variable returns to agglomeration and the effect of road traffic congestion abstract this paper investigates the links between returns to urban density productivity and road traffic congestion a generalised translog production inverse input demand function is estimated to test for the existence of variable returns to agglomeration in manufacturing construction and service industries two separate measures of urban density in which proximity is represented by straight line distance or by generalised cost are constructed and included in the translog to identify the effect of road traffic congestion the results show that for some sectors of the economy diminishing returns to urban density can set in causing the magnitude of agglomeration elasticity to fall as effective densities increase the generalised cost based measure of agglomeration produces higher elasticities because it captures both time and distance dimensions of density a comparison of spatial variance in estimates indicates that road traffic congestion plays an important role in explaining diminishing returns for the most highly urbanised locations

modeling economies of scale the case of us electric power companies modeling and validating the existence of technical progress within the neoclassical production function specification has been facilitated through the translog functional form however attempts to separate out the effects of technical progress and returns to scale has been limited this study develops and presents a model for testing the existence of these two separate effects using data from a sample of us electric power companies the analysis found that for these electric utilities there existed increasing returns to scale and technical progress that was energy using but capital neutral however scale effects were found to be a dominant factor in lessening the impact of declining average productivity

taxation and international migration of superstars evidence from the european football market we analyze the effects of top tax rates on international migration of football players in 14 european countries since 1985 both country case studies and multinomial regressions show evidence of strong mobility responses to tax rates with an elasticity of the number of foreign domestic players to the net of tax rate around one around 0 15 we also find evidence of sorting effects low taxes attract highability players who displace low ability players and displacement effects low taxes on foreigners displace domestic players those results can be rationalized in a simple model of migration and taxation with rigid labor demand jel f22 h24 h31 j44 j61 l83

occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

the effect of deregulation on us fossil fuel substitution in the generation of electricity abstract fossil fuels produce the majority of electricity in the us with coal being by far the most popular fuel used in the past regulation in the natural gas market in the form of well head price controls and under the boiler fuel use restrictions distorted fuel use away from natural gas more recently with deregulation in the natural gas industry these restrictions have been repealed which has changed fuel use patterns to measure the short run fuel use response from regulatory and other market changes we estimate interfuel substitution using two flexible functional forms the translog and the logit on monthly data from 1991 to 1993 in both models we find coal demand has the least elastic price response while gas and oil demand have the highest both models also suggest there is substitution across fuels in the short run but the patterns and magnitudes vary from comparisons with earlier studies fuel use price response is also found to vary across market conditions and regulatory regime

separability functional form and regulatory policy in models of interfuel substitution abstract counter intuitive results such as positive own price elasticities have been found in some studies of interfuel substitution this paper examines three possible reasons for this problem first including energy materials in petroleum and coal aggregates is found to contribute to incorrect signs second the mathematical properties of the translog function contribute to concavity violations in contrast the linear logit model of cost shares is found to provide more sensible estimates of own price elasticities across alternative model specifications finally natural gas curtailment policies and environmental regulations are found to be significant factors influencing us industrial fuel demand although omission of these factors does not directly contribute to curvature violations

analyzing the indirect production function for u s manufacturing in recent years there has been considerable research conducted in applied production economics to estimate the firm s structure of technology and its production characteristics the main concept used in this research is the duality principle relating production and cost or profit together with the use of flexible form econometric specifications for estimating production technologies under the assumption of cost minimization or proft maximization duality implies that for any production function there exists a cost or profit function that provides an equivalent description of the technology what is less well known however is that the firm s technology can be equally well described by the indirect production function a production analog of the indirect utility function in consumer theory 5 8 9 the indirect production function is based on the firm s output maximization subject to a budget constraint on input costs of course it is evident enough that a firm choosing inputs to maximize output for a given input cost produces that output at the minimum cost by implication the indirect production and cost functions are equivalent ways of characterizing the firm s technology and as will be seen there exists a unique correspondence between the two functions in empirical application however the choice between the two functions hinges on the exogeneity or endogeneity of output for the indirect production function the level of output is an endogenous variable in the case of the cost function on the other hand output is exogenously given in most situations it is the indirect production function not the cost function that is more compatible with observed behavior of firms and industries while numerous studies have been conducted recently to estimate the cost or profit function in a variety of firms and industries 1 2 3 6 no attempts have been made to employ the indirect production function as a working tool in applied production analysis this paper attempts to provide empirical evidence from analyzing the indirect production function within the context of an application of the duality principle using the well known data set utilized by berndt and wood 3 and berndt and khaled 2 it reexamines the production structure of u s manufacturing based on a translog specification of the indirect production function for the underlying technology an important question is how the choice of a model the indirect production or cost function

optimal asset allocation and risk shifting in money management this article investigates a fund manager s risk taking incentives induced by an increasing and convex relationship of fund flows to relative performance in a dynamic portfolio choice framework we show that the ensuing convexities in the manager s objective give rise to a finite risk shifting range over which she gambles to finish ahead of her benchmark such gambling entails either an increase or a decrease in the volatility of the manager s portfolio depending on her risk tolerance in the latter case the manager reduces her holdings of the risky asset despite its positive risk premium our empirical analysis lends support to the novel predictions of the model

the impact of subsidies on x efficiency in ldc industry theory and an empirical test the x inefficiency costs of protection and industrial concentration have been topics of considerable interest in the literature on economic development balassa 1975 and bergsman 1974 for example have argued that protection by increasing x inefficiency generates a major welfare cost which is not captured by traditional costs of protection calculations and white 1976 has examined the relationship between inappropriate factor intensities which he associates with xinefficiency and industrial concentration the common theme which emerges from each of these studies is that public policy can have a major impact on economic performance not only by influencing factor proportions but also by influencing the intensity with which a non measurable input x efficiency is employed despite the intuitive appeal of the x efficiency concept there have been very few empirical tests of this hypothesis this partly reflects the imprecise nature of the basic concept but also the lack of adequate micro economic data x efficiency clearly relates to efficiency within firms so that the most appropriate tests would rely on data on firm level efficiency in this paper we propose a direct test of the x efficiency hypothesis using firm level data we build on previous work by corden 1970 1974 and martin 1978 who showed how to model x efficiency effects using the concept of managerial leisure we extend these simple models of managerial behavior emphasizing the role of the external managerial labor market the model is then used to explore the relationship between changes in public policy managerial effort and x inefficiency certain predictions of the model are tested using cross section data from a survey of firms in two subsidized industries in ghana efficiency indices are computed on the basis of a translog frontier production function variations in relative efficiency are then correlated with several explanatory variables including the presence or absence of subsidy payments to the firm subsidized firms in both industries are found to exhibit higher relative levels of x inefficiency

custom hired tractor services and returns to scale in smallholder agriculture a production function approach historically agricultural transformation has often accompanied the increase in the returns to scale little direct evidence exists however on what actually causes such increase despite the knowledge of many factors that are associated with this increase we fill this knowledge gap by testing whether hiring in tractor services has raised returns to scale in agriculture at the household level in nepal terai that has undergone rapid growth in the tractor use through custom hiring services using switching regression and inverse probability weighted generalized method of moments we address two sources of endogeneity involved with the estimation of returns to scale 1 farmers self selection on whether to hire in tractor services and 2 use of inputs in the production function for both cobb douglas and translog production function specifications we find that hiring in tractor services significantly increased the returns to scale in agricultural production by about 0 2 0 3 among farm households not owning tractors for which suitable control groups are found findings are robust under various alternative specifications

effect of public subsidies on farm technical efficiency a meta analysis of empirical results abstractinvestigating the impact of public subsidies on farm technical efficiency is becoming a critical issue in applied agricultural policy analysis this article presents a meta analysis of empirical results on this issue based on data gathered from a systematic literature review we find that in the empirical literature subsidies are commonly negatively associated with farm technical efficiency meta regression estimation results show that the direction significantly negative significantly positive or non significant of the observed effects is sensitive to the way subsidies are modelled in the empirical studies

status intertemporal choice and risk taking this paper takes the position that an individual s concern for relative status is expressed in her preferences we embed this hypothesis in an otherwise conventional model of economic growth and examine its consequences the model generates two kinds of equilibrium in the first all individuals always follow a deterministic consumption and investment strategy such a strategy must be linear in output is independent of payo s and technology and only depends on the discount factor this sort of equilibrium exists when the individual cares only about status and the individual production function is convex in investment in contrast the other kind of equilibrium involves convergence to a steady state in which there is persistent and endogenously generated gambling this kind of equilibrium exists in more plausible circumstances the individual has a utility function that may depend on consumption per se as well as implied status and individual production functions are concave we characterize the unique steady state in such a situation and prove that any dynamic equilibrium path must converge to it risk taking arises not from the presumption of a utility function with strictly convex segments as in friedman savage but naturally from a view of utility as depending on relative status our steady state is broadly consistent with the stylized facts that individuals both insure downside risk and to gamble over upside risk and generates similar patterns of risk taking and avoidance across environments with quite di erent overall wealth levels finally in contrast to friedman 1953 endogenous risk taking here is generally pareto ine cient

a regional linear logit fuel demand model for electric utilities we investigate a short term forecasting and simulation model of utility fuel demand based on the linear logit model the forecasting properties of the model are surprisingly good for such a simple econometric model of factor demand the model ignores the distinctive characteristics of electric utilities load curves wheeling etc yet produces remarkably good forecasts at both the national and regional levels because the model is based on neoclassical theory it can be used for simulations making it more useful and less ad hoc than a pure forecasting model

the missing wealth of nations are europe and the u s net debtors or net creditors this paper shows that official statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens drawing on systematic anomalies in portfolio investment positions and a unique swiss dataset i find that 8 of the global financial wealth of households is held in tax havens 6 of which goes unrecorded on the basis of plausible assumptions accounting for unrecorded assets turns the eurozone officially the world s second largest net debtor into a net creditor it also reduces the u s net debt significantly the results shed new light on global imbalances and challenge the widespread view that after a decade of poor to rich capital flows external assets are now in poor countries and debts in rich countries i provide concrete proposals to improve international investment statistics

taxing the rich affluent households can respond to taxation with means that are not economically viable for the rest of the population such as sophisticated tax plans and international tax arbitrage this article studies an economy in which an inequality averse social planner faces agents who have access to a tax avoidance technology with subadditive costs and who can shape the risk profile of their income as they see fit subadditive avoidance costs imply that optimal taxation cannot be progressive at the top this in turn may trigger excessive risk taking when the avoidance technology consists in costly migration between two countries that compete fiscally we show that an endogenous increase in inequality due to risk taking makes progressive taxation more fragile which vindicates in turn risk taking and can lead to equilibria with regressive tax rates at the top and high migrations of wealth towards the smaller country

determinants of productivity differences in international manufacturing to access the influence of various factors on labor productivity a production function model of a plant in a labor intensive consumer goods industry is developed and estimated econometrically the model is derived from a production function specified in three functional forms which is expanded to include management and quality adjustment factors for the capital and labor inputs the management variable is a performance ranking of the plants in terms of meeting output quality and cost goals data on approximately 30 plants from a dozen countries over the period 1975 through 1982 was used for the analysis all of the plants are of a single multinational firm and produce similar products

the optimal elasticity of taxable income abstract the strength of the behavioral response to a tax rate change depends on the environment individuals operate in and may be manipulated by instruments controlled by the government we first derive a measure of the social benefit to affecting this elasticity the paper then examines this effect in the solution to the optimal income taxation problem when such an instrument is available first in a general model and then in an example when the government chooses the income tax base

unconventional energy taxation and interstate welfare an analysis of pennsylvania s severance tax policy abstract natural gas production from unconventional sources has increased over the past decade a significant portion of this increase has come from output in the marcellus region of pennsylvania this output has altered gas markets and repositioned pennsylvania as a major gas exporter it has also put pennsylvania at odds with other states as it is one of a few without a formal severance tax on extractive resources in this paper we combine results from a structural demand model with a two sector trade model to analyze the interstate welfare impacts of pennsylvania s current severance tax proposal our results demonstrate that most of the welfare losses from this proposed policy are likely to be shifted to residents in other states we also demonstrate how fluctuations in gas prices can substantially reduce tax revenue these findings have important implications for both pennsylvania and u s energy policy given the significant rise in energy production from new sources throughout the u s

farm price responsiveness and the choice of functional form abstract the estimated responsiveness of farmers to changes in the prices of output or inputs is in general very sensitive to the econometric model used using cross section survey data for farms in marginal rice growing districts in west malaysia price elasticities based on estimated input demand equations derived from a quadratic restricted profit function were found to be superior to those derived from translog or cobb douglas production functions or from a translog restricted profit function the cobb douglas production function is restrictive and should be used sparingly restricted profit functions are only believable if the available price data are of high quality

assessment of initial emission allowance allocation methods in the korean electricity market abstract korea will introduce an emission trading policy from 2015 the rules for the initial allocation of emission allowances have not been decided yet this paper assesses the effect of various initial emission allowance allocation methods of the korean electricity market this study employs the mixed complementarity problem which is able to incorporate operation investment and emission trade decisions in the deregulated electricity market in order to provide more realistic results in particular the allocation rules to existing plants and new entrants are modeled separately in this study the model quantifies the impacts of different allocation rules on emissions capacity mix emission allowance prices electricity prices and social welfare we examine typical allocation rules such as auction to all power plants best available technology bat benchmark to all power plants fuel specific benchmark to existing power plants along with bat benchmark to new entrants and fuel specific benchmark to all power plants we find that giving free allocations to new power plants prompts more new investment and this raises overall social welfare even though the direct cost of achieving the emission reduction target rises while the auction is the most powerful policy to reduce emissions in the electricity sector giving away permits to all power plants based on a fuel specific benchmark encourages investment increases output and leads to a greater level of welfare from an imperfectly competitive industry

can private giving promote economic segregation this paper explores the theoretical relationship between tax relief for private giving and individual location choice tax relief for giving may receive political support at the local level because of its distributional effects however through its effects on public provision choices such relief may affect individual location decisions and in so doing has an impact on the jurisdictional configurations that can arise in equilibrium for some demographic parameters it will promote economic segregation rather than integration while for others the opposite is true in the former scenario a ban on local tax incentives for giving would be pareto improving and would thus be sanctioned by a majority supported federal tax constitution

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

a dynamic analysis of interfuel substitution for swedish heating plants abstract this paper estimates a dynamic model of interfuel substitution for swedish heating plants we use the cost share linear logit model developed by considine and mount considine t j mount t d 1984 the use of linear logit models for dynamic input demand systems review of economics and statistics 66 434 443 all estimated own price elasticities are negative and all cross price elasticities are positive the estimated dynamic adjustment rate parameter is small however increasing with the size of the plant and time indicating fast adjustments in the fuel mix when changing relative fuel prices the estimated model is used to illustrate the effects of two different policy changes

fossil fuel producing economies have greater potential for industrial interfuel substitution abstract this study analyzes industrial interfuel substitution in an international context using a large unbalanced panel dataset of 63 countries we find that compared to other countries fossil fuel producing economies have higher short term interfuel substitution elasticities this difference increases further in the long run as fossil fuel producing countries have a considerably longer adjustment of their fuel using capital stock these results imply lower economic cost for policies aimed at climate abatement and more efficient utilization of energy resources in energy intensive economies

the role of energy conservation and natural gas prices in the costs of achieving california s renewable energy goals abstract this paper develops an econometric forecasting system of energy demand coupled with engineering economic models of energy supply the framework is used to quantify the energy and environmental impacts of renewable and natural gas based electricity power generation in california considering the role of on going energy conservation efforts and incorporating different natural gas price scenarios over the forecast horizon 2011 2035 the results indicate that relative to a business as usual scenario of continuing to rely on imported electricity to meet future demand california s renewable portfolio standard rps of 33 renewables by 2020 will increase electricity rates by over 10 however the rps will also provide substantial annual savings in carbon dioxide emissions equal to 40 million metric tons in 2020 continuing non price induced energy conservation at the historical rate will only result in a marginal reduction in electricity rates although lower electricity use means that substantial savings are nonetheless achieved in electricity expenditures in addition continuing trend energy conservation leads to substantial savings in carbon dioxide emissions like the rps developing domestic natural gas generation also leads to rate increases and reductions in carbon dioxide emissions relative to the baseline however these impacts are minor compared to the rps scenario

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

multicrop production models with multinomial logit acreage shares the main objective of this paper is to show that the multinomial logit mnl framework can be used for deriving simple acreage share models more specifically we show that mnl acreage choice models can be defined as parts of consistent multicrop models when coupled with suitably designed crop production models e g a specific parameterization of the standard quadratic yield function the parameters of these multicrop models are easily interpreted and estimated although mnl acreage choice models are usually derived by aggregating crop choices defined at the plot level we show that these models can also be derived by considering a profit maximisation problem at the farm level this provides a simple theoretical background for the standard mnl acreage share model as well as for simple extensions of these models the nested mnl acreage share models an empirical application on french farm level data over the period 1996 2007 investigates the empirical performances of the multicrop econometric models based on the proposed mnl framework for modelling acreage choices

how do banks adjust to changing input prices a dynamic analysis of u s commercial banks before and after the crisis abstract the 2000 2013 period was characterized by substantial regulatory monetary and technological change especially after the onset of the global financial crisis this study assesses the total impact of these policy shifts and technological changes on u s commercial banks short run and long run substitution elasticities an endogenous break test divides the sample into a pre crisis period and a post crisis period during the former period banks inputs tend to be inelastic substitutes after the onset of the crisis particularly the long run substitutability of most input factors decreases to even lower levels due to changes in both cost technology and economic conditions at the same time banks response to input price changes becomes more sluggish hence especially after the onset of the crisis banks have little flexibility regarding input factor usage and are thus sensitive to input price changes from a cost perspective

why are tax expenditures for giving embodied in fiscal constitutions abstract this paper asks whether there can be unanimous support for a fiscal constitution that includes tax expenditures for giving among the set of available fiscal instruments we describe a political economy model of fiscal choices where individuals with different incomes vote over levels of proportional income taxation and over tax incentives for giving and investigate how the availability of such incentives affects political equilibrium outcomes and welfare for different income groups we find that unanimous support for the use of tax incentives for giving can indeed arise and is more likely the more unequal is the distribution of income

applying theil s multinomial extension of the linear logit model to meat expenditure data one of the chief drawbacks of the multinomial extension of the linear logit model is that after the standard linearization the parameters which are directly estimated have no obvious economic meaning this paper presents alternative transformations which facilitate interpretation in one linearization the estimated coefficients will be elasticities at a selected data point such as the mean in another form the coefficients will be slutsky parameters the latter version is chosen for an empirical analysis of the demand for meat in great britain a number of issues concerning the model s error structure and dynamic specification are discussed

the use of linear logit models for dynamic input demand systems this paper demonstrates that a linear logit model with appropriate constraints can be used to specify a system of cost share equations that satisfy neoclassical economic conditions unlike many other flexible functional forms the logistic function is particularly well suited for incorporating dynamic adjustment mechanisms the empirical results suggest that the use of static models overstates short run own price elasticities and understates the corresponding long run price effects

political sustainability and the design of social insurance this paper examines how the issue of political support affects the design of social insurance it distinguishes between redistributive character and size of social protection three main results emerge first it may be appropriate to adopt a system which is less redistributive than otherwise optimal in order to ensure political support for an adequate level of coverage in the second voting stage second supplementary private insurance may increase the welfare of the poor even if it is effectively bought only by the rich third the case for prohibiting supplementary private insurance may become stronger when the efficiency of private insurance markets increases

on income tax avoidance the case of germany abstract we present a micro estimate determining taxed income as a function of gross income and all major deduction options depending on household and asset categories it shows that tax savings strongly increase with increasing income resulting in an effective marginal tax rate 16 percentage points below the legislated one for the highest income groups this calls into question the intended distributional impact of progressive income taxation our estimate suggests aggregate income tax losses to the german fiscal authorities in the order of magnitude of 34 of wage and income taxes paid in 1983 relative to 1994 tax proceeds this percentage would amount to dm 105 b

two tier public provision comparing public systems abstract the paper considers a two tier institution in which government provides public services but individuals can opt out of public provision but not taxes funding for the public service is chosen endogenously by majority vote and we first provide necessary and sufficient conditions for a majority vote equilibrium in line with existing results the equilibrium tax rate usually falls below the one found in a one tier system opting out of public consumption is prohibited as the public system loses the political support of the rich who exit we prove that when the two tier system majority dominates a purely private system a majority in society always welcomes a transition from a one tier public system to a two tier system it is the only system that is stable in an evolutionary sense otherwise a majority consisting of the middle class may be in favor of staying in a one tier system prohibiting exit because of a slippery slope argument

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

singularity and autoregressive disturbances in linear logit models the implications of including autoregressive disturbances in linear logit models of demand systems are explored it is argued that the normality assumption of the error terms is more appropriate in the linear logit model than in a share equation model with additive disturbances commonly found in the literature autoregressive disturbances and their implications for model estimation are discussed in that context both theoretical arguments and empirical evidence are presented in favor of the logit specification given the presence of serial correlation

derivation of the hicks or direct elasticity of substitution using the input distance function abstract i derive a new symmetric elasticity of complementarity from the input distance function by imposing a constant distance condition assuming technical efficiency and a single output the hicks elasticity of substitution is its reciprocal

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

measuring the consumer welfare effects of carbon penalties theory and applications to household energy demand abstract this study implements a money metric approximation to the hicksian equivalent variation hev based on observable demand functions this approach is a less restrictive approximation to the hev than the marshallian consumer surplus mcs in situations where mcs is misleading this study also implements a generalized logit demand system that conforms better to the theory of consumer behaviour than standard flexible functional forms eg translog the almost ideal demand system aids generalized leontief and minflex laurent models the generalized logit model was estimated using new york state level and company level data on residential consumption of electricity natural gas and fuel oil the demand model and money metric were combined to measure the consumer welfare effects of carbon penalties on electricity and fuels while the application is specific the generalized logit model of demand and the money metric measure of welfare change can encompass a wider range of applications than conventional methods of analysis

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

effects of tractor ownership on returns to scale in agriculture evidence from maize in ghana abstract agricultural transformation process around the world has often accompanied the rise in returns to scale rts while tractor ownership is often associated with greater rts in agriculture whether the tractor ownership actually causes such increase in rts has not been formally tested in the literature we bridge this knowledge gap using a unique survey data of tractor owning farm households in ghana we find that owning tractors significantly increases the rts in maize production on the households largest mono cropped plot and weakens inverse relationship between land productivity and farm size this is partly achieved through the rise in the rts in tillage production the amount of tillage conducted rather than the rts in maize production given a fixed amount of tillage produced these sets of evidence are obtained by addressing jointly the multiple sources of endogeneity of tractor ownership tractor values tillage production and other inputs used

fuel switching and climate and energy policies in the european power generation sector a generalized leontief model abstract the purpose of this paper is to analyze a the role and the nature of price induced switching behavior between fossil fuels i e coal oil and natural gas in the western european power sector as well as b the fuel choice impacts of a number of public policies implemented in this sector during the last 20 years the analysis is conducted within a generalized leontief cost function framework and employs pooled data across eight countries over the time period 1978 2004 we present short run own and cross price elasticities of fossil fuel demand and assess the impacts of a set of government policies implemented over this time period the empirical results show evidence of notable short run interfuel substitution between oil and gas and particularly in countries where fossil fuels are used extensively for both base and peak load purposes these findings support the notion that ex post fossil fuel substitution takes place in dual and multi fired plants by switching load between different single fuel fired plants as well as through the conversion of power plants to be able to burn alternate fuels the results also illustrate that different public policies i e removal of coal subsidies electricity market liberalization etc have had profound impacts on fossil fuel choices and have in particular favored power generation gas use at the expense of coal finally the paper makes use of the empirical results to simulate the fuel switching impacts of different carbon prices within the european emissions trading scheme eu ets

a pooled dynamic analysis of interfuel substitution in industrial energy demand by the g 7 countries a dynamic version of considine s 1990 linear logit model is used to obtain theoretically consistent estimates of long run price elasticities from pooled intercountry data on industrial energy consumption this model also provides a rare direct estimate of the important rate of dynamic adjustment revealing a median lag of ten years the long run demands for oil and coal are the most elastic and the strongest channels for interfuel substitution are between oil and natural gas with no significant evidence of complementarity between fuels

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

productivity growth in british manufacturing spatial variation in the role of scale economies technological growth and industrial structure this paper investigates the role of scale economies technological growth and industrial structure in creating spatial variation in manufacturing labour and total factor tfp productivity in britain separate estimates of a translog specification are presented for british manufacturing firms located in defined areas of the country over the period 1994 1998 the results show that tfp change due to scale economies and technological growth has been of much less important in influencing the output growth of manufacturing firms than input growth or industrial structure regarding the components of tfp technological growth has been the dominant force at play the analysis of average labour productivity identifies shifts to other factors of production and industrial structure as being the main determinants of change scale economies appear to have had a marginal role the results identify spatial patterns indicating that more favourable locational effects arise for firms in areas adjacent to large urban centre

the cost of solar centric renewable portfolio standards and reducing coal power generation using arizona as a case study abstract this paper develops an econometric forecasting system of energy demand coupled with engineering economic models of energy supply the framework is used to quantify the impact of a state level renewable portfolio standard rps achieved predominately with solar generation we perform the analysis using arizona s rps as a case study over the period 2012 2035 we find if arizona implements its rps when supplying future electricity demand there will be an increase in electricity rates relative to a business as usual scenario of reliance on gas fired generation extending the current regime of tax credits greatly reduces this increase at the taxpayers expense we find that by 2025 arizona s rps will implicitly abate carbon dioxide emissions at a cost between 58 and 82 per metric ton and by 2035 abatement costs are between 22 and 69 per metric ton depending on the future evolution of nature gas prices the rps always leads to a negative impact on social welfare under low gas prices but after 2029 the welfare impact is positive under high gas prices in contrast phasing out arizona s existing coal fired generation always has positive welfare impacts

total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 1978 this article total factor productivity growth technological progress and technical efficiency change dimensions of productivity change in yugoslavia 1965 78 was reprinted with permission from the december 1982 issue of the economic journal this article proposes a methodology that decomposes total factor productivity change into two distinct elements technological progress and changes in technical efficiency technological progress is defined as the change in the best practice production frontier all other productivity change is attributed to technical efficiency change the article provides a theoretical framework for decomposing total factor productivity growth as well as a specification and estimation of the deterministic frontier production function it employs a programming technique to estimate a flexible functional form of the production frontier the paper then applies this technique to empirical data from yugoslavia of the period from 1965 to 1978 it concludes that for yugoslavia improvements to technical efficiency comprise the dominant contribution to total factor productivity change this agrees with accumulating evidence that in many developing economies productivity gain due to technological mastery of imported technology is substantial

dynamic interfeed substitution implications for incorporating ethanol byproducts into feedlot rations abstractthis study examines interfeed substitution with a focus on the relationship between distiller s dried grain with solubles ddgs and traditional feed grains the dynamic linear logit model is used for the empirical analysis of interfeed substitution the estimation results reveal that an increase in livestock and poultry outputs reduces the relative shares of corn and soybean meal to ddgs the estimated adjustment rate indicates that the demand for feed grains is responsive in the short run with about 37 of the long run response this study also finds that the demand for corn and soybean meal remains inelastic even in the long run showing the possibilities that livestock and poultry producers face high feed costs in response to an increase in the prices of corn and soybean meal the pressures on feed costs can be alleviated by the substitutable relationship between ddgs and corn but the substitution of ddgs for corn has a potential to provide livestock and poultry with different nutritional con

the inverse imported factor demand system in thailand a cointegration analysis abstract in this paper we derive an inverse input demand system and apply cointegration analysis to the imported factor demand of thai industry we found one cointegrating vector and six common stochastic trends all short run flexibilities are less than one

voluntary donations and public expenditures in a federal system proponents of the new federalism argue that nonprofit organizations and local governments will fully offset federal social service expenditure cutbacks the author analyzes this proposition as a competitive game in which donations are motivated by private and public good considerations the author characterizes the response of political economic equilibrium to exogenous changes in federal expenditures when local voters are cognizant of donor reactions partial replacement is the most likely outcome though others are possible copyright 1987 by american economic association

income inequality and the quality of public services a developing country perspective abstract that the high growth rising inequality phenomenon experienced by many high growth developing economies in the recent past may lead to discontent among the poor is a well discussed issue this paper argues that as the demand for higher quality of the public services rises with income the rising income in the hands of the rich leads to their dissatisfaction about the quality of available public services thereby inducing them to form their own club for self provision of the public services whenever possible this however results in a lowering of quality available to the others outside the club despite less crowding at the publicly provided facilities

estimating telephone usage elasticities a shares equation system approach a model of the demand for long distance telephone usage is presented where own price and cross price elasticities for time of day tod usage are estimated using customer specific information in particular a customer choice model is estimated to predict individual customer budget shares for tod usage conditioned on prices expenditures bills and socio economic characteristics a logistic functional form in the budget shares is assumed for estimation which leads to the multinomial logit model specification in a probabilistic context from this specification elasticities can be derived that are theoretically consistent with a demand system the model is estimated using data from southwestern bell telephone company the model s parameter estimates can be used to derive customer specific price elasticities which can predict customers telephone usage shifts between rate periods due to tariff changes understanding how customers usage shifts when prices change in valuable information for market and netw

search equilibrium and social and private returns to education social and private returns to education are computed using the structural estimates of an extended burdett mortensen search equilibrium model the extension includes different skill groups linked via a production function with variable degree of homogeneity allowing thereby for a unimodal earnings density with a decreasing right tail we find that the decreasing unemployment risk for higher skill groups and the absence of tuition fees in germany increase private returns and lead to a too large share of high skilled individuals in the workforce which is suboptimal from the social point of view c 2009 elsevier b v all rights reserved

the equilibrium distribution of income and the market for status this paper explores the implications for risk taking behavior and the equilibrium distribution of income of assuming that the desire for status positions is a powerful motive and that it raises the marginal utility of consumption in contrast to previous analyses we consider the case in which status positions are sold in a hedonic market we show that such a complete hedonic market in status positions can be perfectly replicated by a simpler arrangement with a status good and a social norm that assigns higher status to those that consume more of this good the main result is that for a wide range of initial conditions the equilibrium distribution over income status and consumption is the same that this allocation requires inequality of income and consumption and that this allocation coincides with the optimum of a utilitarian planner

rewarding trading skills without inducing gambling this paper develops a model of active portfolio management in which fund managers may secretly gamble in order to manipulate their reputation and attract more funds we show that such trading strategies may expose investors to severe losses and are more likely to occur when fund managers are impatient their trading skills are scalable and generate higher prot per unit of risk we study investment management contracts that deter this behavior if investors are short lived then the manager must leave rents to investors in order to credibly commit not to gamble if investors are long lived contracts that increase but defer expected bonuses after an outstanding performance implement the rstbest our model can explain a number of observed dierences

the demand for insurance against common shocks abstract in recent years index based insurance has been offered to smallholder farmers in the developing world to protect against common shocks such as weather shocks despite their attractive properties these products have met with low demand we consider the frequent situation where farmers are members of groups with common interests we show that this creates strategic interactions among group members in deciding to insure that reduce the demand for insurance for two reasons one is free riding due to positive externalities on other group members when a member chooses to insure the other is potential coordination failure because it may not be profitable for a risk averse member to insure if the other members do not as a consequence we argue that the demand for insurance against common shocks could increase if the insurance policy were sold to groups rather than to individuals

tracing the sources of local external economies in a cross sectional establishment level analysis using confidential secondary data the paper evaluates the influence of commonly postulated sources of localised external economies supplier access labour pools and knowledge spillovers on the productivity of two us manufacturing sectors farm and garden machinery and measuring and controlling devices measures incorporating different distance decay specifications provide evidence of the spatial extent of the various externality sources chinitz s 1961 hypothesis of the link between local industrial organisation and agglomeration economies is also investigated the results show evidence of labour pooling economies and university linked knowledge spillovers in the case of the higher technology measuring and controlling devices sector while access to input supplies and location near centres of applied innovation positively influences efficiency in the farm and garden machinery industry both sectors benefit from proximity to producer services although primarily at a regional rather than a highly localised scale

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

public provision of private goods government may provide a good that can if legally permitted be supplemented by private purchases policy is determined by majority rule under standard assumptions on preferences a majority voting equilibrium exists a regime of positive government provision with no restriction on private supplements is shown to be majority preferred to a regime of either only market provision or only government provision combined public and private expenditure on the good is higher under this dual provision regime than under either of the alternatives under some preference configurations the median income voter is pivotal under others a voter with income below the median is pivotal

efficient estimation of hedonic inverse input demand systems this article is concerned with efficient estimation of characteristics demand we derive and estimate an inverse input demand system for quality characteristics by using 172 946 observations over 881 trading days in the icelandic fish auctions an improved estimation method based on an expanded random coefficient model is suggested as an alternative to the currently used two stage method of brown and rosen the estimates demonstrate the improved efficiency of the suggested method a number of empirical results emerge including a general increase in the demand for quality the purpose of hedonic price analysis is to determine how the price of a unit of a commodity varies with its characteristics that is to estimate the hedonic price function some recent examples of the estimation of hedonic price functions are nerlove combris lecocq and visser and mcconnell and strand however theory predicts that shifts in supply or demand affect the implicit price relationships between the overall price of the good and its individual characteristics and so we need to estimate the underlying demand and supply functions for the characteristics rosen developed a two stage method for analyzing hedonic markets in the first stage of this method the hedonic price function is estimated and in the second stage a system of demand and supply functions for characteristics is estimated using the shadow prices of the characteristics from the first stage as variables brown and rosen showed that this procedure could yield estimates of demand and supply functions that are mere transformations of the coefficients in the hedonic function they suggested the currently used two stage method using data from multiple markets this method utilizes the within market variation to iden

efficient allocations with hidden income and hidden storage we consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that unlike in environments without unobservable storage the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade riskfree bonds among themselves in this paper we consider an environment in which individuals have random income and can accumulate assets through a storage technology their income realizations and their asset position are private information given these informational frictions we provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or alternatively in which the worst possible outcome is sufficiently dire we show that the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade risk free bonds among themselves there is a large prior literature which examines the characteristics of efficient risksharing in dynamic settings in the presence of private information unlike our paper this literature generally finds that efficient allocations do not coincide with the equilibrium allocations of any economy with a competitive bond market see atkeson and lucas 1992 in particular the key difference between our paper and these preceding ones is that the earlier literature assumes either that agents cannot accumulate resources over time or that if they can this accumulation is observable in contrast we assume that both agents incomes and their stored resources are private information it is this combination of assumptions that leads to our result our findings are reminiscent of allen s 1985 he considers a dynamic principalagent relationship in which the agent is risk averse and has hidden stochastic income the

compensation incentives and the duality of risk aversion and riskiness the common folklore that giving options to agents will make them more willing to take risks is false in fact no incentive schedule will make all expected utility maximizers more or less risk averse this paper finds simple intuitive necessary and sufficient conditions under which incentive schedules make agents more or less risk averse the paper uses these to examine the incentive effects of some common structures such as puts and calls and it briefly explores the duality between a fee schedule that makes an agent more or less risk averse and gambles that increase or decrease risk with the growing interest in executive compensation and agency problems

dynamic translog and linear logit models a factor demand analysis of interfuel substitution in us industrial energy demand abstract we compare and contrast two popular dynamic flexible functional forms for cost functions the translog and the logit j bus econ stat 8 1990 347 353 using data on us industrial energy demand from 1960 to 1992 which has been analysed by previous studies energy econ 11 1989 89 94 appl econ 21 1989 931 945 j bus econ stat 13 1995 459 465 we show the crucial role played by different dynamic formulations of the translog in this analysis of factor demands with respect to rates of dynamic adjustment and substitution possibilities we conclude that the poor performance of the dynamic translog relative to the dynamic logit cannot be explained solely by dynamic model mis specification or the inclusion of price unresponsive non energy fuel use data our most robust empirical result is that coal and oil are substitutes

collective choice and voluntary provision of public goods some public goods are provided entirely with private contributions others with a mixture of public and private funding and still others are entirely publicly funded in order to study this variation a model of dual provision is developed that endogenizes public and private funding households vote over an income tax that finances public supply of the good and on whether to permit private contributions while permitting private contributions may lead to a reduction in total provision a majority always favors permitting private contributions results are developed for small and large economies and the relevance of nonexcludability and noncongestion are investigated

a theory of trickle down growth and development this paper develops a model of growth and income inequalities in the presence of imperfect capital markets and it analyses the trickle down effect of capital accumulation moral hazard with limited wealth constraints on the part of the borrowers is the source of both capital market imperfections and the emergence of persistent income inequalities three main conclusions are obtained from this model first when the rate of capital accumulation is sufficiently high the economy converges to a unique invariant wealth distribution second even though the trickle down mechanism can lead to a unique steady state distribution under laissez faire there is room for government intervention in particular redistribution of wealth from rich lenders to poor and middle class borrowers improves the production efficiency of the economy both because it brings about greater equality of opportunity and also because it accelerates the trickle down process third the process of capital accumulation initially has the effect of widening inequalities but in later stages it reduces them in other words this model can generate a kuznets curve

the translog production function and variable returns to scale this paper examines existing methods of estimating the translog production function and provides a general framework that allows for variable returns to scale the model is based on the inverse input demand function and embeds a nonhomothetic production technology previous estimation methods are valid only for homogeneous technologies with fixed scale effects estimation results for u s manufacturing show that neither homotheticity and homogeneity nor constant returns to scale is a proper characterization of the underlying structure of production thereby vindicating the empirical relevance of the inverse demand framework that entails a nonhomothetic technology copyright 1992 by mit press

agglomeration economies and productivity in indian industry abstract the primary objective of this paper is to examine the extent to which agglomeration economies contribute to economic productivity we distinguish three sources of agglomeration economies 1 at the firm level from improved access to market centers 2 at the industry level from intra industry localization economies and 3 at the regional level from inter industry urbanization economies there is considerable variation in the sources and magnitudes of agglomeration economies between industrial sectors in particular our results indicate that access to markets through improvements in inter regional infrastructure is an important determinant of firm level productivity whereas benefits of locating in dense urban areas do not appear to offset associated costs

economic growth and the transition from traditional to modern energy in sweden we examine the role of substitution from traditional to modern energy carriers and of differential rates of innovation in the use of each of these in economic growth in sweden from 1850 to 1950 we use a simple growth model with a nested ces production function and exogenous factor augmenting technological change and carry out a counterfactual simulation based on the econometric results even though the rate of technical change was higher for modern energy innovation in the use of traditional energy carriers contributed more to growth between 1850 and 1890 since the cost share of traditional energy was so much larger than that of modern energy in that period however after 1890 we find that modern energy contributed much more to economic growth than traditional energy but increasingly labor augmenting technological change became the most important single driver of growth

a positive theory of in kind transfers and the negative income tax normative arguments for restricting redistribution to cash transfers or a negative income tax have not appealed to politicians or their constituents all modern governments redistribute income in kind and provide goods and services that can be produced and distributed privately at times public and private supply coexist housing services medical care and education are examples but so too are safety and many regulatory activities of government

status the distribution of wealth private and social attitudes to risk this paper supposes an individual cares about his her own wealth not only directly but also via the relative standing that this wealth induces the implications for risk taking are investigated in particular such a model provides a natural explanation of the concave convex concave utility described by friedman and savage however there are a number of key differences between the present model and any model based on own wealth alone for example an equilibrium wealth distribution here may have a middle class further the status interaction involves an externality and an equilibrium wealth distribution may be pareto inefficient but also about the implied relative standing in the distribution of wealth has a long but checkered history an early exponent of such ideas was of course veblen 1899 it is indeed a notion which most economists reject albeit usually without explicit comment a notable and articulate exception however is frank 1985 for example see also the references frank cites on pp 33 34 it is however a notion with substantial intuitive appeal and it seems useful to ascertain its consequences before coming to a final judgement as to its merits the present paper is concerned with deriving the consequences of such valuation of status for risk taking what seems to be the sharpest possible model is adopted here this assumes that what is essentially ordinal rank in the wealth distribution enters von neumann morgenstern utility as an argument in addi tion to wealth itself thus higher wealth increases utility not only directly but also indirectly via higher status in the interests of both simplicity and drama it is typically assumed here that all individuals have identical utility functions which are concave in wealth but convex in status section 2 discusses how the model provides a natural explanation of the fundamental phenomenon addressed by friedman and savage 1948 that individuals may simultaneously purchase insurance and participate in lotteries although each individual here has a utility function which is concave in wealth itself utility can nevertheless be convex in wealth over some range when the indirect effect via status is included this effect is enhanced by the convexity of utility in status but will follow in any case if increasing wealth entails moving up in status much more rapidly than losing wealth entails moving down it is shown

explaining differences in productive efficiency an application to belgian municipalities the purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in belgium technical efficiency is evaluated using a non parametric method based on the free disposal hull fdh reference technology we first calculate input output and graph farrell efficiency measures for a cross section of all 589 belgian municipalities in a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77

voting inequality and redistribution this paper surveys models of voting on redistribution under reason able assumptions the baseline model produces an equilibrium with the extent of redistributive taxation chosen by the median income earner if the median is poorer than average redistribution is from rich to poor and increasing inequality increases redistribution however under different assumptions about the economic environment redistribution may not be simply rich to poor and inequality need not increase redistribution several lines of argument are presented in particular political participation public provision of private goods public pensions and tax avoidance or evasion

does option compensation increase managerial risk appetite this paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls under the manager s optimal policy the option ends up either deep in or deep out of the money as the asset value goes to zero volatility goes to infinity however the option compensation does not strictly lead to greater risk seeking sometimes the manager s optimal volatility is less with the option than it would be if he were trading his own account furthermore giving the manager more options causes him to reduce volatility managers with convex compensation schemes play an important role in financial markets this paper solves for the optimal dynamic investment policy for a risk averse manager paid with a call option on the assets he controls the paper focuses on how the option compensation impacts the manager s appetite for risk when he cannot hedge the option position on one hand the convexity of the option makes the manager shun payoffs that are likely to be near the money under the optimal policy the manager either significantly outperforms his benchmark or else incurs severe losses furthermore in examples of optimal trading strategies asset volatility goes to infinity as asset value goes to zero yet option compensation does not strictly lead to greater risk seeking as asset value grows large or if the evaluation date is far away the manager moderates asset risk for example if the manager has constant relative risk aversion crra asset volatility converges to the merton constant as asset value goes to infinity in some situations the manager actually chooses a lower asset volatility than he would if he were investing on his own because the leverage inherent in his option magnifies his exposure to the asset volatility in addition with all constant or decreasing absolute risk averse utility functions from the hyperbolic absolute risk averse hara class giving the manager more options causes him to reduce asset volatility in the crra case for example the manager targets a fixed volatility for his personal

migration and wage effects of taxing top earners evidence from the foreigners tax scheme in denmark this paper analyzes the eects of income taxation on the international migration and earnings of top earners using a danish preferential foreigner tax scheme and populationwide danish administrative data this scheme introduced in 1991 allows new immigrants with high earnings to be taxed at a preferential at rate for a duration of three years we obtain two main results first the scheme has doubled the number of highly paid foreigners in denmark relative to slightly less paid and therefore ineligible foreigners this translates into a very large elasticity of migration with respect to 1 minus the average tax rate on foreigners between 1 5 and 2 second we nd compelling evidence of a negative eect of the scheme induced reduction in the average tax rate on pre tax earnings of foreign migrants at the individual level this nding can be rationalized by a matching frictions

provision of a pure local public good in a spatial model with many jurisdictions abstract this paper examines the provision of a pure local public good in jurisdictions that are spaced evenly along an infinite line each jurisdiction either supplies the local public good or else its residents travel to another jurisdiction to consume the local public good the equilibrium spacing between jurisdictions which supply the local public good which can be uneven varying between a minimum spacing and a maximum spacing for given exogenous parameters can be greater than equal to or less than the socially optimal spacing