how much damage will climate change do recent estimates two reasons to be concerned about climate change are its unjust distributional impact and its negative aggregate effect on economic growth and welfare although our knowledge of the impact of climate change is incomplete and uncertain economic valuation is difficult and controversial and the effect of other developments on the impacts of climate change is largely speculative the authors find that poorer countries and people are more vulnerable than are richer countries and people a modest global warming is likely to have a net negative effect on poor countries in hot climates but may have a net positive effect on rich countries in temperate climates if one counts dollars the world aggregate may be positive if one counts people the world aggregate is probably negative negative impacts would become more negative and positive impacts would turn negative for more substantial warming the marginal costs of carbon dioxide emissions are uncertain and sensitive to assumptions that partially reflect ethical positions but are unlikely to be larger than 50 per tonne carbon

the limits of market oriented regulatory techniques the case of automotive fuel economy the search for more efficient market oriented regulatory techniques has produced significant recent advances in several areas among these would appear to be the corporate average fuel economy cafe approach to reducing gasoline consumption by the domestic automobile fleet the 1975 energy policy and conservation act required manufacturers to sell fleets with a sales weighted average of 18 miles per gallon in the 1978 model year 19 mpg in 1979 20 mpg in 1980 and 27 5 mpg in 1985 1 the standards for the four intervening years were subsequently set by the national highway traffic safety administration at 22 24 26 and 27 miles per gallon the advantages of the averaging approach over uniform vehicle standards or a gas guzzler tax are two fold first cafe permits each firm to increase its overall fuel efficiency in the cheapest manner since the costs of mileage improvements for different vehicles may be rather different 2 and second it permits the continuation of a diverse product mix to the consumer since a uniform standard would probably result in the demise of certain models these arguments for averaging are now so widely accepted that the principle is being proposed inter alia for automotive emissions standards as well that is instead of maximum allowable emissions for each and every model manufacturers could produce models with various levels of pollutants

utility maximization individual production and market equilibrium the theory of the utility maximizing owner operator firm has been well known for years because of income effects the firm s short run product supply curve can be negatively sloped and its input demand curve may be positively sloped what is not well known is whether these results hold for the industry in the long run with entry the answer to this question has serious policy implications consider for example the physicians services sector in the early 1960s 70 percent of physicians were practicing solo there was an excess demand for physician services and the ama was pretty much acting as a cartel through a variety of policies the federal government 1 increased the demand for medical services 2 induced medical schools to double their capacity in a decade and 3 heavily subsidized education entry costs for new doctors health policymakers were amazed to observe that during the 1970s the price of physician services rose faster than the overall cpi moreover the number of patients seen per week per physician fell during this period one reaction to this set of events was that due to asymetrical information physicians must have been inducing increases in the demand for their services we show that under increasing factor costs reductions in entry costs can lead to increases in market price this finding is not possible to reach by looking at the short run theory of the firm alone in addition the result does not require a negative sloped product supply curve or similar perverse results there are many other sectors primarily comprised of small firms that are owned and operated by the same individual farming homebuilding restaurants small stores hairdressers travel agencies and consulting firms many of these sectors have obtained special tax breaks and subsidies from the federal government to encourage increases in supply using the standard theory of the firm these policies seem plausible in both the short and long run in this paper we demonstrate that the efficacy of such policies are questionable when one considers the special nature of these firms in the long run the literature on the utility maximizing owner operator began with scitovsky 13 who argued that utility and profit maximization may not be equivalent in the short run in the most

the distributional incidence of the gasoline tax in chile abstract this paper analyzes the distributional incidence of the excise tax on gasoline in chile using household budget surveys the incidence is calculated with respect to both income and expenditure distributions in order to consider the potential differences between transitory and permanent income the suits index is estimated as a measure of the degree of progressivity of the tax and confidence intervals are calculated using a bootstrap methodology to statistically compare changes in the incidence given changes in the tax the results show that the tax contrary to the evidence for several developed countries is slightly or moderately progressive with a lower degree of progressivity observed in the calculations based on income than those based on expenditure the simulation of the 25 reduction in the tax rate implemented in 2008 shows that in terms of incidence its effect is to reduce the progressivity of the gasoline tax which is the opposite of what was sought by the government with this policy

an anomaly in the service industry the effect of entry on fees in the context of traditional microtheory the entry of new firms into a competitive market is always expected to lower the price of the product being exchanged however several empirical investigations of the private health care industry in the united states have uncovered an apparently perverse relation as the number of health care providers in the market increases the price of the health care service the nominal fee increases a statistically significant positive relation between fees and health care provider density e g physicians per capita has been reported by newhouse i970 fuchs and kramer i972 and dyckman i978 indeed pauly and satterthwaite i 980 asserted that the zero order correlation between physicians per capita and various measures of physician fees tends invariably to be positive these empirical data spawned a number of analyses of the fees charged in private health care markets some researchers used competitive models e g feldstein i970 and fuchs and kramer i972 and assumed health care providers to be price takers most notable however are the papers which abandoned neoclassical theory and turned instead to targeted income demand creation the idea that service providers are able to create demand was first introduced formally by newhouse i970 and subsequently expanded upon by evans et al i973 green i978 fuchs i978 and dyckman i978 the notion was that health care providers have some target income and if the number of providers increases each provider can maintain income by advising patients to consume additional services e g more diagnostic tests the providers are able to create demand and can increase the fee charged along the new demand curve anderson et al i 98 i examined theoretically the concept of supplier induced demand as they demonstrated supplier induced demand can explain the observed positive relation between provider density and fees however such a model also yields additional predictions not borne out empirically e g organised medicine would promote entry of new practitioners additional empirical evidence provided by pauly and satterthwaite i98i also puts into question the validity of targeted income demand creation we propose to reconcile the empirical evidence with traditional microtheory we utilise the full price notion introduced by devany i976 but our analysis goes beyond the implication that demand elasticity increases as more customersupplied time is required our analysis also differs from pauly and satterthwaite s i980 i98i attempt at reconciliation via their theory of increasing

clearing the air the costs and consequences of higher cafe standards and increased gasoline taxes abstract concerns about energy security and climate change have sparked legislators interest in reducing gasoline consumption by increasing corporate average fuel economy cafe standards using an empirically rich simulation model and cost estimates for anticipated fuel economy technologies we estimate annual costs of reducing long run gasoline consumption by 10 via a 3 8 miles per gallon increase in the standards and the potential cost savings from allowing manufacturers to buy and sell fuel economy credits maximum gasoline savings would be realized only after all existing vehicles were replaced or 14 years in our model a gasoline tax would produce greater immediate savings by encouraging people to drive less and eventually to choose more fuel efficient vehicles we demonstrate the advantage of a tax by comparing the cost of the higher cafe standards over the first 14 years against the cost of a gasoline tax that would save the same amount of gasoline over that time

fiscal interactions and the case for carbon taxes over grandfathered carbon permits this paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with pre existing tax distortions in the labour market both policies reduce labour supply as they increase product prices and reduce real household wages the resulting efficiency losses in the labour market can be substantial relative to partial equilibrium abatement costs however much of this added cost can be offset and perhaps more than offset when additional distortions from the tax system are considered if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes consequently there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits copyright 2003 oxford university press

incorporating affirmative action into the welfare state abstract in this paper we discuss a novel aspect of affirmative action policy we examine its redistributive role asking whether in an egalitarian society supplementing the tax transfer system with an affirmative action policy would enhance social welfare we demonstrate that affirmative action could be a desirable policy tool even if racial discrimination does not exist in the labor market

the value of the high aswan dam to the egyptian economy the high aswan dam converted a variable and uncertain flow of nile river water into a predictable and controllable water supply stored in lake nasser we use a computable general equilibrium model of the egyptian economy to estimate the economic impact of the high aswan dam we compare the actual 1997 economy to the 1997 economy as it would have been if historical pre dam nile flows drawn from a 72 year portrait had applied i e the dam had not been built the steady water supply sustained by the high aswan dam increased transport productivity and year round availability of predictable and adequate water sustained a shift towards more valuable summer crops these static effects are worth egp 4 9 billion investments in transport and agriculture increased as a consequence these investments assuming that egypt is a small open economy added another egp 1 1 billion to the value of the dam the risk premium on the reduced variability is estimated to be egp 1 1 billion for a modest risk aversion and perhaps egp 4 4 billion for a high risk aversion the total gain of egp 7 1 billion to 10 3 egp billion equals 2 7 to 4 0 of annual gdp in 1997

the aggregation of climate change damages a welfare theoretic approach the economic value of environmental goods is commonly determined using the concepts of willingness to pay wtp or willingness to accept wta however the wtp wta observed in different countries or between individuals will differ according to socio economic characteristics in particular income this notion of differentiated values for otherwise identical goods say a given reduction in mortality risk has been criticized as unethical most recently in the context of the social cost chapter of the ipcc second assessment report these critics argue that being a function of income wtp wta estimates reflect the unfairness in the current income distribution and for equity reasons uniform per unit values should therefore be applied across individuals and countries this paper analyses the role of equity in the aggregation of climate change damage estimates using basic tools of welfare economics it shows one way of how wtp wta estimates can be corrected in aggregation if the underlying income distribution is considered unfair it proposes that in the aggregation process individual estimates be weighted with an equity factor derived from the social welfare and utility functions equity weighting can significantly increase aggregate global damage figures although some specifications of weighting functions also imply reduced estimates the paper also shows that while the postulate of uniform per unit values is compatible with a wide range of reasonable utility and welfare specifications there are also cases where the common value notion is not compatible with defensible welfare concepts

design for sustainability in companies strategies drivers and needs of turkey s best performing businesses abstract experts have been developing design for sustainability tools and methods for several decades but their practical application remains challenging and varies in different contexts the limited literature on design for sustainability in turkey reflects the inadequacy of legislation market demand and companies practices nonetheless one can find good examples of design for sustainability in the country this study investigates the best performing companies in turkey s sustainability field through a survey that addresses the barriers they face the benefits they achieve their further needs for achieving sustainability and the scope of and drivers for the practices findings indicate that among the design for sustainability strategies the sample companies are more active in producing and manufacturing and packaging they are driven to boost brand value and reputation but not to increase exports inadequate market demand and legislation are by far the biggest barriers companies needs to carry out sustainability activities are high but mostly with regards to research development recent results differ somewhat from the earlier findings in turkey and to a greater extent from previous studies in europe in turkey design for sustainability is still comprehended as an issue of production needing the attention and expertise of designers it can generate benefits even when its practice is limited promoting design for sustainability within the industry by providing good examples can increase its impact this study builds a background for future research on design for sustainability and for spreading its use by companies universities intermediaries and policy makers the results might be applicable to other contexts experiencing similar setbacks on sustainability as the turkish industry

pounds that kill the external costs of vehicle weight heavier vehicles are safer for their own occupants but more hazardous for other vehicles simple theory thus suggests that an unregulated vehicle fleet is inefficiently heavy using three separate identification strategies we show that controlling for own vehicle weight being hit by a vehicle that is 1000 pounds heavier generates a 40 50 increase in fatality risk these results imply a total accident related externality that exceeds the estimated social cost of us carbon emissions and is equivalent to a gas tax of 0 97 per gallon 136 billion annually we consider two policies for internalizing this external cost a weight varying mileage tax and a gas tax and find that they are similar for most vehicles the findings suggest that european gas taxes may be much closer to optimal levels than the us gas tax language en

energy efficiency policy in a non cooperative world abstract in this paper we explore energy efficiency policies in the presence of a global environmental problem and international cost interdependency associated with r d activities we develop a simple model with two regions where the cost of an appliance in one region depends upon the level of energy efficiency in that region and the level of r d activities by the appliance industry in our model the cooperative outcome can be decentralized by imposing a tax on energy however we show that when regions do not cooperate they have an incentive to adopt additional instruments to increase energy efficiency the reason is that the lack of cooperation leads to under taxation of the environmental externality which in turn creates an incentive to try to reduce emissions produced abroad we illustrate this phenomenon with the californian vehicle greenhouse gas standards

a full pricing analysis of the owner managed firm in this paper we set forth a basic analytical framework for the study of the owner managed firm which is based on the assumption that customer time is an important determinant of the optimal delivery of services earlier research done in this area has to a large extent ignored the importance of customer time in the production process 2 4 9 thus the basic trade off between the money price of the service and the opportunity cost of being serviced is ignored more recently recognition of the importance of the value of time required for the acquisition of a product has been forcefully posited in de vany and saving 7 and saving 10 the main objective of this paper is to investigate the optimal changes in the ownermanager s decision variables consumption of a composite good factor usage the supply of services and fees in response to parametric changes in such factors as non labor income prices the value of customers time and the full price of services in the main our comparative statics results yield the same implications as those obtained using standard neoclassical theory provided the revenue function of the firm is concave factors exhibit hicks allen technical complementarity and the waiting time function is quasi convex however we also obtain some new and interesting results for example we find that increasing the value of customer s time reduces aggregate consumption of the ownermanager generates a labor supply response consisting of a negative substitution effect and a positive income effect and increases the use of other factors of production we also find that unlike the standard neoclassical model even if the production function exhibits hicks allen technical complementarity the own price effects of inputs are ambiguous finally since in the full price model owner manager fees are endogenous we obtain some new and interesting results concerning the response of optimal fees to parameter changes our analysis is based on the hypothesis that the customer s opportunity cost of receiving treatment is the value placed on the time spent waiting in line to be serviced and

a theory of physician behavior with supplier induced demand the health care crisis of the 1960 s and 1970 s fueled unprecedented efforts by the congress to control costs and at the same time improve access to care as a basis for policy the economics literature offers confusing direction consisting of alternative theories of demand 9 13 theories of market structure 12 5 11 10 and theories of physician behavior and supply response 4 1 at the most fundamental levels of controversy economists have not resolved the issues of demand creation satisficing behavior and targeted income in the modelling of the physician firm the notion that health care markets may be dominated by the health care provider s ability to create demand was introduced formally in newhouse 12 evans parish and sully 4 green 8 and fuchs 6 all offer further refinement of the supplier induced model however as yet no formal presentation of such a theory exists to a large extent an analytical framework that incorporates the physician s decision making processes is absent and remains implicit in the empirical results found in the literature this paper presents a theoretical framework for a supplier induced model of physician behavior whereby we may compare and contrast its implications with those of the standard neoclassical model 1 the acknowledged strength of the supplier induced theory is its ability to explain empirical evidence which stands at odds with more traditional approaches in particular a number of studies have reported a direct association between physician density and physicians fees 12 7 2 that is as the stock of physicians increases the price of medi

the effects of transport regulation on the oil market does market power matter instruments used to regulate the consumption of oil in the transport sector include fuel taxes biofuel requirements and fuel efficiency standards however the effects that these have on oil consumption and price vary if market power is present in the oil market the directions of change in consumption and price might contrast with those in a competitive market as a result the market structure affects not only the effectiveness of the policy instruments used to reduce oil consumption but also the terms of trade and carbon leakage in particular reduced oil consumption as a result of increased fuel efficiency standards will unambiguously increase the price of oil under a monopoly

discounting and distributional considerations in the context of global warming the economics of global warming is reviewed with special emphasis on how the cost depends on the discount rate and on how costs in poor and rich regions are aggregated into a global cost estimate both of these factors depend on the assumptions made concerning the underlying utility and welfare functions it is common to aggregate welfare gains and losses across generations and countries as if the utility of money were constant but it is not if we assume that a e co2 equivalent dlubling implies costs equal to 1 5 of the income in both high and low income countries a pure rate of time preference equal to zero and a utility function which is logarithmic in income then the marginal cost of co2 emissions is estimated at 260 590 usd ton c for a time horizon in the range 300 1000 years an estimate which is large enough to justify significant reductions of co2 emissions on purely economic grounds the estimate is approximately 50 100 times larger than the estimate made by nordhaus in his dice model and the difference is almost completely due to the choice of discount rate and the weight given to the costs in the developing world as well as a more accurate model of the carbon cycle finally the sensitivity of the marginal cost estimate with respect to several parameters is analyzed

optimal gasoline tax in developing oil producing countries the case of mexico this paper uses the methodology of parry and small 2005 to estimate the optimal gasoline tax for a less developed oil producing country the relevance of the estimation relies on the differences between less developed countries ldcs and industrial countries we argue that lawless roads general subsidies on gasoline poor mass transportation systems older vehicle fleets and unregulated city growth make the tax rates in ldcs differ substantially from the rates in the developed world we find that the optimal gasoline tax is 1 90 per gallon at 2011 prices and show that the estimate differences are in line with the factors hypothesized in contrast to the existing literature on industrial countries we show that the relative gasoline tax incidence may be progressive in mexico and more generally in ldcs

the social cost of carbon and its policy implications the shadow price or social cost of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today cost benefit analysis would set the optimal amount of greenhouse gas emission reduction at the point where this social cost just equals the incremental cost of controlling emissions the higher the value for the social cost of carbon the more control is warranted this comparison assumes that cost benefit analysis is the correct way of determining climate change policy and many believe this is not the case because of the very long term irreversible and potentially catastrophic nature of global warming but in the short run at least a comparison of cost and benefits is required and in any event all decisions imply costs and benefits but what is the right figure for the social cost of carbon this paper reviews the uk government s assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits moreover adoption of the uk government s shadow price would have formidable implications for energy policy in the uk and for policies on afforestation copyright 2003 oxford university press

economy wide estimates of the implications of climate change human health we study the economic impacts of climate change induced change in human health viz cardiovascular and respiratory disorders diarrhoea malaria dengue fever and schistosomiasis changes in morbidity and mortality are interpreted as changes in labour productivity and demand for health care and used to shock the gtap e computable general equilibrium model calibrated for the year 2050 gdp welfare and investment fall rise in regions with net negative positive health impacts prices production and terms of trade show a mixed pattern direct cost estimates common in climate change impact studies underestimate the true welfare losses

equitable cost benefit analysis of climate change greenhouse gas emissions and vulnerability to climate change show a strong negative correlation this is the moral issue at the heart of the climate problem however little attention has been paid to this in the literature see banuri et al 1996 for an overview the literature on equity issues in climate change is largely confined to the distribution of emissions reduction targets this literature takes the need to reduce greenhouse gas emissions for granted and takes a parametric approach to the required reductions on the other hand the literature that tries to derive how much emissions abatement is desirable largely ducks the equity issue this paper is an attempt to combine the two problems

institutionalizing sustainability an empirical study of corporate registration and commitment to the united nations global compact guidelines abstract drawing upon institutional and stakeholder theories we explore the causal mechanisms of institutionalization and their influence on sustainable development initiatives to test our arguments we study the registration patterns of 394 large corporations from 12 western european and latin american countries into the united nations global compact results indicate that the normative and mimetic mechanisms of institutionalization i e academe and peer influence are better indicators of sustainable development initiatives than the coercive one i e government regulation the implications of these findings are consequential if sd practices continue as an ethical choice and not a mandated obligation for corporate decision makers

how should heavy duty trucks be taxed abstract this paper develops and implements an analytical framework for estimating optimal taxes on the fuel use and mileage of heavy duty trucks in the united states accounting for external costs from congestion accidents pavement damage noise energy security and local and global pollution the analysis allows for endogenous fuel economy increased auto travel in response to reduced truck congestion and distinguishes driving by truck type and region we estimate the optimal second best diesel fuel tax at 1 12 per gallon and implementing it increases welfare by 1 34 billion per annum optimizing over both fuel and mileage taxes and differentiating mileage taxes by vehicle type and region yields progressively higher welfare gains the most efficient tax structure involves a diesel fuel tax of 69 cents per gallon and charges on trucks that vary between 7 and 33 cents per mile implementing this tax structure yields estimated welfare gains of 2 06 billion

intermediaries and innovation support in the design for sustainability field cases from the netherlands turkey and the united kingdom abstract companies face challenges and need support when applying specific knowledge to their innovation processes such as design for sustainability the providers of innovation support in innovation systems are intermediaries while the literature on intermediaries focuses on various roles and approaches the way in which intermediaries function in specific fields such as design for sustainability remains underexplored this paper investigates how intermediaries provide innovation support in the design for sustainability field today with a focus on the services and support they offer the approaches and drivers that shape them as well as the challenges of the intermediation process particularly concerning sustainability and design to do this 14 intermediaries from the netherlands the united kingdom and turkey were investigated through case studies the role of design in support processes especially during implementation the importance and types of collaborations among various actors of innovation systems and the emergence of a new type of intermediary that promises radical innovation in sustainability are among the findings in addition based on the empirical data we suggest a framework for describing the roles and attributes of a group of five intermediaries that meets the needs of all types of companies engaged in design for sustainability finally we offer suggestions for turkey on how to raise the capacity of its intermediaries operating in the design for sustainability field which might be applicable to other similar contexts as well this study contributes to the theory and practice of innovation support in the sustainability field from which all innovation system s actors especially intermediaries and governmental institutions might benefit in designing support programs

does britain or the united states have the right gasoline tax this paper develops an analytical framework to assess the second best optimal level of gasoline taxation taking into account unpriced pollution congestion and accident externalities as well as interactions with the broader fiscal system we provide calculations of the optimal taxes for the us and the uk under a variety of parameter scenarios under our central parameter values the second best optimal gasoline tax is 1 01 gal for the us and 1 34 gal for the uk current tax rates are much lower than this in the us and higher in the uk the calculations are moderately sensitive to alternative parameter assumptions the congestion externality is the largest component in both nations revenue raising needs also play a significant role as do accident externalities and local air pollution potential welfare gains from reducing the current uk tax rate are estimated at nearly one fourth the production cost of all gasoline used in the uk even larger gains could be achieved by switching to a tax on vehicle miles with equal revenue yield for the us the welfare gains from optimizing the gasoline tax are smaller but those from switching to an optimal tax on vehicle miles are very large

environmental policy and vehicle safety the impact of gasoline taxes i introduction public policy to address the environmental externalities associated with automobile use will likely lead to substantial changes in the composition of the u s passenger vehicle fleet while many economists suggest pigovian taxation as the best approach to this problem anderson et al 2011 the main policy instrument in the united states has been the corporate average fuel economy cafe standards which have recently been dramatically increased environmental protection agency and department of transportation 2012 while most of the improvement in fuel economy will necessarily come from technological improvements an inexpensive way to improve fuel economy is simply to lower vehicle weights indeed the text of the new regulations states that we expect manufacturers to reduce vehicle mass as a compliance strategy p 62741 the reduction in vehicle weight that occurred in response to the oil price shocks of the 1970s and the initial cafe standards was estimated by crandall and graham 1989 to substantially increase automobile accident fatalities the passenger vehicle fleet has changed greatly since 1989 with one of the most notable features being the increase in the prevalence of light trucks a category that includes minivans pickup trucks and sport utility vehicles suvs several authors have suggested that the external impacts on the safety of occupants of other vehicles may exceed the protective benefit afforded to light truck owners so that the now heavier vehicle fleet might actually be detrimental to overall safety see especially gayer 2004 white 2004 and anderson 2008 the negative safety and environmental externalities associated with vehicle weight could potentially be addressed simultaneously via pigovian taxation further strengthening the argument for taxation over fuel economy standards an important problem that must be addressed in interpreting automobile accident data is to disentangle vehicle fatality rates into a vehicle safety component treatment effect and a driver safety component selection effect this paper presents a novel model that allows simultaneous estimation of the relationship of vehicle weight with the safety of the own vehicle occupants internal impacts and that of other vehicle occupants external impacts conditional upon an accident occurring these estimates can then be used to estimate the relative riskiness of drivers of different types of vehicles the model is estimated using maximum likelihood techniques and data from the fatality analysis reporting system fars which includes data on every fatal accident that occurs in the united states but excludes all non fatal accidents the main empirical finding of the paper is that the protective effects of weight on own occupants are diminishing while the destructive external effects on other vehicle occupants are increasing for marginal vehicle weight changes above approximately 3 800 pounds the external costs outweigh the internal benefits in two vehicle crashes while the protective effect of vehicle weight in single vehicle crashes partly compensates for this a substantial fraction of the vehicle fleet is above the weight where net safety costs exceed benefits the safety externalities associated with these heaviest vehicles substantially exceed the environmental externalities associated with carbon emissions the nature of the model lends itself to simulating the potential impact of relatively arbitrary changes to the vehicle fleet composition simulations of hypothetical changes in the vehicle weight distribution establish that reducing vehicle weight can either increase or decrease automobile accident fatalities depending upon whether the reductions are concentrated at the lower or higher end of the current weight distribution recent empirical changes to the weight distribution of cars sold in the united states are incorporated into the simulation model which predicts little impact on accident fatalities

the stern review a deconstruction using a simple model designed for transparency but nonetheless calibrated to support the much quoted damage estimates of the stern review of the economics of climate change we demonstrate significant sensitivity of those results to assumptions about the pure rate of time preference the time horizon and the rates of risk and equity aversion used to compute certainty and equity equivalent annuities most importantly we demonstrate enormous sensitivity to presumed constant regional vulnerability and underlying assumptions about adaptive capacity manipulation of any of these parameters one at a time across reasonable ranges can diminish damage estimates by as much as 84 or in the case of extending the time horizon with the review s low discount rate increase damage estimates by 900 we also confirm the usual result that limiting atmospheric concentrations to specific benchmarks above 400 ppm cannot eliminate all damages nonetheless we applaud the stern review author team for reconfirming that the climate problem can be approached productively as an economic problem whose solutions can be explored with the tools of decision analysis 2008 elsevier ltd all rights reserved

short run pricing strategies to increase corporate average fuel economy short run pricing strategies to increase corporate average fuel economy i introduction in 1974 the average fuel efficiency of new automobiles sold in the united states reached a low of 14 2 miles per gallon mpg close on the heels of the arab opec oil embargo of 1973 74 and the ensuing petroleum price shocks congress passed the 1975 energy policy and conservation act the act required each manufacturer to meet sales weighted corporate average fuel economy cafe standards beginning with 18 mpg in 1978 and gradually increasing each year to 27 5 mpg in 1985 figure 1 the expressed purpose of the cafe standards was to stimulate the development of technology to improve fuel efficiency the possibility of raising the relative prices of the least energy efficient models as a strategy to meet the standards was considered but only as a last resort 1 although there continues to be intense debate as to whether fuel price increases or the cafe regulations drove the fuel economy improvements of the 1970s and 80s several studies agree that improvements in automotive engineering and design rather than pricing strategies played an overwhelmingly dominant role 2 no empirical evidence supports the effectiveness of using pricing strategies to increase the overall level of automotive fuel economy every year since 1985 automobile manufacturers have successfully petitioned the national highway traffic safety administration which determines the level of the cafe standard to reduce the target from 27 5 to 26 mpg in 1986 88 and 26 5 mpg in 1989 in each case at least one manufacturer argued that it would be unable to meet the original target with its planned product offerings and would have to resort to other strategies that would result in unacceptable economic costs this paper explores a method of estimating the costs of achieving fuel economy goals when pricing strategies are used to alter the distribution of sales the method employs the closed form equation for consumers surplus derived from the multinational logit model of discrete choice discussed by mcfadden 1973 and assumes that manufacturers must bear the full cost of meeting the fuel economy target the estimated cost represents an upper bound on the losses firms would incur by setting prices to minimize loss of profit using econometric estimates of the sensitivity of vehicle choice to vehicle price together with market shares and fuel efficiencies for 1986 i estimate the costs of short term improvements in average fuel economy using pricing strategies for general motors ford and chrysler minor adjustments of up to 1 mpg cost 1 2 percent of the price of a 10 000 car for improvements of 2 mpg or more however pricing strategies become a costly way to improve fuel economy the technique also estimates the market shares for each car line that correspond to the pricing solution it thereby identifies which car lines would be most affected the technique produces precise price changes and market shares for each car line readers should not place too much weight on the apparent precision but should consider the estimates as an approximation the usefulness of which lies in measuring the difficulty of meeting fuel economy targets via pricing strategies alone one can compare the size of these estimates to the fines for failing to meet the standards 50 per mpg per car or to typical manufacturer rebates to stimulate sales often 100 to 2 000 per car ii a formulation of the pricing problem faced with the cafe requirements a firm can respond with engineering and design improvements or by raising the prices of less efficient models and lowering the prices of those that exceed the standard technological improvements generally require a lead time of three to five years very large fluctuations in fuel prices have occurred in far shorter perids figure 1 creating the risk that a manufacturer s product offering could be out of step with the market

fuel economy car class mix and safety fuel economy standards change the composition of the vehicle fleet potentially influencing accident fatality risks i estimate the direction and magnitude of this impact introducing a correction for selection on driver behavior a policy application using my new estimates shows that the present distinction between light trucks and cars in fuel economy rules has very negative consequences for overall safety each mpg increment to the standard results in an additional 150 fatalities per year in expectation my correction for selection is pivotal in this finding i then demonstrate a simple alternative regulation that can produce near zero changes in accident fatalities

on international equity weights and national decision making on climate change abstract estimates of the marginal damage costs of carbon dioxide emissions require the aggregation of monetised impacts of climate change over people with different incomes and in different jurisdictions implicitly or explicitly such estimates assume a social welfare function and hence a particular attitude towards equity and justice we show that previous approaches to equity weighting are inappropriate from a national decision maker s point of view because domestic impacts are not valued at domestic values we propose four alternatives sovereignty altruism good neighbour and compensation with different views on concern for and liability towards foreigners the four alternatives imply radically different estimates of the social cost of carbon and hence the optimal intensity of climate policy

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

spatial and temporal efficiency in climate policy applications of fund fund is an integrated assessment model of the interactions between climate and economy nine world regions emit greenhouse gases and suffer damages from climate change a number of greenhouse gas emission reduction policies are compared including optimal and cost effective strategies strategies with early and late abatement and strategies with and without international co operation the analyses confirm that co operation matters resulting in substantially lower costs or higher welfare the real commitments of policy targets based on an absolute level e g 1990 emissions are hard to estimate because of the uncertainties in the baseline postponing action conflicts with minimising costs and maximising welfare but so does sharp emission reduction at the short term as proposed in the kyoto protocol

the trade off between intra and intergenerational equity in climate policy abstract this paper focuses on two equity dimensions of climate policy intra and intergenerational and analyzes the implications of equity preferences on climate policy and on the production and consumption patterns in rich and poor countries we develop a dynamic two region model in which each region suffers from global warming but also has an inequality aversion over current consumption allocations inequality aversion generally lifts the consumption path of the poor region while the rich region must take a greater share of the climate burden furthermore with inequality aversion the optimal climate policy generally leads to higher investment in clean capital in the north and in dirty capital in the south thereby allowing the south to pollute more and develop faster the optimal policy may even require the poor region to increase emissions relative to the uncoordinated business as usual case introducing local pollution and transfers confirm the main results

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

weight factors in cost benefit analysis of climate change equity considerations may justify the use of weight factors when estimating the costs of climate change this paper reviews different weight factors that have been used in the climate economics literature based on a simple model it is shown that although the different weight factors imply substantially different cost damage estimates they actually yield the same optimal emission reductions this paradox is explained by the fact that some of the approaches require that also the abatement costs are weighted and this offsets the effect of the diverging cost damage estimates the model is then used to analyse the importance weighting may have on the overall cost benefit analysis at present when most of the global emissions of fossil co2 originate from the industrialised countries the global optimal emissions are considerably lower if costs are weighted however the more the emissions in developing countries grow the less important becomes the introduction of weight factors in cost benefit analysis of climate change for the global emission reductions in the model developed here on a regional level the introduction of weight factors continues to play an important role implying substantially lower emissions in the rich region and slightly higher in the poor

why has the introduction of natural gas vehicles failed in germany lessons on the role of market failure in markets for alternative fuel vehicles despite private investments exceeding two billion euros and tax incentives of more than 500 million euros the market share of natural gas vehicles ngvs in germany has lagged far behind expectations and behind market developments in other countries with total cost of ownership being on average lower for ngvs than for gasoline and diesel vehicles this raises the question of the existence of market failure in the german ngv market we use a case study approach where we combine quantitative data with insights from a multi industry expert panel and in depth interviews with experts from industry government and civil society in order to examine whether and how different types of market failure contribute to the status quo in the german market for ngvs we conclude that coordination failure in complementary markets an artificially created monopoly of service stations at motorways imperfect information bounded consumer rationality and principle agent problems are the most prominent market failures inhibiting the development of a functioning market for ngvs our results are instructive for the design of effective public policies and investor strategies aiming to create markets for alternative fuel vehicles

the role of patient time in the pricing of dental services the fee provider density relation explained the literature on the economics of medical care has emphasized certain features of medical markets which appear to set them apart from the conventional supply demand framework of the theory of competitive markets ignorance of medicine and the efficacy of various treatments leave buyers of medical and or dental services dependent upon the physician dentist or other health care provider for information pertinent to the choice of treatment or procedure thus the traditional separation of the consumer s and supplier s decision making processes is broken down and the supplier is in a position to directly influence demand or may even be considered the decision maker proponents of the supplier induced demand model argue that physicians inflate demand whenever the supply of medical manpower is expanded this interpretation has gained attention because it appears to offer an explanation for the observed cross sectional positive relation between fees and the density of health care providers 2 it is well known however that the demand creation model which assumes a zero or constant marginal cost below marginal revenue of demand creation is not closed either fees or demand is unbounded one solution to this problem is to assume a target or reference income as a limit on demand creation feldstein 12 fuchs kramer 13 evans et al 9 with such a limit the demand creation satisficing model can be closed and

vehicle miles not traveled fuel economy requirements vehicle characteristics and household driving abstract a major concern with addressing the negative externalities of gasoline consumption by regulating fuel economy rather than increasing fuel taxes is that households respond by driving more this paper exploits a discrete threshold in the eligibility for cash for clunkers to show that fuel economy restrictions lead households to purchase vehicles that have lower cost per mile but are also smaller and lower performance whereas the former effect can increase driving the latter effect can reduce it results indicate that these households do not drive more suggesting that behavioral responses do not necessarily undermine the effectiveness of fuel economy restrictions at reducing gasoline consumption

environmentalism stimulus and inequality reduction through industrial policy did cash for clunkers achieve the trifecta the 2009 american cash for clunkers program which subsidized consumers who scrapped old vehicles and purchased new vehicles was promoted by appealing to multiple constituencies we evaluate the policy and alternatives according to its stated goals emissions reductions economic stimulus and reducing inequality we calibrate a dynamic partial equilibrium portfolio model to match consumer expenditure data from 1998 to 2011 focusing on heterogeneity across cars and trucks we find the program generated 0 17 in environmental benefits 0 28 in consumer surplus and 0 31 in net discounted additional spending per subsidy dollar since subsidies largely went to middle income infra marginal consumers the program exacerbated consumption inequality we evaluate alternative policy designs and find no policy which simultaneously improves all outcomes jel h23 l52 l92 d63

comparing alternative policies to reduce traffic accidents abstract this paper derives and implements formulas for the welfare effects of uniform mileage taxes gasoline taxes per mile insurance premiums and mileage taxes differentiated across vehicle and driver groups for reducing the external costs of passenger vehicle accidents the average external accident cost is estimated at 2 2 6 6 cents per mile accidents costs differ substantially across driver groups but only moderately across vehicles groups annual welfare gains from a mileage tax equal to marginal external costs for each driver vehicle group are 9 4 billion in the benchmark case the uniform mileage tax and per mile insurance reform can achieve 76 and 65 of this welfare gain respectively while the gasoline tax can achieve only 28 of the welfare gain unlike other policies the gasoline tax induces costly improvements in average fleet fuel economy that have little effect on reducing external costs

how disagreement about social costs leads to inefficient energy productivity investment public energy productivity investment influences the amount of future energy consumption if a present government expects its successor to value the social costs of fuel usage differently this adds a strategic component to its investment considerations we analyze this governmental time inconsistency situation as a sequential game in particular we show how the expectation of a more conservative party taking over makes a green government choose an investment level that is inefficient in that neither of the parties would prefer it to the investment level of a permanent green government under some circumstances the opposition would even prefer the government definitely to stay in power the gain from avoiding a strategic investment then outweighs the loss of not being able to regulate energy consumption we also analyze the welfare gains from binding agreements

assessing the economic cost of greenhouse induced sea level rise methods and application in support of a national survey the potential cost of sea level rise has dominated many of the recent estimates of the economic damage that greenhouse warming might inflict on the united states over the course of the next century the cost of coastal protection and abandonment accounted for more than 80 of the early nordhaus estimate of likely damages part of a review of the then existing evidence which suggested that an effective doubling of atmospheric carbon concentrations might cost 0 26 of annual gdp the proportion of total cost attributed to sea level rise was a much smaller 11 in cline but the sea level rise costs that he quoted were among the most broadly accepted of his longer list of damages the relative importance of sea level rise in assessing the potential cost of greenhouse warming and thus in evaluating the potential benefit of any mitigating strategy has brought the original damage estimates under closer scrutiny a series of integrated assessments of aggregate damages has begun each has noted that the titus estimates were based on the assumptions that all developed property would be protected and that all undeveloped property including wetlands would be abandoned these assumptions were supported by comparisons of the economic vulnerability estimatesmore produced by yohe and protection cost estimates produced by weggel but they are clearly too simplistic some of each type of property will be abandoned though in which case the true future economic cost of sacrificed property must also be added to the damage calculus across an equally diverse collection of coastal sites moreover the decision of when whether and for how long to protect any piece of property will involve accurately weighing the tradeoff between the cost of its protection and the economic cost of its abandonment a balancing calculation which must be conducted on a site by site basis the key is to consider the world as it is likely to be and not necessarily as it is now 26 refs 1 fig 7 tabs less

policy watch the economics of fuel economy standards one of the most hotly contested of all energy policy issues involves corporate average fuel economy or cafe standards for new cars and light duty trucks tighter standards would reduce gasoline consumption and hence both greenhouse gas emissions as well as this country s vulnerability to oil price shocks but they would also increase the price of new vehicles worsen traffic congestion and depending on how they are phased in possibly even reduce occupant safety these effects are amenable to economic analysis and we review the evidence to date bearing on this interesting and important question

the damage costs of climate change toward more comprehensive calculations it is argued that estimating the damage costs of a certain benchmark climate change is not sufficient what is needed are cost functions and confidence intervals although these are contained in the integrated models and their technical manuals this paper brings them into the open in order to stimulate discussion after briefly reviewing the benchmark climate change damage costs region specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate furthermore cost functions are assumed to be quadratic as an approximation of the unknown but presumably convex functions results from the damage module of the integrated climate economy model fund are presented next uncertainties are incorporated and expected damages are calculated it is shown that because of convex loss functions and right skewed uncertain ties the risk premium is substantial calling for more action than analysis based on best guess estimates the final section explores some needs for further scientific research

the effect of standards and fuel prices on automobile fuel economy an international analysis abstract there is an intense debate over whether fuel economy standards or fuel taxation is the more efficient policy instrument to raise fuel economy and reduce co 2 emissions of cars the aim of this paper is to analyze the impact of standards and fuel prices on new car fuel economy with the aid of cross section time series analysis of data from 18 countries we employ a dynamic specification of new car fuel consumption as a function of fuel prices standards and per capita income it turns out that standards have induced considerable fuel savings throughout the world although their welfare impact is not examined here if standards are not further tightened then retail fuel prices would have to remain at high levels for more than a decade in order to attain similar fuel savings finally without higher fuel prices or tighter standards one should not expect any marked improvements in fuel economy under business as usual conditions

market organization and product quality the modern discussion of the impact of market organization on product quality had its beginnings in the work of levhari and srinivasan 7 and schmalensee 8 both of these works argued that a monopolistic market resulted in equilibrium in a product with lower quality in their case lower durability than a similar industry competitively organized it was later pointed out by swan 10 that both levhari and srinivasan and schmalensee had neglected to appropriately account for the opportunity cost of holding the stock of the durable good required to produce the long run equilibrium level of service flow once this cost was accounted for both forms of market organization produced goods of equal quality once again equal durability that is not to say that monopoly is efficient in the economic sense but only that the inefficiency of monopoly lies not in the quality of product it produces but in the quantity of output