international technology oriented agreements to address climate change much discussion has surrounded possible alternatives for international agreements on climate change particularly post 2012 among these alternatives technology oriented agreements toas are perhaps the least well defined we explore what toas may consist of why they might be sensible which toas already exist in international energy and environmental governance and whether they could make a valuable contribution to addressing climate change we find that toas aimed at knowledge sharing and coordination research development or demonstration could increase the overall efficiency and effectiveness of international climate cooperation but are likely to have limited environmental effectiveness on their own technology transfer agreements are likely to have similar properties unless the level of resources expended is large in which case they could be environmentally significant technology specific mandates or incentives could be environmentally effective within the applicable sector but are more likely to make a cost effective contribution when viewed as a complement to rather than a substitute for flexible emissions based policies these results indicate that toas could potentially provide a valuable contribution to the global response to climate change the success of specific toas will depend on their design implementation and the role they are expected to play relative to other components of the policy portfolio

premuneration values and investments in matching markets we analyze a model in which agents make investments and then match into pairs to create a surplus the agents can make transfers to reallocate their pretransfer ownership claims on the surplus mailath postlewaite and samuelson 2013 showed that when investments are unobservable equilibrium investments are generally inecient in this paper we work with a more structured model that is suciently tractable to analyze the nature of the investment ineciencies we provide conditions under which investment is ineciently high or low and conditions under which changes in the pretransfer ownership claims on the surplus will be pareto improving as well as examine how the degree of heterogeneity on either side of the market aects investment eciency

financial firm production of monetary services a generalized symmetric baroett variable profit function approach an alternative monetary production model of financial firms is employed to investigate supply side monetary aggregation financial firms are conceived to produce monetary services as outputs through financial intermediation a new method for testing the existence of consistent monetary output aggregates in financial firms production technology is developed in terms of a multiproduct firm s variable profit function and the method does not require homotheticity of the aggregator function we use a generalized symmetric barnett flexible functional form that specification satisfies global curvature conditions and retains its flexibility under the null hypothesis of weak separability neither of those properties is possessed by other flexible functional forms

efficient non contractible investments in large economies abstract do investors making complementary investments face the correct incentives especially when they cannot contract with each other prior to their decisions we present a two sided matching model in which buyers and sellers make investments prior to matching once matched buyer and seller bargain over the price taking into account outside options efficient decisions can always be sustained in equilibrium we characterize the inefficiencies that can arise in equilibrium and show that equilibria will be constrained efficient we also show that the degree of diversity in a large market has implications for the extent of any inefficiency journal of economic literature classification numbers c78 d41 d51

long run equilibrium modeling of emissions allowance allocation systems in electric power markets carbon dioxide allowance trading systems for electricity generators are in place in the european union and in several u s states an important question in the design of such systems is how allowances are to be initially allocated by auction by giving away fixed amounts grandfathering or by allocating based on present or recent output investment or other decisions the latter system can bias investment operations and product pricing decisions and increase costs relative to the other systems a nonlinear complementarity model is proposed for investigating the long run equilibria that would result under alternative systems for power markets characterized by time varying demand and multiple technology types existence of equilibria is shown under mild conditions solutions for simple systems show that allocating allowances to new capacity based on fuel use or generator type can yield large distortions in capacity investment invert the operating order of power plants and inflate consumer costs the distortions can be smaller for tighter co2 restrictions and are somewhat mitigated if there is also a market for electricity capacity or minimum run restrictions on coal plants distortions are also less if allowances are allocated to plants in proportion to sales rather than capacity

wealth effects distribution and the theory of organization abstract we construct a general equilibrium model of firm formation in which organization is endogenous firms are coalitions of agents providing effort and investment capital effort is unobservable unless a fixed monitoring cost is paid and borrowing is subject to a costly state verification problem because incentives vary with an agent s wealth different types of agents become attractive firm members under different circumstances when borrowing is not costly firms essentially consist of one type of agent and are organized efficiently but when the costly state verification problem is sufficiently severe firm organization will depend on the distribution of wealth with enough inequality it will tend to be dictated by incentives of rich agents to earn high returns to wealth even if the chosen organizational form is not a technically efficient way to provide incentives journal of economic literatureclassification numbers d2 d31 j41 l2

climate policy and fiscal constraints do tax interactions outweigh carbon leakage climate policymaking faces twin challenges of carbon leakage and public sector revenue requirements a large literature advocates the use of carbon dioxide co2 pricing and recycling the revenues to lower distorting taxes as a way to minimize costs in this paper we explore the implications of labor tax interactions for the cost effectiveness of border adjustments and other measures to cope with leakage we find that for plausible values of labor supply elasticities the cost savings from revenue recycling are significant from 15 to 25 percent the cost savings from anti leakage measures are generally smaller but also significant particularly for small coalitions or more binding reduction targets tax interactions further enhance the cost savings from border adjustments but make other measures like rebates or exemptions less attractive

output based allocations and revenue recycling implications for the new zealand emissions trading scheme abstract the new zealand emissions trading scheme nz ets is more comprehensive in its coverage of emissions than schemes introduced or proposed to date in any other country in that it includes agricultural greenhouse gases which account for half of new zealand s total emissions but motivated by concerns for the international competitiveness of emissions intensive trade exposed industrial and agricultural activities current legislation provides for substantial ongoing free allocations to such activities linked to their output here we use a computable general equilibrium model to analyse the impacts of output based allocation given the possibility of recycling net revenues to reduce prior distorting taxes unlike previous modelling studies of alternative nz ets designs we allow for a more realistic modelling both of capital and labour supply we find that as suggested by theoretical results interactions between the ets and existing taxes are important given any level of output based allocation the negative macroeconomic impacts can be reduced by recycling net revenues as efficiently as possible less obviously we find that there may be an optimal non zero level of output based allocation this optimal level increases as the carbon price and or factor supply elasticities increase but decreases if revenues are recycled with greater efficiency

money demand variability a demand systems approach this article tests the fourier flexible form on quarterly u s monetary data the data have been prescreened for consistency with the general axiom of revealed preference and subindexes are formed using the divisia approach in this article the global fourier model fits well although there is a potential problem of overfitting and certain data points exhibit behavior inconsistent with the model the elasticities are variable over time particularly around business cycle troughs it appears that financial asset demand surfaces are highly nonlinear and the many unsuccessful existing attempts to estimate money demand may not have worked well for this reason

what is the cost of a renewable energy based approach to greenhouse gas mitigation energy policies for greenhouse gas ghg mitigation in the united states have set sector specific standards such as the renewable fuel standard rfs and the renewable portfolio standard rps for the transportation and the electricity sectors respectively this paper examines the welfare costs and effectiveness of ghg abatement with these policies and compares them with those under a carbon tax normalized to achieve the same level of abatement over the 2007 2030 period we show that the global welfare cost per ton of ghg abatement with the rfs and rps is 171 while with the carbon tax it is 7

an analysis of substitution bias in measuring inflation 1959 851 we analyze the substitution bias in laspeyres type price indexes such as the cpi using 1959 1985 nipa consumption data for 101 commodities we employ two methodological approaches to calculation of the bias first we construct the tightest theoretical bounds on the col by applying nonparametric methods using algorithms developed by afriat and by varian second following diewert we construct superlative price index formulas namely tomqvist and fisher s ideal indexes under a chain as well as a fixed base specification homothetic preferences are found to be consistent with the data and sensitivity tests indicate that this result is not vacuous if the hypothesis of homotheticity is maintained the col bias has upper and lower limits of 0 22 and 0 14 percent per year respectively using the superlative indexes as the measure of the col the bias is about 0 18 percent per year for the period 1959 85 this estimate is somewhat larger than found in earlier studies our use of more disaggregated data is found to be responsible for part of the difference with the size of the estimated bias directly related to the extent of the aggregation

a comparison of nonparametric tests of weak separability for annual and quarterly data on consumption leisure and money among the most fundamental assumptions made in economics are utility maximization and the separability of the arguments in the representative consumer s utility function these assumptions are important for theoretical and empirical applications of economics in this article we present results from nonparametric tests of these assumptions of consumer behavior we find that utility maximization generally obtains with either annual or quarterly per capita data on consumption goods leisure and relatively liquid monetary assets annual data on consumption goods leisure and all monetary assets are consistent with utility maximization there is some evidence in support of using partial adjustment models when estimating quarterly data models of the demand for monetary assets further annual data on consumption goods and leisure and on liquid monetary assets meet the necessary and sufficient conditions for weak separability these results support the notion of a monetary aggregate more broadly based than cu

economic and emissions implications of load based source based and first seller emissions trading programs under california ab32 in response to assembly bill 32 the state of california considered three types of carbon emissions trading programs for the electric power sector load based source based and first seller they differed in terms of their point of regulation and in whether in state to out of state and out of state to in state electricity sales are regulated in this paper we formulate a market equilibrium model for each of the three approaches considering power markets transmission limitations and emissions trading and making the simplifying assumption of pure bilateral markets we analyze the properties of their solutions and show the equivalence of load based first seller and source based approaches when in state to out of state sales are regulated under the cap a numeric example illustrates the emissions and economic implications of the models in the simulated cases leakage eliminates most of the emissions reductions that the regulations attempt to impose furthermore contract reshuffling occurs to such an extent that all the apparent emissions reductions resulting from changes in sources of imported power are illusory in reality the three systems would not be equivalent because there will also be pool type markets and the three systems provide different incentives for participating in those markets however the equivalence results under our simplifying assumptions show that load based trading has no inherent advantage compared to other systems in terms of costs to consumers contrary to claims elsewhere

a semi nonparametric approach to the demand for uk monetary assets we estimate an asymptotically ideal model of the demand for uk personal sector monetary assets we use data that are consistent with utility maximizing behaviour and find that uk monetary assets are generally substitutes in use the estimated elasticities of substitution during the 1980s and the early 1990s indicate that a relatively broad monetary aggregate should be used in economic studies the results also suggest that any policy based on interest or user cost elasticities of substitution between financial assets should be based on the morishima elasticities as the allen uzawa calculation can give misleading results

risky monetary aggregates for the uk and us abstract we extend the scope of monetary aggregation beyond capital certain assets that make up central bank data sets and identify groups of assets that form monetary aggregates composed of both capital certain and risky capital uncertain assets we construct monetary aggregates for the us and uk using a superlative index and relax a key assumption of the consumption capital asset pricing model ccapm a one year planning horizon by using forecasted returns on risky assets our new risky monetary aggregates perform well in var tests we recommended exploring risky assets as providers of liquidity services in future research on this topic

monetary aggregation and the neutrality of money zisimos koustas this article tests the long run neutrality of money proposition using quarterly u s data over the period from 1960 1 to 1996 2 and the methodology suggested by king and watson 1997 paying particular attention to the integration and cointegration properties of the variables comparisons are made among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b series of divisia and ce monetary aggregates jel e40 e50 c32 i introduction the aim of this article is to investigate a long run question about the role of money in monetary policy whether changes in the conduct of monetary policy influence the growth rate of output as lucas 1996 p 661 puts it so much thought has been devoted to this question and so much evidence is available that one might reasonably assume that it had been solved long ago but this is not the case in fact recently fisher and seater 1993 and king and watson 1997 contribute to the literature on testing quantity theoretic propositions by developing tests using recent advances in the theory of nonstationary regressors and show that meaningful long run neutrality and superneutrality tests can only be constructed if both nominal and real variables satisfy certain nonstationarity conditions and that much of the older literature violates these requirements in this paper in the spirit of serletis and koustas 1998 and koustas and serletis 1999 we test the long run neutrality and superneutrality of money using the king and watson 1997 methodology paying particular attention to the gains that can be achieved by rigorous use of microeconomic and aggregation theoretic foundations in the construction of money measures this is accomplished by making comparisons among simple sum divisia and currency equivalent ce monetary aggregates using the anderson et al 1997a 1997b data see anderson et al 1997a 1997b for more details we also pay attention to the integration and cointegration properties of the variables because meaningful neutrality and superneutrality tests critically depend on such properties the organization of the article is as follows the next section briefly discusses the problem of the definition aggregation of money in section iii we investigate the univariate time series properties of the variables as these properties are relevant for some problems of potential importance in the practical conduct of monetary policy as well as for estimation and hypothesis testing in section iv we test the long run neutrality and superneutrality of money propositions using the king and watson 1997 structural bivariate autoregressive methodology paying particular attention to the integration and cointegration properties of the data the final section concludes ii the many kinds of money the monetary aggregates currently in use by the federal reserve are simple sum indices in which all monetary components are assigned a constant and equal unitary weight this index is m in 1 m sigma sup n sub i 1 x sub i where x sub i is one of the n monetary components of the monetary aggregate m this summation index implies that all monetary components contribute equally to the money total and it views all components as dollar for dollar perfect substitutes there is no question that such an index represents an index of the stock of nominal monetary wealth but cannot in general represent a valid structural economic variable for the services of the quantity of money over the years there has been a steady stream of attempts at properly weighting monetary components within a simple sum aggregate with no theory however any weighting scheme is questionable barnett 1980 derived the theoretical linkage between monetary theory and aggregation and index number theory he applied economic aggregation and index number theory and constructed monetary aggregates based on diewert s 1976 class of superlative quantity index numbers

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

the substitutability of equities and consumer durable goods a portfolio choice approach the stock market crash of october 1987 led many economists to lower their forecast of gnp growth for 1988 the rationale was that the loss of wealth that resulted from the crash would force asset holders to reduce their consumption expenditures yet a major slowdown in economic growth was not realized in the months following the crash gamer 11 explains this fact in terms of the life cycle hypothesis of consumption he argues that the potential adverse effect of stock market losses on planned consumption would be spread out over the entire lifetime of asset holders so that the immediate effect of the crash on the level

bounding an economic monetary aggregate under nonhomothetic preferences we construct nonparametric bounds on true quantity indexes for the realistic case of nonhomothetic preferences these bounds do not require assumptions about the form of the underlying aggregator function we construct these bounds using monetary assets that meet necessary conditions for the existence of an aggregate we find that a tornqvist index of these monetary assets falls within the nonparametric bounds on true quantity indexes almost all of the time whereas a simple sum of these monetary assets falls outside these bounds more than one third of the time

the social costs of second best policies evidence from agricultural ghg mitigation abstract this paper investigates the social costs of second best agricultural greenhouse gas ghg mitigation policies adjustments along the land use and input intensity margins are represented within a regionalized optimization model of california crop production calibrated to economic and agronomic information second best policies relying on spatially aggregated ghg emission factors lead to small abatement efficiency losses while policies targeting a single ghg lead to moderate losses in contrast policies targeting a single input entail large abatement efficiency losses which nonetheless can be reduced by combining instruments

nonparametric demand analysis of u k personal sector decisions on consumption leisure and monetary assets a reappraisal this paper utilizes a new data set to test for utility maximizing behavior and weakly separable subutility functions in the context of a utility function comprising durables nondurables services leisure and monetary asset holdings for the u k personal sector all the data sets analyzed demonstrated consistency with respect to utility maximizing behavior the weak separability results prove to be relatively invariant to the degree of aggregation over goods but highly sensitive to the assump tion made regarding the representative consumer per household scaling of the data produced a utility function that is weakly separable in goods services and leisure and in monetary assets

expecting the unexpected emissions uncertainty and environmental market design we study potential equilibria in california s cap and trade market for greenhouse gases ghgs based on information available before the market started we find large ex ante uncertainty in business as usual emissions and in the abatement that might result from non market policies much larger than the reduction that could plausibly occur in response to an allowance price within a politically acceptable range this implies that the market price is very likely to be determined by an administrative price floor or ceiling similar factors seem likely to be present in other cap and trade markets for ghgs

a spillover based theory of credentialism i propose a model in which credentials such as diplomas are instrumentally valuable to workers the model avoids an important criticism of standard job market signalling models by tying a worker s wage to their output a worker s productivity is influenced by the skills of their co workers where such skills arise from an ability augmenting investment that is made prior to matching with co workers credentials allow workers to demonstrate their investment to the labour market thereby allowing them to match with high skill co workers in equilibrium despite the positive externality associated with a worker s investment i show how overinvestment is pervasive in equilibrium

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

robust technology policy against emission leakage the case of upstream subsidies asymmetric regulation of a global pollutant between countries can alter the competitiveness of industries and lead to emissions leakage which hampers countries welfare in order to limit leakage governments consider supporting domestic trade exposed firms by subsidizing their investments in abatement technology the suppliers of such technologies tend to be less than perfectly competitive particularly when both emissions regulations and advanced technologies are new in this context of twin market failures we consider the relative effects and desirability of subsidies for abatement technology we find a more robust recommendation for upstream subsidies than for downstream subsidies downstream subsidies tend to increase global abatement technology prices reduce pollution abatement abroad and increase emission leakage on the contrary upstream subsidies reduce abatement technology prices and hence also emissions leakage

designing climate mitigation policy this us paper provides an exhaustive review of critical issues in the design of climate mitigation policy by pulling together key findings and controversies from diverse literatures on mitigation costs damage valuation policy instrument choice technological innovation and international climate policy the authors begin with the broadest issue of how high assessments suggest the near and medium term price on greenhouse gases would need to be both under cost effective stabilization of global climate and under net benefit maximization or pigouvian emissions pricing the remainder of the paper focuses on the appropriate scope of regulation issues in policy instrument choice complementary technology policy and international policy architectures

output based allocations in pollution markets with uncertainty and self selection we study pollution permit markets in which a fraction of permits are allocated to firms based on their output output based allocations which are receiving increasing attention in the design of carbon markets around the world e g europe california new zealand are shown to be optimal under demand and supply volatility despite the output distortions they may create in a market that covers multiple sectors the optimal design combines auctioned permits with output based allocations that are specific to each sector and increasing in its volatility when firms are better informed about the latter or must self select the regulator resort to some free i e lump sum allocations to sort firms out numerical exercises illustrate the policy relevance of our results the gains from considering output based allocations can be substantial

pollution taxes and revenue recycling abstract discussions of environmental policy and the tax system have emphasized the value of pollution tax revenues which can be used to reduce other tax distortions in the economy however by raising private marginal production costs environmental taxes also tend to reduce gdp and exacerbate the welfare costs of conventional taxes for environmental taxes in consumption goods industries the net welfare change from these two effects is negative unless this good is a relatively weak substitute for leisure an estimate for the optimal pollution tax with full revenue recycling is 63 to 78 of marginal environmental damages

competing premarital investments this paper studies premarital parental investments in children s wealth where spousal wealth is a public good in marriage by investing in their children s wealth parents increase the wealth of their children and the quality of the spouses that their children can marry in large marriage markets the hedonic return to investment internalizes all the external benefits of premarital investment in wealth so that the competitive equilibrium is efficient marriage market competition also increases investments in small marriage markets relative to no competition but equilibrium investments are not efficient

output based allocation of emissions permits for mitigating tax and trade interactions the allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account we compare different rules for allocating carbon allowances within sectors lumpsum grandfathering output based allocation oba auctioning and among sectors historical emissions or value added shares the output subsidies implicit in oba mitigate tax interactions unlike grand fathering oba with sectoral distributions based on value added is similar to revenue recycling with auctioning oba based on historical emissions supports heavier polluters more effectively counter acting carbon leakage but at higher welfare costs less energy intensive sectors are also sensitive to allocation rules

unilateral co2 reductions and carbon leakage the consequences of international trade in oil and basic materials a recursively dynamic general equilibrium model featuring six world regions with trade in energy and non energy goods is used to simulate the period from 1990 through 2100 in 10 year intervals the simulations explore the effect of unilateral action by the oecd to curb global co2 emissions unilateral cuts create incentives for free riding by non participating regions so that global emissions are reduced by less than the amount that the oecd cuts back its regional emissions carbon leakage occurs through two channels first basic materials production increases in unconstrained regions resulting in increased carbon intensity of gdp second reductions in oecd oil imports cause the world oil price to fall leading to an increased energy intensity in the non participant regions in this paper we use a general equilibrium model to assess the extent to which these two mechanisms reduce the effectiveness of oecd reductions in curbing global co2 concentrations

carbon emission forensic in the energy sector is it worth the effort abstract climate policy has mostly focused on regulating power suppliers there is a growing interest in exploring regulating emissions from the demand side by incentivizing consumers to reduce their energy consumptions or to purchase power from cleaner sources through tracking carbon content of power flow in the transmission network this paper analyzes market outcomes under two approaches producer based and demand based carbon taxes we formulate each approach as a market equilibrium model for the consumer based approach the analysis assumes that a utility procuring electricity on behalf of consumers is subject to the carbon tax for the producer based approach the producers are subject to the carbon tax and therefore pay for their emissions we show that the two approaches are equivalent when the program s coverage is complete however when the coverage is incomplete the consumer based carbon tax is less effective in pricing carbon emissions owing to the fact that sales to unregulated regions are not subject to the carbon tax given that the transaction cost of implementing consumer based tax is likely to be high benefit of tracking power flows in order to estimate carbon content or footprint might not be justified even with a full coverage program

implications of the eu emissions trading system for the south east europe regional electricity market as part of its climate policy the european union eu aims to reduce greenhouse gas ghg emissions levels by 20 by the year 2020 compared to 1990 levels although the eu is projected to reach this goal its achievement of objectives under its emissions trading system ets may be delayed by carbon leakage which is defined as a situation in which the reduction in emissions in the ets region is partially offset by an increase in carbon emissions in the non ets regions we study the interaction between emissions and hydropower availability in order to estimate the magnitude of carbon leakage in the south east europe regional electricity market see rem via a bottom up partial equilibrium framework we find that 6 3 to 40 5 of the emissions reduction achieved in the ets part of see rem could be leaked to the non ets part depending on the price of allowances somewhat surprisingly greater hydropower availability may increase emissions in the ets part of see rem however carbon leakage might be limited by demand response to higher electricity prices in the non ets area of see rem such carbon leakage can affect both the competitiveness of producers in ets member countries on the periphery of the ets and the achievement of eu targets for co2 emissions reduction meanwhile higher non ets electricity prices imply that the current policy can have undesirable outcomes for consumers in non ets countries while non ets producers would experience an increase in their profits due to higher power prices as well as exports the presence of carbon leakage in see rem suggests that current eu policy might become more effective when it is expanded to cover more countries in the future

monotone matching in perfect and imperfect worlds we study frictionless matching in large economies with and without market imperfections providing sufficient conditions for monotone matching that are weaker than those previously known necessary conditions which depend on a key analytical object we call the surplus function are also offered changes in the surplus yield valuable information about the comparative statics of matching patterns across environments we apply our framework to some examples adapted from the literature accounting for and extending several comparative static and welfare results we also explore the dependence of the matching pattern on the type distribution

a computable general equilibrium model of international sanctions in iran we detail recent international sanctions against the iranian economy and its government imposed by a subset of developed countries the effects of these sanctions on the iranian economy in general and upon upper and lower income rural and urban iranian households as well as the iranian government are modelled using a computable general equilibrium cge model we supplement the global trade analysis project 8 data set using income and expenditure shares from the urban and rural household income and expenditure survey from the statistical centre of iran sci the model is calibrated to simulate the effects of international sanctions as closely as possible we use endogenous trade taxes to simulate the effects of sanctions on iranian oil and petrochemical exports and iranian imports of petroleum products metal products and motor vehicles our study finds that international sanctions reduced aggregate iranian welfare by 14 15 rural households in iran suffered welfare losses which were almost double those experienced by urban households and the poorest urban and rural households experienced the largest welfare losses in the order of 5 10 but the government of iran sees a decrease in real revenue of 40 50 due to the large negative effect of sanctions on the iranian oil sector

economic and environmental impact analysis of carbon tariffs on chinese exports as an alternative measure for the proposal of border tax adjustments btas advocated by the countries that seek to abate co2 emissions hereafter referred to as abating countries export carbon tax ect voluntarily conducted by the developing countries has been widely discussed in recent years this paper uses the multi regional and multi commodity computable general equilibrium cge model and the gtap8 1 database to investigate the economic and environmental effects of carbon tariffs on chinese exports the following three policy scenarios are considered 1 the abating countries implement cap and trade emission programs without btas 2 the unilaterally abating countries levy import tariffs and export subsidies on non abating countries and 3 the abating countries implement unilateral climate policies combined with ect imposed by china the ect policy of china is evaluated with a carbon price set at 17 us t co2 results illustrate that the ect voluntarily implemented by china is ineffective in reducing its domestic co2 emissions moreover ect merely has a minor impact on global emissions finally the competitiveness of china s energy intensive and trade exposed eite industries suffers substantial losses if export tariffs are imposed however china s gains in terms of welfare and gross domestic product gdp would be slightly improved if an ect policy is implemented compared to the scenario where china is subjected to btas levied by the abating coalition in the light of the tradeoff between tariff revenue for welfare and competiveness losses of the eite industries it is therefore difficult to conclude that carbon tariff on chinese exports is an alternative policy to btas

economic implications of alternative allocation schemes for emission allowances political feasibility of emission trading systems may crucially depend on the free initial allocation of emission allowances to energy intensive industries in order to ameliorate adverse production and employment effects we investigate the potential trade off between such compensation and economic efficiency for alternative allocation rules where emission allowances are based on either emissions or output based on analytical partial equilibrium and numerical general equilibrium analysis we show that in open trading systems the trade off becomes the more severe the higher the international permit price is whenever the permit price can be considered exogenous to firms or industries the output based allocation rule is distinctly less costly than the emission based rule to preserve output and employment in energy intensive sectors the reason is that emission based allocation of allowances not only provides an implicit output subsidy but also lowers the effective price of emission inputs to regulated firms emissionbased allocation is particularly expensive towards higher international permit prices where the implicit subsidies to emission use in energy intensive sectors produce drastic efficiency losses since they imply high expenditures for carbon permit imports rather than high net revenues from efficient carbon permit exports

homothetic efficiency theory and applications we provide a nonparametric revealed preference approach to demand analysis based on homothetic efficiency homotheticity is widely assumed often implicitly because it is a convenient and often useful restriction however this assumption is rarely tested and data rarely satisfy testable conditions to overcome this we provide a way to estimate homothetic efficiency of consumption choices the method provides considerably higher discriminatory power against random behavior than the commonly used afriat efficiency we use experimental and household survey data to illustrate how our approach is useful for different empirical applications and can provide greater predictive success

leakage in regional environmental policy the case of the regional greenhouse gas initiative abstract subglobal and subnational greenhouse gas policies are often thought to be less effective than comprehensive policies as production and emissions of trade exposed industries may move from the regulated to the unregulated regions a process referred to as leakage leakage negates some emission reductions from the regulated regions we use detailed electricity generation and transmission data to show that this is the case for the regional greenhouse gas initiative rggi a co2 cap and trade program for the electricity sector in select northeastern u s states more specifically our results indicate that rggi induced a reduction in coal fired generation in rggi states and an increase in ngcc generation in rggi surrounding regions this finding suggests that the pollution haven hypothesis holds for state level variation in environmental policy even when compliance costs are low

downstream regulation of co2 emissions in california s electricity sector this paper examines the implications of alternative forms of cap and trade regulations on the california electricity market specific focus is given to the implementation of a downstream form of regulation known as the first deliverer policy under this policy importers i e first deliverers of electricity into california are responsible for the emissions associated with the power plants from which the power originated even if those plants are physically located outside of california we find that absent strict non economic barriers to changing import patterns such policies are extremely vulnerable to reshuffling of import resources the net impact implies that the first deliverer policies will be only marginally more effective than a conventional source based regulation

nonparametric tests of utility maximization and weak separability for consumption leisure and money some of the most fundamental assumptions of economics are utility maximization and weak separability of the arguments in the represen tative consumer s utility function this paper contains results from nonparametric tests of these assumptions about consumer behavior the authors find that quarterly per capita data on consumption goods le isure and monetary assets are consistent with utility maximization further consumption goods and leisure meet necessary and sufficient conditions for weak separability additionally one grouping of relat ively liquid monetary assets meets the necessary conditions for weak separability they also test and find no evidence of homothetic prefe rences copyright 1987 by mit press

impacts of climate policy on the competitiveness of canadian industry how big and how to mitigate competitiveness concerns have been at the forefront of climate policy debates in canada particularly as a result of its high energy intensity and significant exposure to international markets this paper uses a dynamic computable general equilibrium model to assess the likely impacts on sectoral competitiveness that would accompany efforts to meet greenhouse gas mitigation targets that have been set by the canadian government additionally it evaluates several design mechanisms that could be used to reduce the negative competiveness impacts associated with adoption of domestic climate policies the analysis suggests that several sectors would likely face significant competiveness challenges under a reference scenario in which permits are given to emitters in lump sum however it finds that competiveness impacts can be minimized by using output based recycling of permits or by using border tax adjustments

the translog utility function and the demand for money in the united states in recent years considerable effort has been directed towards establishing the nature of the relationship between money and nearmonies but with mixed success the approaches vary from multi interest rate single equation studies to the careful simultaneous equations studies summarized and amended by feige and pearce 1977 and extended recently by donovan 1978 offenbacher 1979 and barnett 1980 the empirical results also vary with numerous studies favoring only one interest rate see the surveys in fisher 1978 1983 some claiming that a variety of entities are close substitutes for money e g chetty 1969 and others showing that weak substitution or even complementarity may be the result of the measurement of elasticities of substitution between money and a number of other assets e g feige and pearce 1977 offenbacher 1979 and barnett 1980 the debate seems to have overshadowed a second and equally intriguing issue which centers on the establishment of an acceptable definition of money the basic idea of this study is to take an approach that takes account of the different degrees of moneyness possessed by the various monetary assets this paper produces quantitative estimates of the degree of substitutability of other monetary assets for money in the context of a flexible functional form model with a

using output based allocations to manage volatility and leakage in pollution markets abstract output based allocations obas are typically used in emission trading systems ets with a fixed cap to mitigate leakage in sectors at risk recent work has shown they may also be welfare enhancing in markets subject to supply and demand shocks by introducing some flexibility in the total cap resulting in a carbon price closer to marginal damage we extend previous work to simultaneously include both leakage and volatility we study how oba permits can be implemented under an overall cap that may change with the level of production in contrast with a design that deducts oba permits from the overall permit allocation as is the current practice in the eu ets and california we show that introducing oba permits while keeping the overall cap fixed would only increase price fluctuations and induce severe welfare losses to non oba sectors

effects of unilateral climate policy on terms of trade capital accumulation and welfare in a world economy we present a two good two country overlapping generations model where emissions arise from production and each country has a domestic emission permit system when one country unilaterally reduces her cap on emissions her output available for domestic and foreign consumption diminishes more than in the other country with unchanged consumption expenditure shares for both goods the domestic terms of trade improve while capital stocks decline in the reducing and less strongly in the non reducing country improving terms of trade in the reducing country and falling capital stocks lead in total to welfare losses in both countries however if the country which unilaterally reduces her emission permits is a net creditor to the world economy and the golden rule applies her own welfare loss remains below that of the non reducing country

the timing of education we study an assignment with investment model to highlight a tradeoff between investment in human capital before ex ante system and after ex post system matching on the labor market the ex post system is better at coordinating investment within firms whereas the ex ante system is better at reducing mismatches we further show that the ability to transfer surplus within firms affects mismatches and the relative performance of the two systems at high degrees of transferability they are equivalent but when transferability is very low the ex post system outperforms the ex ante system although with moderate transferability the reverse is true jel i21 i28 j31 j42

allocation of co2 emissions permits a general equilibrium analysis of policy instruments what are the effects of different ways of allocating co2 emissions permits under a tradable permit scheme numerical simulations show that using the permit revenue to lower existing taxes implies by far the lowest welfare cost but also a large reduction in employment in energy intensive sectors and substantial stranded costs grandfathering the permits compensates owners for losses on stranded investments but comes at a welfare cost and does not mitigate the adjustment imposed on the economy finally distributing the permits according to market shares reduces the degree of sectoral adjustment but also comes at a high welfare cost

revenue raising vs other approaches to environmental protection the critical significance of pre existing tax distortions using analytical and numerical general equilibrium models we show that preexisting factor taxes produce a tax interaction effect that increases the costs of pollution taxes and quotas under policies that raise revenue and recycle it through cuts in marginal factor tax rates this effect is partially offset by a revenue recycling effect grandfathered pollution quotas such as those used under the 1990 clean air act amendments to regulate electric utilities so2 emissions do not benefit from this offset preexisting taxes raise this regulation s cost by over 70 more than half of this additional cost could be avoided by auctioning quotas and exploiting the revenue recycling effect

the composition and construction of monetary aggregates an economic monetary aggregate is composed from a set of monetary goods that are at least weakly separable from other goods in the optimizing agent s utility function we construct such an aggregate using a divisia index number we demonstrate that through the middle of the 1980s forecasts of the inflation rate based on our economic monetary aggregate are superior to forecasts based on the simple sum monetary aggregates m1 or m2

are risky assets substitutes for monetary assets i introduction financial innovation over the past couple of decades has enhanced the liquidity of many financial assets particularly noncapital certain risky assets further financial assets previously not regarded as monetary assets such as mutual funds and particularly money market mutual funds now provide monetary services such as liquidity and transactions services l given the increased liquidity of such funds the question arises as to whether risky assets are substitutes for capital certain monetary assets if noncapital certain assets are indeed substitutes for capital certain assets and are also being used for transactions purposes then agents may be treating risky assets as money although this issue has been addressed in the united states in the context of the addition of bond funds to m2 by for example duca 1995 no such research has yet been conducted in the united kingdom including risky assets in the analysis contradicts the work of ando and shell 1975 spencer 1986 appendix i pp 184 93 and spencer 1994 broadly they argue that since some nonrisky assets provide monetary services and probability also liquidity individuals would not hold risky assets for these purposes 2 in contrast hicks 1935 states that falling transaction costs and rising wealth encourages individuals to increase the proportion of risky assets in portfolio holdings most studies generally assume that risky assets fail to provide significant monetary services and for example have been excluded from the asset demand analysis of barr and cuthbertson 1991a drake fleissig and swofford 1997 and money demand studies such as taylor 1987 belongia and chrystal 1991 drake and chrystal 1994 and drake 1996 alternatively barr and cuthbertson 1991b use only risky assets in their asset demand system analysis the degree of substitution between risky assets and capital certain assets is an empirical issue while noncapital certain risky assets mutual funds and other financial assets may well be becoming closer substitutes for what people are using as money they are in no way perfect substitutes for the highly liquid cash assets to evaluate the role of noncapital certain assets we construct a noncapital certain risky divisia aggregate consisting of equities government bonds and unit trusts the divisia index allows for less than perfect substitution between assets and weights component assets according to their differing degrees of moneyness which may vary over time due to many factors for example financial innovation see barnett 1980 this methodology has been widely applied to monetary aggregation and money demand studies in a number of countries as in belongia 1996 drake 1996 drake and chrystal 1997 and anderson jones and nesmith 1997 to determine whether risky assets are substitutes for capital certain assets we use two other divisia aggregates constructed from traditional measures of money the first of these is an aggregate of highly liquid zero yield cash assets given that the component assets all have zero own rates of return however divisia aggregation is equivalent in this case to simple summation the second aggregate is a divisia aggregate of interest bearing capital certain assets including risky assets complicates the analysis because the degree of risk aversion will affect the estimates of substitution between capital certain and noncapital certain assets thus we also analyze how different degrees of risk aversion affect the results the substitution relationship between assets is estimated from an asymptotically ideal model aim the choice of an aim is in line with the recommendation of barnett fisher and serletis 1992 that flexible systems of demand equations should be used that allow for nonlinear optimizing behavior by economic agents furthermore this paper can be seen as an extension of the recent application of this model to u

does california s co2 price affect wholesale electricity prices in the western u s a abstract using a sample of daily market data we quantify the effect of california s co 2 cap and trade program on the wholesale electricity prices of four interconnected market hubs in the western u s a north of path 15 np15 and south of path 15 sp15 in california mid columbia mid c in the pacific northwest and palo verde pv in the desert southwest a 1 metric ton increase in california s co 2 price is estimated to have increased the electricity prices by 0 41 mwh p value p value p value 0 0056 for mid c and 0 15 mwh p value 0 0925 for pv these estimates reflect a the np15 and sp15 sellers pricing behavior of fully including the co 2 price in their intra state transactions b the mid c price s 100 pass through of the co 2 price in the pacific northwest s hydro export to california and c the statutory obligation of paying the co 2 emissions cost by california s buyers of the electricity imported from the desert southwest the policy implication is that internalization of co 2 s externality in the western u s a requires a cap and trade program with a regional scope that encompasses all four hubs thereby remedying the california program s limited geographic coverage which introduces distortions in neighboring markets