involuntary unemployment and implicit contracts this paper provides an explanation of involuntary umemployment arising as a consequence of asymmetric information between firms and workers involuntary unemployment is defined as a situation where ex post gains to trade exist a model of labor contracts is developed where the allocations are not ex post optimal it is shown that inferiority of leisure is a necessary and sufficient condition for the existence of involuntary unemployment

policy debates government output and expenditure in uk regions and sub regions an analysis of the new experimental accounts data gripaios p and bishop p 2005 government output and expenditure in uk regions and sub regions an analysis of the new experimental accounts data regional studies 39 805 813 this paper examines the regional and sub regional distribution of uk state spending by analysing new data available from recently published regional government accounts the data indicate wide variations in public spending per head across regions with london being a particular beneficiary the results do not indicate any relationship between gross domestic product per head and public spending and they suggest that in total government spending is doing little to ameliorate regional inequality if the state wishes to pursue an active regional policy it hence needs to consider the regional dimension of all state functions not simply those associated with traditional regional policy

implicit contracts moral hazard and unemployment this paper considers a firm whose marginal revenue product of labor is a random variable we derive the form of an optimal long term contract between workers and the firm under the assumption that labor s marginal product is observed by the firm but not by the workers we show that the existence of asymmetric information causes unemployment to be greater than in a situation where information about labor s marginal product is public or where employment is determined in spot markets in particular unemployment can occur when the marginal product of labor exceeds the reservation wage

a lottery within a lottery an examination of the distribution of lottery funds in england the uk national lottery has been in operation since 1994 an examination of the regional distribution of awards per head of population suggests marked spatial disparities with london doing particularly well and scotland northern ireland wales and the north east faring much better than other regions such disparities also exist at english local authority level with london and some major provincial centres doing much better than more rural authorities such inequalities may give grounds for concern given that they appear to replicate those for other types of government spending the results of an empirical model designed to explain the spatial distribution of awards suggest that in addition to a london effect levels of deprivation have a positive impact another important explanatory variable which has a positive impact on lottery funding is the qualifications of residents which might plausibly reflect the quality of lottery bids received from an area however once these factors are taken account of

regional taxing and spending the search for balance the financial settlement has been described as the key to devolution public spending above tax in scotland and wales has been criticized public spending is above tax in seven uk regions including four english regions if we treat equal citizens equally public spending will be above tax in poorer regions there is nothing extraordinary about spending above tax but there are important questions with regard to regional levels of expenditure in four regions london south east scotland and northern ireland public expenditure is well above the level expected for their degree of prosperity this article provides possible explanations

regional analysis of public capital expenditure to which regions is public capital expenditure channelled to rich or to poor ones bla ek j and maceskova m regional analysis of public capital expenditure to which regions is public capital expenditure channelled to rich or to poor ones regional studies the paper aims to contribute to the debate on the regional dimension of sectoral that is non regional policies and to demonstrate empirically the huge discrepancy between both the volume and the regional pattern of sectoral public capital expenditure policies on the one hand and official regional policy on the other analyses were based on a unique database of public investment in the czech republic covering the years 1995 2005 their results show significant conflicts in policy objectives and thus represent a clear argument in favour of pursuing territorial impact assessment tia of sectoral policies bla ek j et maceskova m une analyse des depenses en capital publiques vers quelles regions les depenses en capital publiques sont elles canalisees vers les regions riches ou les regions pauvres regional studies

green electricity market development lessons from europe and the us this study compares the development and implementation of green electricity policies in germany the netherlands sweden and the united states a set of countries applying a range of policy instruments to encourage electricity from renewable energy sources a general tendency is identified that policies shift emphasis from r d stimulation towards dissemination and market application of renewable energy technologies we argue that in light of the long term nature of policy goals on energy security mitigation of climate change and environmental protection the applied range of policy instruments may be lacking in providing incentives for the long term development of new technologies clarifying policy objectives would allow careful selection of policy instruments including support for r d improved capacity building for policy implementation is also important

implementing the eu renewable target through green certificate markets abstract the european parliament has agreed on a target of a 20 share of renewables in the eu s total energy consumption by 2020 to achieve the target the european council has adopted mandatory differentiated national targets for each of the member states in this paper we consider the use of green certificates to reach the renewable targets and we analyze the potential for cost reductions by allowing for trade in green certificates across member states we show that differentiated national targets cannot ensure a cost effective implementation of the overall target for the eu s renewable energy consumption trade in green certificates can ensure a cost effective distribution of renewable energy production but the national targets prevent a cost effective distribution of energy consumption nevertheless our numerical model indicates that eu wide trade in green certificates may cut the eu s total cost of fulfilling the renewable target by as much as 70 compared with a situation with no trade however the design of green certificate markets may have a large impact on the distribution of costs across countries

the danish green certificate system some simple analytical results we formulate a simple static equilibrium model for the electricity market taking account of both green certificates and co2 emission permits the objective is to investigate the relationship between these markets under the existence of upper and lower price bounds on the green certificates both in the short and in the long run we perform various comparative static changes of the parameters of the model and study how these affect the endogenous variables of the model as well as producers and consumers surplus we also investigate the effects of imports and exports of electricity several comparative static results are derived and in particular it is shown that harsher co2 emission constraints and increased import wholesale price both may lead to reduced capacity of green electricity

carbon trading in the policy mix the kyoto protocol is stimulating the development of emissions trading schemes at the national and international levels these are being introduced alongside existing policy instruments such as carbon taxes and negotiated agreements leading to complex problems of policy interaction but the topic of policy interaction remains under researched this paper aims to improve understanding of such interactions by examining the conditions under which a cap and trade scheme for carbon dioxide emissions may usefully coexist with carbon energy taxes support mechanisms for renewable electricity and policies to promote energy efficiency the paper argues that each of these instrument combinations may be acceptable provided they contribute to either improving the static or dynamic efficiency of the trading scheme or delivering other valued policy objectives but since the coexisting instruments may raise overall abatement costs while contributing nothing further to emission reductions the objectives and trade offs within the policy mix must be explicit

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

the regional dimension of taxes and public expenditure in ireland morgenroth e regional dimension of taxes and public expenditure in ireland regional studies in ireland as in many other countries there has been an ongoing debate on the nature degree and trends of regional imbalance however relatively little is known about the effects of policies at the regional level in ireland this paper considers two aspects of public policy namely the fiscal system and public expenditure in particular regional government accounts are constructed that identify the level of taxation subsidization and public expenditure at the regional level the analysis of these data confirms that the fiscal system does reduce relative income differences in ireland furthermore there are substantial resource transfers across regions morgenroth e les impots et les depenses publiques en irlande le point de vue regional regional studies en irlande comme dans la plupart des pays on discute du desequilibre regional de sa nature son importance et ses tendances cependant on sait tres

smart srec a stochastic model of the new jersey solar renewable energy certificate market markets for solar renewable energy certificates srecs are gaining in promi nence in many states stimulating growth of the u s solar industry however srec market prices have been extremely volatile causing high risk to participants and potentially less investment in solar power generation such concerns necessitate the development of realis tic flexible and tractable models of srec prices that capture the behavior of participants given the rules that govern the market we propose an original stochastic model called smart srec to fill this role building on established ideas from the carbon pricing liter ature and including a feedback mechanism for generation response to prices we calibrate the model to the new jersey market and backtest it analyzing parameter sensitivity and demonstrating its ability to reproduce historical dynamics finally we run simulations to investigate the role and impact of regulatory parameters thus providing insight into the crucial role played by market design

the regional dimension of public expenditure in england public expenditure in the uk has a location dimension with respect to the devolved arrangements for scotland wales and northern ireland there is no location dimension to the allocation of public expenditure to the regions of england nevertheless whether planned or not public expenditure impacts on the regions through the provision of services and associated employment and income generation this paper examines the methodological issues in assigning public expenditure to countries and regions and reviews existing and past patterns of public expenditure in english regions it then considers the relevance of this analysis to policy options for introducing an explicit regional dimension to the public expenditure allocation mechanism in england paradoxically english regional devolution is potentially more radical in its implications in terms of rupturing existing allocative mechanisms that lead to flows of expenditure than devolution in the territories where it can be interpreted as putting democrat

governance in the english regions the role of the regional development agencies in the absence of regional government new labour has pursued a process of administrative decentralisation in the english regions outside london including the appointment of regional development agencies rdas charged with stimulating economic modernisation and assisting in reducing regional economic disparities they have acquired a key position as strategic power brokers situated between the agendas of whitehall and the demands of sub national interests rdas operate however within complex competing structures tied to meeting nationally determined targets and too little attention has been given to capturing their overall effectiveness reflecting new labour s rejection of the need for a more even spread of economic activity between regions rdas also lack sufficient resources to make a significant impact on economic disparities treasury led reforms could see the agencies taking responsibility for preparing single regional strategies but there are contradictions between their remit to increase economic growth and deliver social and environmental objectives

decarbonizing europe s power sector by 2050 analyzing the economic implications of alternative decarbonization pathways abstract the european union aims to reduce greenhouse gas emissions by 80 95 in 2050 compared to 1990 levels the transition towards a low carbon economy implies the almost complete decarbonization of europe s power sector which could be achieved along various pathways in this paper we evaluate the economic implications of alternative energy policies for europe s power sector by applying a linear dynamic electricity system optimization model in over 36 scenarios we find that the costs of decarbonizing europe s power sector by 2050 vary between 139 and 633 bn 2010 which corresponds to an increase of between 11 and 44 compared to the total system costs when no co2 reduction targets are implemented in line with economic theory the decarbonization of europe s power sector is achieved at minimal costs under a stand alone co2 reduction target which ensures competition between all low carbon technologies if however renewable energies are exempted from competition via supplementary renewable energy res e targets or if investments in new nuclear and ccs power plants are politically restricted the costs of decarbonization significantly rise moreover we find that the excess costs of supplementary res e targets depend on the acceptance of alternative low carbon technologies for example given a complete nuclear phase out in europe by 2050 and politically implemented restrictions on the application of ccs to conventional power plants supplementary res e targets are redundant while in such a scenario the overall costs of decarbonization are comparatively high the excess costs of supplementary res e targets are close to zero

some implications of investment cost reduction policies in energy markets employing green certificate systems around the world green certificate systems are widely employed as support mechanisms for the promotion of renewable energy production due to large initial capital costs for renewable energy projects investment cost reduction policies are often employed by policy makers as complementary support measures in this note we study some implications of the use of investment cost reduction policies in an energy market operated under a green certificate system we demonstrate that paradoxically use of or intensification of investment cost reduction policies results in increased emissions from fossil fuel black producers welfare effects depend on the distribution of costs and benefits to the relevant interest groups however if the policy objective requires maintaining a constant level of emissions investment cost mitigation must be accompanied by a simultaneous upward adjustment in the renewables target

optimal regulation of renewable energy a comparison of feed in tariffs and tradable green certificates in the spanish electricity system abstract incentives for renewable energy based on feed in tariffs have succeeded in achieving high levels of renewable installed capacity however these incentives have not been responsive to market conditions or price signals imposing in some cases a great financial burden on consumers when renewable energy sources reached significant levels a way out of this problem could be a market mechanism where incentives respond to the level of investment on renewables we explore this issue comparing a regulatory system based on tradable green certificates able to react to market changes to a feed in tariffs incentive scheme we model the strategic interaction between participants in the electricity pool and the tradable green certificates market and focus on the optimal regulation for the retailer segment which generates the desired demand for green certificates as a decreasing function of the certificate price we then calibrate our theoretical model with data from the spanish electricity system for the period 2008 2013 simulations show that a green certificate scheme could both achieve the 2020 targets for renewable electricity and reduce regulatory costs however the role of regulators is still important since setting the right target for renewable electricity affects the cost burden of the system

electricity markets for energy flexibility and availability impact of capacity mechanisms on the remuneration of generation technologies abstract increased shares of renewable energy sources res to fulfill ambitious european policy targets mothballing or decommissioning of existing units and absent investments lead to concerns about the system and market adequacy to restore market adequacy capacity mechanisms cms are widely discussed and implemented in various types they are intended to provide sufficient and clearly perceivable long term price signals for available capacity as integral part of the market cms interact with the other markets markets like day ahead markets are used to trade energy imbalance markets or reserve requirements are examples for markets for flexibility among others green certificates are in place to value emission neutral injection from res resulting altered prices and shifting remuneration have effects on all generation technologies cms may affect participating technologies by imposing a capacity demand a resulting change in the generation mix may also have an impact on non participating technologies two gaps can be identified in the discussion and modeling of cms in the literature first proposed game theoretic equilibrium models fall short in representing the distinctive features of different types of cms second most models incorporating cms found in the literature only focus on the interaction with the energy based market valid assessments of cm need to consider the interaction of remuneration for available capacity and flexibility and the indirect interaction with the remuneration for emission neutral res two formulations of a game theoretic market equilibrium model are proposed which represent specific cms with its distinctive features in particular a market wide centralized capacity market ccm and targeted strategic reserves srs moreover the equilibrium models explicitly combine the cms with markets for flexibility and indirect with remuneration for res we contribute to the discussion of cms by quantifying the interactions and shifting shares of remuneration based on the interaction between cms and remuneration for emission neutral injection the effect of cms on non participating res is described we conclude based on the case study results that targeted mechanisms like srs implemented with the single purpose of ensuring availability introduce large inefficiencies in the system by missing on the interaction between availability and flexibility in contrast a market wide ccm provides a beneficial outcome for all technologies at the same time it yields a sufficient high reserve margin at lowest cost it provides clear signals for the different values of energy output flexibility availability and emission neutral injection

employment with asymmetric information in an economy without informational and other distortions entrepreneurs and workers can write labor contracts that support a pareto optimal allocation of resources this paper is an attempt to characterize contracts when enterpreneurs are better informed about the state of nature than are their workers asymmetric information generally results in a suboptimal allocation of both risk and worker effort in particular if consumption and leisure are perfect substitutes employment will be less than fully pareto optimal in all but the most favorable states of nature

implicit contracts with asymmetric information and bankruptcy the effect of interest rates on layoffs this paper develops a model in which a firm writes labour contracts with workers and debt contracts with creditors firms have more information than do the owners of the factors of production and they are also subject to limited liability we show that if the limited liability constraint is binding then the employment level is inefficient relative to a situation of symmetric information the firm is then embedded into a partial equilibrium model in which the real rate of interest is exogenously determined we show that increases in the real rate of interest increase the inefficiency of the optimal employment contract and lead to layoffs in more states of nature than would occur at lower real interest rates recent literature in the area of implicit contracts has shown considerable interest in the assumption of asymmetric information henceforth a i papers by azariadis 1982 green and kahn 1982 and grossman and hart 1981 have all shown that a i will interfere with optimal risk sharing but although these models produce non walrasian outcomes it is not clear that they are capable of explaining the observed variations in employment over the business cycle in the absence of a link between the level of employment and other macroeconomic variables these new versions of contract theory are open to the charge that they are presenting a complicated explanation of frictional unemployment one potential link between variations in output and variations in intertemporal prices is suggested by models which explicitly allow for the possibility of bankruptcy sappington 1983 has shown that bankruptcy will generate inefficient outcomes even between risk neutral agents and farmer 1984 has shown that if sappington type contracts are incorporated into a macroeconomic structure then the resulting model predicts that bankruptcies will vary countercyclically over the business cycle although bankruptcy is important however it is unlikely that bankruptcies alone will account for all of the output loss during a recession the purpose of this paper is to show that the assumptions of a i and limited liability will generate a model in which the employment level is inefficient and in which the magnitude of this inefficiency varies systematically with the expected real rate of interest this model predicts that the observed increase in the incidence of layoffs during recessions is directly attributable to the effects of high interest rates on aggregate supply some evidence of the phenomenon to be explained is presented below

optimal labour contracts and involuntary unemployment under costly and imperfect monitoring this paper provides an explanation for the concurrence of rigid wages and involuntary unemployment we consider cases in which a firm monitors its workers but at some cost a key assumption in the model is that the firm cannot perfectly distinguish shirkers from nonshirkers thus the firm has to rely on negotiated compensation and work effort as well as monitoring to reduce the incentive to shirk we find that rigid wages and involuntary unemployment arise simultaneously when monitoring costs are large and the effectiveness of monitoring is low

impact of the regulatory framework for transmission investments on the cost of renewable energy in the eu abstract under the current regulatory frame in the eu transmission planning is done at the national level to maximize national welfare rather than european welfare in this paper we develop a competitive equilibrium model that calculates the impact of this imperfect regulatory framework on the cost of renewable energy we apply the model to a power system with two interconnected zones and find that the impact is case specific but significant we also find that the negative impact of national transmission planning on the cost of renewable energy is more significant in a state of the world in which member states trade renewable energy but that this negative effect is much smaller than the positive effect of renewable energy trade between member states we conclude that the imperfect regulatory framework for transmission investment is a significant cost for renewable energy in the eu but that it should not stop member states from trading renewable energy

quantitatively exploring the future of renewable portfolio standard in the korean electricity sector via a bottom up energy model abstract the republic of korea started to apply a new renewable energy policy renewable portfolio standard rps in 2012 but the policy has failed to obtain positive evaluation and some problems have arisen during the first two years in this study we have tried to investigate the current design operational mechanism of the policy to examine the reasons for its problems and to quantitatively predict future outlook for the examination and prediction we use the bottom up model approach which has not been commonly used for the rps policy but is usually utilized for evaluating specific policy options in an energy system therefore the main purpose of this study is not only to introduce a new approach for the exploration of the rps policy a scenario based quantitative analysis based on a bottom up energy system model but also to apply the approach into the policy in korea we develop a multi regional bottom up energy model and explicitly implement the mechanism of the policy in the model such as the transfer of tradable attribute renewable energy certificates recs the results of the model predict a serious disharmony of the current design of the policy under the national basic plan the optimistic fulfillment rate of recs in the entire mechanism will be around 66 in 2022 so the most regulated generators will suffer from the large shortfalls of recs and the total penalty for all regulated generators will be expected up to 1350 billion krw in 2022 we also diagnose the reasons of the disharmony as well as address some suggestions for its continued application as the korean case study we believe that the approach in this study can be utilized when policy makers design or amend the mechanism of rps with recs to help the policy operate efficiently and to prevent potential undesirable consequences

interactions of a tradable green certificate market with a tradable permits market abstract the reduction of greenhouse gas ghg emissions is an important goal in the energy and environmental policies of the european union eu and its member states according to a recent directive proposal from the eu commission the inclusion of renewable technologies is one of the important ways to achieve this emission reduction more policy instruments are on hand to pursue this objective frequently discussed currently is the establishing of a market for tradable permits for co2 emissions to achieve emission reductions in the power industry in parallel with this is the introduction of a green certificate market to promote the development of renewables if these two instruments are brought into play at the same time two separate markets with two individual targets will co exist in a number of countries with a focus on the green certificate market this paper discusses how these two markets may interact with each other in international trade three different cases are analysed 1 a green certificate market without any tradable permits scheme 2 a green certificate market in combination with a tradable permits scheme based on grandfathering and finally 3 a green certificate market in combination with a tradable permits bidding scheme emphasis is placed on analysing the pricing mechanisms in international trade at the green certificate and tradable permits market in relation to the value of the reductions in ghg emissions actually achieved the influence of the permits scheme on the spot market price of electricity is shown and the benefits of trading green certificates compared to a domestic implementation of renewable technologies are discussed the main conclusion is that only if a green certificate market is combined with a tradable permit scheme based on a bidding procedure will trade in certificates be equivalent to the domestic development of renewables using the bidding system no other country will have to pay for co2 reductions in the home country of the renewable development as would otherwise be the case if a tradable permit system based on grandfathering were introduced or even worse if no tradable permits were introduced at all finally it must be stated that even if the green certificate market were introduced alongside with a tradable permit bidding system there still would be no incentives for international certificate trade on account of the need for ghg reductions in the version of the green certificate market discussed in this paper no ghg credits are attached to certificates this means that the development of renewables will add to ghg reductions only in those countries where the plants are established no matter what kind of tradable permit scheme is adopted

cost effectiveness of renewable electricity policies we analyze policies to promote renewable sources of electricity a portfolio standard rps raises electricity prices and primarily reduces gas fired generation a knee of the cost curve exists between 15 and 20 goals for 2020 in our central case and higher natural gas prices lower the cost of greater reliance on renewables a renewable energy production tax credit lowers electricity price at the expense of taxpayers which limits its effectiveness in reducing carbon emissions and it is less cost effective at increasing renewables than a portfolio standard neither policy is as cost effective as a cap and trade policy for achieving carbon emission reductions

on allocative distortions in problems of self selection this article considers the general structure of self selection models by imposing conditions which permit the ordering of agents by their preferences we provide a characterization of the distortions inherent in the sorting process

optimal interconnection and renewable targets for north west europe we present a mixed integer linear programming model for determining optimal interconnection for a given level of renewable generation using a cost minimisation approach optimal interconnection and capacity investment decisions are determined under various targets for renewable penetration the model is applied to a test system for eight regions in northern europe it is found that considerations on the supply side dominate demand side considerations when determining optimal interconnection investment interconnection is found to decrease generation capacity investment and total costs only when there is a target for renewable generation higher wind integration costs see a concentration of wind in high wind regions with interconnection to other regions

dynamic labor contracts under asymmetric information abstract this paper discusses the distortion of employment within a two period asymmetric information contracting model in which an exogenous demand shock is serially correlated and is known only to firms the obtained results show that serial correlations of the state of nature can cause not only underemployment but also overemployment even when overemployment never occurs in the context of a static asymmetric information contracting model

renewable generation expansion under different support schemes a stochastic equilibrium approach abstract following the deregulation of electricity markets a current challenge of policy makers is to facilitate the transition to a sustainable power system at the highest welfare for society in this paper we investigate the efficiency of different support schemes such as a feed in tariff a feed in premium and tradable green certificates with respect to incentivizing the required investments in renewable generation we consider a number of generation expansion problems and formulate stochastic equilibrium models that account for uncertainty in demand and renewable supply the risk aversion of investors and the competitiveness of the market the problem of the policy maker is formulated as a mathematical program with equilibrium constraints mpec and as a non linear complementarity problem ncp for the feed in schemes and the certificate market respectively our models are solved for a small illustrative example and a larger case study based on the danish power system the results confirm that the main driver for the optimal choice of renewable support scheme is the aversion of power producers towards price and volume risk while the competitiveness of the market rarely affects such choice

the policy implications of the different interpretations of the cost effectiveness of renewable electricity support abstract the cost effectiveness of support for renewable electricity is a main criterion to assess the success of policy instruments together with effectiveness the costs of support are also a source of significant concern for governments all over the world however significant confusion exists in the literature on the cost effectiveness of public support for renewable electricity while some authors define the concept of cost effectiveness as that which complies with the equimarginality principle many others including documents from relevant organisations european commission international energy agency intergovernmental panel on climate change define it as the lowest costs of support generally equating it with the minimisation of consumer costs the aim of this paper is to clarify the differences between both approaches and their policy implications regarding the choice of instruments and design elements it is shown that they partly overlap and that their policy implications clearly differ leading to very different policy prescriptions while the former favours technology neutral instruments and design elements the minimisation of consumer costs approach favours instruments and design elements which adjust support levels to the costs of the technologies

labor contracts under asymmetric information when workers are free to quit this paper examines the impact of workers ability to quit on the performance of labor contracts between workers and privately informed firms while the need to induce workers to remain with the firm necessarily lowers total welfare the effect on employment levels is to reduce the magnitude of the inefficiency due to asymmetric information whether this inefficiency is under or overemployment the model predicts that employment distortions increase with the strength of lock in effects on workers a prediction which contrasts with the results of efficiency wage models and which may help in empirical testing of labor contract theory