this study supplements previous regime switching studies on wti crude oil and finds two possible volatility regimes for the strategic commodity prices of brent oil wti oil copper gold and silver and the s p 500 index but with varying high to low volatility ratios the dynamic conditional correlations dccs indicate increasing correlations among all the commodities since the 2003 iraq war but decreasing correlations with the s p 500 index the commodities also show different volatility persistence responses to financial and geopolitical crises while the s p 500 index responds to both financial and geopolitical crises implications are discussed

market integration among electricity markets and their major fuel source markets dynamic price information flows among u s electricity wholesale spot prices and the prices of the major electricity generation fuel sources natural gas uranium coal and crude oil are studied multivariate time series methods applied to weekly price data show that in contemporaneous time peak electricity prices move natural gas prices which in turn influence crude oil in the long run price is discovered in the fuel sources market except uranium as these prices are weakly exogenous in a reduced rank regression representation of these energy prices

the climate policy hold up green technologies intellectual property rights and the abatement incentives of international agreements the success of global climate policies over the coming decades depends on the diffusion of green technologies this requires that international environmental agreements ieas and trade related intellectual property rights trips interact productively using a simple and tractable model we highlight the strategic reduction in abatement commitments on account of a hold up effect in anticipation of rent extraction by the innovator signatories might abate less than non signatories turning the iea brown self enforcing ieas have fewer signatories and diffusion can reduce global abatement under trips countries hosting patent holders extract rents from trips but may be better off without them

trends in the gender earnings differential in urban china 1988 2004 this paper analyzes changes in the gender earnings gap in urban china over the period 1988 2004 using urban household survey data the mean female male earnings ratio declined from 86 3 to 76 2

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

distributional changes in the gender wage gap using panel study of income dynamics psid data the authors analyze changes in wage differentials between white men and women over time and across the entire wage distribution the authors decompose distributional changes in the gender wage gap to assess the contribution of observed characteristics measuring individual productivity they find that the gender wage gap narrowed by 16 at the lowest decile and by less than 5 at the highest decile the decomposition results indicate that changes in the gender wage gap are mainly attributable to changes in educational attainment at the top of the wage distribution with a sizable part due to work history changes at the bottom the findings further reveal that the accuracy of the results depends on the direction in which the decompositions are performed

buy coal a case for supply side environmental policy free riding is at the core of environmental problems if a climate coalition reduces its emissions world prices change and nonparticipants typically emit more they may also extract the dirtiest type of fossil fuel and invest too little in green technology the coalition s second best policy distorts trade and is not time consistent however suppose that the countries can trade the rights to exploit fossil fuel deposits as soon as the market clears the above mentioned problems vanish and the first best is implemented in short the coalition s best policy is to simply buy foreign deposits and conserve them

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way

a strategic analysis of global warming theory and some numbers we model the global warming process as a dynamic commons game in which the players are countries their actions at each date produce emissions of greenhouse gases and the state variable is the current stock of greenhouse gases the theoretical analysis is complemented by a calibration exercise the first set of results establishes theoretically and then with illustrative numbers the over emissions due to a tragedy of the commons the power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry finally a complete theoretical charactrization is provided for the best equilibrium and it is shown that it has a very simple structure it involves a constant emission rate through time

gender wage inequality during sri lanka s post reform growth a distributional analysis abstract this paper investigates gender wage inequality in sri lanka during 1992 2014 a period of robust economic growth following pro market reforms the gap in mean wages between men and women decreased steadily over this period unconditional quantile regression reveals the decline in gender wage inequality was driven by the upper half of the distribution and was due to improvements in women s observable human capital yet the pay structure became more unequal indicating widening gender gaps in the returns to labor market characteristics and in unobservable determinants of wages the gender gap in pay structure widened disproportionately in the lower half of the distribution coinciding with falling absolute and relative returns to women in manufacturing industries and production occupations facing greater international competition the study also demonstrates selection bias underestimates the gender wage gap and overestimates the gains in equality over time factors that hinder gender equality in the labor market are discussed along with policy implications

performance pay and the white black wage gap we show that the reported tendency for performance pay to be associated with greater wage inequality at the top of the earnings distribution applies only to white workers this results in the white black wage differential among those in performance pay jobs growing over the earnings distribution even as the same differential shrinks over the distribution for those not in performance pay jobs we show that this remains true even when examining suitable counterfactuals that hold observables constant between whites and blacks we explore reasons behind our finding focusing on the interactions between discrimination unmeasured ability and selection

holdups standard breach remedies and optimal investment in bilateral trading problems the parties may be hesitant to make relationship specific investments without adequate contractual protection we postulate that the parties can sign noncontingent contracts prior to investing and can freely renegotiate them after information about the desirability of trade is revealed we find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages moreover specific performance can induce both parties to invest efficiently if a separability condition holds expectation damages on the other hand is poorly suited to solve bilateral investment problems forthcoming the american economic review please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

evaluating a simple method for estimating black white gaps in median wages racial differences in wage rates are important measures of economic inequality among races because for almost all individuals labor income constitutes the most important component of lifetime income as a consequence the prices at which individuals may sell their time provide vital infornation about the distribution of welfare and economic success however we only observe prices when market transactions occur and thus we only observe wage rates for individuals who are employed since the wages of employed workers are not randomly sampled from the distribution of potential wages it is difficult to draw inferences concerning racial gaps in potential wages from data on observed wage rates richard butler and james heckman 1977 raised this issue in the context of assessing the impact of government policies on racial income inequality charles brown 1984 james smith and finis welch 1989 and amitabh chandra 2000 also examine the extent of racial differences in participation rates and the impact of these differences on measures of racial wage and income gaps this topic remains salient in part because employment rates among working age black males remain significantly below corresponding rates for whites neal and johnson 1996 estimated racial gaps in median wages among men by imputing wages of zero for all men in a particular crosssection who report that they have not worked at all during the survey period under a specific assumption concerning the distribution of missing wages this procedure yields consistent estimates of the black white gap in median wages conditional on observed characteristics below we spell out this assumption and use panel data to investigate the extent to which it may be violated in cross section wage analyses our results suggest that imputing wages of zero for unemployed individuals may provide a reasonable way to estimate median wage regressions among men

provision of a public good with multiple dynasties carbon emissions create externalities across countries and generations these externalities depend on the degree of contemporaneous cooperation and intergenerational altruism i study the relative importance of these features in determining equilibrium climate policy by imbedding an olg framework with intergenerational altruism into a differential game among dynasties each representing a coalition of nations there is an isomorphism between pure and paternalistic altruism i illustrate the multiplicity of equilibria using an analytic linear in state model equilibrium steady states are more sensitive to small changes in cooperation than altruism consideration of large changes in altruism and cooperation can reverse this ranking

are policymakers ambiguity averse we investigate the ambiguity preferences of a unique sample of real life policymakers at the paris un climate conference cop21 we find that policymakers are generally ambiguity averse using a simple design we are moreover able to show that these preferences are not necessarily due to an irrational behaviour but rather to intrinsic preferences over unknown probabilities exploring the heterogeneity within our sample we also show that the country of origin and the degree of quantitative sophistication affect policymakers attitudes towards compound risk but not towards ambiguity robustness results are obtained in a lab experiment with a sample of university students

dynamic jumps in global oil price and its impacts on china s bulk commodities abstract this paper investigated the impacts of oil price shocks especially dynamic jumps in its returns on china s bulk commodity markets at both the aggregate and industry levels after setting a zero lower bound to the jump intensity of the arji model we found that dynamic jumps exist in oil price movements moreover under shocks of oil price jumps not only the returns but also the risks of china s bulk commodity markets are affected significantly and the reactions of risks are characterized by overreactions meanwhile by decomposing oil price shocks into expected positive negative and unexpected positive negative components we discovered that the impacts of unexpected shocks are positive and significantly asymmetric at both levels while those of the expected shocks are negative and insignificantly asymmetric at the industry level in addition the volatility clustering of all price movements and the permanent volatility effects on china s bulk commodities are also authenticated by applying the garch family models

a distributional analysis of the gender wage gap in bangladesh this article empirically investigates the gender wage gap in bangladesh during the period 2005 2009 applying unconditional quantile regression models the article demonstrates that women are paid less than men throughout the wage distribution and the gap is higher at the lower end of the distribution discrimination against women is the primary determinant of the wage gap the article also demonstrates that the observed gender wage gap is likely to be underestimated if we ignore selection in full time employment a number of policy implications are discussed

the anti paradox of cooperation diversity may pay abstract this paper considers the stability and success of a public good agreement we allow for any type and degree of asymmetry regarding benefits and costs we ask the question whether asymmetry and which type and degree of asymmetry is conducive to cooperation we employ a simple non cooperative game theoretic model of coalition formation and derive analytical solutions for two scenarios an agreement without and with optimal transfers a central message of the paper is that asymmetry does not have to be an obstacle for successful cooperation but can be an asset we qualify two central results in the literature firstly the paradox of cooperation known since barrett 1994 and reiterated by many others afterwards stating that under those conditions when cooperation would matter most stable agreements achieve only little secondly a kind of coalition folk theorem known without proof in the literature for a long time stating that without transfers stable coalitions will be smaller with asymmetric than symmetric players we show that even without transfers the grand coalition can be stable if there is a negative covariance between benefit and cost parameters with massive gains from cooperation moreover with transfers many distributions of benefit and cost parameters lead to a stable grand coalition again some of them implying huge gains from cooperation stability and success greatly benefit from a very skewed asymmetric distribution of benefit and costs i e diversity may pay

addressing global environmental externalities transaction costs considerations is there a way to understand why some global environmental externalities are addressed effectively whereas others are not the transaction costs of defining the property rights to mitigation benefits and costs is a useful framework for such analysis this approach views international cooperation as a contractual process among country leaders to assign those property rights leaders cooperate when it serves domestic interests to do so the demand for property rights comes from those who value and stand to gain from multilateral action property rights are supplied by international agreements that specify resource access and use assign costs and benefits including outlining the size and duration of compensating transfer payments and determining who will pay and who will receive them four factors raise the transaction costs of assigning property rights i scientific uncertainty regarding mitigation benefits and costs ii varying preferences and perceptions across heterogeneous populations iii asymmetric information and iv the extent of compliance and new entry these factors are used to examine the role of transaction costs in the establishment and allocation of property rights to provide globally valued national parks implement the convention on the international trade in endangered species of wild fauna and flora execute the montreal protocol to manage emissions that damage the stratospheric ozone layer set limits on harvest of highly migratory ocean fish stocks and control greenhouse gas emissions jel d23 p14 q22 q51 q54 q58

repeated moral hazard the role of memory commitment and the access to credit markets abstract the dynamic dimension introduces new questions in moral hazard models thus the roles of memory and commitment have recently raised a marked interest the goal of this paper is to discuss and clarify the issues at hand and to present some new results we show that two conditions are necessary for the optimal long term contract to be implementable via spot contracts first the long term optimum should be renegotiation proof second spot contracts should provide efficient consumption smoothing we discuss how the availability of credit to the agent affects these two prerequisites we also study the hitherto neglected case in which the repetition of the moral hazard problem generates hidden information at recontracting dates the optimal renegotiation proof contract then implements the minimum effort level unless it involves randomized savings

bargaining and international environmental agreements this article surveys game theoretic papers focused on the negotiation process that leads to an international environmental agreement most of the papers considered apply bargaining theory although other approaches have been considered as well among other issues the papers considered analyze the burden sharing rule that will result from a negotiation over a global public good the role of information asymmetries the impact of unilateral commitments delegation and ratification whether or not countries are going to form groups during the negotiation process and the influence of the expectation of a future bargaining process on investment decisions the basic bargaining model is optimistic as it predicts that countries will reach an efficient agreement immediately however all the developments of this model surveyed afterwards are rather pessimistic and even the basic model has perverse incentives for pre negotiation signals

cooperation on climate change mitigation abstract we analyze conditions under which it is possible to achieve efficient mitigation of greenhouse gas emissions with a self enforcing international agreement in which all countries find it in their self interest to abide by the agreement we model the choice of emissions by countries as a dynamic game we use a two part punishment scheme for deviations from an agreement that is renegotiation proof and show when this scheme supports the efficient outcome as a subgame perfect equilibrium using numerical examples we show that an efficient subgame perfect equilibrium exists for a range of reasonable parameter values the existence of such equilibrium may be non monotonic in the discount rate and the ratio of slope of marginal abatement cost and marginal damages

climate contracts a game of emissions investments negotiations and renegotiations the paper presents a dynamic game where players can contribute to a public bad invest in technologies and write incomplete contracts despite the n 1 stocks in the model the analysis is tractable and the symmetric markov perfect equilibrium unique the framework helps to analyze emissions investments and international environmental agreements if only the emission levels are contractible then investments are suboptimally small if the contract is short term or close to its expiration date to encourage investments the optimal contract is more ambitious if it is short term and it is tougher to satisfy close to its expiration date and for countries with small investment costs if renegotiation is possible such an incomplete contract implements the rst best the results have important lessons for how to design a climate treaty

subgame perfect cooperation in an extensive game abstract we propose a new solution concept for games in extensive form that incorporates both cooperation and subgame perfection from its definition and properties the new solution concept named the subgame perfect core is a refinement of the core of an extensive game in the same sense as the set of subgame perfect nash equilibria is a refinement of the set of nash equilibria to further characterize the subgame perfect core we show that each subgame perfect core payoff vector can be implemented as a non cooperative solution as it is a subgame perfect nash equilibrium payoff vector of an extensive form game that is closely related to the original game we also motivate and introduce a related concept of subgame perfect strong nash equilibrium of an extensive game that is coalition proof

contracting on time the paper shows how the time considerations especially those concerning contract duration affect incomplete contract theory time is not only a dimension along which the relationship unfolds but also a continuous verifiable variable that can be included in contracts we consider a bilateral trade setting where contracting investment trade and renegotiation take place in continuous time we show that efficient investment can be induced either through a sequence of constantly renegotiated fixed term contracts or through a renegotiation proof evergreen contract a perpetual contract that allows unilateral termination with advance notice we provide a detailed analysis of properties of optimal contracts

the effect of environmental policies on risk reductions in energy generation abstract we demonstrate that environmental policies can decrease the risks in energy generation for private investors when several renewable technologies are simultaneously triggered this is because diverse renewable technologies can hedge the intermittent generation of other forms of renewable power our study is distinct from previous literature which has not examined environmental policies through a risk reduction analysis or has only considered a few technologies such as wind and solar when analyzing risk reduction benefits this paper is important as environmental policies can be justified not only due to environmental benefits but also economically from a risk reduction perspective by using basic diversification gains

labor market discrimination against hispanic and black men h ispanic american men have lower average wage rates than white non hispanics in 1975 the average white non hispanic male wage earner in the united states earned 5 97 an hour mexican men earned 4 31 72 as much as white non hispanics puerto rican men earned 4 52 76 as much and cuban men earned 5 33 89 as much as white non hispanics by way of comparison black men s average wages in 1975 were 4 65 78 of the white male wage several possible reasons for the hispanics lower wages come to mind among them are age and education geographic location immigration language difficulties and discrimination for example as shown in table 1 mexicans and puerto ricans are younger on average than the white non hispanic population and earnings tend to rise with age hispanics have lower average levels of education than white non hispanics and wages are positively associated with education many mexican americans live in the southwest where prices are relatively low moreover hispanics are more likely to be recent immigrants and to lack fluency in english than white non hispanics and so to be at a disadvantage in the labor market in addition there is a widespread belief that hispanics suffer from employment discrimination and cannot obtain the wages that their human capital would command if they were non hispanic whites how much of the wage differentials described above are due to each of these factors and to other inter group differences in wage related characteristics in particular how much impact does labor market discrimination have on the average hispanic man s wage and how does this compare with discrimination against blacks this paper provides answers to these questions a few other efforts have been made to analyze the relative earnings of hispanic and white nonhispanic men using 1960 and 1970 census data fogel 1966 poston and alvirez 1973 poston alvirez and tienda 1976 long 1977 and gwartney and long 1978 we use more recent data from the 1976 survey of income and education this data set enables us to measure wage rates more accurately and to specify the wage function more completely than does the census unlike previous analysts in estimating the wage function we take account of possible selectivity bias due to the distinction between average wage offers and average observed wages thus we hope to obtain a more accurate and up to date measure of labor market discrimination against hispanic men section ii explains the method used to separate the minority white non hispanic wage differential into the portions due to differences in average characteristics and the portion due to differences in unobserved factors and discrimination taking into account the possibility of selectivity bias in the observed wage sample section iii describes the data used in the study and the specification of the wage equation the breakdown of the observed wage differentials into components due to differences in participation in the wage and salary sector local price levels average characteristics and discrimination are presented in section iv section v summarizes our findings and discusses their implications for efforts to improve the economic situation of hispanics in the united states

climate treaties and breakthrough technologies an effective climate change treaty must promote the joint supply of two global public goods climate change mitigation and knowledge of new technologies that can lower mitigation costs r d is especially needed to bring about substantial long term reductions in atmospheric concentrations of greenhouse gases for this will require the development and diffusion of revolutionary breakthrough technologies martin i hoffert et al 2002 in principle such an outcome could be realized by the kyoto protocol approach if that agreement were strengthened over time however that response may be inadequate kyoto makes no provision for r d and as i shall demonstrate unlikely to succeed can a treaty system relying directly on targeted r d and the adoption of breakthrough technologies perform better in this same setting of anarchic international relations i will show that as a general rule the answer is no essentially the same forces that undermine kyoto also challenge the r d and technology approach there is one exception to this rule r d leading to breakthrough technologies exhibiting increasing returns can improve dramatically on the kyoto approach even when these technologies are otherwise inferior to the alternatives available this suggests that our approach to treaty design should be strategic

estimating strategic models of international treaty formation this article develops an empirical framework for analysing the timing of international treaties a treaty is modelled as a dynamic game among governments that decide on participation in every period the net benefit of treaty membership increases over time spillovers among members and non members accelerate or delay treaty formation by transforming participation into a strategic complement or substitute respectively the predictions of the model inform the estimation of the structural parameters based on a cross section of treaty ratification dates with this approach i estimate the sign and magnitude of strategic interaction in the ratification of the montreal protocol in the formation of europe s preferential trade agreements and in the growth of germany s network of bilateral investment treaties through a series of counterfactual experiments i explore different mechanisms that give rise to strategic interaction in the formation of these treaties

the principal agent model with multilateral externalities an application to climate agreements we consider contracting of a principal with an agent if multilateral externalities are present the motivating example is that of an international climate agreement given private information about the willingness to pay wtp for emissions abatement due to multilateral externalities the principal uses her own emissions besides subsidies to incentivize the agent and to assure his participation optimal contracts equalize marginal abatement costs and thus can be implemented by a system of competitive permit trading moreover optimal contracts can include a boundary part i e the endogenous type dependent participation constraint is binding which is not a copy of the outside option of no contract compared to this outside option a contract can increase emissions of the principal for types with a low wtp and reduce her payoff for high types subsidies can be constant or even decreasing in emission reductions and turn negative so that the agent reduces emissions and pays the principal

threatening thresholds the effect of disastrous regime shifts on the non cooperative use of environmental goods and services abstract this paper presents a tractable dynamic game in which agents jointly use a resource the resource replenishes fully but collapses irreversibly if the total use exceeds a threshold the threshold is assumed to be constant but its location may be unknown consequently an experiment to increase the level of safe resource use will only reveal whether the threshold has been crossed or not if the consequence of crossing the threshold is disastrous i e independent of how far the threshold has been exceeded it is individually and socially optimal to update beliefs about the threshold s location at most once the threat of a disastrous regime thereby facilitates coordination on a cautious equilibrium if the initial safe level is sufficiently valuable the equilibrium implies no experimentation and coincides with the first best resource use the less valuable the initial safe value the more the agents will experiment for sufficiently low initial values immediate depletion of the resource is the only equilibrium when the regime shift is not disastrous but the damage depends on how far threshold has been exceeded experimentation may be gradual

labor market dropouts and trends in the wages of black and white men there is continuing debate over whether and to what degree estimations of black white wage convergence are biased because they leave labor market dropouts out of the picture if a high proportion of blacks become discouraged and cease searching for jobs and if those dropouts have on average poor job prospects the average wage of black workers who remain in the labor market will be an upwardly biased estimate of the average wage across the population this paper introduces a simple method of imputing wages to non workers when non workers are accounted for in the calculations real wage growth for prime age black men over the 1969 98 period is reduced approximately 40 and black white wage convergence is reduced by approximately one third the author finds that a source of bias as important as falling employment rates is the growing gap between wages of workers and potential wages of non workers

electricity consumption and economic growth in india abstract this paper tries to examine the granger causality between electricity consumption per capita and gross domestic product gdp per capita for india using annual data covering the period 1950 51 to 1996 97 phillips perron tests reveal that both the series after logarithmic transformation are non stationary and individually integrated of order one this study finds the absence of long run equilibrium relationship among the variables but there exists unidirectional granger causality running from economic growth to electricity consumption without any feedback effect so electricity conservation policies can be initiated without deteriorating economic side effects

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the mirrlees approach to mechanism design with renegotiation with applications to hold up and risk sharing the paper studies the implementation problem first analyzed by maskin and moore 1999 in which two agents observe an unverifiable state of nature and may renegotiate inefficient outcomes following play of the mechanism we develop a first order approach to characterizing the set of implementable utility mappings in this problem paralleling mirrlees s 1971 first order analysis of standard mechanism design problems we use this characterization to study optimal contracting in hold up and risk sharing models in particular we examine when the contracting parties can optimally restrict attention to simple contracts such as noncontingent contracts and option contracts where only one agent sends a message

the market reaction to stock splits in this paper a model of market reaction to stock splits is presented and tested we argue that the announcement of a split sets off the following chain of events the market recognizes that subsequent to the reverse split ex day the daily number of transactions along with the raw volume of shares traded will increase decrease this increase in volume results in an increase in the noisiness of the security s return process the increase in noise raises the tax option value of the stock and it is this value that generates the announcement effect of stock splits empirical evidence using security returns daily trading volume and shareholder data strongly supports this theory the evidence in conjunction with this theory also agrees with extant literature that splits result in decreased liquidity but there is no evidence that this reduction in liquidity is priced stock splits have presented finance theorists with a conundrum these nonevents seem to be a purely cosmetic change nevertheless research shows that significant price reaction is attributable directly to splits recently grinblatt masulis and titman 12 show that even in clean cases i e where no other firm specific event coincides with a split announcement stock splits generate a positive abnormal return of close to three percent upon announcement and an additional one percent abnormal return on the ex day the primary contribution of this paper is to provide and empirically support a rational explanation for the split reverse split announcement effect a recent study by ohlson and penman 16 documents a statistical aberration that stock volatilities increase by an average of thirty five percent subsequent to split ex days in this paper we provide a direct statistical extension of ohlson and penman in three directions first we examine reverse splits and demonstrate that they exhibit reductions in volatility second we isolate the shift in volatility as between the nonsystematic and systematic components finally we establish a link between trading volume and the increased volatility copeland 9 shows that contrary to market folklore the liquidity of a stock is actually reduced by a split we provide a statistical extension to copeland by examining the volume pattern of reverse splits copeland observes a drop in split adjusted volume and concludes that liquidity has declined once again we show that the behavior of stocks that reverse split is opposite that of splitting stocks

dynamic free riding with irreversible investments we study the markov equilibria of a model of free riding in which n infinitely lived agents choose between private consumption and irreversible contributions to a durable public good we show that the set of equilibrium steady states converges to a unique point as depreciation converges to zero for any level of depreciation moreover the highest steady state converges to the efficient level as agents become increasingly patient these results are in contrast to the case with reversible investments where a continuum of inefficient equilibrium steady states exists for any level of depreciation discount factor and size of population

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

recursive nash bargaining over a productive asset abstract we propose an equilibrium concept the recursive nash bargaining solution that describes the outcome of repeated negotiations between two rational agents under the assumptions that the state of the economic system under consideration changes according to the actions of the players and that neither party can make binding commitments to future behavior this equilibrium is dynamically consistent but typically not pareto efficient as an application we compute the recursive nash bargaining solution in a model of two heterogeneous agents bargaining over the use of a productive asset with constant gross rate of return and study how the time preference rates and the elasticities of substitution affect the solution

on the decomposition of wage differentials the often used method for decomposing wage differentials into human capital and discrimination components is reformulated so that both t he disadvantage or cost discrimination it imposes on a black or minority wage earner and the advantage or benefit it bestows on a white or majority wage earner can be estimated copyright 1988 by mit press

the incentives for north south transfer of climate mitigation technologies with trade in polluting goods the need to transfer climate mitigation technologies towards the developing world has been acknowledged since the beginning of climate negotiations little progress has however been made as shown by article 10 of the paris agreement one reason is that these technologies could become vital assets to compete on global markets this paper presents a partial equilibrium model with two regions the north and the south and imperfect competition in the international polluting goods market to analyze the north s incentives to accept technology transfer results crucially depend on the existence of environmental cooperation when both northern and southern governments set emission quotas non cooperatively inducing fewer global emissions is a necessary but not sufficient condition for the north to accept the transfer in contrast when governments set quotas cooperatively the north has no incentive to share its technology either before or after the agreement technology transfer commitments may be included in the agreement but with no effect on global emissions and global surplus the only impacts are distributional technology transfers and side payments may be substitute instruments

incomplete contracts specific investments and risk sharing an optimal contract design problem is considered contracts which are incomplete and simple are used to investigate the extent to which constrained revisions can mitigate inefficiencies resulting from contractual incompleteness an optimal contract is characterized in two cases first when a contract is being used to facilitate trade between two risk neutral parties who must make relationship specific investments it is possible to implement the first best by a simple contract second when a contract is being used to share risk it is generally not possible to implement the first best when one party is risk neutral however it is possible to implement the first best by assigning all the ex post decision rights to that party

can negotiations prevent fish wars abstract the standard alternating offer model is extended by integrating it with the levhari and mirman fish war model in order to investigate negotiations over fish quota the disagreement actions are endogenous the interior and linear markov perfect equilibrium mpe results in immediate agreement on an efficient path of fish quota this mpe is not analytically tractable numerical solutions show that patience is a disadvantage in this mpe and small differences in patience lead to large asymmetries in the bargaining outcome

existence and properties of equilibria for a dynamic game on productive assets abstract we consider a model in which two agents share access to the same stock of a productive asset and study the implications of non cooperative consumption behavior over time under standard assumptions on the production function we construct infinitely many nash equilibria all of which consist of stationary markovian strategies these equilibria result in overconsumption so that the uniquely determined long run asset stock is too low as compared to the cooperative solution however in the limit as the discount rate becomes sufficiently small the stead states generated by the markovian nash equilibria converge to the efficient steady state journal of economic literatureclassification numbers c73 o41 q22

dynamic voluntary provision of public goods abstract the paper considers a dynamic public goods problem in which individuals contributions are accumulated over time analyzing the infinite duration dynamic game with continuous contributions and flow benefits the paper demonstrates that the free riding problem is aggravated when players contributions are conditional on the observable collective contributions hence without commitment an additional incentive to depress contributions arises a current contributor can free ride on all future contributions as well as on current ones

participation and duration of environmental agreements we analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies if complete contracts are feasible participants eliminate the holdup problem associated with their investments however most countries prefer to free ride rather than participate if investments are noncontractible countries face a holdup problem every time they negotiate but the free rider problem can be mitigated and significant participation is feasible participation becomes attractive because only large coalitions commit to long term agreements that circumvent the holdup problem under well specified conditions even the first best outcome is possible when the contract is incomplete

electricity prices and fuel costs long run relations and short run dynamics the paper examines the long run relation and short run dynamics between electricity prices and three fossil fuel prices coal natural gas and crude oil using annual data for the u s for 1960 2007 the results suggest 1 a stable long run relation between real prices for electricity and coal 2 bi directional long run causality between coal and electricity prices 3 insignificant long run relations between electricity and crude oil and or natural gas prices and 4 no evidence of asymmetries in the adjustment of electricity prices to deviations from equilibrium a number of implications are addressed

the message in north american energy prices how similar is the price behavior of north american natural gas fuel oil and power prices using current state of the art econometric methodology we explore the degree of shared trends across north american energy markets across these markets there appear to be effective arbitraging mechanisms for the price of natural gas and fuel oil but not for the price of electricity

climate agreements in a mitigation adaptation game abstract we analyze the strategic interaction between mitigation public good and adaptation private good strategies in a climate agreement we show the fear that adaptation will reduce the incentives to mitigate carbon emissions may be unwarranted adaptation can lead to larger self enforcing agreements associated with higher global mitigation levels and welfare if it causes mitigation levels between different countries to be no longer strategic substitutes but complements we argue that our results extend to many public goods the well known problem of easy riding may turn into easy matching if the marginal utility of public good consumption is strongly influenced by private consumption

interpreting bargaining strategies of developing countries in climate negotiations a quantitative approach despite the efforts made during the last climate conferences cops countries participating in the negotiation process are still far from reaching an agreement on the implementation of a new post kyoto climate regime the growing role played by developing countries in negotiations is one of the main causes behind the deadlock further attention should therefore be paid to the composition of the alliances formed by developing countries in order to better understand the key structural features driving their bargaining positions by applying a cluster analysis this paper aims to investigate the role played by heterogeneity in specific characteristics of developing countries in explaining divergent costs and benefits associated with alternative climate negotiation outcomes by clustering developing countries according to their economic geographic environmental energy and social characteristics the paper presents some considerations on climate political economy strategies in these countries with respect to existing bargaining coalitions