the carbon footprint of uk households 1990 2004 a socio economically disaggregated quasi multi regional input output model this paper presents a socio economically disaggregated framework for attributing co2 emissions to people s high level functional needs based around a quasi multi regional input output qmrio model the study in theory takes into account all co2 emissions that arise from energy used in production of goods and services to satisfy uk household demand whether the emissions occur in the uk or abroad results show that co2 emissions attributable to households were 15 above 1990 levels in 2004 and that although absolute decoupling occurred between household expenditure and co2 during the uk s switch from coal to gas in the early 1990s since then only slight relative decoupling is evident the proportion of co2 that arises outside uk borders in support of uk consumption is rising and reducing these emissions is particularly problematic in a global trading system investigation into the carbon footprint of different segments of the uk population shows wide variation the segment with the highest carbon footprint emits 64 more co2 than the segment with the lowest results show that recreation and leisure are responsible for over one quarter of co2 emissions in a typical uk household in 2004 we conclude that expanding lifestyle aspirations are significant factors in driving household co2 emissions but the study also emphasizes that attention must be paid to the infrastructures and institutions that result in considerable amounts of co2 being locked up in basic household activities through which people meet their everyday needs for subsistence protection and communication with family and friends the findings highlight the sheer scale of the challenge facing uk policy makers and suggest that policies should be targeted towards segments of society responsible for the highest carbon footprints

on the robustness of robustness checks of the environmental kuznets curve hypothesis since its first inception in the debate on the relationship between environment and growth in 1992 the environmental kuznets curve hypothesis ekc hereafter has been subject of continuous and intense scrutiny the most recent line of investigation criticizes the ekc hypothesis on more fundamental grounds in that it stresses the lack of sufficient statistical testing of the empirical relationship and questions the very existence of the notion of ekc attention is in particular drawn on the stationarity properties of the series involved per capita emissions or concentrations and per capita gdp and in case of presence of unit roots on the cointegration property that must be present for the ekc to be a well defined concept only at that point can the researcher ask whether the long run relationship exhibits an inverted u pattern on the basis of panel integration and cointegration tests for sulfur stern 2004 and perman and stern 1999 2003 have presented evidence and forcefully stated that the ekc hypothesis does not exist in this paper we ask whether similar strong conclusions can be arrived at when carrying out tests of system fractional integration and cointegration as an example we use the controversial case of carbon dioxide emissions the results show that more ekcs come back into life relative to traditional integration cointegration tests however we confirm that the ekc hypothesis remains a fragile concept

rank order contracts for a principal with many agents for a principal with many agents rank order contracts remain incentive compatible even when information about agents performance is known only to the principal because the total payment from the principal to all agents taken together is independent of the outcome that occurs under wider conditions than those considered previously in the literature there is shown to exist a rank order contract equivalent exactly or approximately to any nonlinear piece rate contract under those conditions therefore results that depend on the unenforceability of piece rates under such asymmetric information disappear if rank order contracts can be used in principal agent models compensation paid to agents is based on their outputs because their inputs are not public information in this context information is public if it is verifiable in court so that a contract contingent on it is legally enforceable rank order contracts also called tournaments and contests make each agent s compensation a function solely of the ranking of his output relative to the outputs of other agents in contrast individual piece rate contracts make each agent s compensation a function only of his own output lazear and rosen 1981 green and stokey 1983 and nalebuff and stiglitz 1983 all have results comparing the two when agents actions are not observed by the principal but only for the case in which the principal is risk neutral and the utility function of agents additively separable in income and action the main purpose of the present paper is to show that for the case of a continuum of agents these two kinds of contract are in fact formally equivalent or in some cases approximately equivalent under somewhat more general conditions than those considered so far in the

challenges of responding to sustainability with implications for affordable housing abstract sustainability is one of the most contested ideologies of our time because everyone acknowledges that it must occur but no one can agree on what needs to change in response this is unsurprising because objecting to the goal of sustainability is like objecting to other inherently good goals like peace or freedom responses to sustainability exist on a long continuum with some interpreting sustainability to mean conservation at all costs and reduced economic growth while others suggest that the market will ensure sustainable outcomes eventually result further sustainability can be easily manipulated to justify predetermined outcomes there are indeed a multitude of conceptual and pragmatic challenges to operating on sustainability particularly when the scale shifts from a global goal to local action using the application of sustainability to affordable housing in australia as a case study this article argues that rather than limiting sustainable outcomes the existence of the sustainability debate which focuses on the many challenges is a positive indicator that sustainability may be attainable

capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

a note on dynamic tax incidence under certain reasonable conditions for a growth model the path of adjustment between steady states generated by a change in an exogenous policy variable is solved for explicitly the overall welfare effect is then shown to be a weighted average of the short and long run effects for a large class of social welfare functions these results are applied to a simple neoclassical growth model for the purpose of investigating the dynamic incidence of a labor income tax contrary to the claims of previous investigators the long run effect is shown to be more important for a wide range of parameter values

realising the wellbeing dividend an exploratory study using the human scale development approach abstract despite claims about the existence of the wellbeing dividend that sustainable and reduced consumption is compatible with increased wellbeing there is little evidence that this dividend is being realised the present research illustrates how through workshops addressing the cultural economic political and personal factors that impede or promote human need satisfaction a given society can unravel its own pathway towards sustainability and wellbeing this study draws on the wellbeing literature particularly max neef s approach to human needs and satisfiers it uses an analysis of group discussions in lleida a medium sized catalonian city to show how unsustainable consumption is associated with local hurdles for actualising needs and how sustainable consumption is linked to local descriptions of the utopian need actualising society the manner of progressing towards need actualisation and sustainability is also addressed by participants who identify the changes in norms institutions and personal identity that need to be in place the analysis reveals the interrelatedness of satisfiers and argues for a systemic perspective to address social transition towards sustainability and wellbeing at the local level

welfare analysis and intertemporal substitution abstract this paper explores the structure of welfare comparisons when direct utility is weakly separable over time the lifetime welfare effect of a reform is then the sum of atemporal hicksian variations and intertemporal variations reflecting intertemporal substitution these latter are shown to be of only second order importance in lifetime welfare comparisons approximations to the intertemporal variations when preferences are intertemporally additive are derived pointing to the welfare significance in this context of not only the intertemporal elasticity of substitution but also within period income effects numerical examples illustrate the analysis and suggest possible orders of magnitude

statistical measures of unsustainability abstract statistical measures are needed to reveal at a glance how far or near various countries are to meeting the conditions of long run sustainability and how conditions are changing on a year to year basis i e whether sustainability is being approached or not the scheme proposed in this paper presents numerical comparisons of energy and materials use in the real world vis a vis an ideal case where all of the identifiable criteria for sustainability are satisfied apart from population stabilization five general but quantifiable criteria for sustainability are suggested including 1 stabilization of greenhouse gas concentrations in the atmosphere 2 stabilization of acidity ph in rainfall 3 reduction of dissipative uses and wastes of heavy metals to natural mobilization rates or lower 4 elimination of agriculture based on pumping fossil water from non renewable aquifers and 5 elimination of loss of arable land because of salination or erosion other criteria such as preservation of biodiversity and socio economic equity between countries and generations might be added to the list they introduce more difficult measurement problems however which are not considered further in the paper having fixed the list of criteria the next step is to identify measures that either go to zero or unity as the system approaches more and more closely to sustainability at least in the limited sense defined above various types of measures of sustainability unsustainability can be developed viz i measures of relative dependence of the economy on non renewable sources of energy and materials ii measures of the productivity of energy and materials consumed by the economic system and iii measures of dissipative loss especially of toxic and hazardous substances specific examples of each type are discussed

fossil resource trade balances emerging trends for the uk abstract the aim of this paper is to examine the extent to which the uk can be classified as a net importer of fossil resources and a creator of pollution havens abroad between 1968 and 2000 using input output techniques and a derived resource flow classification system both the physical trade balance ptb and pollution trade balance utb associated with fossil resource use are computed the ptb shows that between 1968 and the early 1980 s the uk is presented as a net importer of direct fossil resource flows between 1984 and 2000 the uk is identified as a net exporter of direct fossil resources these trends are primarily explained by the uk s discovery and commercial production of north sea oil and gas fields in the late 1970s on the other hand the utb shows that over the whole period the indirect used flows attributable to the uk s exports are higher than those attributable to its imports these findings suggest that the uk did not create pollution havens abroad from the use of fossil resources between 1968 and 2000 however it is noticeable in both cases that from 1995 the uk s position as a net exporter has been decreasing considerably maturing north sea oil and gas fields set against increasing demands for fossil fuels and imported goods is signalling a return to the uk s pre 1984 dependence on direct imported fossil resources and the possible creation of pollution havens abroad knowledge of these trends contributes to the evidence base for the uk s changing import and export structure and the potential environmental repercussions at home and abroad

competition and cooperation in the workplace abstract this paper examines promotion systems which are competitive a tournament or noncompetitive a quota scheme we introduce helping technologies where some aid to co workers is efficient and consider various worker bargaining strategies it is shown that the competitive scheme consistently prevents helping efforts while the non competitive scheme induces an efficient allocation of effort if workers bargain over help because the non competitive scheme is less risky it may dominate the competitive scheme even if workers do not help each other if workers bargain over help the non competitive scheme will typically enhance welfare

environmental kuznets curves real progress or passing the buck abstract recent research has examined the hypothesis of an environmental kuznets curve ekc the notion that environmental impact increases in the early stages of development followed by declines in the later stages these studies have focused on the relationship between per capita income and a variety of environmental indicators results imply that ekcs may exist for a number of cases however the measures of environmental impact used generally focus on production processes and reflect environmental impacts that are local in nature and for which abatement is relatively inexpensive in terms of monetary costs and or lifestyle changes significantly more consumption based measures such co2 emissions and municipal waste for which impacts are relatively easy to externalize or costly to control show no tendency to decline with increasing per capita income by considering consumption and trade patterns the author re examines the concept of the ekc and proposes the use of alternative consumption based measures of environmental impact the author speculates that what appear to be improvements in environmental quality may in reality be indicators of increased ability of consumers in wealthy nations to distance themselves from the environmental degradation associated with their consumption

tax policy and consumer foresight a general equilibrium simulation study this paper presents a dynamic computational general equilibrium model in which expectations regarding future prices can be varied systematically the model is employed to evaluate how expectations influence the effect of long run tax policy changes under policies like a consumption tax that reduce rates of return over time individuals with perfect foresight save less than individuals with myopic beliefs this is because consumers with foresight are better able to anticipate the lower returns lower saving means that existing distortions due to capital taxes are not offset as much so that welfare gains are smaller under perfect foresight

trade environment and development the issues in perspective abstract this special issue on trade and the environment brings together a number of papers that are constructively critical of the conventional economic wisdom on the topic we think that this criticism is warranted because of the decidely uncritical way in which free trade has been advocated in much of the literature and especially in policy the papers analyse the validity of the underlying assumptions on which the conventional wisdom is based and provide suggestions for ways to facilitate trade that is also adequately protective of the environment sustainability and other social values in this introductory piece we discuss trade the environment and sustainability summarizing arguments in the papers included in this issue and adding a few additional points not covered by them

economic contests comparative reward schemes contests are situations in which an individual s reward depends on his performance relative to others students are graded on a curve the candidate with the most votes gets the political office the underling who performs best is promoted to the executive position contests are useful in dealing with indivisible rewards reducing monitoring costs and minimizing risks from common uncertainties they are employed to sort potential participants and once they have entered to induce appropriate effort from them with monitoring precision and prize spreads as potential choice variables optimal contest structures are derived for fair and unfair contests among equal and unequal participants the converse problems of climbing low ability individuals enter the contest designed for high ability candidates and slumming are shown to be manageable

the impacts of china s household consumption expenditure patterns on energy demand and carbon emissions towards 2050 abstract this paper explores how china s household consumption patterns over the period 2005 2050 influence the total energy demand and carbon dioxide co2 emissions in two baseline scenarios and how it influences carbon prices as well as the economic cost in the corresponding carbon mitigation scenarios to this end we first put forward two possible household consumption expenditure patterns up to 2050 using the working leser model taking into account total expenditure increase and urbanization for comparison both expenditure patterns are then incorporated in a hybrid recursive dynamic computable general equilibrium model the results reveal that as income level increases in the coming decades the direct and indirect household energy requirements and co2 emissions would rise drastically when household expenditure shifts from material products and transport to service oriented goods around 21 000 mtce 1 of primary energy and 45 billion tons of co2 emissions would be saved over the 45 year period from 2005 to 2050 moreover carbon prices in the dematerialized mitigation scenario would fall by 13 in 2050 thus reducing the economic cost

luxury or lock in an exploration of unsustainable consumption in the uk 1968 to 2000 abstract sustainable consumption demands the ability to understand the patterns of resource consumption associated with changing lifestyles this paper explores changes in resource consumption patterns in the uk between 1968 and 2000 using an environmental input output model the paper tracks the fossil resource requirements attributable to 8 high level functional purposes and finds that overall fossil resource consumption increased 35 over the 32 year period the four functional purposes most closely related to the provision of basic material needs showed little change over the period the bulk of the increase in fossil resource requirements was attributable to two specific functional purposes 1 recreation and entertainment 2 commuting and business travel the authors discuss the relevance of these findings for the continuing debate over the question whether rising consumption is being driven by expanding social aspirations luxury or whether it is the result of structural lock in

stoking the fires co2 emissions and economic growth abstract we examine the relationship between economic development and carbon dioxide emissions a greenhouse gas central to global warming predictions estimates derived from global panel data suggest a diminishing marginal propensity to emit mpe carbon dioxide as gdp per capita rises despite this global carbon dioxide emissions growth will continue at 1 8 percent per annum for the foreseeable future a result that is not sensitive to average output growth instead emissions growth continues because output and population will grow most rapidly in lower income nations with high mpes this latter feature emphasizes the distributional consequences of policies to reduce emissions

marginal cost of public funds for different tax instruments and government expenditures the marginal cost of public funds that is the size of the direct and indirect excess burden costs for marginal tax revenues is examined in this paper for an open economy with a savings response and using swedish 1979 data the marginal cost of public funds spent on transfer payments is estimated to vary from 1 47 for a distributionally neutral tax on labor and capital to 7 20 for a more progressive tax where average and marginal labor taxes increase by the same rates for changes in the most important tax instrument the marginal cost of public funds varies from 0 98 for expenditures on infrastructure to 2 27 for transfer payments

developments in the throughput income relationship theoretical and empirical observations abstract it has been suggested that the relationship between income and the associated environmental pressure in terms of derived materials inputs and pollution levels may take an inverted u shape indicating a delinking of environmental pressure from economic growth in relation to rising per capita incomes the likelihood of such a relationship being persistent is discussed in the context of a simple macro model of industrial metabolism and the possibility of relinking clearly emerges data on specific indicators of environmental pressure i e the throughput of materials energy and the volume of transport in 19 countries have been used to investigate patterns of delinking the results suggest that delinking may not be persistent already some advanced economies may be entering a new period of relinking the relationships between environmental pressure and welfare in the medium long term may be n shaped rather than inverted u shaped

the dynamics of willingness to consume abstract it is increasingly acknowledged that the growing consumption in the north constitutes an important part of global environmental problems to improve the possibilities of dealing with this aspect of the problems this paper explores some of the driving forces behind the growth in consumption the first section introduces the environmental debate on consumption including the relationship between final consumption and the consumption of resources the recent political acceptance of dealing with consumption and the fundamental conditions for consumption growth in the north in the following sections a cross disciplinary approach is applied in a broad search for the driving forces behind the willingness to consume throughout the exposition two questions are explored 1 why are productivity increases largely transformed into income increases instead of more leisure 2 why is such a large part of these income increases used for the consumption of goods and services with a relatively high materials intensity instead of less material intensive alternatives the explanations are divided into three groups first the economic explanations including socio economic aspects related to the institutional set up of the economy second socio psychological explanations focusing on consumption from the perspective of the human being embedded in specific social relations third historical and socio technological explanations focusing on different aspects of everyday life the paper concludes with some reflections on the political implications of the analysis

willing consumers or locked in policies for a sustainable consumption postmodern explanations of consumer behaviour stress social and psychological factors to the neglect of explanations based on structural issues such as the working life conditions which favour a work and spend lifestyle the conditions of urban living or the effects of pervasive marketing this paper argues that consumers may not be so keen and willing but are rather locked in by circumstances some of these circumstances are deliberately created by other interests and a policy to limit consumption must look for adequate means over a large and varied field in the end shorter working hours may be an important key to a more sustainable future 2002 elsevier science b v all rights reserved

economic growth and environmental degradation the environmental kuznets curve and sustainable development abstract in this paper we critically examine the concept of the environmental kuznets curve ekc it proposes that there is an inverted u shape relation between environmental degradation and income per capita so that eventually growth reduces the environmental impact of economic activity the concept is dependent on a model of the economy in which there is no feedback from the quality of the environment to production possibilities and in which trade has a neutral effect on environmental degradation the actual violation of these assumptions gives rise to fundamental problems in estimating the parameters of an ekc the paper identifies other econometric problems with estimates of the ekc and reviews a number of empirical studies the inference from some such ekc estimates that further development will reduce environmental degradation is dependent on the assumption that world per capita income is normally distributed when in fact median income is far below mean income we carry out simulations combining ekc estimates from the literature with world bank forecasts for economic growth for individual countries aggregating over countries to derive the global impact within the horizon of the bank s forecast 2025 global emissions of so 2 continue to increase forest loss stabilizes before the end of the period but tropical deforestation continues at a constant rate throughout the period

the indexation of interest depreciation and capital gains and tax reform in the united states abstract the treasury s 1984 tax plan suggests features of a comprehensive income tax including the indexation of interest depreciation and capital gains the 1985 president s proposal retains some of these indexing provisions but the tax reform act of 1986 does not this paper looks at the incentives under these tax regimes to make marginal investments in the corporate sector noncorporate sector and owner occupied housing it finds that inflation in the old system caused effective tax rates to rise for some assets and fall for others under the treasury or president s proposals the interference of inflation is virtually eliminated also the effects of inflation are substantially reduced by the 1986 act because mismeasured depreciation and interest deductions are taken at much lower rates

the determinants of atmospheric so2 concentrations reconsidering the environmental kuznets curve this analysis explores the effects of income and the spatial intensity of economic activity on the atmospheric concentration of sulfur dioxide the results indicate that there is a u shaped relation between income and atmospheric concentration of so2 and an inverted u shaped relation between the spatial intensity of economic activity and so2 concentrations these results suggest that the spatial intensity of economic activity rather than income provides the impetus for policies and technologies that reduce so2 emissions based on this result the atmospheric concentration of so2 in developing nations may decline faster than indicated by previous analyses the potential for this decline depends on the rate at which income grows relative to population the trade off between the effects of income gains and the spatial intensity of economic activity on the atmospheric concentration of so2 is consistent with the notion that some environmental problems can be ameliorated by slowing population growth and increasing income levels

the interaction of population growth and environmental quality an important question for policy is whether holding constant per capita income and other relevant factors population pressures have a significant effect upon environmental degradation the authors examine the effect of population pressures upon deforestation in 64 developing countries in an attempt to provide relevant empirical findings data on deforestation were drawn from the food and agriculture organizations production yearbook results suggest that a relationship exists between per capita income and deforestation and that for africa rural population density shifts the relationship upward the increase in the rate of deforestation levels off as income increases the rate of growth in per capita income also has a significant negative impact upon deforestation although the magnitude of the effect is small the authors close in stressing that reducing the rate of population growth is not necessarily the best way to reduce the rate of deforestation deforestation in developing countries is really a problem of market failure since property rights are often neither defined nor enforced there is essentially no private cost of deforestation with no long term stake in the land people have no incentive to use land efficiently this situation must be addressed in conjunction with the problems of poverty and population growth

consumption sustainable welfare and human needs with reference to uk expenditure patterns between 1954 and 1994 abstract this paper explores the complex relationship between economic consumption and human welfare or well being conventional economics suggests that increasing levels of economic consumption lead to increasing levels of well being however this view has been criticised on both environmental and social grounds on the one hand the material impacts of increasing consumption are environmentally unsustainable on the other hand material consumption can conflict with crucial social and psychological components of human welfare this paper develops a perspective on human welfare which is based on max neef s characterisation of human needs it discusses the implications of this alternative perspective for the conventional viewpoint and illustrates the importance of it with reference to patterns of consumer expenditure in the uk over the last 40 years the authors suggest that from this perspective modern societies may be seriously adrift in their pursuit of human well being however they also point out that addressing this situation provides far more opportunity for ecologically sustainable development than is generally recognised

saving pension contributions and the real interest rate a test of the hypothesis that estimates of the interest elasticity of personal and private saving may be biased downward by a failure to control for behavior related to defined benefit pension programs fails to reject existence of a positive interest elasticity of private saving correcting for pension funding bias the estimated interest elasticity of private saving is 0 04 well below michael j boskin s 1978 estimate of 0 4 obtained with a different data set and different estimation procedures the estimated interest elasticity of personal saving is 0 28 copyright 1989 by mit press

from the static to the dynamic some problems in the theory of taxation abstract this paper considers problems and issues that arise when we attempt to extend the static theory of taxation and production planning to a dynamic context and to combine that theory with theories of growth the reasons dynamic theory is less developed include problems with the analytical tractability of even those dynamic models which attempt to retain the basic structure of the static model furthermore difficult and interesting issues arise in a dynamic context which are either not present or are much less severe in the static theory special attention is paid to these new issues and the difficulties they pose

escaping carbon lock in this article explores the climate policy implications of the arguments made in understanding carbon lock in unruh 2000 which posited that industrial countries have become locked into fossil fuel based energy systems through path dependent processes driven by increasing returns to scale carbon lock in arises through technological organizational social and institutional co evolution culminating in what was termed as techno institutional complex tic in order to resolve the climate problem an escape from the lock in condition is required however due to the self referential nature of tic escape conditions are unlikely to be generated internally and it is argued here that exogenous forces are probably required

involuntary unemployment and worker moral hazard this paper critically examines the hypothesis that layoffs are involuntary in implicit labour contracts because they are used by employers to punish inferior worker performance in repeated moral hazard situations workers typically bear risk associated with whether they are chosen to be laid off even though the latter is uninformative about previous effort choices and wages are performance contingent however the hypothesis is unsatisfactory as optimal contracts involve involuntary retentions rather than involuntary layoffs in a wide variety of circumstances the theory of implicit labour contracts as developed over the past decade has thrown considerable light on the nature of long term employment relationships by emphasizing that firm owners are usually less risk averse than workers and thus have an incentive to insure workers against fluctuations in the demand for the firm s product the theory manages to explain the emergence of long term contracts characterized by downward real wage rigidity see holmstrom 1983 however the theory also typically implies that workers will be indifferent about whether they are to be retained or laid off this runs contrary to the common observation that there is an element of involuntariness in layoff decisions i e within any job category with given skill and performance history if a proportion of randomly chosen workers are to be laid off in a recession the laid off workers would strictly prefer to be retained not only is this phenomenon of involuntary layoffs interesting to explain per se it also seems relevant to the keynesian notion of involuntary unemployment interpreted as unequal treatment of similar workers where some are employed while others are not and unemployed workers would strictly prefer to be employed it thus seems worthwhile to examine if the theory of implicit contracts can be extended to explain this phenomenon satisfactorily as a test of its plausibility and as a possible source of a consistent microfoundation for keynesian propositions to explain why the firm does not insure workers against the risk associated with selection of those to be laid off it is natural to think of possible informational asymmetries this has been attempted by geanakoplos and ito 1981 and moore 1985 geanakoplos and ito introduce the realistic feature that a firm does not observe spot market opportunities available ex post to a laid off worker this permits only incomplete insurance against the risk of layoff however their model produces the paradoxical conclusion that with decreasing absolute risk aversion workers strictly prefer ex ante being laid off moore allows workers to have better ex ante information about their spot market opportunities but finds a similar tendency toward involuntary retentions rather than involuntary layoffs in this paper we explore the alternative hypothesis that firms cannot perfectly observe effort decisions of employed workers and use the threat of involuntary layoff as a discipline device the analysis of stiglitz and weiss 1983 shapiro and stiglitz 1984 and singh 1982 of principal agent relations in the absence of demand fluctuations suggests that the threat of contract termination may be used as an incentive device in their models

carbon intensity and economic development 1962 1991 a brief exploration of the environmental kuznets curve the relationship between national carbon dioxide emissions intensity co2 emitted per unit of gross domestic product and level of economic development has changed from essentially linear in 1962 to strongly curvilinear in 1991 the inverted u curve reached statistical significance briefly in the early 1970s and increasingly since 1982 this is the result not of groups of countries passing through stages of development but of efficiency improvements in a small number of wealthy countries combined with worse performance in poor and middle income countries the curvilinear relation is deepening and is likely to persist due to constraints on poorer countries in the world economy

economic growth trade and energy implications for the environmental kuznets curve abstract the environmental kuznets curve ekc hypothesis asserts that pollution follows an inverted u path with respect to economic growth the ekc has been explained in terms of structural changes in the composition of economic output and increased environmental regulation at higher income levels while some authors have incorporated the impact of trade policy orientation on the ekc the impact of the actual movement between countries of goods that embody pollution has not been considered this paper attempts to econometrically quantify the effect using pooled cross country and time series data the ekc hypothesis is examined with respect to commercial energy consumption the source of many serious environmental problems it was found that while both industrializing and industrialized countries have added to their energy requirements by exporting manufactured goods the growth has been substantially higher in the former at the same time industrialized countries have been able to reduce their energy requirements by importing manufactured goods exports of manufactured goods by industrialized countries has thus been an important factor in generating the upward sloping portion of the ekc and imports by industrialized countries have contributed to the downward slope

trade and the environment a partial synthesis there is an emerging consensus in the environmentalist community opposing free trade while some economists view this as simply another outlet for protectionism recent work has begun to move beyond the rhetoric to probe more deeply into the theoretical and empirical relationships between international trade and environmental quality the purpose of the present paper is twofold we first integrate some of the existing literature by using the simple concepts of general equilibrium pollution supply and demand our survey of the trade and environment literature is more

household consumption associated fossil fuel demand and carbon dioxide emissions the case of greece between 1990 and 2006 abstract this paper explores how greece s household consumption has changed between 1990 and 2006 and its environmental implications in terms of fossil fuel demand and carbon dioxide co2 emissions the results show that the 44 increase in greece s household expenditure between 1990 and 2006 was accompanied by a 67 increase in fossil fuel demand of this total indirect demand accounted for approximately 60 throughout the 16 year period increasing by 56 overall whereas direct fossil fuel demand grew by 80 the results also show that associated co2 emissions increased by 60 resulting in a relative decoupling from energy demand this relative decoupling is shown to be due to fossil fuel mix changes from the supply side rather than action from consumers these insights highlight the opportunities for demand side policies to further reduce fossil fuel demand and co2 emissions allowing greece to set more proactive and ambitious post kyoto targets

the bare necessities how much household carbon do we really need the consumption patterns of western nations are generally deemed to be unsustainable yet there is little attempt to restrain either material throughput or income growth nonetheless in the face of the need to make deep cuts in carbon emissions for instance consumption restraint may be a perfectly legitimate response this paper explores the potential for a reduced consumption scenario in the uk constructed by assuming that households achieve a specific minimum income standard which is deemed to provide a decent life for each household type the minimum income standards are taken from a recent study for the joseph rowntree foundation and include not only subsistence commodities such as food warmth and shelter but also the means to participate effectively in society the joseph rowntree foundation study produced detailed household expenditure budgets for these income standards the paper uses an environmentally extended quasi multi regional input output model to estimate the greenhouse gas ghg emissions required in the production and distribution of all goods and services purchased according to these budgets our results show that average household ghg emissions in the uk would be around 37 lower in the reduced consumption scenario than they are currently we explore several implications of these findings including the need to change social norms around consumption the need for investment to improve the thermal performance of homes and the need to develop new transport infrastructures we also address the potential to reduce emissions below the level achieved in this scenario and discuss the implications for policy

energy requirements of consumption urban form climatic and socio economic factors rebounds and their policy implications household consumption requires energy to be used at all stages of the economic process thereby directly and indirectly leading to environmental impacts across the entire production chain the levels structure and determinants of energy requirements of household consumption therefore constitute an important avenue of research incorporating the full upstream requirements into the analysis helps to avoid simplistic conclusions which would actually only imply shifts between consumption categories without taking the economy wide effects into account this paper presents the investigation of the direct and indirect primary energy requirements of australian households contrasting urban suburban and rural consumption patterns as well as inter and intra regional levels of inequality in energy requirements furthermore the spatial and socio economic drivers of energy consumption for different categories of energy requirements are identified and quantified conclusions regarding the relationships between energy requirements household characteristics urban form and urbanization processes are drawn and the respective policy implications are explored

a general equilibrium model of housing taxes and portfolio choice we describe a model in which rental and owner housing are risky assets tenure choice is endogenous and each household is constrained to consume the same amount of owner housing that it has in its investment portfolio at each iteration in the search for an equilibrium we determine the new taxable income for each of 3 578 households from the survey of consumer finances and we use statutory schedules to find the marginal rate and tax paid equilibrium net rates of return are major determinants of the amount of owner housing but a logit model indicates that demographic factors are the main determinants of ownership rates in our simulation taxes on owner housing would raise welfare not only by reallocating capital but also by the government s taking part of the risk from individual properties and diversifying it away measures to disallow property tax or mortgage interest deductions do not help share this risk simulations of the 1986 tax reform indicate a small shift from rental to owner housing and

a simple model of endogenous tax reform abstract this paper presents a model of optimal taxation that is useful for understanding governments incentives to switch from wage to consumption taxation the key ingredient is the fact that governments cannot precommit policy although under precommitment governments would tax only wages there is an ex post incentive to switch to the consumption tax as savings grow numerical examples for a nested ces utility function find that for reasonable parameter values equilibrium features a switch to consumption taxation in particular the model produces this tax reform when parameterized as in auerbach and kotlikoff s 1987 study

measuring fossil resource inequality a case study for the uk between 1968 and 2000 this paper quantifies fossil resource inequalities amongst income quintiles in the uk between 1968 and 2000 it calculates a resource based gini coefficient using an input output based resource allocation model the results show that the gini coefficient for total fossil resource consumption grew by 24 over the time period by comparison the gini coefficient for overall household expenditure rose by only 13 the increase in resource inequality was prompted by the rising demand by high income quintiles for goods and services such as fuel and light heating and lighting the home car use private transportation recreation travel and other services the analysis shows further that the gini coefficient for direct fossil resources fuel and light and car use was lower and rose less steeply than the gini coefficient for fossil resources embodied in other goods and services indirect fossil resource requirements investigation into the drivers behind direct and indirect resource inequalities suggests a number of policy conclusions firstly it is clear that policy initiatives to reduce fossil resource requirements and the associated climate change impacts must pay careful attention to distributional differences additionally increased attention needs to be paid to the inequalities associated with indirect fossil resources consumption as well as the more visible direct resource inequalities

municipal waste kuznets curves evidence on socio economic drivers and policy effectiveness from the eu waste generation and waste disposal are becoming increasingly prominent in the environmental arena from a policy perspective and in the context of delinking analysis in general waste generation is still increasing proportionally with income and economic and environmental costs associated to landfilling are also increasing this paper provides a comprehensive analysis of waste generation incineration and landfill dynamics based on panel data for the eu25 to assess the effects of different drivers economic structural policy and the eventual differences between western and eastern eu countries we show that for waste generation there is still no waste kuznets curve wkc trend although elasticity to income drivers appears lower than in the past landfill and other policy effects do not seem to provide backward incentives for waste prevention and in terms of landfill and incineration as expected they are respectively decreasing and increasing with policy acting as a strong driver eastern countries appear to be performing generally quite well thus benefiting from eu membership and related policies in terms of environmental performance we can conclude that although absolute delinking is far from being achieved for waste generation there are some first positive signs of an increasing relative delinking for waste generation and robust landfill diversion and varying evidence of a significant role of the eu waste policies implemented in the late 1990s and early 2000s our evidence suggests that if while landfill diversion is currently associated to a delinking partly explained by eu policies waste prevention must be the next objective of waste regulation efforts

tax treatment of housing in a dynamic sequenced general equilibrium model this paper evaluates the efliciency effects of possible changes in the tax treatment of housing using a dynamic sequenced general equilibrium model based on canadian data for 1972 our model is similar in structure to that used by fullerton shoven and whalley fsw 1983 to analyze the impacts of a switch to a consumption tax in the united states except that we include two assets rather than one the motivation for the paper arises from existing literature on the treatment of housing under the income tax most of this literature emphasizes the non taxation of imputed income from owner occupied housing as a deviation from the haig simons concept of income and approaches taxation of housing as a static resource allocation issue this implicitly argues for the inclusion of imputed income in the income tax base and suggests that a welfare gain would result when viewed from a dynamic perspective one s perception of the appropriate tax treatment for housing correspondingly changes evaluated relative to a pure consumption tax rather than a pure income tax housing is appropriately treated if imputed income goes untaxed since the income stream to the asset is not further taxed once the asset has been purchased the intertemporal misallocation problem arises not with housing but from taxation of non housing capital income this issue is however more complex than this discussion indicates because of inter asset distortions arising from the differential tax treatment of housing

measuring progress towards carbon reduction in the uk the uk climate change bill proposes to establish legally binding targets for a 60 reduction in carbon dioxide emissions by 2050 this paper discusses the challenges posed by measuring progress towards this target it takes as a premise that the conventional productionbased accounting framework enshrined in the unfccc emissions accounting guidelines is inappropriate for this task because it fails to account for the carbon traded across the uk national boundary accordingly it sets out a consumption based accounting framework using a two region environmental input output eio model which could in principle measure progress in reducing the emissions attributable to final consumers in the uk it illustrates the use of this framework to measure the reduction in carbon dioxide achieved by the uk between 1990 the kyoto base year and the year 2004 and compares this against the production perspective the results indicate that any progress towards the uk s carbon reduction targets visible under a production perspective disappears completely when viewed from a consumption perspective but the robustness of this conclusion depends critically on the accuracy of underlying economic and environmental data sets as well as specific assumptions concerning imports by analysing the consistency of uk input output data we conclude that eio is still some way from being able to answer the critical question of the carbon trade balance for the uk in these circumstances measuring real progress towards carbon reduction in the uk remains elusive

replacing the u s income tax with a progressive consumption tax a sequenced general equilibrium approach abstract this paper examines the welfare consequences of changing the current u s income tax system to a progressive consumption tax we compute a sequence of single period equilibria in which savings decisions depend on the expected future return to capital in the presence of existing income taxes the u s economy is assumed to lie on a balanced growth path with the change to a consumption tax individuals save more and initially consume less as the capital stock grows consumption eventually overtakes that of the original path and the economy approaches the new balanced growth path with higher consumption and a greater capital stock both the transition and the balanced growth paths enter our welfare evaluations we find the discounted present value of the stream of net gains is approximately 650 billion in 1973 dollars just over 1 percent of the discounted present value of national income larger gains occur if further reform of capital income taxation accompanies the change we examine the sensitivity of the results both to the design of the consumption tax and to the values of elasticity and other parameters the paper also contains estimates of the time required to adjust from one growth path to the other

the hot hand fallacy re examined new evidence from the english premier league previous studies have illustrated human misperceptions of randomness and resultant suboptimal decision making with reference to the hot hand or momentum effect in sport the notion of serial dependency between outcomes however issues of omitted variables bias have plagued many due to a reliance on nonparametric techniques or basic regression models this article examines across game and within game momentum in the english premier league epl football competition using fixed effects regressions to control for time invariant heterogeneity in conjunction with traditional nonparametric techniques although the results show evidence of performance reversal following winning streaks no such evidence is found for streaks of draws or losses or in goal scoring performance within games this suggests that momentum is better suited as a post hoc label of performance than a robust causal phenomenon

tax policy and economic growth lessons from the 1980s the past seven years of u s economic policy and performance constitute a truly remarkable if confusing experiment few would have guessed in 1980 that inflation would fall rapidly to 4 percent and hold pretty steady during a lengthy recovery that productivity growth would partially rebound the national debt more than double capital imports reach 150 billion in a single year or that employment would continue to expand at rates envied by other advanced economies perhaps fewer still would have predicted two major and two minor tax reforms would be passed in six years a flip flop in depreciation schedules and a top personal tax rate below 30 percent while it is always easier to draw inferences concerning economic growth its determinants and policies affecting the determinants with long historical hindsight this paper will attempt to provide information evaluation and conjecture to draw some tentative lessons about the effects of tax policies in the 1980s on long run economic growth the good news from the 1980s is the remarkable achievement of substantially lower marginal tax rates making the government a much smaller silent partner in many economic decisions for example the tax advantage of debt finance is reduced substantially with the much lower marginal tax rates the bad news is that the nation could not afford all of the good news the very large budget deficits add to the instability in the tax code in addition to whatever other problems they cause moreover in a country with the lowest saving and investment rates in the advanced world the consequence of which may be to decrease our long run growth potential and short run trade competitiveness the remaining anti saving and investment features of our tax law while probably less important in the long run than the u s

corporate tax integration in the united states a general equilibrium approach this paper presents estimates of static and dynamic general equilibrium resource allocation effects for four alternative plans for corporate and personal income tax integration in the united states a medium scale numerical general equilibrium model is used which integrates the u s tax system with consumer demand behavior by household and producer behavior by industry results indicate that total integration of personal and corporate taxes would yield an annual static efficiency gain of around 6 billion 1973 dollars partial integration plans yield less dynamic effects are larger and our analysis indicates that full integration may yield gains whose present value is as large as 500 billion or about 1 0 percent of the discounted present value of the gnp stream to the u s economy after correction for population growth plans differ in their distributional impacts although these findings depend on the nature of replacement taxes used to preserve government revenues the size of dynamic resource allocation effects is sensitive to the choice of the replacement tax while static gains are reasonably robust

an empirical study of income growth and manufacturing industry pollution in new england 1980 1990 abstract this paper is an empirical examination of how a community s income growth is affected by polluting manufacturing activity the hypothesis i test is that this activity has two conflicting effects first industrial investment encourages economic growth through the creation of employment and other positive economic spillover effects and second the associated pollution causes out migration of residents i hypothesize that a community that is initially relatively wealthy will experience relatively more out migration of its higher income residents who are assumed to have a lower tolerance for pollution thus such communities will grow less in response to such investment compared to its poorer neighbors therefore in my econometric model the marginal effect of pollution on income growth is allowed to vary with initial incomes i use a unique data set that incorporates toxics release inventory tri and census tract level data for new england for the years 1980 and 1990 the estimated effect of pollution on growth is negative on average and is more negative in initial incomes in an effort to measure the out migration effects of pollution i use a separate measure of toxic pollution i find that holding constant total pollution toxic pollution has a more negative effect on growth for wealthier communities these results are consistent with the above hypotheses

uncertain parameter values and the choice among policy options abstract we use a tax policy example to show how debate on the value of an elasticity parameter translates into a debate about policy choices to construct this example suppose that the choice among four particular tax reform options is based on a single measure of efficiency gain for each reform we show how the size of this gain depends upon the elasticity of saving with respect to the net rate of return moreover within quite narrow and reasonable bounds for the elasticity parameter we find regions in which each of three different tax reforms turns out to dominate the others

the agent agents problem payment by relative output this paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output the major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers the paper thus joins a growing literature associated with the work of lazear and rosen on rank order tournaments

the incentive effects of tournaments with positive externalities among workers much recent research concerning work incentives has analyzed tournaments or contests between workers for rewards based on a comparison of their relative performance 3 5 8 9 12 bull schotter and weigelt 2 2 argue that tournaments are empirically pervasive characterizing incentives for many salespeople competing for bonuses managers vying for high level positions academics striving for limited tenured positions and politicians whose election hinges on relative votes received contrarily nalebuff and stiglitz 12 40 suggest that tournaments are rare for example many employees face incentives produced by upward sloping age earnings profiles 6 individual piece rates profit sharing or group bonus schemes 14 or potential firing 11 responding to this lack of agreement over the pervasiveness of tournaments recent theoretical research has begun to identify circumstances where tournaments fail or succeed the corpus of such work generalizes the conditions under which tournaments are optimal for example tournaments can respond effectively to common environmental shocks to productivity 5 12 heterogeneous workers 13 employee and employer moral hazard problems 3 monitoring difficulties 9 and inefficiencies associated with firing as an incentive 11 less work has addressed circumstances where tournaments may fail the question which concerns us here to date three circumstances where tournaments fail have been identified first as lazear and rosen noted in their seminal article on tournaments such incentives fail if individual effort can be measured perfectly or precisely inferred from output as they put it a difference of opinion is necessary for a horse race 8 845 if the winner is known before the race only the winner will run and slowly at that second lazear 7 analyzes circumstances where agents can engage in sabotage or increase the probability of winning by reducing their opponent s measured output tournaments then fail because the saboteur can reduce his or her own output while

information costs and incentives to shirk disability compensation of air traffic controllers it has become fashionable in recent years to level charges of abuse at a variety of social welfare programs unemployment insurance and certain disability compensation programs come to mind as targets of a barrage of criticism based on inherent work disincentives and sloppy administration no doubt there is an element of truth in many of the criticisms however it is one thing to allege the existence of disincentives and quite another to predict the ways in which they will alter observable behavior this paper attempts the latter task numerous authors have noted that the incentives imbedded in any contract are a function of the contractual provisions and enforcement by its very nature a contract governing exchange between two parties constrains their behavior each contractual provision or restriction attempts to limit the responses of both parties however if the restrictions are not perfectly enforced the constraints are not binding which lowers the costs of contractual violations depending upon the type of contract these violations may be labeled default cheating shirking fraud negligence or moral hazard as a case in point consider the analysis by armen alchian and harold demsetz 1972 of the possibility that individuals might shirk contractual responsibilities if benefits exceeded the costs recall that the theory of shirking was originally couched in terms of a utility maximizing employee s laborleisure tradeoff labor time yields a pecuniary reward in the form of income leisure may be thought of as its own reward or as the time devoted to the individual s other desired pursuits given a time constraint an individual will allocate his labor to equate the gains from income with the gains from leisure at the margin if labor rewards are not perfectly correlated with productive effort then the incentive to produce is diminished shirking results if shirking could be costlessly detected neither party to a contract would have an incentive to shirk since the full costs of shirking could be brought to bear on the guilty party through renegotiations of the terms of trade however if detecting shirking through some monitoring mechanism is costly the guilty party will not generally be forced to bear the full costs of his behavior monitoring will only be undertaken so long as the marginal gains from reduced shirking equal or exceed the marginal costs of detection less than perfect monitoring implies some shirking incentives remain strickly speaking shirking may be defined as the act of seeking to avoid performance of contractual duty although alchian and demsetz developed the theory to explain organizations of employer employee relationships it is clear that it can be applied to any contract their results are now well known contractual violations are an increas university of delaware and purdue university respectively we are indebted to the carthage foundation and the krannert graduate school at purdue university for financial support we thank numerous colleagues at the university of delaware and purdue university for intellectual support in particular thanks must go to jack barron james chelius robert clower and an anonymous referee for their helpful comments on earlier drafts while much of the data used for testing came from owcp the faa and lengthy interviews with individuals in the air traffic control industry none of these groups encouraged or funded this study the views expressed here are solely our own the individual still adjusts at his labor leisure margin positive detection costs imply that each person will be induced to take more leisure because the effect of relaxing on his realized reward rate of substitution between output and leisure will be less than the effect on the true rate of substitution his realized cost of leisure will fall more than the true cost of leisure so he buys more leisure i e more nonpecuniary reward alchian and demsetz p 780

us environmental load displacement examining consumption regulations and the role of nafta abstract in light of concerns that structural changes to us production may not be accompanied by similar changes to us consumption this paper provides a detailed examination of us environmental load displacement over the period 1974 2001 the forces that drive such displacement are also examined with particular attention paid to the scale and composition of us consumption the share of imports in consumption the role of environmental regulations and the potential impact of nafta it is found that the usa as a whole has experienced environmental load displacement over the period under consideration with the extent of this displacement seeming to increase over the last decade it would appear to be the increasing scale of us trade that is increasing environmental load displacement indeed the composition of us imports and exports have become significantly cleaner over the period considered however although imports from mexico have grown more rapidly than exports to mexico no evidence is found to suggest that nafta is increasing displacement to mexico with regard to us domestic consumption patterns although they have become cleaner a greater share than ever is now met via imports sectoral pollution abatement costs are found to be a determinant of this increasing share of imports in domestic consumption

external recruitment versus internal promotion this article analyzes the choice between internal promotion and external recruitment within the framework of an economic contest opening up the competition for a position to external candidates re

tax reform and external balance abstract this paper examines the effect of a transformation from capital taxation to consumption in an open economy with the residential capital tax rate being endogenous an increase in the domestic consumption tax rate decreases the interest rate increases capital accumulation and increases the domestic country s net foreign asset holdings and trade surplus with the territorial capital tax rate being endogenous an increase in the domestic consumption tax rate may either increase or decrease the domestic country s interest rate net foreign asset holdings and trade surplus depending on the interest elasticity of capital demand