the economics of a blend mandate for biofuels a biofuel blend mandate may increase or decrease consumer fuel prices with endogenous oil prices depending on relative supply elasticities biofuel tax credits always reduce fuel prices tax credits result in lower fuel prices than under a mandate for the same level of biofuel production if tax credits are implemented alongside mandates then tax credits subsidize fuel consumption instead of biofuels this contradicts energy policy goals by increasing oil dependency co 2 emissions and traffic congestion while providing little benefit to either corn or ethanol producers these social costs will be substantial with tax credits costing taxpayers 28 7 billion annually by 2022 copyright 2008 oxford university press

political competition and the politicization of the state in east central europe the expansion and politicization of the postcommunist state even among the reform leaders of czech republic hungary poland and slovakia has confounded early expectations that the state would s

law enforcement and transition abstract we present a simple model to analyze law enforcement problems in transition economies law enforcement implies coordination problems and multiplicity of equilibria due to a law abidance and a fiscal externality we analyze two institutional mechanisms for solving the coordination problem a first mechanism which we call dualism follows the scenario of chinese transition where the government keeps direct control over economic resources and where a liberalized non state sector follows market rules the second mechanism we put forward is accession to the european union we show that accession to the european union even without external borrowing provides a mechanism to eliminate the bad equilibrium provided the accessing country is small enough relative to the european union interestingly we show that accession without conditionality is better than with conditionality because conditionality creates a coordination problem of its own that partly annihilates the positive effects of expected accession

common trends and common cycles the existence of a serial correlation common feature among the first differences of a set of i 1 variables implies the existence of a common cycle in the beveridge nelson stock watson decomposition of those variables a test for the existence of common cycles among cointegrated variables is developed the test is used to examine the validity of the common trend common cycle structure implied by flavin s excess sensitivity hypothesis and campbell and mankiw s mixture of rational expectations and rule of thumb hypothesis for consumption and income linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components copyright 1993 by john wiley sons ltd

the commodity terms of trade unit roots and nonlinear alternatives a smooth transition approach market price dynamics for north american oriented strand board markets are examined specifically the role of transactions costs are examined vis a vis the law of one price weekly data for the january 3rd 1995 through april 14th 2006 period are used in the analysis nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions stars results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the star models implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

after the big bang obstacles to the emergence of the rule of law in post communist societies when russia launched mass privatization it was widely believed that it would create a powerful constituency for the rule of law that didn t happen we present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the pareto efficient rule of the game the reason is that uncertainty about the legal regime can lead to asset stripping and stripping can give agents an interest in prolonging the absence of the rule of law this abstract was borrowed from another version of this item

on the comovement of commodity prices we present strong evidence against the excess comovement hypothesis that the prices of commodities move together beyond what can be explained by fundamentals prior studies employ broad macroeconomic indicators to explain common price movements and potentially correlated fundamentals are not controlled for we use inventory and harvest data to fit a partial equilibrium model that more effectively captures the variation in individual prices the model explains the majority of the comovements among commodities with high price correlation and all of the comovements among those with marginal price correlation common movements in supply factors appear to play an important role in the observed comovements in commodity prices

optimal maintenance and production rates for a machine a nonlinear economic control problem abstract this paper derives qualitative properties such as monotonicity and limiting behavior of the optimal policy for a class of nonlinear optimal control problems the problem structure is characteristic of certain economic investment problems where two control instruments influence the rate of deterioration of a capital good an example for this is the problem of determining the optimal production and maintenance rates for a machine when the effectiveness of the maintenance expenditures is subject to decreasing returns to scale and where the marginal deterioration is an increasing function of the production rate a stability analysis in both of the phase planes state costate and state control is carried out and it is shown that the jacobian determinants in both cases are identical also provided is a sensitivity analysis of the equilibrium furthermore other applications of the model in the areas of advertising and pollution control models are proposed

exiting a lawless state an earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset stripping and the prevalence of asset stripping led to the absence of a demand for the rule of law highlighting a coordination failure this paper looks more carefully at the dynamics of transition from a non rule of law state the paper identifies a commitment problem as the critical feature inhibiting the transition the inability under a rule of law to forgive theft this can lead to the perpetuation of the non rule of law state even when it might seem that the alternative is pareto improving

food versus fuel what do prices tell us abstract sorting out the impacts of biofuels on global agricultural commodity prices is impossible without turning to data and distinguishing between the short run versus the long run impacts using time series prices on fuels and agricultural commodities the aim is to investigate the long run cointegration of these prices simultaneously with their multivariate short run interactions results indicate no direct long run price relations between fuel and agricultural commodity prices and limited if any direct short run relationships in terms of short run price movements sugar prices are influencing all the other agricultural commodity prices except rice with sugar the number one world input for ethanol results indicate increased ethanol production is potentially influencing short run agricultural commodity prices overall results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibria after a demand or supply event shock

the design of reform packages under uncertainty the authors present a model of large scale economic reforms modeled on the transition process in eastern europe with aggregate and individual uncertainty concerning the outcome of reforms the government is assumed to choose the speed and sequencing of reforms the authors compare big bang strategies with gradualist reform packages they show that gradualist reform packages may be easier to get started optimal sequencing of reforms should aim at creating constituencies for further reforms and gradualism may generate a higher investment response because of a lower option value of waiting than would a big bang approach copyright 1995 by american economic association

when does privatization work the impact of private ownership on corporate performance in the transition economies this paper compares the performance of privatized and state firms in the transition economies of central europe while controlling for various forms of selection bias it argues that privatization has different effects depending on the types of owners to whom it gives control in particular privatization to outsider but not insider owners has significant performance effects where privatization is effective the effect on revenue performance is very pronounced but there is no comparable effect on cost reduction overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from postprivatization restructuring

nonlinearities in the u s corn ethanol oil gasoline price system we use a smooth transition vector error correction model to assess price relationships within the u s ethanol industry monthly ethanol corn oil and gasoline prices from 1990 to 2008 are used in the analysis results indicate the existence of long run relationships among the prices analyzed strong links between energy and food prices are identified

business culture and tax evasion why corruption and the unofficial economy can persist abstract this paper shows that business and tax inspection culture can create multiple equilibria in bad equilibria high cheating and corruption increases in penalties or auditing can have perverse impacts and increase cheating the source of the multiple equilibria is the externalities created by business and tax inspection cultures as tax evasion and corruption become more common they become more acceptable and their cost is lowered a third externality that between firms and inspectors is the source of the perverse effect more cheating by firms is good for bribe taking inspectors and more bribe taking inspectors are good for cheating firms

u s corn exports the role of the exchange rate abstract time series econometric methods are applied to monthly observational data over the period 1978 1992 on real exchange rates real corn prices corn export sales and corn export shipments for the united states in sample fit and out of sample forecast results are used to discern whether exchange rates have elicited systematic responses in u s corn prices sales and shipments and whether the dynamic transmission mechanisms tying these variables together have changed over time a structural break appears to have occurred in early 1985 no cointegration is found between exchange rates price sales and shipments in either sub period influences are all short run or between stationary variables the role of the exchange rate appears to have moderated in the post 1985 period implications for policy analysis are discussed

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

original sin good works and property rights in russia are property rights obtained through dubious means forever tainted with original sin or can right holders make their ill gotten gains legitimate by doing good works this is a critical question for developing and transition countries where privatization is often opaque and businesspeople may receive property but remain unwilling to use it productively due to concerns about the vulnerability of their rights to political challenge using a survey of 660 businesspeople conducted in russia in 2005 the author finds that the original sin of an illegal privatization is difficult to expunge contrary to a coasian view of privatization property rights transferred through a legally questionable privatization are seen as illegitimate long after privatization businesspeople however can improve the legitimacy of property rights by doing good works such as providing public goods and using their assets well finally managers who provide public goods for their region are more likely to invest in their firms than those who do not this suggests a possible political rationale for the provision of public goods by private firms these findings have implications for studies of privatization property rights and business state relations in transitions and developing countries

long run and short run co movements in energy prices and the prices of agricultural feedstocks for biofuel recent expansions in biofuel production have led to concerns about an emerging new relationship between energy prices and the prices of agricultural feedstock for biofuel we provide new econometric evidence on this relationship using common trend common cycle decompositions to estimate long run and short run co movement across various energy and agricultural prices we also test for the presence of regime changes that may alter the relationship between energy and agricultural feedstock prices under certain conditions we find that co movements between energy and agricultural feedstock prices tend to dissipate in the long run which has important implications for biofuel and food policy

who wants to revise privatization the complementarity of market skills and institutions using survey data from 28 transition countries we test for the complementarity and substitutability of market relevant skills and institutions we show that democracy and good governance complement market skills in transition economies under autocracy and weak governance institutions there is no significant difference in support for revising privatization between high and low skilled respondents as the level of democracy and the quality of governance increases the difference in the level of support for revising privatization between the high and low skilled grows dramatically this finding contributes to our understanding of microfoundations of the politics of economic reform

four myths surrounding u s biofuels the rapid growth of biofuels has elicited claims and predictions concerning the current and future role of these fuels in the u s vehicle fuel portfolio these assertions are at times based on a false set of assumptions concerning the biofuel s market related to the petroleum and agricultural commodities markets and the nonmarket consequences of our automobile driving as an aid in clarifying these market relations the following four biofuel myths are presented 1 biofuels will be adopted because we will soon run out of oil 2 biofuels will solve the major external costs associated with our automobile driving 3 biofuels cause food price inflation the food before fuel issue and 4 biofuels will become a major vehicle fuel

multiple regime spatial price transmission with an application to maize markets in southern africa conventional threshold models of price transmission allow for different speeds of adjustment to equilibria depending on the magnitude of price differentials between markets however these models typically assume only one underlying long run equilibrium price relationship in this article we develop a framework for allowing multiple equilibria and multiple speeds of adjustment with regime separation depending on the magnitude of trade flows between regions rather than the magnitude of price differentials applying this framework to maize price transmission between south africa and zambia shows no transmission during periods of high imports when the government was heavily involved in maize importation but stronger transmission during periods of low imports when the government was not importing copyright 2012 oxford university press