the symmetry between controlling pollution by price and controlling it by quantity under ideally competitive conditions both controlling pollution by price using a combined charge subsidy scheme and controlling it by quantity using a marketable permit scheme can achieve short and long run efficiency and also political acceptability provided that both schemes embody the same degree of environmental ownership the resulting full symmetry between control by price and control by quantity a symmetry overlooked in the literature because of the entry exit assumptions automatically made for most subsidy schemes allows a useful practical choice to be made between the two control systems

linear pigovian taxes and the optimal size of a polluting industry confusion surrounding the appropriateness of long run considerations in effluent regulation has arisen in the literature and recently carried over into textbooks we use a factor input model under oligopsony to show that when firms can influence the level of marginal damages a linear pollution tax does not satisfy the long run entry exit condition previous results to the contrary are shown to depend on restrictive assumptions efficient policy design requires a lump sum refund or any one of various non linear pricing schemes jel classification q2 l1 il y a beaucoup de confusion dans les debats qui entourent la reglementation des effluents et son caractere plus ou moins appropriea long terme tant dans la litterature specialisee que dans les manuels les auteurs tentent d eliminer cette confusion en analysant les emissions a l aide d un modele standard de demande d intrant quand les entreprises peuvent influencer la valeur presente des dommages marginaux un impot lineaire sur la pollution n entraine pas necessairement les decisions appropriees d entree et de sortie on peut corriger le probleme a l aide d un remboursement forfaitaire ou de l une ou l autre des formes de tarification non lineaire

effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

how does political connection affect firm financial distress and resolution in china we examine the impact of political connections on firm performance financial distress and its resolution in china a country where government influence over stock markets has been demonstrated to

the market for used capital endogenous irreversibility and reallocation over the business cycle capital reallocation is strongly procyclical in the data but in standard business cycle models with heterogeneous firms it is countercyclical in this paper i argue that endogenizing the price of used capital solves this puzzle first i show empirically that for several sectors the price of used investment goods relative to new is procyclical second i build an equilibrium model of endogenous partial irreversibility with heterogeneous firms facing aggregate and idiosyncratic productivity shocks used investment goods are imperfect substitutes for new investment because of firm level capital specificity and this creates a downward sloping demand for used capital that shifts in response to aggregate shocks the model generates a procyclical resale price and procyclical reallocation in a recession when the price of used capital is low both static and dynamic real options effects induce unproductive firms to sell fewer assets to more productive firms this generates an amplification mechanism for measured aggregate tfp finally the model shows that endogenous irreversibility smooths aggregate investment and generates a countercyclical cross sectional dispersion of returns from capital consistent with the empirical evidence

are emissions permits regressive grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders consequently they can be highly regressive even if the poor do not have large budget shares for polluting goods using an analytical model this paper estimates the burden of emissions permits borne by different income groups under control of power plant emissions of carbon so2 and nox we also compare the burden borne by poor households under permits with that under emissions taxes performance standards technology mandates and input taxes and we show how the social costs of policies differ from efficiency costs when society has aversion to inequality

liquidity effects and the monetary transmission mechanism several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment existing quantitative general equilibrium models which allow for capital accumulation are inconsistent with this view there does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates output and employment to a money supply shock however a key shortcoming of these models is that they cannot rationalize persistent liquidity effects this paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence we argue that once a simplified version of the model in christiano and eichenbaum 1991 is modified to allow for extremely small costs of adjusting sectoral flow of funds positive money shocks generate long lasting quantitatively significant liquidity effects as well as persistent increases in aggregate economic activity

a cournot mechanism for pollution control under asymmetric information the contribution of this paper is to show that a simple nonlinear tax can achieve a long run socially optimal level of pollution without the regulator knowing marginal abatement costs firms are charged their differential contribution to total damages evaluated at the upper margin of current emissions this induces a cournot game in pollution levels we show that the nash equilibrium exists corresponds to the socially optimal long run output and emission levels and number of firms is stable and can be reached by iterative computations where conjectures are formed using a linear estimator based on past emission levels

environmental policy intra industry trade and transfrontier pollution the paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution we use a dixit stiglitz typemodel of monopolistic competition with an endogenous number of firms production generates environmental externalities which spill over to theother country it is shown that environmental policy has an impact onmarket structure at home and abroad these market structure effectsinduce changes in emissions abroad in contrast to what has been derivedin earlier contributions it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad the paperderives these results and provides the economic intuition behind them finally conditions for optimal environmental policies are derived

modelling business cycle nonlinearity in conditional mean and conditional variance some international and sectoral evidence this paper tests for the presence of output mean and variance nonlinearities in international industrial production and uk and us sectoral production growth rates using armagqarch bilinear bl and joint bl gqarch models arma gqarch models confirm the presence of asymmetric variance effects in italian uk and us industrial production and in all sectors other than us nondurables and such that the conditional variance of output is increased following negative shocks bl models are identified for german italian and us industrial production and us manufacturing while bl gqarch models of joint nonlinearity in both conditional mean and conditional variance are also found to hold for us industrial production and manufacturing moreover with the exception of italy all bl and bl qarch models provide superior out of sample mean forecasts relative to forecasts from both naive models and models of the arma gqarch class

financial distress outside directors and corporate tax aggressiveness spanning the global financial crisis an empirical analysis abstract we examine financial distress and tax aggressiveness spanning the global financial crisis gfc of 2008 and the impact of the interaction between board independence and firm specific financial distress on tax aggressiveness our regression results show that both financial distress and the gfc are positively associated with tax aggressiveness more importantly we find that the positive association between financial distress and tax aggressiveness is magnified by the gfc we also observe that the interaction between board independence and financial distress is positively associated with tax aggressiveness our results are robust to multiple measures of financial distress and tax aggressiveness

prices vs quantities the effects on technology choice abstract it is well known that price and quantity based regulation approaches provide different investment incentives but usually only the effect on the level of investment is studied in this paper we show that under uncertainty they also lead to the adoption of different technologies due to the disparate risks that a regulated firm is exposed to different regulatory instruments induce different technologies and this effect cannot be compensated by varying the design of the instruments furthermore price based instruments lead to the adoption of a socially suboptimal technology so that the inclusion of technology choice provides a bias in favor of a quantity based regulation compared with weitzman s weitzman m l 1974 prices vs quantities review of economic studies 41 477 491 criterion

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

deposit insurance and wealth effects the value of being too big to fail this paper investigates the effect on bank equity values of the comptroller of the currency s announcement that some banks were too big to fail and that for those banks total deposit insurance would be provided using an event study methodology we find positive wealth effects accruing to tbtf banks with corresponding negative effects accruing to non included banks we demonstrate that the magnitude of these effects differed with bank solvency and size we also show that the policy to which the market reacted was that suggested by the wall street journal and not that actually intended by the comptroller the role of deposit insurance has become a topic of increasing debate advocates argue that by removing the incentive to run deposit insurance protects individual financial institutions from instability in the intermediation process thereby providing stability to the financial system as a whole 1 the recent rise in bank failures and the concomitant crises in the s l industry however demonstrate that this stability is not guaranteed moreover critics note that deposit insurance may introduce incentive problems and wealth effects into the financial system both of which can impede the effective functioning of any deposit insurance system these problems have prompted concern about the structure of the current deposit insurance system and have led to numerous proposals regarding its restructuring 2 this paper investigates one aspect of this debate by analyzing the effect on bank equity values of the policy decision to insure completely some banks but not others specifically in september 1984 the comptroller of the currency testified before congress that some banks were simply too big to fail tbtf and that for those banks total deposit insurance would be provided while not explicitly naming the banks the comptroller admitted that this policy would apply to the eleven largest banks using an event study methodology we analyze

outage costs in chilean industry this paper estimates the cost of energy shortages to chilean industry the information was obtained from a sample survey carried out shortly after the 1989 electricity restriction the results obtained show that a 10 one month equiproportional restriction involves an average net outage cost of us 7 7 kw h 1 in the same scenario the average outage cost drops to us 3 2 kw h 1 when a limited selective restriction is applied we show that under current legislation the outage cost in fact lies between the costs of an equiproportional and a selective restriction however subtle modifications to legislation would make it possible to allocate the scarce supply efficiently

does bank ownership increase firm value evidence from china abstract direct bank ownership of company shares is believed to benefit borrowing companies in developed markets however little is known about how such bank relationship works in emerging markets where the relative costs and benefits of such practice become less straightforward due to loose institutional background and weak governance utilizing novel data on bank equity ownership and board structure of listed companies in china one of the leading emerging markets we find that 1 banks hold considerable shares of listed companies 2 banks appoint board members through equity holdings 3 bank ownership promotes company access to bank capital 4 companies with banks as leading shareholders witness relatively poor operating performance such results are robust with alternative performance measures industries and sample periods further analysis indicates that inefficient investments resulting from bank ownership are responsible for the disappointing performance our results provide new insights to the debate regarding the merits of bank equity ownership of companies and emphasize how banking and corporate finance behave differently in emerging markets due to their unique institutional background

optimal environmental regulation under asymmetric information abstract a market model of environmental regulation with interdependent production and pollution abatement costs and heterogeneous firms is developed firms have private information about costs which have a quadratic form firms pursue bayes nash strategies in communication with the regulator the full information optimum cannot be attained unless gains from trade in the product market net of external damages exceed the information rents earned by firms aggregate output and externality levels are lower at the regulated equilibrium than at the full information social optimum

partial adjustment without apology econometric partial adjustment models perform relatively well at the aggregate level however many kinds of microeconomic behavior involve discrete and occasional choices analyzing the classic employment adjustment problem we show how a generalized partial adjustment model tractably accommodates both observations by aggregating the actions of heterogeneous producers facing fixed adjustment costs aggregate disturbances cause changes in establishment level target employment and in the measure of establishments actively adjusting to their target whereas aggregate responses exhibit partial adjustment our framework also can be applied in general equilibrium settings with persistent idiosyncratic shocks without forfeiting the convenient use of linear solution methods

second best energy policies for heterogeneous firms this paper investigates second best issues in the regulation of external costs of energy use by heterogeneous firms the efficiency of regulatory energy policies depends in general on the policy incentives given for both output reduction and input substitution the resulting endogeneity of firms supply functions appears to lead to complicated policy rules in contrast to earlier efforts the analysis considers an arbitrarily large number of non identical price taking firms in a joint market a large variety of possible production functions including varying levels of economies of scale and possibilities for input substitution and elasticities of market demand which may vary from completely elastic to completely inelastic two second best instruments are considered namely output taxes and energy efficiency standards and are compared to the benchmark of first best energy taxes the underlying market factors determining the relative efficiency of these second best instruments when used optimally are identified

free riding carbon treaties and trade wars the role of domestic environmental policies this paper uses a calibrated general equilibrium model of north south trade with carbon emissions to explore the strategic open economy implications of price and quantity based instruments for co2 emission reduction we compute non cooperative environmental and trade policy equilibria and nash bargaining outcomes in environmental policies with side payments of cash results show that quotas can lead to higher internalization levels in a non cooperative zero tariff equilibrium in comparison with emission fees if tariffs are also chosen non cooperatively the form of policy instrument used affects equilibrium tariffs with quotas leading to lower trade barriers particularly under a regional carbon treaty

the dual political economy of taxes and tradable permits abstract the widely accepted difference in the political economy of taxes and tradable permits results from overly simple models a more general model shows that the distributional impacts driving the political economy of grandfathered permits can be similar for both policies

designing development planning charges settlement patterns cost recovery and public facilities there is a large body of literature that discusses the control of settlement patterns using traditional planning instruments whilst there is some theoretical literature discussing the use of development charges to influence settlement patterns by addressing market failure there is limited literature examining how such charging is implemented in practice this paper presents the theoretical basis for development charging based on the pigouvian tradition and discusses how these charges can be calibrated it identifies the potential for second best approaches including hypothecation of revenues this approach is distinguished from infrastructure charging which is a cost recovery instrument the irish system of infrastructure charging is assessed as a means of exploring how current instrument design could be improved to align with policy aspirations using the lessons that theory provides

administrative costs and instrument choice for stochastic non point source pollutants this paper extends the empiricalanalysis of non point source pollution to thecase where the pollutant is stochastic andalternative regulatory instruments havedifferent administrative costs it also appliesa method of stochastic programming whereemissions are log normally distributed forthe kennet catchment in south west england werank a range of policies in terms of abatementcosts alone and total costs abatement andadministrative costs on the basis ofabatement costs alone a uniform emission taxis the cost minimising policy but on the basisof total cost a nitrogen input tax is theleast cost policy furthermore the policyranking based on total costs changes as thereliability standard increases

tax versus emissions trading scheme in the long run in this paper we compare the performance of emission taxes and tradable permits under free market entry when firms face idiosyncratic ex ante cost uncertainty we show that under auctioned permits insufficient entry occurs while under a linear emission tax scheme depending on parameters market entry can be either excessive or insufficient our long run analysis thus contrasts with spulber s 1985 equivalence result and also modifies weitzman s result in favor of an ets in that the superiority of a tax over an ets is not guaranteed even when the weitzman condition favors a tax we also show that an ets is superior to a tax scheme when the entry cost is low and the magnitude of uncertainty asymmetric information and the size of the output market are large

nonconvex factor adjustments in equilibrium business cycle models do nonlinearities matter recent empirical analysis has found nonlinearities to be important in understanding aggregated investment using an equilibrium business cycle model we search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs we find that while such costs lead to nontrivial nonlinearities in aggregate investment demand equilibrium investment is effectively unchanged our finding based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity is robust to the introduction of shocks to the relative price of investment goods

emissions trading with updated allocation effects on entry exit and distribution allocation of emissions allowances may have significant distributional and efficiency effects it is well known that cost efficiency may be achieved if allowances are auctioned or distributed in a lump sum manner e g based on emissions levels before the start of the system grandfathering bohringer and lange eur econ rev 49 2041 2055 2005 show that a cost effective outcome can also be achieved if the base year for allocation is continually updated updating given that banking and borrowing are prohibited in this paper we examine whether updating alters the entry and exit conditions for firms compared to grandfathering and how it affects profits for new and existing firms we find that the two schemes function surprisingly similar first the incentives to entry and exit are identical second the total value of free quotas to existing firms based on emissions before the system starts is also identical without any auctioning with updating initial claims for free allowances have a shorter lifetime compared to grandfathering but quota prices are higher as firms anticipate the effect of current emissions on future claims to free allowances the two effects exactly cancel each other out if there is some combination of auction and free allocation the total value of free quotas will always be highest under grandfathering if the auction rate is the same entry and exit incentives are still equal

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

output fluctuations at the plant level this paper examines the short run dynamics of manufacturing costs by detailing how plants in the u s automobile industry change output weekly data show a variety of margins on which firms adjust production these margins which are distinct from the usual factor demand choices differ in their lumpiness their adjustment costs and their variable costs the existence of these margins explains several empirical puzzles of output fluctuations using a theory of the short run dynamic cost function we are able to infer some of the characteristics of the underlying cost function from the dynamic behavior of the different margins

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

the effect of allowance allocations on cap and trade system performance abstractan implication of the coase theorem is that under certain conditions the market equilibrium in a cap and trade system will be cost effective and independent of the initial allocation of tradable rights that is the overall cost of achieving a given aggregate emission reduction will be minimized and the final allocation of permits will be independent of the initial allocation we call this the independence property this property is important because it means that the government can establish the overall pollution reduction goal for a cap and trade system by setting the cap and leaving it up to the legislature to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs we examine the conditions under which the independence property is likely to hold both in theory and in practice

choosing the right instrument the role of public revenues for environmental policy this paper analyses the optimal choice of second best optimal environmental policies using a partial equilibrium model the paper first reconfirms the well known result that the existence of a double dividend in its weak definition favours environmental policy instruments which maximise tax revenues for a given improvement in environmental quality additional revenues can be used to reduce the distortion of existing taxes such as taxes on labour and capital income without uncertainty environmental taxes and auctioned permits are equally appropriate in the presence of uncertainty however the optimal choice of taxes or tradable permits depends on the relative magnitudes of the marginal environmental damage and the marginal benefit from consuming a polluting good in the second part the paper therefore analyses how the revenue capacity affects the optimal choice of environmental policy instruments in the presence of uncertainty the paper shows that the first best choice rule between price and quantity regulation weitzman 1974 remains valid in a second best world with distortionary taxation

pollution and land use optimum and decentralization abstract space matters not only by inducing transport costs but also by mitigating pollution damages previous models of pollution either disregard space altogether or presume a predetermined separation between polluters and pollutees in our model workers commute to factories and all possible location combinations of housing and industry around a circle are considered we investigate optimal allocations and their decentralization the tradeoff between pollution costs and transport costs along with the non convexity inherent in spatial models results in multiple local optima with negligible commuting costs the optimal allocation has one industrial and one residential zone as commuting costs increase the number of zones of each type increases until an allocation is reached in which housing and industry are completely intermixed the global optimal allocation is decentralized by imposing a tax per unit area of industrial land at a particular location equal to the total damage caused by the pollution from that unit area evaluated at the global optimum location specific pigouvian taxes by themselves are inefficient

emission taxes and optimal refunding schemes abstract we examine how refunding emission taxes to firms dependent on market shares should be designed while refunding is harmful under perfect competition a first best self financing tax tax refunding scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms under pre investment in cleaner technology with short term abatement opportunities a first best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares

improving efficiency in bilateral emission trading when environmental damages from emissions are spatially nonuniform permit trading has been modeled most often as a pollution offset program in which emission permits are traded between agents subject to constraints on ambient air quality to date the institution envisioned to implement such a program involves trading on a bilateral and sequential basis however simulation studies indicate that the sequence of trades may alter the outcome and undermine the cost savings from a pollution offset program this paper identifies a design for the trading institution that tends to overcome this phenomenon and improve the efficiency of equilibria obtained in a simulation model we model a bilateral trading process for the reduction of sulfur dioxide emissions with a stochastic description of the sequence of trades within groups of nations in europe when trading takes place between disaggregated stylistic representations of economic enterprises rather than between national governments a significantly greater portion of potential savings is achieved in fact under most sets of assumptions approximate first order stochastic dominance is achieved wherein the more decentralized the trading agents the greater the expected savings from a trading program

plant level nonconvex output adjustment and aggregate fluctuations in most manufacturing industries plant level output is adjusted along three margins of capacity utilization shiftwork weekend work and closing temporarily down due to the discrete and lumpy nature of these margins only a fraction of plants adjust output in response to shocks in a business cycle model calibrated to establishment level observations these nonconvexities make aggregate output less volatile than when plants can adjust smoothly further the mass of adjusting plants is larger in downturns than in upturns leading to counter cyclical volatility of aggregate output and government policy being slightly more effective in recessions than in expansions

is lumpy investment relevant for the business cycle the lumpiness of investment activity at the plant level is a well established fact previous research has suggested that such discrete and occasional adjustments have significant aggregate implications in particular it has been argued that changes in plants willingness to invest in response to aggregate shocks can at times generate large movements in total investment demand in this study i reassess these predictions in a general equilibrium environment specifically assuming nonconvex costs of capital adjustment i derive generalized s s adjustment rules yielding lumpy plant level investment within an otherwise standard equilibrium business cycle model in contrast to previous partial equilibrium analyses model results reveal that the aggregate effects of lumpy investment are negligible in general equilibrium households preference for relatively smooth consumption profiles offsets changes in aggregate investment demand implied by the introduction of lumpy plant level investment as a result

straight time and overtime in equilibrium abstract we formulate an equilibrium model of straight time and overtime wages by imposing restrictions on agents consumption sets and using a commodity space that includes employment lotteries we extract some time series implications from a linear quadratic approximation to our model evaluated at particular parameter values we use our model informally to interpret some features of observed time series for wages and employment

green tax reform in an oligopolistic industry oecd countries reduce or eliminate certain taxes when they introduce new environmental taxes the purpose of this paper is to analyze the incidence of such green tax reform in an oligopolistic industry the paper shows that a rise in taxes could result in the expansion of the aggregate pollution in the presence of a large technology gap the paper further shows that the government loses tax revenue as a result of the green tax reform if it continues to apply the same environmental standard this implies that the government needs to raise environmental standards to keep the existing level of public spending after a green tax reform

equilibrium selection in imperfectly competitive economies with multiple equilibria this paper investigates the selection of an equilibrium in an economy with multiple pareto ranked nash equilibria a history dependent selection criterion is proposed which induces correlated behavior in equilibrium even though agents are playing one shot games and disturbances are not correlated over time the model economy may experience prolonged periods in which a low productivity technology is in use and then as a consequence of a large real disturbance may switch to an alternative equilibrium in which a high productivity technology is utilized thus the model qualitatively matches observations of serially correlated movements in output and employment and generates procyclical productivity though there are no exogenous technology shocks copyright 1994 by royal economic society

compensating differentials for shift work a model analyzing the choice of shift is developed and estimated using data from two supplements to the current population survey the findings show a positive wage premium for shift work that varies with personal characteristics and there is strong evidence showing the importance of self selection as workers with low potential daytime earnings are more likely to choose night work and supplement their earnings the findings demonstrate that cross section estimates of wage premiums for union membership and firm size are biased upward because they pick up some of the compensating differential for shift work

environmental accidents under moral hazard and limited firm liability we study optimal government policy when firms operations involve a risk of a large environmental accident firms do not have sufficient assets to cover such costs and the risk is affected by firms efforts which are unobservable to outsiders when firms profits and government revenues have equal weights in the social welfare function a first best can be implemented and requires that the firm be subsidized heavily when operating with no accident and all its assets confiscated in the event of an accident with a lower weight on firm profits the solution is always second best with lower subsidies to the firm and a firm effort lower than at the first best solution when firm investments affect both the required accident preventing effort for given risk and the work effort required for a given output the first best never involves specific investment subsidies while a second best solution generally always does

cyclical patterns in the variance of economic activity this article models the conditional mean and variance of real gross national product gnp and its components using asymmetric exponential generalized autoregressive conditional hetero scedasticity a model previously applied only to financial variables the results imply that the variance of real gnp is higher following negative innovations than positive innovations and that this asymmetry arises in the cyclically sensitive sectors further evidence links this asymmetry to the phase of the business cycle the conditional variance appears to be largest around business cycle troughs in addition shocks to the conditional variance of gnp and its components typically persist for long periods the evidence of asymmetry in conditional variance is robust to a variety of alternative specifications

emission taxes and tradable permits a comparison of views on long run efficiency we compare three different views on the long runefficiencies of emission taxes which includethresholds inframarginalexemptions and of tradeable emission permitswhere some permits areinitially free the differences are caused bydifferent assumptions aboutwhether thresholds and free permits should besubsidies given only to firmsthat produce or full property rights treatingtax thresholds as well asfree permits as property rights would departfrom the conventional view but would allow greater flexibility in makingeconomic instruments bothefficient and acceptable such flexibilitycould be very important inachieving efficient control of greenhouse gasemissions

political connections ownership structure and private equity placement decision evidence from chinese listed firms in contrast with many other countries chinese listed firms must obtain approval to make private equity placements peps from the chinese security regulatory commission csrc a state bureau that regulates capital market financing we analyse the role of political connection pc and ownership structures when accessing private equity pe market while investigating the mechanisms through which political ties operate within the regulatory process of peps the findings suggest that pcs do not contribute to the firm s decision to apply for peps but firms with state ownership demonstrate a higher propensity to apply for peps pc and state ownership appear to help firms to obtain approval from the csrc and these firms are treated more favourably than their rivals without such connections politically connected firms spend less time in managing bureaucracy but pc and state ownership negatively affect proceeds from the pe market in china firms with politically connected directors with professional busines

efficiency in pollution control in the short and long runs a system of rental emission permits efficiency in pollution control in the short and long runs a system of rental emission permits author s robert a collinge and wallace e oates source the canadian journal of economics revue canadienne d economique vol 15 no 2 may 1982 pp 346 354 published by blackwell publishing on behalf of the canadian economics association stable url http www jstor org stable 134787 accessed 05 05 2008 21 07

political connections and the process of going public evidence from china abstract we examine how political connections impact the process of going public specifically we test how political connections impact the pricing of the newly offered shares the magnitude of underpricing and the fixed cost of going public based on the experience of the newly public firms from chinese security markets and using multiple measures of political connections we find robust evidence that the issuing firms with political connections reap significant preferential benefits in the process of going public to be specific we find that firms irrespective of their ownership status with greater political connections have relatively higher offering price lower underpricing and lower fixed costs during the going public process

dynamic incentives by environmental policy instruments a survey abstract in this paper i survey and discuss recent developments on the incentives provided by environmental policy instruments for both adoption and development of advanced abatement technology a main conclusion to be drawn from the literature is that under competitive conditions market based instruments usually perform better than command and control moreover taxes may provide stronger long term incentives than tradable permits if the regulator is myopic if the government can anticipate new technology or is able to react on it optimally regulatory policies by virtue of administered prices taxes and policies by setting quantities issuing tradable permits are almost equivalent the literature also shows that under competitive conditions there is no difference between auctioning permits and grandfathering moreover timing and commitment of environmental policy is not crucial for adoption under competitive conditions commitment has positive incentive effects however if an r d sector has market power in the presence of market imperfections the ranking of the different policy instruments is ambiguous

price volatility and banking in green certificate markets there is concern that prices in a market for green certificates gcs primarily based on volatile wind power will fluctuate excessively leading to corresponding volatility of electricity prices applying a rational expectations simulation model of competitive storage and speculation of gcs the paper shows that the introduction of banking of gcs may reduce price volatility considerably and lead to increased social surplus banking lowers average prices and is therefore not necessarily to the benefit of green producers proposed price bounds on gc prices will reduce the importance of banking and even of the gc system itself

the effect of emission taxes and abatement subsidies on market structure abstract emission taxes and abatement subsidies are considered to be efficient measures for environment protection the purpose of this paper is to quantify their effects on industry output firm output and on the number of firms in the industry three types of market structure are under discussion perfect competition oligopoly and a dominant firm with a competitive fringe it turns out that emission taxes and abatement subsidies affect the structure of the polluting industry in opposite ways while the effects on industry s emissions are similar in direction but different

feed in subsidies taxation and inefficient entry we study energy markets with dirty production and lumpy entry costs of clean production renewables for intermediate entry costs markets yield inefficient production and inefficient entry a mix of three popular regulatory instruments polluter taxation feed in subsidies for renewables and consumption taxation cannot correct these market failures for larger entry costs the instruments are imperfect because they affect marginal incentives whereas entry is a lumpy fixed cost problem whenever the first best is implementable feed in subsidies and consumption taxes are redundant the second best requires feed in subsidies or consumption taxes in addition to a pollution tax and overshoots first best levels given production levels the instruments do not affect the regulator s budget

macroeconomic determinants of corporate failures evidence from the uk previous studies on the relationship between macroeconomic aggregates and business failures have been restricted to the description of the short run relationships among the variables this paper uses an error correction model ecm to investigate the determinants of uk corporate failures by modelling the short run and long run behaviours of corporate failure rates in relation to macroeconomic phenomena over the period 1966 1999 the findings indicate that failure rates are associated with interest rates credit profits price and corporate birth rates both in the short run and in the long run of these macroeconomic variables interest rate appears to be an important factor influencing failure rates and can be used as a feasible policy instrument to reduce the incidence of corporate failures the impact of the insolvency act 1986 has also been examined and its mitigating effect on corporate failures has been identified

idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics we examine a model of lumpy investment wherein establishments face persistent shocks to common and plant specific productivity and nonconvex adjustment costs lead them to pursue generalized s s investment rules we allow persistent heterogeneity in both capital and total factor productivity alongside low level investments exempt from adjustment costs to develop the first model consistent with available evidence on establishment level investment rates reassessing the implications of lumpy investment for aggregate dynamics in this setting we find that they remain substantial when factor supply considerations are ignored but are quantitatively irrelevant in general equilibrium the substantial implications of general equilibrium extend beyond the dynamics of aggregate series while the presence of idiosyncratic shocks makes the time averaged distribution of plant level investment rates largely invariant to market clearing movements in real wages and interest rates we show that the dynamics of plants investments differ sharply in their presence thus model based estimations of capital adjustment costs involving panel data may be quite sensitive to the assumption about equilibrium our analysis also offers new insights about how nonconvex adjustment costs influence investment at the plant when establishments face large and weakly persistent idiosyncratic productivity shocks consistent with existing estimates we find that nonconvex costs do not cause lumpy investments but act to eliminate them

taxing average emissions to overcome the shutdown problem abstract the paper shows that the optimal regulation of stock pollutants can require fluctuating emissions even in the absence of uncertainty the optimum cannot be implemented by the usual pigouvian flow tax since it leads to a shutdown problem a remedy for the problem is to use a linear tax given by a mechanism that effectively taxes average emissions over time an alternative is to use tax schedules depending on cumulative emissions over a short period of time a calibration using cost estimates of greenhouse gases suggests that potential gains from fluctuating carbon emissions are considerable

the workweek of capital and its cyclical implications abstract the neoclassical growth model studied in the kydland and prescott time to build paper is modified to permit the capital utilization rate to vary the effect of this modification is to increase the amplitude of the aggregate fluctuations predicted by theory as the equilibrium response to technological shocks if following solow the changes in output not accounted for by changes in the labor and tangible capital inputs are interpreted as being the technology shocks the statistical properties of the fluctuations in the postwar united states economy are close in magnitude and nature to those predicted by theory

pigouvian penalty for oil spills abstract the imposition of ex ante taxes on expected spilled oil in addition to ex post payments for damages under tort liability would foster economic efficiency this paper begins the analysis of the joint approach with the case in which pigouvian taxes are used exclusively a model is developed in which the volume of spilled oil causing environmental damage is reduced first by spill prevention expenditures by shippers and then by clean up expenditures by the government the efficient pigouvian tax on expected spilled oil equals marginal environmental damage which equals the net marginal cost of prevention which equals marginal clean up cost

non convex costs and capital utilization a study of production scheduling at automobile assembly plants i study detailed data from eleven automobile assembly plants these data display considerable cross plant heterogeneity in production scheduling to explain the observed heterogeneity i solve a dynamic programming model when desired production is below the plant s minimum e cient scale non convexities induce production bunching the plant uses less than full capital utilization on average and production is more volatile than sales when desired production is above the plant s minimum e cient scale the plant operates in a convex region of the cost curve in this case it uses high levels of capital utilization and production is less volatile than sales 2000 elsevier science b v all rights reserved jel classixcation e23 d21 l23

prices vs quantities technology choice uncertainty and welfare technological improvements have proven essential in mitigating environmental problems such as climate change depletion of the ozone layer and acid rain while it is well known that price and quantity based regulatory instruments provide different investment levels the effects on the choice between different technologies have received scant attention this paper expands on the prices versus quantities literature by investigating firms technology choice in the face of demand and supply side uncertainty i show that the regulator can not design tradable emissions permits and an emissions tax such that the two regimes are equivalent even in terms of expected values moreover a tax encourages the most flexible abatement technology if and only if stochastic costs and the equilibrium permit price have sufficiently strong positive covariance compared with the variance in consumer demand for the good produced finally the firms technology choices are socially optimal under tradable emissions permits but not under an emissions tax

on the utilisation controversy a rejoinder and some comments the critique by gahn and gonzalez 2019 of the conclusions in nikiforos 2016 regarding what data should be used to evaluate whether capacity utilization is endogenous to demand is weak for the following reasons i the federal reserve board frb measure of utilization is not appropriate for measuring long run variations of utilization because of the method and purpose of its construction even if its difference from the measures of the average workweek of capital aww were trivial this would still be the case if anything it would show that the aww is also an inappropriate measure ii gahn and gonzalez choose to ignore the longest available estimate of the aww produced by foss which has a clear long run trend iii their econometric results are not robust to more suitable specifications of the unit root tests under these specifications the tests overwhelmingly fail to reject the unit root hypothesis iv other estimates of the aww which were not included in nikiforos 2016 confirm these conclusions v for the comparison between the aww series and the frb series they construct variables that are not meaningful because they subtract series in different units when the comparison is done correctly the results confirm that the difference between the aww series and the frb series has a unit root vi a stationary utilization rate is not consistent with any theory of the determination of capacity utilization even if demand did not play a role there is no reason to expect that all the other factors that determine utilization would change in a fashion that would keep utilization constant