does additional campaign spending really hurt incumbents the theoretical importance of past investments in political brand name the existing literature ignores the fact that the marginal return to current campaign expenditures depends on the candidate s stock of brand name this simple observation is then used to provide a possible explanation for the negative empirical relationship observed between an incumbent s campaign spending and how well he does

are legislative tv and campaign finance regulations complementary entry barriers evidence from the usa the present study examines the political use of legislative television and campaign finance restrictions as either complementary or substitutable forms of entry barriers using data from the 50 states for 1976 results from a simultaneous probit procedure indicate that where campaign finance regulations are relaxed demand for televised house sessions is increased results also suggest that the presence of televised proceedings increases the restrictiveness of a state s campaign finance rules thus supporting the hypothesis that legislative television and campaign finance restrictions serve incumbent legislators as complementary institutional entry barriers mixon 2002 supports this view by providing examples of outlets for voters to scrutinize elected legislators at the federal level in the united states for instance legislative positions for members of congress are often described in detail by nationally circulated periodicals such as time and newsweek and in widely circulated newspapers such as th

the environment and emerging development issues development economics for the most part has failed to recognize renewable environmental resources as economic goods yet the lives of the poor in developing countries are intimately tied to the fate of their local common property resources soil fuel wood water and so on ignoring the loss of common property renewable resources via degradation centralization or privatization in calculations of net national product can mask the destruction of resources available to a country s poor behind the false appearance of a growing national economy this paper describes the difference between the problem of managing local common property resources in developing countries and the problem of protecting the global commons such as the atmosphere and oceans it outlines the calculations that would include the local commons in the national income accounting of capital assets and argues that the interests of those most dependent on the increasingly scarce local commons will be best served by placing control in their hands while the central government provides infrastructure and educational support to control the pollution of the global commons on the other hand the paper sketches a plan in which most countries would have a high incentive to participate a global allocation of limited tradable permits to discharge defined pollutants

joint production and substitution in timber supply a panel data analysis supply equations for sawlog and pulpwood were developed with a panel of data from 102 norwegian municipalities observed from 1980 to 2000 static and dynamic models were estimated by cross section time series andpanel data methods a static model estimated by first differencing gavethe best overall results in terms of theoretical expectations pattern ofresiduals prediction accuracy and parsimony the results showed thatsawlog supply responded positively to its own price elasticity e 0 91 0 07 but negatively to the pulpwood price e 0 22 0 06 the pulpwood supply responded positively to the price of both pulpwood e 0 53 0 06 and sawlogs e 0 20 0 07 sawlog and pulpwood supply had a common elasticity of 2 04 0 25 with respect to the growing stock and of 0 30 0 21 with respect to the interest rate the supply elasticity of substitution of sawlog for pulpwood with respect to their relative price was 0 74 0 04 policies to raise the annual harvest which is currently well

gerrymandering and the voting rights act of 1982 a public choice analysis of turnover in the u s house of representatives the present paper uses various data sets and statistical techniques to examine the outcome of gerrymandering under the voting rights act of 1982 on turnover rates in the u s house of representatives as well as the competitiveness in party primaries for house seats evidence presented here suggests that political redistricting at the federal level namely for u s house seats has tended to favor incumbents in both the party primaries and general elections in fact some results suggest that turnover rates for 1988 are between 8 9 and 10 3 percentage points lower within states that engaged in such redistricting efforts our findings generally support the main tenets of the public choice view of legislator behavior

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

getting agriculture moving do markets provide the right signals abstract political discrimination has often pushed the domestic value of agriculture in developing countries below its value in markets at the border this paper seeks to explain the reasons why border prices themselves undervalue the linkages that agriculture has to economic growth in the early stages of development if agriculture is critically important to stimulating and sustaining rapid economic growth those countries that fail to correct this discrimination exact a heavy toll in economic performance furthermore the poorest countries will suffer the most agricultural development and development of the non agricultural economy are closely linked the traditional market mediated linkages form the core of economic analysis of the role of agriculture in economic development providing labour for an industrial work force food for an expanding population with higher incomes savings for industrial investments markets for industrial output export earnings to pay for imported capital goods and raw materials for agro processing industries a second category of linkages is not well mediated by market forces even when markets are working well the impact of agricultural growth on the rest of the economy through non market linkages can be traced using a simple growth accounting framework that examines contributions to the labour force capital investment and the productivity with which these two physical factors are utilised several linkages stand out as likely to be important and potentially measurable because they draw on the efficiency of decision making in rural households the low opportunity cost of their labour resources the opportunity for farm investment without financial intermediaries the potential to earn high rates of return on public investments that correct for urban bias the contribution of food price stability to increased efficiency in investment decisions and the impact of growth in food production on widespread improvement in nutrient intake and labour productivity each of these factors alone as public investment and favourable policy stimulate growth in the agricultural sector should cause an increase in the efficiency of resource allocation and thus higher total factor productivity several of these mechanisms will also serve to speed factor accumulation by increasing the savings rate or improving factor mobility

prices and qualities in markets with costly information this paper extends the seminal work of akerlof and salop and stiglitz in two directions i the sellers can select both the selling prices and quality levels of their good and ii the buyers can acquire price quality information about individual sellers at a cost we observe multiple price quality combinations in equilibrium which depend upon the distribution of information costs of consumers and upon whether quality or price or both are costly observable welfare comparisons of equilibrium are considered we show that welfare will be greater when price advertising is permitted

competitive price and quality under asymmetric information we present an analysis of equilibrium in markets with asymmetrically informed consumers some consumers know both price and quality of all sellers whereas others know neither but may search among sellers the equilibrium correlation between price and quality generally increases with the level of information in the market and can be negative when this level is sufficiently small a meta analysis of the available empirical studies strongly supports the model s predictions

advertising as information an empirical note lamm r mcfall unionism and prices in the food retailing industry journal of labor research 3 winter 1982 69 79 marion bruce w willard f mueller ronald w cotterill frederick e geithman and john r schmelzer the food retailing industrv market structure profits and prices new york praeger 1979a the price and profit performance of leading food chains a merican journal of a gricultural economics 61 aug 1979b 420 433 salinger michael a tobin s q unionization and the concentration profits relationship rand journal of economics 15 summer 1984 159 170 voos paula b and lawrence r mishel the union impact on profits evidence from the supermarket industry working paper no 88 north central project 117 university of wisconsin madison oct 1985 the union impact on profits evidence from industry price cost margin data journal of labor economics 4 jan 1986 105 133

modeling fertilizer externalities around palo verde national park costa rica irrigated rice farming in costa rica involves use of agrochemicals that pollute important wetlands ecosystems such as the palo verde national park in the northeastern province of guanacaste we characterize rice farming in this region apply duality theory to estimate conditional factor demand for fertilizer and then simulate the impacts of alternative policies on fertilizer use using a normalized profit function we also estimate policy impacts on farmer profits as expected prices of rice seeds and fertilizer significantly affect use of fertilizer price incentives or taxes could encourage farming practices that reduce the threat to downstream ecosystems

relating inertia and experience in technology markets an analysis of households personal computer choices this article empirically analyses how households pc purchasing behaviours change with market experience we find that households generally exhibit inertia in their pc purchases the level of inertia is increasing as a function of experience on the pc market and for households switching brands the likelihood of buying a lesser known brand increases with experience regardless of the brand of the previous purchase these findings are consistent with the predictions of a simple learning model and extend our understanding of how market experience affects purchasing behaviour to an important technology product with implications that may apply to other similar products

consumption risk farm characteristics and soil conservation adoption among low income farmers in the philippines abstract this paper investigates patterns of soil conservation adoption among low income farmers in the philippines a model is presented that focuses attention on the role of assets and consumption risk in influencing soil conservation adoption decisions results from a reduced form probit model of adoption are reported these econometric findings indicate that patterns of soil conservation adoption reflect relative risk considerations in addition to farm and household characteristics farm size tenure security labor availability and land quality all exhibit a positive association with soil conservation adoption in contrast controlling on these and other household characteristics the probability of adoption falls as consumption risk rises these results underscore a need for greater sensitivity among policymakers to the role of consumption risk in influencing soil conservation decisions in low income settings

trade and tax policy reform and the environment the economics of soil erosion in developing countries the widespread view that trade reform is bad for the environment has rarely been subjected to close scrutiny in a developing country model we trace general equilibrium impacts of tax and tariff policy changes on upland resource allocation and by implication on the rate of erosion our analysis highlights the role of domestic market linkages as conduits between lowland and upland economies when economywide effects are taken into account indirect policies such as tariff reforms may in some cases provide better means for reducing upland erosion than would direct environmental policies

international trade and the environment policy reform in a polluted small open economy abstract this paper investigates sufficient conditions for welfare improving policy reforms in a small open economy facing many trade and pollution distortions we investigate and compare reform in tax regimes quota regimes and mixed regimes where some pollutants are regulated with taxes and others with quotas it is also shown that the welfare benefits of reforming pollution policy are greater in an economy with international factor mobility than in an economy not subject to such mobility

an analysis of congressional voting on legislation limiting congressional campaign expenditures congressional voting on proposed floor amendments concerned solely with setting the level of the election campaign expenditure ceiling provision of the house administration committee s broad campaign finance reform bill of 1974 is analyzed for consistency with either the public interest or economic theories of regulation the benefit or cost to the individual congressman of a given ceiling is defined as the implied increase or decrease in his probability of reelection under the ceiling logit regression analysis provides the preponderant support for the economic theory of regulation by indicating that the likelihood of voting for a given ceiling varies directly with the implied change in reelection probability under the ceiling and is quite sensitive to the implied change

economic factors in farmer adoption of agroforestry patterns observed in western kenya abstract a study of agroforestry adoption by 3 000 project participants in siaya and south nyanza districts in kenya supports three hypotheses 1 1 historical increases in tree domestication and management intensity are responses to declining supply of uncultivated tree resources increased subsistence and commercial demand for tree products and perceived risks of ecological degradation adoption of agroforestry is most likely where consistent with economic incentives for land use change 2 2 high variability in individual farmers tree growing strategies reflects differences in resources and livelihood strategies and household level returns to agroforestry relative to alternative options for meeting specific objectives 3 3 farmers reduce risks associated with new agroforestry practices through incremental adoption and adaptation and cost and risk reducing modifications in technology design

an objective measure of search versus experience goods i introduction search goods and experience goods have been part of the lexicon of economics for twenty years now during this time a substantial body of research has been influenced by nelson s 1970 and 1974 papers which enlarged upon stigler s 1961 seminal paper despite the appeal of the search versus experience dichotomy to members of the economics profession empirical development and application of the concepts involved has not been impressive 1 stigler 1961 argued that consumers efforts to acquire information about the quality or performance of products and vendors are a function of expected benefits and costs nelson s 1970 1974 work attempted to measure the expected benefits and to a lesser extent expected costs to consumers of acquiring product and vendor information unfortunately although this search versus experience dichotomy now is part of economists conventional wisdom it has led to little empirical analysis beyond nelson s investigations the root problem seems to be a lack of agreement over the definition of a search good versus an experience good to nelson 1970 the latter is one whose qualitative characteristics are not ascertainable by buyer inspection prior to purchase thus information about the product s quality or performance can be obtained only through buying and using the item we can however ascertain performance information about search goods prior to purchase porter s 1976 analysis of the acquisition of product information by consumers classified items as convenience and non convenience goods the former are characterized by low unit price and high frequency of purchase the opposite holds for non convenience goods the low unit price of convenience goods implies that relevant performance information will be acquired via sampling experience even though one might be able to acquire the information from other sources but at higher cost an experience good is not such by design rather by virtue of consumer choice in the face of varying informational costs thus porter s measure of the incentive to acquire product vendor information is product price as opposed to nelson s ad hoc search experience dichotomy using porter s classification meisel 1979 argues that the degree to which consumers efforts to acquire information take the form of search rather than sampling experience depends on the expected costs and benefits for any given product similarly laband 1986 argues that consumer demand for product and vendor information in advance of purchase is affected by both price and frequency of purchase nelson s classification scheme is at odds with his definitions for example he regards food as an experience item although much relevant information about it is available prior to purchase 2 product classification is admittedly ambiguous e g jewelry and silverware in fact the search vs experience classification more logically represents the two extremes of product classification with most items falling somewhere in between by subdividing experience goods into durable and nondurable categories nelson 1974 validates this assertion given this ambiguity it is understandable that empirical research in this nexus of producer consumer interaction has been limited to use the search experience classification for empirical analysis one must either borrow nelson s existing scheme which is limited in product coverage or create new product classifications which are of dubious merit on the other hand the porter meisel analyses which do provide the micro foundations of consumer behavior in the face of uncertain product vendor quality have never supplanted or integrated nelson s work into their broader framework the purpose of this paper is to bridge these two strands of the advertising as information literature i argue that the discussion of search versus experience goods and more importantly the behavior of buyers and sellers is driven by the cost to the buyer of a disappointing purchase

advertising as information further evidence in the past 30 years the economics of information has become an important feature of the revolution in modern microeconomic theory the seminal literature includes theoretical advances by stigler 10 nelson 7 8 spence 9 and darby and karni 1 in an original approach laband 3 tests the proposition that the supply of product quality signals increases with a rise in the expected marginal return to consumers utilizing yellow pages advertisements in various urban settings in later expositions laband 4 5 provides further evidence of the durability of the informational content and the differences in information provision of television and commercial advertisements for different types of goods the present paper extends and provides alternatives to laband s tests of the impact of time costs faced by consumers on the informational content of advertising this study employs a supplementary category to laband s of credence goods developed in the literature 2 6 and analyzes the impact of income as a proxy for time and information costs with a unique intra city data set from new york city and los angeles

the economics of breakdowns checkups and cures a market in which the owner of a durable good x contracts with an expert for diagnostic and treatment services is studied good x may be in one of three states health disease or failure only experts can determine whether x is healthy or diseased and perform treatment the owner cannot tell whether recommended treatment is really needed this creates an information based demand for health insurance by risk neutral consumers imperfections in the market for spot insurance may give rise to free diagnostic checks strategic procrastination and long term health maintenance agreements

consequences of a food security strategy for economic welfare income distribution and land degradation the philippine case like many developing countries the philippines pursues a food security strategy in which self sufficiency and price stabilization feature prominently in addition to their widely debated welfare effects food policies based on price and trade restrictions may also accelerate land degradation by promoting expansion of relatively erosive grain crops the paper explores the welfare and environmental implications of food policies first with a simple heuristic model then with an applied general equilibrium model comparing market restrictions with technical progress as alternative food policy strategies the authors find that the former increase land degradation and reduce welfare moreover anti poverty and distributional benefits often claimed for such interventions may be illusory

advertising as special service provision under non price vertical restraints exclusive territories in beer distribution this article presents statistical evidence which supports lester telser s 1960 hypothesis that when vertical restraints are made illegal intrabrand competition results which diminishes the provision of point of sale special services this results because of the public goods problem exhibited by the special services increased special service provision by the national manufacturer must then substitute for the special service provision left unfilled by the wholesaler evidence relating to the efficacy of such substitution is also presented

honesty in a model of strategic information transmission we consider the following simple model of consumer fraud consumers need one of two possible repairs an expensive repair denoted e or an inexpensive repair denoted i the exogenous probability that a consumer needs the more costly remedy is r each consumer is assumed to know r an expert can observe with certainty which of the two repairs is needed and can offer to sell either to the consumer in a simple extension we allow for uncertainty with respect to the expert s observation we assume that selling the expensive remedy to a consumer who needs only the inexpensive one is more profitable than selling the inexpensive one thus h eii h1 iji where h denotes profit and i denotes conditional on needing the profit functions are increasing in the price of the respective repairs for convenience we suppress the dependence of h on prices in our notation we also assume that a consumer prefers to obtain the appropriate repair to the inappropriate one thus u eie u ije and u iii u eii where u is the consumer s payoff lastly we assume that the functions u eje and u e i are decreasing in the price of the expensive repair and that u iie and u iii are decreasing in the price of the inexpensive repair we also assume that u iie is decreasing in the price of the expensive repair since the consumer ultimately buys the expensive repair in this case see below for further assumptions regarding the repairs we are interested in the equilibrium levels of honesty in this model how honest is the expert at the equilibrium do consumers always follow the expert s advice does the level of honesty increase as the interests of the agents become more similar in a sense to be defined below our assumptions are similar to those in the abstract strategic information transmission models of vincent crawford and joel sobel 1982 and jerry green and nancy stokey 1980 we follow the former paper which asks whether the signals sent become less noisy as the agents preferences become more similar despite the similarity of our model to crawford sobel s we arrive at some different conclusions with respect to the expert s honesty vis a vis the agents closeness of interests we explain this in detail in section iii in addition we allow that the expert may be uncertain about the true state of the world we also explicitly model the level of expert honesty which extends crawford sobel the outline of the paper is as follows in section i we provide the details of the model and show that a unique equilibrium exists comparative static results and a simple extension incorporating the assumption of the incompetent expert are given in section ii we draw comparisons with crawfordsobel in section iii in section iv we conclude with a brief summary

the online shadow of offline signals which sellers get contacted in online b2b marketplaces this article extends the understanding of what impels buyers to contact particular sellers in online business to business b2b marketplaces which are typically characterized by sparse social structures and concomitant limitations in observing social cues integrating an institutional perspective with signaling theory our core argument is that offline seller characteristics that are visible online in particular geographic location and legal status convey credible signals of seller behavior because they provide buyers with information on sellers local institutional quality and the institutionally induced obligations and controls acting on sellers using unique data from a large italian online b2b marketplace between the fourth quarter of 1999 and july 2001 we find that both sellers local institutional quality and their legal statuses affect a buyer s likelihood of contacting a seller moreover consistent with the idea that a buyer s own local institutional quality generates a relevant reference point against which sellers are evaluated we find that a buyer is progressively more likely to contact sellers the higher their local institutional quality relative to the buyer jointly our findings imply that in online b2b marketplaces signals conveyed by sellers geographic locations and legal statuses may constitute substantive sources of competitive heterogeneity and market segmentation

on the role of verifiability and commitment in credence goods markets a client has a problem but does not know whether it is serious or minor she consults an expert who can correctly diagnose and fix her problem this paper characterizes the equilibrium pricing and recommendation strategies of an expert under the assumptions that i the type of treatment is verifiable by the client ii the client has the option of rejecting any treatment recommendation and iii the expert is not liable for the outcome of the treatment it is found for any parameter configuration that there exist equilibria in which the expert makes fraudulent recommendations resulting in inefficient treatment the market outcome is compared with that under an alternative market environment in which the expert is liable for treatment outcome but the type of treatment performed is non verifiable it is shown that for some parameter configurations the equilibrium is more efficient when liability is in place than when the treatment is verifiable these findings stand in sharp contrast to the received wisdom that the market outcome under verifiability of treatment is efficient while the market outcome under liability for outcome is not finally this paper shows that the existence of some honest experts may induce more fraudulent behavior by opportunistic experts

agricultural growth poverty and nutrition in tanzania abstract rapid economic growth does not appear to have significantly improved poverty and nutrition outcomes in tanzania we link recent production trends to household incomes using a regionalized recursive dynamic computable general equilibrium and microsimulation model results indicate some inconsistency between recent growth and poverty measurements in tanzania we also find that the structure of economic growth may have constrained the rate of poverty reduction agricultural growth has been driven by larger scale farmers who are less likely to be poor and has been concentrated among crops grown in specific regions of the country slow expansion of food crops and livestock also explain the weak relationship between agricultural growth and nutrition outcomes we find that accelerating agricultural growth particularly in maize strengthens the growth poverty relationship and enhances households caloric availability while also contributing significantly to growth itself

links between rural poverty and the environment in developing countries asset categories and investment poverty abstract this paper presents a framework for analyzing the links between poverty and the environment in rural areas of developing countries it introduces the concept of investment poverty and relates it to other measures of poverty in analysis of these links the notion of poverty is examined in the context of categories of assets and categories of environment change with particular focus on farm household income generation and investment strategies as determinants of the links the strength and direction of the poverty environment links are shown to differ even invert depending on the composition of the assets held by the rural poor and the types of environmental problems they face policy strategies need to focus on conditioning variables that affect market development community wealth infrastructure household asset distribution and the affordability and appropriateness of natural resource conservation technologies

presidential campaign expenditures evidence on allocations and effects this paper analyzes the impact of presidential campaign spending on election results analyses of expenditures and voting are often plagued by simultaneity between campaign spending and expected vote share however game theoretic models of resource allocation decisions made by a central actor i e a presidential campaign suggest that candidates will spend more in close races and in races likely to be pivotal we provide empirical support for this theory using federal communications commission data from the 1972 presidential election we find that expenditures were higher in states where the election was expected to be closer and in states likely to be pivotal we use these two factors as instruments in a two stage least squares model to estimate the effect of spending on votes we find that contrary to previous theory and research presidential campaign spending significantly increases a candidate s vote share

credence goods costly diagnosis and subjective evaluation we study contracting between a consumer and an expert the expert can invest in diagnosis to obtain a noisy signal about whether a low cost service is sufficient or whether a high cost treatment is required to solve the consumer s problem this involves moral hazard because diagnosis effort and signals are not observable treatments are contractible but success or failure of the low cost treatment is observed only by the consumer payments can therefore not depend on the objective outcome but only the consumer s report or subjective evaluation a failure of the low cost treatment delays the solution of the consumer s problem by the high cost treatment to a second period we show that the first best solution can always be implemented if the parties discount rate is zero an increase in the discount rate reduces the range of parameter combinations for which the first best can be obtained in an extension we show that the first best is also always implementable if diagnosis and treatment can be separated by contracting with two different agents

competition between networks a study of the market for yellow pages this paper estimates the importance of network effects in the market for yellow pages i estimate three simultaneous equations consumer demand for usage of a directory advertiser demand for advertising and a publisher s first order condition derived from profit maximizing behaviour estimation shows that advertisers value consumer usage and that consumers value advertising implying a network effect i find that internalizing network effects would significantly increase surplus as an application i consider whether the market benefits from monopoly which takes advantage of network effects or oligopoly which reduces market power i find that a more competitive market is preferable copyright 2004 wiley blackwell

determinants of smallholder commercial tree cultivation abstract this article contains a discussion of how output prices tenure information credit technology government policies and labor availability affect smallholder commercial tree cultivation output prices play the key role in smallholder commercial tree cultivation even in the face of insecure tenure output prices however are a necessary but not a sufficient condition to induce smallholders to undertake commercial fuelwood cultivation

how well do tree plantations comply with the twin targets of the clean development mechanism the case of tree plantations in tanzania the clean development mechanism cdm of the kyoto protocol is supposed to provide both carbon mitigation and poverty reduction this article reports from a model based study of market related carbon leakage and poverty reduction in the wake of a cdm tree planting project in tanzania a tree plantation was incorporated in a computable general equilibrium cge model with income differentiated household segments the study focused on sensitivity of carbon leakage and income distribution to different project ownerships and carbon premium allocations it turned out that the project value in terms of carbon premium has clear shortcomings as indicator of induced gdp growth and poverty alleviation the non poor rural and urban households benefit considerably more than the poor households however rising household income in all domestic project ownership arrangements increases demand for food raises use of fertilizer and crop yields a carbon cycle module for agricultural land use was incorporated in the cge model showing an increased carbon sequestration in agricultural soil representing a negative leakage through markets in the range of 60 120 of the certified emissions reductions as registered in the cdm tree plantation project

business strategies and the small professional firm evidence from the conveyancing market this paper examines the use of business strategies by firms of solicitors in england although still often seen as the epitome of the traditional profession recent deregulation and liberalisation of the legal services market has forced solicitors to consider the use of more business like approaches to the operations of their firms using the framework provided by john kay it is possible to identify distinctive capabilities among some firms in the provision of conveyancing despite the fact that this is a relatively routine service provided mainly by small professional firms the use of reputation is crucial here analysis of the conduct of sample firms suggests that business strategies can be identified with respect to pricing and advertising and that the advertising behaviour of law firms closely matches the predictions of relevant economic theory the paper concludes that it is meaningful to speak of strategy among at least some small professional firms

prices and tree planting on hillside farms in palawan abstract this paper investigates determinants of tree planting decisions on low income farms in the philippines the analysis quantifies the extent to which agricultural prices price uncertainty and farm specific characteristics help to explain mango planting decisions on hillside farms regression analysis is applied to data on tree planting for 1981 94 results indicate tree planting is positively correlated with mango prices and negatively correlated with prices of competing crops relative price uncertainty and farm size also play important roles in explaining tree planting patterns implications for policies to encourage tree planting are discussed

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

bank failures as poisson variates abstract the elasticity of bank failures with respect to a set of explanatory variables is estimated using a maximum likelihood poisson estimator the resulting estimates are compared with their ols counterparts

information transmission in regulated markets the seminal papers of vincent p crawford and joel sobel 1982 and jerry green and nancy stokey 1980 study models in which a signal about the state of the world is transmitted from a perfectly informed sender to an uninformed receiver the authors study a model in which multiple signalers compete for consumers the authors ask how much information is revealed how consumers shopping around affects this information and how each is affected by incentives an implication of the model is that in a price regulated market for health care patients should not be prohibited from gathering more than one opinion

impacts of a common green certificate market on electricity and co2 emission markets in the nordic countries abstract the purpose of this study is to analyze the effects of introducing a common nordic system for tradable green certificates tgcs on the electricity market and a future market for tradable co 2 emission permits teps in the analysis the energy system model generator markal was used to model the electricity and district heating supply systems in the four nordic countries sweden norway finland and denmark it is shown that the introduction of tgc quotas reduces wholesale electricity and tep prices the impact on the latter is very pronounced retail electricity prices may become lower or higher depending on the tgc quota than if obligations to fulfill tgc quotas were absent the tgc scheme s efficiency in reducing a specific amount of co 2 emissions is also compared to the corresponding efficiency of a tep scheme involving a broader range of technologies furthermore obligations to fulfill tgc quotas affect investment incentives for new non renewable electricity supply this seems especially true for gas fired power plants finally it is indicated that electricity supply based on biomass combustion dominates the tgc scheme at least in the short run

agriculture aid and economic growth in africa how can foreign aid to agriculture support economic growth in africa this paper constructs a geographically indexed applied general equilibrium model that considers pathways through which aid might affect growth and structural transformation of labor markets in the context of soil nutrient variation minimum subsistence consumption requirements domestic transport costs labor mobility and constraints to self financing of agricultural inputs using plausible parameters the model is presented for uganda as an illustrative case three stylized scenarios demonstrate the potential economy wide impacts of both soil nutrient loss and replenishment and how foreign aid can be targeted to support agricultural inputs that boost rural productivity and shift labor to boost real wages one simulation shows how a temporary program of targeted official development assistance oda for agriculture could generate contrary to traditional dutch disease concerns an expansion in the primary tradable sector and positive permanent productivity and welfare effects leading to a steady decline in the need for complementary oda for budget support

structural adjustment and soil degradation in tanzania a cge model approach with endogenous soil productivity abstract in this paper a model of the nitrogen cycle in the soil is incorporated in a computable general equilibrium cge model of the tanzanian economy thus establishing a two way link between the environment and the economy for a given level of natural soil productivity profit maximising farmers choose input levels and hence production volumes which in turn influence soil productivity in the following years through the recycling of nitrogen from the residues of roots and stover and the degree of erosion the model is used to simulate the effects of typical structural adjustment policies like a reduction in agro chemicals subsidies reduced implicit export tax rate etc after 10 years the result of a joint implementation is a 9 higher gross domestic product gdp level compared to the baseline scenario the effect of soil degradation is found to represent a reduction in the gdp level of more than 5 for the same time period

campaign spending in congressional elections campaign spending in congressional elections i introduction empirical studies of the effects of campaign spending on the outcome of congressional elections have found that campaign spending by incumbents is not as effective as that of their challengers indeed kau and rubin 1982 and jacobson 1985 1987 find that incumbent spending reduces the number of votes they receive and netter 1983 that it increases the challenger s votes incumbents seeking reelection however are very successful winning nine times out of ten in the postwar era if their campaign spending is so inefficient why do incumbents continue to outspend their challengers in a majority of elections we argue that these researchers counterintuitive findings are the result of using models which do not adequately correct for the simultaneous determination of the election outcome and campaign contributions and which do not include an electoral check on incumbent behavior 1 in their studies jacobson and netter as well as lott 1986 and laband and lentz 1985 assume the incumbent s ability to repel challengers is independent of his or her behavior while in office few would agree that the electoral check is so ineffective we develop a simultaneous model to correct these deficiencies it captures the effects of campaign expenditures tenure the consistency of the incumbent s votes with his constituents preferences and the size of the voter turnout on the votes received by incumbents and challengers in four congressional elections between 1978 and 1984 the model is very robust over these four elections the use of primary election data insures model identification ii model and empirical measures we assume that the platforms of any two candidates for a political office can be measured along a single left right spectrum voters know their preferred position on the dimension but cannot observe the positions of the two candidates with certainty because of rational ignorance a theory accepted since downs 1957 following congleton 1986 we assume voters are risk averse and receive more utility from candidates with positions closer to the voters preferred position but lose utility as the candidate s position becomes more uncertain voters compare the candidates and vote for the one that provides them greater expected utility voters can observe the incumbent s performance and are thus less uncertain of his views and credibility uncertainty should decrease with an incumbent s tenure in office tenure provides voters with knowledge of the incumbent s position and the incumbent with political capital this accumulation of political capital may make it more difficult for challengers to mount a successful campaign in this sense tenure acts as a barrier to entry 2 if all incumbents were at the same point on the spectrum as the median voter of their districts all incumbents would win reelection if all potential challengers were aware of this fact they would not challenge since campaigns are costly but one observes many challengers and some defeated incumbents so we proceed from the hypothesis that challengers enter the race when they perceive a gap between the position of the incumbent and that of the median voter and assume this position as their platform a large difference between the incumbent s position and the median voter s position increases the likelihood of a successful challenge if voters were certain of the positions of both candidates and the challenger s assessment was correct the challenger would win but challengers are usually less well known than incumbents and this additional uncertainty gives incumbents an advantage thus the challenger must convince the voters that his or her position is closest to the median voter s position and advertising is the primary means to that end 3 repetition of the message reduces the voters uncertainty over a challenger s position

trees as savings and security for the rural poor abstract professionals have rarely seen trees as savings banks for poor people but while trees and their products have become more valuable and easier to market many poor people have become more vulnerable as contingencies cost more and traditional supports weaken consequently trees have increasing importance and potential as savings and security for the poor and for use to meet contingencies for savings and security trees compare quite well with jewelry large stock small stock land and bank deposits disadvantages of trees can include insecure or unclear rights restrictions on cutting and selling when needed and problems with marketing but common advantages include cheap and easy establishment rapid appreciation in value divisibility to meet needs closely and regeneration after cutting more empirical studies are needed on the use and potential of trees as poor people s savings banks the policy implications of present evidence and analysis include tree reform improved marketing and prices and above all investing poor people with secure and full ownership of trees with rights to harvest cut and sell similar to the withdrawal rights of depositors in savings banks

induced innovation and land degradation results from a bioeconomic model of a village in west africa abstract this paper introduces a modeling method which simulates a village s response to population and market pressure the method combines a recursive and dynamic linear programming model with a biophysical model of soil condition and plant growth that predicts yields and land degradation for different type of land land use and cropping patterns the linear programming model simulates farmers plans aggregated at the village level under constraints of risk aversion food consumption land area soil fertility soil depth labor and cash availability detailed agroecological factors determine the main processes of land degradation a large number of technological alternatives representing different degrees of labor and or land saving techniques available in the study areas are introduced taking into account their respective constraints costs and advantages the method has been calibrated for a village located in the sub humid region of burkina faso several simulations are carried out to the year 2030 the results show that population pressure leads to intensification and investment in land conservation practices but not necessarily to better farm incomes increasing market opportunities can play a more positive role in boosting productivity but for the next decades the best way to increase production per farmer is to let farmers migrate from the high population density areas to the low population density areas because under the current economic conditions of most sahelian countries intensification per hectare is stil more expensive than the fallow system

face value information and signaling in an illegal market author affiliation trevon d logan the ohio state university and nber 410 arps hall 1945 north high street columbus oh 43210 usa e mail logan 155 osu edu corresponding author manisha shah dagger university of california los angeles and nber 3250 public affairs building los angeles ca 91195 e mail manishashah ucla edu acknowledgment we would like to thank george akerlof rodney j andrews raj arunachalam andrea a cann lisa d cook brahima coulibaly scott cunningham angus deaton avinash dixit claudia d goldin karla hoff joseph kaboski simon loertscher joseph m newhard christina paxson john pepper ruth peterson patricia reagan seth sanders ebonya washington nathan woodfork three anonymous referees and numerous seminar participants who provided helpful suggestions the usual disclaimer applies 1 introductionformal enforcement is often seen as the cornerstone of contract design while information can overcome the problems of asymmetric information akerlof 1970 spence 1973 principals are unlikely to engage agents unless the information conveyed is credible and verifiable while the use of formal institutions such as courts is rare relative to the volume of transactions the standard argument is that the presence of formal institutions gives contracts their authority in schelling s 1960 classic terminology the power to sue and be sued gives parties the ability to make credible enforceable commitments a prerequisite to most transactions without means of redress the information that principals and agents share would a priori have little value numerous studies have documented how informal networks long term relationships and reputations overcome problems of asymmetric information indeed researchers have developed large literatures that look at limited contractibility hart 1995 tirole 1999 and situations in which formal enforcement is costly greif 1993 to consider the additional mechanisms that must be in place if existing institutions are lacking or unable to mediate disputes however the literature has not developed an empirical answer to whether the value of information without formal enforcement approaches its value when formal enforcement is present in this article we ask two questions i are formal enforcement mechanisms necessary for the information that principals and agents share to have value ii if not then what is the value of information in an environment without formal enforcement ideally we would like to analyze an illegal market to answer these questions illegal markets rule out the possibility that market function or variation in the information environment is due to the presence of formal enforcement similarly in an illegal market the information that principals and agents convey to one another may not be credible or verifiable and misrepresentation is not likely to be punished the problem is that most illegal markets have coarse information environments it is therefore challenging to obtain information on prices quantities and consumer and producer behavior making empirical answers to these questions especially difficult we overcome these problems by analyzing an illegal market with a rich information structure the online market for male sex work we begin with a general description of this seldom studied market we then document the ways in which the clients of male sex workers informally police the market by informing other clients of deceptive sex workers and by reviewing sex workers on independent client owned web sites the informal policing in the market raises the cost of misrepresentation for would be fraudulent escorts and rewards the truthful self disclosure of honest escorts encouraging truthful self disclosure we further exploit this institutional knowledge to identify the specific information clients treat as signals of escort quality

has legislative television changed legislator behavior c span2 and the frequency of senate filibustering using data from 1959 1998 this study examines the impact of legislative television c span2 on the number of filibusters in the united states senate as previous work has sug gested the institutional rules of the federal legislative branch of government in the u s often allow for political grandstanding and posturing and these activities are enhanced with the presence of television cameras on the legislative floor like those previous studies the present work builds a theoretical model wherein political services are considered search experience goods and service providers federal legislators are expected utility maximizers who are concerned with promoting their policy preferences and their re election prospects poisson model estimates suggest that the presence of legislative television has worked to increase the filibuster count in the senate as a result such posturing and positioning on the issues by incumbents in front of television cameras is costly for challengers to replicate and likely contributes to lower turnover rates in the legislative branch

on the limitation of warranty duration this paper analyzes the frequently observed phenomenon that firms offer product warranties that are of much shorter duration than the life expectancy of these products it is shown that competitive equilibria may entail limitation of warranty duration if firms face adverse selection problems with respect to different consumers copyright 1989 by blackwell publishing ltd

projecting demand and supply of forest biomass for heating in norway abstract this paper assesses the increase in demand and supply for forest biomass for heating in norway in 2020 by then there is a political aim to double the national production of bioenergy from the level in 2008 the competitiveness of woody biomass in central and district heating is analyzed in a model selecting the least cost heating technology and scale in municipalities given a set of constraints and under different fuels price scenarios the supply of forest biomass from roundwood is estimated based on data of forest inventories combined with elasticities regarding price and standing volumes the supply of biomass from harvesting residues is estimated in an engineering approach based on data from the national forest inventories and roundwood harvest the results show how the production of bioenergy is affected by changes in energy prices and support schemes for bioenergy one conclusion from the analyses is that the government target of 14 twh more bioenergy by 2020 is not likely to be met by current technologies and policy incentives the contribution of the analysis is the detailed presentation of the heat market potentials and technology choices combined with supply functions for both roundwood and harvesting residues

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

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

prices product qualities and asymmetric information the competitive case recent developments in the economics of information emphasize the informational content of prices we examine the degree to which prices convey information on product quality to uninformed agents under perfect competition we show that a rational expectations equilibrium may not exist when an equilibrium does exist the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents

informative and persuasive campaigning in this paper we use a simple downsian spatial model to analyze the properties of campaign contributions we first consider campaign contributions that are intended to inform voters of candidate positions we show that it is difficult to construct arguments in a downsian spatial model for why some voters would choose to contribute to a candidateand the candidate would want to spend the money contributed to inform voters of his position we then define persuasive campaign expenditures as those that are intended to convince an individual to vote for a candidate regardless of the candidate s position on issues in the presence of persuasive campaign expenditures some voters have an incentive to contribute to one or both candidates and the candidates have an incentive to spend the money we show why the nature of persuasive campaign expenditures may explain both their growth in recent years and the increasing advantage of incumbency

customer return policies for experience goods the impact of product price and consumer search costs on seller provided informational cues the present article provides an extension of previous theoretical arguments regarding customer return policies for experience goods logit regressions presented here suggest the importance of the full cost to consumers of a purchase mistake as proxied by experience goods prices and the time costs to consumers associated with search in the seller s decision to produce information in advertisements regarding return policies the evidence points out that sellers do respond in their decisions to produce information in a manner that reduces the total cost of voluntary exchange and maximizes seller profits

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

credence goods monopolists abstract with a credence good consumers never discover how much of the good they actually need therefore the seller acts as the expert determining the customers requirements this information asymmetry creates strong incentives for the seller to cheat on services we analyze whether the market mechanism may induce non fraudulent seller behavior we consider four scenarios differing in the amount of information consumers have at hand to infer the seller s incentives to be honest in three constellations the profit maximizing credence goods monopolist provides honest services only in one scenario there is no trade

the cost of soil erosion in nicaragua the cost of soil erosion is not so much dependent on the physical amount of soil lost as determined by the economic effects of these losses soil erosion has both onsite and offsite effects loss of soil productivity is the main onsite effect while enhanced productivity of downstream land sedimentation and eutrophication of waterways and reservoirs are common offsite effects in this paper we consider only the onsite effects of erosion the loss of agricultural productivity is however studied within a broader economic framework than usual by incorporating the direct economic effects of soil loss into a general equilibrium model it is possible to shed light on some of the many interlinkages between agricultural activity and other parts of the economy which are important for determining the social cost of soil erosion based on model simulations we find that soil erosion represents a considerable drag on the nicaraguan economy but that the burden of soil erosion depends on conditions and policies in non agricultural markets such as the labour market furthermore the sharing of the burden is not always to the disadvantage of the peasants while uncertainties in data and modelling prevent us from drawing strong conclusions the present study underlines the importance of considering the overall economic environment when policy proposals for mitigating excessive soil erosion is formulated

a discrete time hazard model of the adoption of legislative television evidence from the us congress 1961 1986 the present study examines the probability of the adoption of legislative television over time 1961 1986 in the us congress using a discrete time hazard model against a theoretical construct where political services are modelled as search experience goods evidence is provided suggesting that constituent homogeneity relative power struggles involving the legislative branches of congress and the white house and the potential prowess of legislators in congress regarding skilful use of television are all important facets in this probability model use of alternative data sources and statistical techniques such as those presented here works to provide a greater foundation of knowledge regarding the relationship between representative democracy and modern means of communication

pivotal power brokers theory and evidence on political fundraising this study examines the campaign fundraising success of senate incumbents that have a unique pivotal status legislatively in the senate with regards to parliamentary procedures e g the filibuster regression estimates place the fundraising advantage in favor of certain pivotal moderates over all other senators at about 2 12 million in real terms in total contribution per 2 yr election cycle pivotal status is even more significant in explaining variations in pac contribution in the u s senate given that individuals who make contributions are not likely to be as interested as pacs in buying policy the results also suggest that krehbiel s pivotal politics krehbiel k 1988 pivotal politics a theory of u s lawmaking chicago il university of chicago press construct warrants modification given that it offers prediction about policy outcomes and gridlock intervals without fully incorporating interest group politics of the vote buying or policy buying variety

agricultural insurance and soil depletion in a simple dynamic model we study the effects of agricultural insurance on farm production choices soil depletion and the environment when there are two related risks one in short to medium run production revenues and the other in land value the analysis considers pure and truncating insurance programs that stabilize linear combinations of short run revenue risk and land price risk production revenue stabilizing insurance is often found to elicit increased farmer output thus exacerbating environmental externalities and causing further soil depletion land value stabilizing insurance typically elicits lower output thus mitigating environmental externalities and pushing farmers closer to their complete insurance output levels

shine bright like a diamond a hedonic model of grading and pricing an experience good diamonds are generally evaluated on the basis of sensory characteristics such as carat weight colour clarity and cut however given the experience goods nature of diamonds few consumers grasp how the sensory characteristics of these stones are evaluated by the gemological grading laboratories that independently issue diamond reports this study extends prior research by determining whether diamonds graded by certain gemological laboratories are subject to pricing premiums or discounts in online retail markets regression models employing a sample of 169 483 real time diamond offerings from online diamond retailers e g blue nile james allen and adiamor find significant price discounts attributable to diamonds graded by the european gemological laboratory usa in relation to diamonds graded by the gemological institute of america gia and significant price premiums attributable to diamonds graded by the american gem society in relation to diamonds graded by the gia

natural resource management and economywide policies in costa rica a computable general equilibrium cge modeling approach a computable general equilibrium cge model is used to trace the effects of government policies on costa rican forests in the presence of incomplete markets the results indicate that correcting the market failure would as expected reduce deforestation more interestingly in the presence of the market failure lowering the tax on unskilled labor reduces deforestation because people gain employment in other parts of the economy taxation of other produced goods changes the incentives for deforestation for example a tax on agricultural products elevates the relative price of capital and shifts resources away from the capital intensive industrial sector toward the agricultural and forest sectors as a result such a tax increases deforestation

gavel to gavel congressional television coverage as political advertising the impact of c span on legislative sessions kamal p upadhyaya this article examines the effect of television on the length of legislative sessions at the federal level in the united states data from the u s congress during the period 1972 96 are employed during part of which time each house of congress received significant television coverage by c span and c span2 evidence from a parks regression suggests that the presence of c span has increased house sessions by 88 250 hours and the presence of c span2 has increased senate sessions by a striking 252 431 hours other things constant additional estimates suggest that house sessions are about two minutes longer per bill introduced under the eye of c span and senate sessions are about four minutes longer per bill introduced in the presence of c span2 longer sessions which represent low cost forms of advertising for incumbents are not without costs to taxpayers we estimate that these costs lie somewhere between 16 million and 392 million in real terms per session of congress jel d72 h11 i introduction as grain and goff 1988 point out the number of political watchers c span junkies seems to be on the rise from a 1986 estimate of 40 million since 1986 the grain and goff 1988 study has been the only significant empirical study of the impact of television on representative democracy despite the potential availability of relevant data and statistical techniques the purpose of the present article is to partially fill the void concerning the impact of television on the democratic process by concentrating on the effect of television on the length of legislative sessions in the u s congress this study makes use of a voter shopping construct that analyzes political services as search experience goods and employs data from the u s house of representatives and the u s senate during the period 1972 96 during some of which time each branch of congress received significant television coverage by c span or c span2 ii product classifications and the provision of political services as grain and goff 1988 point out the theory of product advertising parallels the theory of information as in stigler 1961 and nelson 1970 1974 these articles define search goods as goods for which consumer judgments about quality or performance can be made prior to purchase and experience goods as those for which consumer judgments about product quality performance can be made only after purchase nelson points out that information regarding experience good search good quality can be obtained by consumers at high cost low cost for experience goods ads contain cues indirect on the reputation of the seller which is verifiable at low cost and from which the buyer can make inferences regarding product quality 1 crain and goff 1988 point out that one point of view in the literature holds that political services are like search goods because candidates records are available to voters for verification and evaluation at low cost on the other hand it might be costly for voters to gather information on candidates prior to an election and or difficult for voters to draw inferences about the future behavior of politicians which suggests that political services are experience goods crain and goff 1988 11 in this regard any technological advancement that changes the costs of information gathering by voters will alter the nature of political services as in crain and goff 1988 19 because televising legislative proceedings lowers the cost of evaluating a politician s advertised qualities against his or her actual qualities political services would be more like search goods it is within this framework that we analyze the impact of television on the length of legislative sessions however we argue that there are differences in this regard with state level legislatures which were analyzed by crain and goff 1988 and the u

tenure security resource endowments and tree growing evidence from the amhara region of ethiopia we analyze roles of tenure insecurity and household endowments in explaining tree growing in ethiopia where farmers cannot sell or mortgage land and factor markets are imperfect unlike most other studies we use panel data and examine determinants of the decision and intensity of tree growing unlike other studies we compare the decision to keep trees and the decision to plant in the recent past the results suggest that land tenure insecurity influences the decision to grow trees but not the number of trees households grow household endowments time and location also explain tree growing by farmers

policy watch congressional campaign finance reform while campaign finance reform attracts a lot of attention it seems unlikely that such reform at least in it current guise will have a large impact on the functioning of the american political system recent studies have called into question the conventional wisdom that challenger campaign spending is especially effective suggesting that attempts to close the gap between incumbent and challenger spending will have a smaller than expected impact on election outcomes while it is safe to conclude that pacs wield some influence it is not clear that limiting cash contributions will have a substantial effect

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

impacts of policy means for increased use of forest based bioenergy in norway a spatial partial equilibrium analysis abstract like the european union eu norway has defined quite ambitious targets regarding increased use of bioenergy however the bioenergy market develops relatively slowly and stronger policies seem necessary to reach the targets this study analyses how different policy means high on the agenda in the norwegian energy debate may affect the use of forest based bioenergy in norway the means studied are i subsidies reducing investment costs of district heating installations ii deposit grant for replacement of oil burners with burners based on bioenergy iii feed in supporting energy production in district heating based on bioenergy the study is based on a regionalised partial equilibrium model covering forestry forest industries and the bioenergy sector the advantage of this methodology is that it allows for assessments of the economic potential of bioenergy under different policy alternatives taking into account the competition for raw materials from the forest industries regional differences regarding heat demand and wood fibre supply as well as important spatial aspects connected to inter regional transport and trade of wood the results of the study give medium term projections for bioenergy use in norway under different bioenergy policy regimes some investments in bioburners in central heating systems and new district heating based on bioenergy are profitable at the current energy prices but policy incentives in terms of grants subsidies or feed in systems make it possible to overcome inertia in investments decisions and provide substantial increase in the supply of bioenergy the results show that the analysed policy means are effective at the current energy price levels and have a significant impact on bioenergy production while some results are specific to norway other results and the methodology used are of more general value also to other european countries