the role of capital and labour in shaping the environmental effects of fiscal stimulus abstract although the macroeconomic consequences of short term fiscal stimulation packages have been thoroughly analysed in the literature still relatively little is known about their environmental effects we discuss an important channel through which short run expansionary fiscal policy influences greenhouse gas emissions we show that fiscal policy exerts its impact not only by increasing general level of economic activity but also by changing the composition of factors of production capital and labour using the dynamic stochastic general equilibrium model of economy we demonstrate that fiscal expansion results in a shift from capital intensive to more labour intensive technologies our panel study proves that the latter tends to be associated with lower emissions of greenhouse gases per unit of production hence our analysis demonstrates that an extensive use of fiscal stimulus during recessions can significantly reduce the environmental burden of the additional units of gdp

calculating and using second order accurate solutions of discrete time dynamic equilibrium models we describe an algorithm for calculating second order approximations to the solutions to nonlinear stochastic rational expectations models the paper also explains methods for using such an approximate solution to generate forecasts simulated time paths for the model and evaluations of expected welfare differences across different versions of a model the paper gives conditions for local validity of the approximation that allow for disturbance distributions with unbounded support and allow for non stationarity of the solution process

uncertainty and optimal taxation in defense of commodity taxes abstract this paper re examines the theory of optimal commodity taxation in the presence of a linear income tax under wage uncertainty there are two categories of goods the consumption levels in one group are committed to before the resolution of uncertainty and those of the other after the paper i characterizes the structure of the optimal commodity taxes in view of the insurance they provide against random wage movements ii proves that optimal taxation requires a mix of differential commodity taxes and a uniform lump sum tax and iii demonstrates that the post uncertainty goods should face a positive tax rate which is higher than the tax rate on the pre committed goods

demand information and competition why do food prices fall at seasonal demand peaks prices for seasonal food products fall at demand peaks price declines are not driven by falling agricultural input prices indeed farm to retail margins narrow sharply i use electronic scanner data from a sample of us supermarkets to show that seasonal price declines are closely linked to market concentration and are much larger in markets with several rivals than where a single brand dominates seasonal demand increases reduce the effective costs of informative advertising and increased informative advertising by retailers and manufacturers in turn may allow for increased market information and greater price sensitivity on the part of buyers

the response of co2 emissions to the business cycle new evidence for the u s abstract this paper investigates the response of co 2 emissions to the business cycle for the u s on a monthly basis between 1973 and 2015 using a rolling regression approach we find that the emissions elasticity with respect to gdp is not constant over time irrespective which filtering method such as the hodrick prescott the baxter king the christiano fitzgerald or the butterworth filter has been employed in order to check whether or not emissions react differently during normal and recession times next we employ a markov switching approach we find first that emissions are significantly more elastic during recessions than in normal times second depending on the filtering method we also obtain parameter estimates of the emissions elasticity above one in recession times and below one in normal times the results are also robust against including monetary policy also in times of the zero lower bound thus environmental policy instruments not turning out to be sub optimal should account for this asymmetric response of emissions due to changes in gdp

are macroeconomic policies better in curbing air pollution than environmental policies a dsge approach with carbon dependent fiscal and monetary policies abstract the environmental impacts of macroeconomic policies and their interaction with climate policies are under researched in the existing literature this paper compares the effectiveness of standard macroeconomic tools fiscal and monetary policies with carbon taxation in curbing air pollution by using an environmental dynamic stochastic general equilibrium e dsge model we show how government expenditure interest rate and carbon tax rate should vary over time in order to stabilize carbon emission levels we find that i while all the aforementioned policies could stabilize carbon emissions their underlying mechanisms are different fiscal monetary and carbon tax policies uniquely and respectively lead to a reduction in abatement effort income tax revenue and general price level ii with economic expansions driven by total factor productivity tfp shocks fiscal policy is the only policy that could maintain the emission levels and simultaneously improve household welfare in term of consumption and labor iii regarding the interaction between carbon and macroeconomic policies carbon taxation should complement monetary policy while it should not respond to fiscal policy

emissions cap or emissions tax a multi sector business cycle analysis abstract we develop a multi sector business cycle model to analyze stochastic implications of reducing co 2 emissions with carbon permits or with carbon taxes in the presence of multiple sources of macroeconomic uncertainty the model is calibrated to reflect the u s experience as in previous studies using a single sector version of our model we find that the cap regime generates lower volatility of real variables than the tax regime but the latter may be preferable from the welfare perspective still our multi sector analysis points to the importance of the origin of the shocks in the ranking of the two instruments and to the desirability of going beyond a single sector analysis in evaluating their merits we find no significant difference between the cap and the tax regimes when shocks come from non energy sectors in contrast the cap has lower volatility but higher welfare costs than the tax for the shocks to energy production

countercyclical pricing a consumer heterogeneity explanation we show that a seasonal good could be priced countercyclically due to the heterogeneous seasonal shifts in consumer valuations we provide empirical support for our explanation based on two product categories canned soup and tuna studied in the literature

price changes in the euro area and the united states some facts from individual consumer price data prices of goods and services do not adjust immediately in response to changing demand and supply conditions this paper characterizes the average frequency and size of price changes in the euro area and its member countries investigates the determinants of the probability of price changes and compares the evidence for the euro area with available u s results the facts documented in this paper are based on evidence from individual price data recorded at the store level in all euro area countries except ireland and greece that is in datasets covering austria belgium finland france germany italy luxembourg the netherlands portugal and spain which together account for around 97 percent of euro area gdp the data used are the monthly price records underlying the computation of national consumer price indices and harmonized consumer price indices these data cover a large number of products selected on the basis of extensive household budget surveys

on the impacts of anticipated carbon policies a dynamic stochastic general equilibrium model approach abstract this paper examines the environmental and welfare impacts of pre announced carbon policies using an environmental dynamic stochastic general equilibrium e dsge model we find that pre announcing a rise in the carbon tax rate could reduce co2 emissions but would decrease output and investment during the interim period between the announcement and implementation dates pre announcing an increase in the carbon tax rate from 1 to 5 1 and 3 years in advance could reduce the quarterly aggregate consumption by 0 081 and 0 114 respectively compared to carbon taxation pre announcing a tightening carbon intensity target could reduce co2 emissions even more while pre announcing a tightening carbon capacity target under a cap and trade regime has no such co2 reduction effect in a welfare analysis we show that an unanticipated rise in the carbon tax rate is more preferable to the 1 year 2 year and 3 year ahead announcements the intensity regime produces a greater welfare than the cap and trade regime which is in turn better than the carbon taxation regime

optimal wage taxation when human capital and employment are endogenous this paper studies how optimal wage tax conclusions from the classic two period life cycle model of human capital accumulation are affected by endogenizing the number of taxpaying workers in the absence of a corrective policy young individuals underinvest in human capital from a social perspective because tax premiums for transfers to nonworkers are not actuarially adjusted downward for human capital attainment a combination of wage taxes and wage subsidies can restore proper price signals numerical simulations suggest that even modest employment elasticities can be sufficient to substantially impact the magnitudes and even the signs of optimal wage tax rates jel h21 h3 j24

human capital accumulation and the optimal level of unemployment insurance provision previous studies of optimal unemployment insurance ui design ignore the impact of ui on human capital investment decisions we show that fully experience rated ui increases investment in human capital when future employment opportunities are not known with certainty in the presence of wage taxation the optimal level of ui trades off full insurance and the impact through human capital of ui on the wage tax base this trade off in turn depends on the extent to which human capital accumulation reallocates labor between market and untaxed nonmarket activities taxation of ui benefits increases the optimal level of ui provision

on environmental kuznets curves arising from stock externalities abstract we develop a stock externality model in an optimal growth framework and examine the relationship between economic growth and the environment we find that as incomes rise over the growth path both the marginal benefits of pollution control and the marginal costs of pollution control rise if at a given income level the marginal benefits rise more than the marginal costs the emissions income relationship has a negative slope at that income level and vice versa we are thus able to generate examples of emissions income relationships of varying shapes by varying pollution specific parameters which determine marginal costs and benefits such as the convexity of the cost function the rate of decay of the stock of pollution and the share of consumption in the composite good an inverted u shape relationship an environmental kuznets curve requires only minimal assumptions a convex cost function and that environmental quality is a normal good imply an inverted u shape relationship for an open set of parameters we also examine how environment income relationship varies according to what measure is used for the environment emissions stock of pollution or emissions control

optimal intensity targets for greenhouse gas emissions trading under uncertainty uncertainty is an obstacle for commitments under cap and trade schemes for emission permits we assess how well intensity targets where each country s permit allocation is indexed to its future realized gdp can cope with uncertainties in international greenhouse emissions trading we present some empirical foundations for intensity targets and derive a simple rule for the optimal degree of indexation to gdp using an 18 region simulation model of a cooperative global cap and trade treaty in 2020 under multiple uncertainties and endogenous commitments we show that optimal intensity targets could reduce the cost of uncertainty and achieve significant increases in global abatement the optimal degree of indexation to gdp would vary greatly between countries including super indexation in some advanced countries and partial indexation for most developing countries standard intensity targets with one to one indexation would also improve the overall outcome but to a lesser degree and not in all individual cases although target indexation is no magic wand for a future global climate treaty gains from reduced cost uncertainty and the potential for more stringent environmental commitments could justify the increased complexity and other potential downsides of intensity targets

empirical generalizations about market evolution and stationarity we present empirical generalizations about conditions under which marketing variables evolve or remain stationary we first define evolution statistically and make the case why it is an important concept for increasing our understanding of long run marketing effectiveness we then briefly review ways in which evolution can be tested empirically from readily available data we present a database of over 400 prior analyses and catalog the relative incidence of stationarity versus evolution in market performance and marketing spending we find that evolution is the dominant characteristic for sales and marketing mix spending but that stationarity is the dominant characteristic for market share thus we find strong support for the conjecture that many markets are in a long run equilibrium where the relative position of the players is only temporarily disturbed by their respective marketing activities we assess the impact of a number of covariates on the likelihood of finding stationarity evolution in sales

riding the waves revealing the impact of intrayear category demand cycles on advertising and pricing effectiveness abstractgoing beyond traditional seasonality this research introduces the concept of the intrayear category demand cycle this phenomenon reflects demand cycles most consumer packaged goods categories experience throughout the year with periods of higher demand following periods of lower demand the author argues that acknowledging the existence of these cycles and understanding their impact on both advertising and pricing effectiveness and practice is critical for marketers specifically the author demonstrates how both advertising and price elasticities and observed advertising and prices evolve along these cycles for a unique set of 252 brands ranging from high advertising high priced premium mass brands to low advertising low priced value niche brands in 61 consumer packaged goods categories overall both advertising efectiveness and observed advertising are found to be stronger at demand peaks surprisingly consumer reactions to price decreases are weaker at demand peaks whereas reactions

optimal emissions tax rates under habit formation and social comparisons abstract the existing climate models ignore the behavioral anomalies of households and conclude that the optimal environmental tax rate should comove with business cycles however this assumption has received extensive criticism recently to this end this paper studies the optimal emissions tax rate when households are bounded rational in particular we calculate the optimal climate policy in a dynamic stochastic general equilibrium dsge model that features households with habit formation internal habits and social comparisons external habits compared to the benchmark model without consumption externality the social comparisons model amplifies consumption volatility but produces a similar response of pollutant emissions in the presence of the three types of economic shocks considered in contrast the habit formation model decreases the volatility of both consumption and pollutant emissions in contrast to the previous result that the optimal emissions tax rate should be procyclical we find that the social comparisons model largely mitigates the procyclicality of optimal emissions tax rates and the optimal emissions tax rates under the habit formation model remain constant in response to all the economic shocks considered

environmental policy and macroeconomic dynamics in a new keynesian model this paper studies the dynamic behavior of an economy under different environmental policy regimes in a new keynesian model with nominal and real uncertainty we find the following results i an emissions cap policy is likely to dampen macroeconomic fluctuations ii staggered price adjustment alters significantly the performance of the environmental policy regime put in place iii the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction

ghg emissions control and monetary policy this paper examines the optimal environmental and monetary policy mix in a new keynesian model embodying pollutant emissions abatement technology and environmental damage the optimal response of the economy to productivity shocks is shown to depend crucially on the instruments policy makers have available the intensity of the distortions they have to address i e imperfect competition costly price adjustment and negative environmental externality and the way they interact

the effect of taxation on human capital this study finds a significant negative effect of proportional income taxation on human capital of the few earlier studies to address this issue most suggested a negligible effect of taxation on investment in human capital this earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

environmental expenditure spillovers evidence from an estimated multi area dsge model abstract this article constructs and estimates a multi area dynamic stochastic general equilibrium model with a spatial simultaneous equation taking beijing tianjin hebei region in china as an example we explain the dynamic effect of environmental expenditure shock and its spillover effects environmental expenditure has an obvious crowding out effect on consumption and investment in local area but has some positive influences on the economy of external regions over the business cycle environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters however environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area one interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area

the periodicity of pricing abstract retail pricing data combine multiple decisions e g regular pricing and discounting that are possibly made by multiple decision makers e g retailers and manufacturers for example temporary price reductions high frequency price changes can be used to price discriminate in the short run whereas regular price adjustments low frequency price changes might reflect changes in long term costs or demand time disaggregation cannot disentangle these factors because frequency aggregation exists even when data are analyzed at the lowest possible level of temporal aggregation because little is known about the nature of pricing interactions across various planning cycles this article develops several empirical generalizations about the role of periodicity in pricing using week store stockkeeping unit level price data in 35 grocery categories the authors find that 1 cross brand correlation in prices occurs at multiple planning horizons and the planning horizon of the predominant interacti

predicting advertising pulsing policies in an oligopoly a model and empirical test given that firms pulse in advertising should firms pulse in or out of phase it is shown that out of phase maximizes the oligopoly profits and is also the markov perfect equilibrium of the infinite horizon game the basic intuition for this result comes from the following fact it is more profitable to increase consideration when the competitor s consideration is lower evidence from several product categories seems to support this theoretical result

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

human capital investment and labor supply under uncertainty we extend the theory of human capital investment under uncertainty by incorporating post investment labor supply as a choice variable we show that human capital investment decreases in response to an increase in risk about its return if such investment is an inferior activity and preferences exhibit decreasing risk aversion however if investment is normal then the effect of an increase in risk is indeterminate these results highlight the importance of obtaining empirical evidence on the income elasticity of demand for human capital investment for arriving at refutable hypotheses about the effect of risk

labor income taxation and human capital accumulation abstract this paper provides alternative analytical results concerning the effect of labor income taxation on human capital accumulation with the tax revenues being consumed by the government and savings being negatively related to the labor tax rate an increase in the labor income tax rate reduces the incentive for human capital accumulation and thus decreases human capital with tax revenues being consumed by government and savings being positively related to the labor tax rate an increase in the tax rate increases the incentive for human capital accumulation and increases human capital with the tax revenues being used to compensate the individuals who pay the taxes an increase in the tax rate has no effect on human capital

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

sticky prices in the euro area a summary of new micro evidence this paper summarises the vast evidence on micro price setting recently obtained for euro area countries we consider studies with micro data on consumer and producer prices as well as survey information the main findings are 1 prices in the euro area are sticky and stickier than in the us 2 downward price rigidity is only slightly more marked than upward price rigidity 3 heterogeneity and asymmetries are observed in price setting and 4 the relevance of theories that explain price stickiness such as implicit or explicit contracts marginal costs and coordination failure is confirmed whereas menu costs pricing thresholds and costly information explanations are judged much less relevant by firms jel c25 d40 e31

examining the economic and environmental effects of emissions policies in china a bayesian dsge model abstract the purpose of this study is to build an energy emissions economy dynamic stochastic general equilibrium model to examine the economic and environmental effects of the carbon tax and carbon intensity target the model is calibrated to china s economy the results show that both the carbon tax and carbon intensity target policies have a negative effect on china s economy and environment however the carbon tax exerts more negative effects on the economy and environment than the carbon intensity target moreover the carbon tax shock lasts shorter than the carbon intensity target shock the findings additionally indicate that the effects of the increase in the productivity of energy sectors are greater than those of the increase in the productivity of other sectors thanks to the low carbon technology shock china s carbon dioxide emissions will reduce and output will increase taken together this study highlights the key policy implications associated with the results

an alternative approach to simulating var models abstract this paper proposes a simple approach to the problem of handling contemporaneous correlation of the error terms when simulating var models the approach is illustrated with an example using an estimated var model of the new zealand economy

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

labor market integration investment in risky human capital and fiscal competition this paper presents a general equilibrium model where human capital investment increases specialization and exposes skilled workers to region specific earnings risk interjurisdictional mobility of skilled labor mitigates these risks state contingent migration of skilled labor also improves efficiency with perfect capital markets labor market integration raises welfare and reduces ex post earnings inequality if instead human capital investment can only be financed through local taxes labor market integration leads to interjurisdictional fiscal competition shifting the burden of taxation to low skilled immobile workers decentralized public provision of human capital investment creates earnings inequalities and is inefficient

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

in work benefits in the united states the earned income tax credit the earned income tax credit eitc is or soon will be the largest cash or nearcash benefit provided to low income households in the united states the eitc is a credit on the federal income tax available to working poor families with children in i994 the credit equals 26 3 of earned income wages salaries self employment income and farm income for taxpayers with one child up to an earned income of 7 750 hence the maximum benefit is 2 038 for families with one child because benefits increase with earned income up to a certain point the eitc seems to encourage work and therefore is a popular antipoverty programme taxpayers with one child and incomes above 7 750 but below i i ooo receive the maximum benefit taxpayers with one child whose incomes exceed i i ooo are in the phase out range of the credit their 2 038 credit is reduced by i5 98 cents for every dollar of income earned over and above i i ooo taxpayers with two or more children are entitled to a slightly larger credit 2 528 or 30o0 0 of 8 425 which is phased out at a i 7p68 0 rate a small credit of at most 306 was available to childless taxpayers betnween the ages of 25 and 64 for the first time in i 994 unlike most credits and deductions in the federal individual income tax system the eitc is refundable that is if the amount of the credit exceeds what the taxpayer owes he or she receives a payment from the us treasury for the difference the eitc was adopted in i975 and was originally promoted as a way to relieve the burden of the social security payroll tax on low wage working parents 2 the original eitc equaled io 0 of earnings up to a maximum credit of 400 for taxpayers with children and was phased out at a rate of io cents per dollar of earnings or adjusted gross income whichever was higher for incomes between 4 ooo and 8 ooo the eitc has been increased many times since i975 though the largest changes occurred in i990 and i993 in i996 when the i993 legislative changes are fully phased in the credit rate will be 40 0 of earnings for families with two or more children and 34 0 for families

price and advertising effectiveness over the business cycle abstract firms are under increasing pressure to justify their marketing expenditures this evolution toward greater accountability is reinforced in harsh economic times when marketing budgets are among the first to be reconsidered to make such decisions managers must know whether and to what extent marketing s effectiveness varies with the economic tide however surprisingly little research addresses this issue therefore the authors conduct a systematic investigation of the business cycle s impact on the effectiveness of two important marketing instruments price and advertising to do so they estimate time varying short and long term advertising and price elasticities for 150 brands across 36 consumer packaged goods categories using 18 years of monthly u k data from 1993 to 2010 the long term price sensitivity tends to decrease during economic expansions whereas long term advertising elasticities increase during contractions the long term own and cross price elasticities increase moreover

business cycles and emission trading with banking abstract we propose an emission cap adjustment policy for an emission trading system ets that allows banking of allowances for later use and faces business cycle uncertainty the forward looking banking decisions cause a commitment problem with respect to regulator s next period allowance supply decision we tackle the commitment problem by focusing on the markov equilibrium of the policy the equilibrium policy has a surprisingly simple structure combining features from both price and quantity instruments the regulator s ability to choose a new cap for each period does not render banking obsolete but on the contrary makes banking an integral part of the equilibrium policy using data from the eu ets to calibrate the model we solve the markov equilibrium policy for the case of carbon emissions regulation and compare markov policies with and without the possibility to bank allowances a counterfactual analysis of the eu ets during the period of 2009 2013 shows that the optimal markov policy would have led to a steadier allowance price level and a stricter emission regulation than what was actually observed in the eu ets

low wage employment subsidies versus the welfare state this paper is a brief for the introduction of a subsidy to any qualified firm for its use of low wage employees as a means to reduce the unemployment and raise the pay of disadvantaged workers there would be a case for such a wage subsidy in all the advanced market economies and certainly the american one regardless of recent trends the case has grown stronger however with the worsening of the relative wages and especially the unemployment rates of low age workers the globalization of investment and the bias of technical progress are the causes most often suggested i would add the growth of the welfare system the public entitlements to hospitalization to retirement and disability insurance and to the benefits labeled welfare in the narrow sense since this factor tends to be overlooked i devote section i to it section ii proceeds to the case for a low wage employment subsidy it will be clear that the beneficial effects of the subsidy on disadvantaged workers are the mirror opposite of the harmful side effects of the welfare system side effects that the subsidy would counteract i side effects of the welfare system

emissions targets and the real business cycle intensity targets versus caps or taxes for reducing greenhouse gas emissions intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps for the same expected emissions however the economic responses to unexpected productivity shocks differ using a real business cycle model we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint an emissions tax leads to the same expected outcomes as a cap but with greater volatility certainty equivalent intensity targets maintain higher levels of labor capital and output than other policies with lower expected costs and no more volatility than with no policy

the impact of reference price effects on the profitability of price promotions this paper investigates the impact of reference price effects on retailer price promotions and describes why these effects can make promoting profitable first we analyze the profit impact of reference price effects generated by a single period of promotion the promotion can increase profit if the gain that these effects create in the promotion period outweighs the loss they create in future periods we then describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effects over a time horizon examples of such strategies are presented for a retailer selling a national brand of peanut butter we obtain insights into how promotion prices timing and profits are affected by changes in costs interest rates consumers reactions to reference price effects and error in estimates used in the model the retailer s optimal reaction to a trade deal is also examined this strategy involves a phase of increased promotion activity sandwiched between phases of decreased activity we explain these results using the effects described in the single period model

optimal wage and income taxation with wage uncertainty optimal taxation in a two period model with human capital investment and second period wage uncertainty is analyzed a proportional tax on wages dominates lump sum taxation and the socially optimal level of human capital exceeds that which individuals choose a tax on interest income may raise welfare by encouraging investment in human capital the interest income tax reduces the difference between returns to physical and human capital from individuals inability to reduce human capital risk through diversification a positive interest income tax rate may therefore be optimal even with an optimal wage tax by encouraging m ore investment in human capital copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

spite and development in a wide variety of settings spiteful preferences would constitute an obstacle to cooperation trade and thus economic development this paper shows that spiteful preferences the desire to reduce another s material payoff for the mere purpose of increasing one s relative payoff are surprisingly widespread in experiments conducted in one of the least developed regions in india uttar pradesh in a one shot trust game the authors find that a large majority of subjects punish cooperative behavior although such punishment clearly increases inequality and decreases the payoffs of both subjects in experiments to study coordination and to measure social preferences the findings reveal empirical patterns suggesting that the willingness to reduce another s material payoff either for the sake of achieving more equality or for the sake of being ahead is stronger among individuals belonging to high castes than among those belonging to low castes because extreme social hierarchies are typically accompanied by a culture that stresses status seeking it is plausible that the observed social preference patterns are at least partly shaped by this culture thus an exciting question for future research is the extent to which different institutions and cultures produce preferences that are conducive or detrimental to economic development

collaborative optimal carbon tax rate under economic and energy price shocks a dynamic stochastic general equilibrium model approach abstract existing literature on climate policy analysis in an international environmental agreement does not condition the optimal policy on the economic conditions of the countries this paper constructs a two country environmental dynamic stochastic general equilibrium e dsge model to compare the optimal carbon tax rates between countries in noncooperative and cooperative scenarios in the presence of different economic shocks compared to those in the cooperative scenario countries without cooperation would have an optimal carbon tax rate that increases less in response to a positive home country total factor productivity tfp shock and decreases more in response to a positive energy price shock further in the noncooperative scenario the carbon tax rate decreases in response to the foreign country tfp shock but to a lesser extent than that in the cooperative scenario countries cooperation does not necessarily lead to a lower emissions stock it decreases only in response to positive home and foreign country tfp shocks and it increases in response to a positive energy price shock

assessing the role of institutions in limiting the environmental externalities of economic growth emissions of pollutants tend to be procyclical as they generally increase with economic growth however as government policy has a role to play in the mitigation of the environmental consequences of economic activity the quality of institutions may influence the procyclicality of pollution and reduce the environmental cost of economic growth based on the assumption that changes in emissions are stronger at earlier stages of development we develop a non linear framework and confirm first the presence of income related threshold effects in the relationship between pollution co 2 and greenhouse gas emissions and growth for a panel of 142 countries over a period spanning from 1960 to 2017 we also find that institutional quality influences this relationship as the quality of institutions lowers the value of the threshold and the degree of procyclicality of emissions these results bring therefore evidence that higher institutional quality can attenuate the environmental externalities of economic growth

the effect of financial development on convergence theory and evidence we introduce imperfect creditor protection in a multicountry schumpeterian growth model the theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier and that all other countries will have a strictly lower long run growth rate we present evidence supporting these and other implications in the form of a cross country growth regression with a significant and sizable negative coefficient on initial per capita gdp relative to the united states interacted with financial intermediation in addition we find that other variables representing schooling geography health policy politics and institutions do not affect the significance of the interaction between financial intermediation and initial per capita gdp and do not show any independent effect on convergence in the regressions our findings are robust to removal of outliers and to alternative conditioning sets estimation procedures and measures of financial development