community based tradable permits for localized pollution this paper considers the assignment of tradable permits representing property rights of an environmental good to community members who are harmed by pollution generated by firms these community members can in turn sell permits to polluters according to their personal preferences for a special case with a sole household market transactions between the household and polluters achieve an efficient pollution level however for a group of households the decentralized market solution fails to yield social efficiency because of competitive consumption of the environmental goods we design a revenue sharing mechanism akin to unitization under which market transactions also achieve efficient resource allocation importantly in some cases efficiency can be achieved even when regulators are ignorant of the private valuation of the environmental good

effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

avoiding an ecological regime shift is sound economic policy we extend the shallow lake model by adding the capital stock of an industry a government can mitigate the effects of pollution arising from industrial activities by imposing the requirement to abate emissions within this framework two scenarios are examined in the social optimal benchmark the social planner optimally allocates investment in the competitive equilibrium market forces determine the investment in capital but the government can still abate emissions we find that irreversible environmental regime shifts are avoided in the competitive equilibrium by means of a static level of abatement when it is socially optimal to do so

the accuracy of reports of foreign exchange intervention abstract this paper considers both qualitative and quantitative evidence on the accuracy of press reports of foreign exchange intervention by the federal reserve between january 1985 and december 1989 the evidence shows that the likelihood of intervention being reported given that it actually occurred was 72 per cent and that the likelihood of intervention actually occurring given that it was reported was 88 per cent interventions which were reported were larger on average than those which were not reported and this difference is statistically significant multinomial logit analysis also demonstrates that the likelihood of intervention being reported increased with the size of the intervention jel f31

designing economic instruments for the environment in a decentralized fiscal system designing economic instruments for the environment when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

externalities a market model failure we focus here on a set of conceptual problems related to the accepted theory of externalities we are primarily concerned with difficulties that arise when a theoretical system is extended beyond its logical domain this is the practice in externality theory when the market model assuming independent agents is used to analyze physical interdependency the different kinds of dependencies obscure the standard use of the paretian analysis as the issues of rights and efficiency are mixed up the creation of emissions and the creation of externalities are further not held apart producing flows in the efficiency evaluations due to the interdependencies involved actions of both emitter and victim must be taken into account while searching for efficient policies finally we analyze the interrelationships between what is termed the internal structure of the market model and the annexed sphere of externalities we conclude that the accepted policy prescriptions both assume and demand no interrelationships between these two spheres we find the assumption unrealistic and inconsistent as concerns the basic foundations of the market model there are two main traditions addressing externalities the coasean and the pigovian this paper shows that both are vulnerable to the above critique thus the presumption that externality theory is now settled and coherent is seen to be without theoretical support

pigovian taxes which work in the small number case abstract an appropriately conceived pollution tax can achieve a pareto optimal equilibrium which is 1 stable in the presence of myopia 2 not subject to strategic manipulation even in the small number case and 3 resistant to inefficient cost shifting by the participants when transaction costs are low a considerable amount of confusion in the literature exists because different authors use different tax formulas often implicitly and different assumptions regarding conjectural behavior some of this confusion is cleared up by formally presenting various pigovian tax formulas explicitly considering whether there is cournot or stackleberg behavior and comparing the properties of the various configurations

fiscal federalism approach for controlling global environmental pollution this paper finds that optimal international carbon taxes are country specific and we can decompose a tax on a domestically produced carbon intensive commodity into a revenue tax a tax to control local atmospheric pollution and an international carbon tax it shows that an institutional arrangement for the world economy similar to the fiscal federalism in the federal countries can be useful to internalize the global externalities of atmospheric pollution

married women s economic dependency 1940 1980 a fundamental assumption of stratification theory is that the family is the unit of stratification with no inequality between husband and wife the argument here is that the condition for this spousal equality is the economic dependency of married women and that an examination of dependency is essential for understanding women s societal position this paper examines changes in the extent to which married women were economically dependent on their husbands from 1940 to 1980 the finding is that the situation in 1980 is greatly different from the situation in 1940 when the vast majority of married women were completely dependent on spouses for economic support today completely dependent wives constitute a distinct minority minority women have been less dependent than white women throughout this period married women become less dependent as they grow older owing in part to the social security benefits that accrue to them regardless of work force participation a multivariate analysis pinpoints the so

reformulating taxes for an energy transition abstract an energy transition toward clean energy sources would reduce environmental impacts one proposal to trigger this energy transition uses economic instruments particularly environmental taxes this research studies the potential impact of taxes on electricity on the environment and the economy using a dynamic computable general equilibrium model for spain with energy and environmental extensions we assess their current impact on gdp growth energy use and a set of different pollutant emissions then we propose a reform that would foster an energy transition toward clean energies and assess their economic and environmental impact we find that only taxing the production of electricity by coal oil and natural gas can be better for the environment and economy than taxing all forms of electricity production in a revenue neutral context moreover the production of electricity by biomass though considered renewable is an important source of pollutant emissions and in these terms should have less importance in an energy transition

post plaza intervention in the dem usd exchange rate in this paper whether specific methods of conducting central bank interventions in crease the likelihood of achieving its objectives in analysed daily bundesbank and fed inter vention data covering the entire post plaza period are used to estimate binary choice models over the sample of observations when at least one of the two central banks were intervening the results suggest that central banks can in fact improve the likelihood of success primarily through coordination and that unilateral intervention conducted by the bundesbank appears to have been destabilizing furthermore it is shown that relatively infrequent intervention has a

nonconvexity induced by external costs on production theoretical curio or policy dilemma this paper considers with a degree of scepticism the sweeping policy conclusions that can be found in the theoretical literature concerning nonconvexit ies in the social production set induced by external costs on firms this literature has provided proofs of the possibility that such nonconvexit ies exist but these proofs have readily been interpreted as a basis on which to judge the advisability of policies to control external costs 2 indeed a number of authors have felt able to proceed from specific theoretical examples of the existence of nonconvexity to the opinion that nonconvexity represents a general obstacle to policy one of the ma in themes will be to demonstrate that the theoretical possibility of the existence of a nonconvexity at a m icro level does not imply the existence of a m icro or a fortiori macro nonconvexity in the real world nor does it imply that any nonconvexity that does exist in reality is relevant to policy the intention is not to deny that nonconvexit ies may represent an obstacle to the efficient control of external costs in specific contexts but in order to establish the real world policy relevance of a nonconvexity it is necessary to verify its existence emp irically and to establish that it stands in a particular relationship to the no policy starting point

free riding carbon treaties and trade wars the role of domestic environmental policies this paper uses a calibrated general equilibrium model of north south trade with carbon emissions to explore the strategic open economy implications of price and quantity based instruments for co2 emission reduction we compute non cooperative environmental and trade policy equilibria and nash bargaining outcomes in environmental policies with side payments of cash results show that quotas can lead to higher internalization levels in a non cooperative zero tariff equilibrium in comparison with emission fees if tariffs are also chosen non cooperatively the form of policy instrument used affects equilibrium tariffs with quotas leading to lower trade barriers particularly under a regional carbon treaty

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

sharing the cost of global warming due to meteorological factors the distribution of the environmental damage due to climate change bears no relationship to that of global emissions we argue in favor of osetting this discrepancy and propose a global insurance scheme to be ncanced according to countries respon sibility for climate change because ghg decay very slowly we argue that the actual burden of global warming should be shared on the basis of cumulated emissions raher than sharing the expected costs of actual emissions as in a pigovian taxation scheme we characterize new versions of two well known cost sharing schemes by adapting the responsibility theory of bossert and fleurbaey 1996 to a context with externalities j e l classi cation d62 d63 q54

identifying the efficacy of central bank interventions evidence from australia and japan abstract using a model incorporating the endogenous relationship between exchange rates and intervention we show how a change in central bank policy can be used as an identification assumption estimating this model with simulated gmm for daily data from australia and japan we find that a us 100 million purchase appreciates the australian dollar by 1 3 1 8 but the yen by just 0 2 almost all of the impact of an intervention occurs during the day it is conducted and we confirm that central banks typically lean against the wind

effects of carbon taxes in an economy with prior tax distortions an intertemporal general equilibrium analysis abstract this paper analyzes the costs of carbon taxes in a model that recognizes interactions between this tax and pre existing taxes first we examine the extent to which costs of a u s carbon tax are reduced when its revenues finance cuts in income taxes such use of revenues significantly reduces but does not eliminate the overall policy costs the positive overall costs reflect the carbon tax s focus on intermediate inputs and its relatively narrow base in comparison with income taxes we also examine the sensitivity of the carbon tax s costs to the level of pre existing taxes for any given use of revenues welfare costs rise significantly with pre existing tax rates indicating that models disregarding pre existing taxes may substantially understate the costs of new environmental tax initiatives

taxation of rent seeking activities we consider taxes on firms which engage in rent seeking contests the taxes can be on realized profits or on rent seeking expenditures the prize can be awarded to either the highest bidder or to a firm with probability proportional to its share of total spending on lobbying we find the conditions under which taxes do not reduce rent seeking effort generate tax revenue with no tax burden and cause no reduction in the profits of firms

can coasean bargaining justify pigouvian taxation the fact that according to the celebrated coase theorem rational parties always try to exploit all gains from trade is usually taken as an argument against the necessity of government intervention through pigouvian taxation in order to correct externalities however we show that the hold up problem which occurs if non verifiable investments have external effects and parties cannot be prevented from always exploiting ex post gains from trade through coasean bargaining may be solved by government intervention in this sense the impossibility of ruling out coasean bargaining after investments are sunk may in fact justify pigouvian taxation

central bank authorities beliefs about foreign exchange intervention abstract this paper presents the results of a survey of monetary authorities with respect to foreign exchange intervention the survey offers evidence on new issues that would otherwise be difficult to investigate such as response times non foreign exchange factors in intervention and profitability the survey also reveals new evidence on previously studied issues such as channels of effectiveness respondents disagreed with predominant views on intervention and volatility and common arguments against intervention exchange rate regimes explain central bank beliefs about important aspects of intervention including factors that lead to detection of secret interventions and the potential profitability of intervention

an empirical study of portfolio balance and information effects of order flow on exchange rates abstract we propose a simple structural model of exchange rate determination which is inspired by the analytical framework recently forward by bacchetta and van wincoop 2006 and allows us to disentangle the portfolio balance and information effects of order flow on exchange rates we estimate this model employing an innovative transaction data set that covers all indirect foreign exchange transactions completed in the usd eur market via ebs and reuters between august 2000 and january 2001 our results indicate that the strong contemporaneous correlation between order flow and exchange rates is largely due to portfolio balance effects this result also appears to carry through the four fx intervention events that appear in our sample

externalities in a regulated industry the aircraft noise problem airline noise is an externality in the traditional sense of being a byproduct of normal economic activity it affects the population around airports in single event bundles and cumulatively the transient nature of noise itself is unlike most other externalities as with the others however general improvements in technology and increases in population have made the situation more difficult to tolerate the combination of these things has led to a critical situation for the affected population since it involves its physical and mental health from among the various methods of dealing with externalities we choose the effluent charge scheme it generally allows each firm to incorporate the environmental standard into its marginal operating choices if each firm makes efficient decisions then the cost to society of achieving an environmental standard will be a minimum in this paper there are two modifications of the traditional charge scheme one is that because of the well known difficulties in specifying and estimating social costs we use the estimated direct noise abatement costs of achieving the environmental standard the second is that airlines cannot be necessarily thought of as cost minimizers the charges used for the control of airline noise are generated as shadow prices in a simple linear programming model solution to the problem involves choosing a mix of noise abating options that achieves proposed environmental standards at least cost additional bounds on the problem are limitations on service reductions and rate of return ror oni investment regulation the data sources used for the program were generally fragmentary and incomplete for our purposes after calculating a noise charge for a hypothetical airport we discuss the implementation and ramifications of the charge plan in the regulated airline industry included is a discussion of the link between noise abatement and fuel consumption

the effect of production versus consumption based emission tax under demand uncertainty abstract emission tax is an instrument widely adopted by countries and regions to incentivize emission abatement by emission intensive firms including manufacturers however policies differ in how they allocate emission responsibilities among stakeholders for example the chile emission tax directly penalizes manufacturers for the emissions they generate during their production production based emission tax whereas the sweden electricity emission tax penalizes the consumption of electricity rather than its production consumption based emission tax these two methods have potentially varying implications on manufacturers profits their emission abatement decisions as well as the resulting emission levels especially when demand uncertainty is involved in this paper we investigate the impact of the two distinct methods by studying a profit maximizing manufacturer facing stochastic demand under either production or consumption based emission tax the manufacturer s optimal decisions on its selling price production quantity and emission abatement investment are derived perhaps surprisingly we show that under either tax it is possible for an increase in the emission tax to discourage the manufacturer from investing in emission abatement the impact of tax rate abatement technology efficiency and demand uncertainty on the manufacturer s profitability and abatement decision are also studied interestingly higher demand uncertainty may motivate the manufacturer to invest more in emission abatement under production based emission tax using a numerical example of an electricity power generator we offer further insights into the comparison between the two taxes and find that there exist cases for either tax to dominate the other in terms of both profit and emissions

carbon abatement in the fuel market with biofuels implications for second best policies a carbon tax on fuel would penalize carbon intensive fuels like gasoline and shift fuel consumption to less carbon intensive alternatives like biofuels since biofuel production competes for land with agricultural production a carbon tax could increase land rents and raise food prices this paper analyzes the welfare effect of a carbon tax on fuel consisting of gasoline and biofuel in the presence of a labor tax with and without a biofuel subsidy the market impacts of a carbon tax are also compared with that of a subsidy findings show that if a carbon tax increases biofuel demand the tax interaction effect due to higher fuel prices is exacerbated by higher land rent and food prices and greater erosion of the carbon tax base thus the second best optimal carbon tax for fuel is lower with biofuel in the fuel mix especially if biofuel is subsidized

the economics of renewable energy support abstract this paper uses theoretical and numerical economic equilibrium models to examine optimal renewable energy re support policies for wind and solar resources in the presence of a carbon externality associated with the use of fossil fuels we emphasize three main issues for policy design the heterogeneity of intermittent natural resources budget neutral financing rules and incentives for carbon mitigation we find that differentiated subsidies for wind and solar while being optimal only yield negligible efficiency gains policies with smart financing of re subsidies which either relax budget neutrality or use polluter pays financing in the context of budget neutral schemes can however approximate socially optimal outcomes our analysis suggests that optimally designed re support policies do not necessarily have to be viewed as a costly second best option when carbon pricing is unavailable

production uncertainty and pollution there has been considerable interest in two sector models in which the production of one of the goods is subject to uncertainty the major papers in this area are by rothenberg and smith 13 batra 1 britto 3 diamond 5 mills 12 and harford and park 8 in the latest of these papers harford and park 8 41 build on a model in mills 12 to show that if constant relative risk aversion r which is mathematically analogous to the pratt arrow measure is less than exceeds or equal to unity the direction of efficient resource flow under uncertainty as compared to certainty is away from the risky sector toward the risky sector or unchanged respectively in their model as in mills 12 the preferences of consumers are represented by a community expected utility function in the present two sector model the risky sector is an industry that is adversely affected by air pollution which is a by product of production in the other industry although there is a deterministic relation between the output and emissions of the polluting stable sector the damage caused to the other sector as a result of any given level of emissions depends upon random variables such as mixing height and wind velocity and is therefore stochastic it is not intuitively obvious whether the results of harford and park 8 hold if the uncertainty in the risky sector is the consequence of production in the stable sector in fact there is substantial dissimilarity in the results if the measure of risk aversion r is less than unity the efficient direction of resource flow is generally though not always toward the risky polluted sector if r equals unity the results also differ with resources shifting under uncertainty in the direction of the risky polluted sector only if r exceeds unity are the results always the same in both models with resources flowing toward the risky sector this paper presents the marginal condition such that under uncertainty the optimal combination of outputs includes less of the stable polluting good and more of the risky pollution sensitive good than would be the case if pollution damage were anticipated with certainty if this marginal condition does not hold the risk averse community may prefer either more or less of the polluting good a narrowed interpretation of the marginal condition is then used to predict the special case in which the efficient flow of resources under uncertainty is toward the polluting sector

does the fed beat the foreign exchange market abstract this paper s estimates and tests of fed intervention profits are the first that explicitly adjust for foreign exchange risk premia failure to adjust may grossly affect estimated profits profits appear economically and statistically significant whether risk premia are modeled as time constant or as appreciation s market beta depending on fed intervention the estimates are sensitive to the method of risk adjustment and to the periods used because a key variable cumulative intervention is i 1 test statistics may have non standard distributions a problem affecting past tests this paper s tests account for non standard distributions possible explanations of these profits have mixed empirical support in the literature

externality regulation and the monopoly firm abstract differences in strategic assumptions lead to predictable variations in the conclusions one may draw the formal theory of monopoly power and externalities reflects this variability in assumptions and conclusions this paper contains a unified model of monopoly power marketable product output and externality abatement

foreign exchange intervention when interest rates are zero does the portfolio balance channel matter after all abstract this paper provides an empirical investigation of transmission channels of central bank foreign exchange intervention when interest rates are zero and traditional monetary policy options are constrained the paper develops empirically testable hypotheses regarding the functioning of the intervention transmission channels under study these hypotheses evolve around whether or not the market is aware or unaware of intervention official daily data on interventions in the jpy usd market during the 1999 to 2004 japanese zero interest rate period facilitate the analysis the results of the analysis are consistent with the suggestion that intervention when interest rates are zero works through the portfolio balance channel

do exchange rates respond to day to day changes in monetary policy expectations when no monetary policy changes occur this paper addresses whether exchange rates respond to changes in expectations of future u s monetary policy when no actual monetary policy changes occur we employ data on federal funds futures contracts for extracting a measure of policy expectations control for the surprise element of macroeconomic news and policy developments and analyze more than 12 years of daily exchange rate data our findings show that continuous day to day changes in expectations of future monetary policy are associated in a highly significant and systematic way with day to day changes in exchange rates even when no actual monetary policy changes occur this suggests that monetary policy matters for daily exchange rate determination in more ways than merely through infrequent actual policy changes

steering the climate system using inertia to lower the cost of policy common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially we show that this hotelling tax on carbon emissions is actually inefficient the least cost policy path takes advantage of the climate system s inertia to delay reducing emissions and allow greater cumulative emissions the efficient carbon tax follows an inverse u shaped path and grows more slowly than the hotelling tax economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming overestimating the efficient near term carbon tax and overvaluing technologies that mature sooner

providing adequate economic incentives for bioenergies with co2 capture and geological storage abstract knowing that carbon capture and storage ccs could play an important role in reducing emissions it is important to have a good understanding of this role and the importance of environmental policies to support carbon capture and geological storage from bioenergies beccs to date ccs technologies are not deployed on a commercial level and policy instruments should be used to provide incentives to firms to use these technologies to reduce pollution the aim of this paper is to compare the cost efficiency of several incentive based instruments a fossil fuel tax an emissions tax a cap and trade system and a subsidy on captured emissions needed to spur the adoption of ccs and beccs using a dynamic general equilibrium model this type of model has become the standard for assessing economy wide impacts of environmental and technological policies the study shows that beccs will be deployed only if a specific subsidy per unit of biomass emissions captured with a ccs technology is available we show also that the two most cost efficient instruments for achieving a given emissions reduction target are a specific subsidy that rewards captured emissions and a carbon tax whose revenues are recycled to subsidize beccs

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

emission taxes and optimal refunding schemes abstract we examine how refunding emission taxes to firms dependent on market shares should be designed while refunding is harmful under perfect competition a first best self financing tax tax refunding scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms under pre investment in cleaner technology with short term abatement opportunities a first best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares

marriage market mismatches in japan an alternative view of the relationship between women s education and marriage in japan unlike in most other industrialized societies the decline in marriage rates has been most pronounced among highly educated women theoretical interpretations of this distinctive pattern of change have typically emphasized increasing economic independence for women and reductions in the gains to marriage in this paper the authors develop and evaluate an alternative explanation that emphasizes women s continued dependence on men s economic resources and decline in the relative supply of highly educated men using data from four rounds of the japanese national fertility survey the authors decompose the observed decline in marriage rates into changes in the propensity to marry and changes in the educational composition of the marriage market results indicate that change in the availability ofpotential spouses accounts for one fourth of the decline in marriage among university educated women and explains a substantial proportion of the growing educational differences in marriage the conclusion is that the relatively large decline in marriage among highly educated japanese women likely reflects both increasing economic independence and continued economic dependence on men

pigou and coase a mathematical reconciliation abstract this paper provides a rigorous statement of the coase theorem and establishes a formal equivalence between abstract allocative mechanisms attributed to coase and pigou the model proceeds from output functions that reduce to production functions in special cases thereby capturing effects that are obscured by conventional production and cost functions the model also emphasizes fundamental differences in the characteristics of inputs particularly land that are implied in the construction of externality stories finally the model embodies a clear distinction between local e g nuisance and global e g pollution externalities the coase theorem as stated is valid only in the former case

refunded emission payments theory distribution of costs and swedish experience of nox abatement in this paper we discuss the effect of refunding environmental charges taxes are often resisted by polluters because they imply both abatement and tax costs when charges are refunded the incentives for abatement are essentially the same as for a tax as long as there are many producers the incidence and distribution of costs is however different lower net tax payments reduce resistance from the polluters and make refunded emissions payments politically easier to implement at a sufficiently high charge level to have significant abatement effects we describe and examine the refunded emissions payment scheme as a policy instrument and compare it with taxes and permits with regard to allocative properties distribution of costs property rights and consequently the politics of implementation as an empirical example the swedish charge on nitrogen oxides is analyzed

a theoretical approach to sterilized foreign exchange intervention in this paper we survey prominent theories that have shaped the literature on sterilized foreign exchange interventions we identify three main strands of literature 1 that which deems interventions futile 2 that which requires some market friction i e limited arbitrage in order for interventions to be effective and 3 that which advocates the use of interventions as long as they convey signals on the stance of future monetary policy we contribute to the literature in three important ways first by reviewing new theoretical models that have surfaced within the last decade second by further penetrating into the theory of interventions in order to analyze the key features that make each model distinct and third by only focusing on sterilized operations which allows us to sidestep the effects induced by changes in the stock of money supply in addition the models that we present comprise both a macro and microstructure approach so as to provide a comprehensive view of the theory behind exchange rate intervention

the effect of emission taxes and abatement subsidies on market structure comment abstract conrad and wang 1993 international journal of industrial organization 11 499 518 determine that a tax on emissions decreases the total output of a polluting industry but if demand is sufficiently inelastic can increase the number of firms in that industry this follows from their proposition that the tax reduces the scale of the polluting firm in contrast the scale of the polluting firm in the present model increases when there are increasing returns to scale in abatement whereas conrad and wang extend their results to cases of monopolistic competition the present paper is confined to perfect competition but extends the analysis to the pollution damaged industry

banning the bulb institutional evolution and the phased ban of incandescent lighting in germany much academic attention has been directed at analysing energy efficiency investments through the lens of behavioural failure these studies have challenged the neoclassical framing of regulation which emphasises the efficiency benefits of price based policy underpinned by the notion of rational individual self mastery the increasing use of a regulatory ban on electric lamps in many countries is one of the most recent and high profile flash points in this dialectic of freedom versus the state in the public policy discourse this paper interrogates this debate through a study of electric lamp diffusion in germany it is argued that neoclassical theory and equilibrium analysis is inadequate as a tool for policy analysis as it takes the formation of market institutions such as existing regulations for granted further still it may be prone to encourage idealistic debates around such grand narratives which may in practice simply serve those who benefit most from the status quo instead we argue for an evolutionary approach which we suggest offers a more pragmatic framing tool which focuses on the formation of market institutions in light of shifting social norms and political goals in our case progress towards energy efficiency and environmental goals

coasean bargaining in the presence of pigouvian taxation coasean arguments against the pigouvian perspective are well established a central tenet in this criticism argues that a pigouvian tax may be a source of inefficiency if parties were to bargain in the presence of a pigouvian tax allocative inefficiencies would occur the so called buchanan stubblebine turvey theorem by analyzing a coasean environment where the appropriation of property rights is costly we show coasean bargaining in the presence of a pre existing pigouvian tax may be superior this has implications for policy where dual regulatory environments exist such as regulation at the state and federal level as well as environmental liability and litigation

elements of an economic justification for municipal zoning abstract the possibility that externalities will produce a nonconvexity in the social production set limits the application of both the coase and pigou solutions for achieving an optimal allocation of land resources conditions on relative land prices are derived which indicate that external effects are strong enough to introduce a nonconvexity into the production set these conditions were not fulfilled in a sample of single family and multifamily dwellings in foster city california this does not preclude the possibility that they are fulfilled in cases of more severe external effects

on the effects of sterilized intervention an analysis of weekly data abstract as the recent empirical studies surveyed here illustrate it is very difficult to demonstrate that the exchange rate risk premium depends through a portfolio balance channel on the currency composition of outside assets the existence of a portfolio balance effect is a necessary condition for sterilized intervention to be a genuinely independent tool of monetary policy this paper studies u s canadian data and attempts to improve on earlier studies by using higher frequency weekly data and by implementing an appropriate instrumental variables technique 2s2sls however we still fail to detect evidence of a portfolio balance effect

green fiscal reform in sweden econometric assessment of the carbon and energy taxation scheme abstract empirical econometric assessment of environmental policy effectiveness is capable of demonstrating which tools have been helping to achieve the desired effect of reducing harmful emissions or stimulating technological change this paper employs an econometric approach to analyse the effectiveness of energy and carbon taxes in sweden the country which was one of the first to introduce a co2 tax as well as an extensive environmental tax reform the results showed that taken in isolation a co2 tax was not sufficient to result in a significant change in co2 emissions in sweden except in the case of petrol on the other hand energy taxes for coal and lpg have been statistically significantly effective it was also clear that a technological innovation in the form of development of nuclear and hydro energy played a significant role in reducing co2 emissions and higher oil price was also important in reducing national co2 emissions in sweden at the same time renewable energy excluding hydro a more recent innovation has not been a statistically significant driver of co2 emissions reduction perhaps due to the fact that wind and solar play a much lesser role in sweden at the moment the net electricity imports from other countries have contributed positively towards reducing co2 emissions in sweden while the use of coal and biomass tended to increase co2 emissions compared to the ex ante modelling results from the literature review the findings confirm the role of environmental taxation as a viable policy instrument effective in reducing co2 emissions in sweden although point towards a more nuanced picture the paper raises important policy questions focused on the effectiveness of environmental policy tools

fed intervention dollar appreciation and systematic risk abstract in a four factor asset pricing model estimated on daily data fed intervention significantly affects betas of surprises in the market return expected inflation rate yield curve and corporate bond risk premium fed foreign currency sales cause economically and statistically significant increases in the systematic risk premium in appreciation and thus in the dollar s expected appreciation rate the direction the fed desires and consistent with the signaling but not the portfolio balance channel intervention s effects on actual appreciation are less reliable they depend on unpredictable risk factor realizations even successful intervention to strengthen the dollar may be costly by increasing the dollar s systematic risk intervention reduces the attractiveness of u s relative to foreign investments further uncertainty about future fed interventions may induce resource misallocation ceteris paribus investors find it harder to estimate risk adjusted discount rates and forecast the home currency value of cash flows

the impact of tax reform on new car purchases in ireland we examine the impact of recent tax reforms in ireland on private car transport and its greenhouse gas emissions a carbon tax was introduced on fuels and purchase vehicle registration and ownership motor taxes were switched from engine size to potential emissions we use a demographic model of the car stock by age size and fuel and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes the model shows a dramatic shift from petrol to diesel cars particularly for large engines the same pattern is observed in the latest data on car sales this has a substantial impact on tax revenue as car owners shift to the lower tax rates the tax burden has shifted from car ownership to car use and that the overall tax burden on private car transport falls as diesel engines are more fuel efficient than petrol engines carbon dioxide emissions fall modestly or if we consider the rebound effect of travel costs on mileage minimally from the perspective of the revenue the costs per tonne of carbon dioxide avoided are very high

the inefficiency of private adaptation to pollution in the presence of endogenous market structure the paper considers an industry where production costs rise due to pollution but where this effect can be partially off set by investing in adaptation as a private good the focus is not on external effects but industries where economies of scale are introduced from adapting to pollution the structure of the resulting oligopolistic market is endogenous since the level of adaptation is chosen by the firms the analysis of externalities usually disregards defensive or adaptation measures with a few exceptions that point to considerable complications the present debate on adaptation to climate change shows the importance of understanding defensive measures i show that the market failure caused by economies of scale leads to production costs above the social optimum i e to under adapation when pollution increases adaptation only increases if demand is price inelastic otherwise welfare loss from market failure decreases with pollution the total welfare loss is only convex if demand is price inelastic and the influence of pollution on production costs is stronger than the influence of adaptation concave welfare loss has crucial implications for abatement policies

is intervention a signal of future monetary policy evidence from the federal funds futures market sterilized foreign exchange market intervelltioll may affect the exchange rate if it signals future monetary policy actions sigllaling will be effective if the celltral bank backs up interventioll with predictable changes in the stance of molletary policy and in turn affects currellt expectations we investigate whether illtervention operations in the united states are lelated to changes in expectatiolls over the stance of future monetary policy whele expectations are proxied by ifederal funds futures rates this relatively new futures market instrument has proved to be all efficiellt and ullbiased predictor of the future spot federal funds rate estimates obtained from a garch time series model over the l 989 93 period using daily data do not suppol1 the signalillg hypothesis dollar suppolt intervention is not related to a rise in expected future short term interest ates monetary tightening however intervention appears to significantly increase the conditional variance of federal funds futures rates suggesting that it adds considerable noise to the market alld possibly increasing the degree of uncertainty ovet the future course of molletary policy the effect of foreign exchange market intervention on exchange rates is a subject of continuing controversy few doubt that unsterilized intervention may affect nominal exchange rates by changing interest rates and monetary aggregates however the effect of sterilized intervention on exchange rates is less clear the portfolio balance channel through which sterilized intervention changes the currency denomination of relative asset supplies and thereby the exchange risk premium if assets are imperfect substitutes has received little empirical support for example rogoff 1984 humpage 1991 edison 1993 sweelaey 1995

cap and trade taxes and distributional conflict enacting market based environmental regulation such as emissions taxes and cap and trade programs often create rents that are contested by agents in this paper we create a framework that compares social welfare from alternative market based environmental policy instruments under the presence of rent seeking we show that contrary to the commonly held view non revenue raising instruments nrris are in many cases preferable over revenue raising instruments rris we find that the choice of instrument depends on the size of a potential revenue recycling effect and the level of preassigned rents

are forign exchange intervention and monetary policy related and does it really matter the relationship between foreign exchange intervention and monetary policy underlies the question of whether sterilized interventions can affect the exchange rate in this article the author examines this relationship using data on u s foreign exchange interventions from 1985 to 1990 recently made publicly available she examines whether interventions could be viewed as signaling changes in future monetary policy variables the author also considers whether changes in monetary policy may induce interventions in an effort by central bankers to lean against the wind of exchange rate movements interestingly she finds evidence both that interventions help predict monetary policy variables and that monetary variables help predict interventions copyright 1995 by university of chicago press

till death do us part or i get my pension wives pension holding and marital dissolution in the united states wives financial independence gained from their pension may increase the risk of marital dissolution especially when wives are approaching retirement age the older wives independence hypothesis applying single and simultaneous equations probit models to data from the panel study of income dynamics we investigate the effect of wives pension holding in 1984 on the risk of subsequent marital dissolution results from the single equation model appear to support the older wives independence hypothesis however results from the simultaneous equations model suggest that interpreting the single equation results as a sign of older wives economic independence may be misleading

controlling the monopolistic polluter nihilism or eclecticism abstract this paper is concerned with the consequences of pollution control when the polluter is a monopolist who can choose between abating pollution by reducing output and by adopting a less polluting technology it is suggested that the risk of welfare losses resulting from control policy is lower when technology is flexible than when it is rigid nevertheless some risk does remain so the paper concludes with a discussion of the possible use of selective control instruments to keep the risk to a minimum

a note on externalities and taxation the purpose of this paper is to explore the distributional aspects of a tax that is imposed in order to correct the detrimental effects of a production externality in the framework of a two sector general equilibrium model we show that harberger s classic results of tax incidence may change considerably because of the presence of the externality we also show that the tax is effective in reducing the detrimental effect of the externality although the return of the taxed factor may rise relative to the return of the untaxed factors

restricted coasean bargaining we investigate the efficiency of coasean bargaining when restrictions are placed on the set of feasible bargaining outcomes when property rights are costly to defend appropriate we find bargaining restrictions may be pareto superior to unconstrainedvoluntary exchange under cost uncertainty over the harmful activity we show an efficient configuration of restrictions must balance the potential reduction in appropriation costs with the possibility of allocatively inefficient bargaining restrictions for an all pay auction we find conditions where precluding bargaining is always ex ante preferable to unrestricted bargaining for cases where the restrictions are contested we show conditions for the continuing existence of welfare improvements

peer pressure experimental evidence from restroom behavior we provide experimental evidence on the effect of peer pressure on individual behavior specifically we study the effect of being exposed to an observer in a public restroom on handwashing and urinal flushing behavior our estimates show that being exposed to an observer increases the probability of handwashing by 13 percentage points and the probability of urinal flushing by 15 percentage points given that handwashing and urinal flushing have social benefits that exceed individual benefits our findings provide support for peer pressure as an additional way of addressing the social suboptimality arising from externalities jel c91 c93

fundamental nonconvexities in arrovian markets and a coasian solution to the problem of externalities abstract d starrett j econ theory 4 1972 180 199 argues that the presence of externalities implies fundamental nonconvexities which cause arrow markets to fail while this is true we argue this failure is due to the structure of the arrovian markets that starrett uses and not to the presence of externalities as such we provide an extension of a general equilibrium public goods model in which property rights are explicitly treated nonconvexities are not fundamental in this framework we define a notion of coasian equilibrium for this economy and show first and second welfare theorems in this context the first welfare theorem is a type of coase theorem journal of economic literature classification numbers d62 h41