dynamic employment and hours effects of government spending shocks in this paper we analyze the dynamic behaviour of employment and hours worked per worker in a stochastic general equilibrium model with a matching mechanism between vacancies and unemployed workers the model is estimated for the united states using the generalized methods of moments gmm estimation technique an increase in government spending raises hours worked

the effects of development constraints on forest management at the urban forest interface this article develops a model of a forest owner operating in a small open city environment where the rent for developed land is increasing concave in nearby preserved open space and is rising over time reflecting an upward trend in households income within this framework we examine how changes in nearby preserved open space and alternative development constraints affect an individual private landowner s decisions regarding both regeneration harvests and conversion dates we also examine how such policies affect development density once conversion from forestry to residential use occurs we show that when residential rents change over time the nature of the timber problem at the urban forest interface changes because it forces us to allow for the possibility of changes in land use from timber to residential use as a result the traditional faustmann setup is not suitable to study forest management decisions at this interface we also find that in the presence of rising income increases in permanently preserved open space hasten regeneration and conversion cuts of a neighboring parcel currently under forest use and leads to lower density development once conversion takes place compared to the case where income is constant we also find that both a binding development moratorium and a binding minimum lot size policy can postpone regeneration and conversion cut dates and thus help to protect open space even if only temporarily however the policies do not have the same effects on development density of converted forestland while the former leads to high density development the latter encourages low density development

unemployment growth and taxation in industrial countries unemployeement and taxes do taxes affect the rate of umemployeement to the layman the upward trend in european unemployment is related to the slowdown of economic growth we argue that the layman s view is correct the increase in european unemployment and the slowdown in economic growth are related because they stem from a common cause an excessively rapid growth in the cost of labour in europe labour costs have gone up for many reasons but one is particularly easy to identify higher taxes on labour if wages are set by strong and decentralized trade unions an increase in labour taxes is shifted onto higher real wages this has two effects first it reduces labour demand and thus creates unemployment secondly as firms substitute capital for labour the marginal product of capital falls over long periods of time this in turn diminishes the incentive to invest and to grow the data strongly support this view according to our estimates the observed rise of 14 percentage points in labour tax rates between 1965 and 1995 in the eu could account for a rise in eu unemployment of roughly 4 percentage points a reduction of the investment share of output of about 3 percentage points and a growth slowdown of about 0 4 percentage points a year francesco daveri and guido tabellini

option pricing and timberland s land use conversion option reply thomson s response to my recent article zinkhan 1991 in this journal proposes an alternative approach for valuing a timberland land use conversion option the most significant distinction between the zinkhan model zm and the thomson model tm is the selection of different analogies for two black scholes option pricing model parameters the underlying asset price and the exercise price thomson defines the adjusted price of the alternative land use s in his response to be the underlying asset price the sum of the land expectation value for continuous forest production lev and the physical costs associated with converting from timber to the alternative land use cc is treated as the exercise price x in contrast the gap sadj in zinkhan between the price of the alternative land use pal to after adjustment and the highest bid received for the given tract poffo after adjustment serves as the underlying asset price in the zm zinkhan assumes that the exercise price x is the sum of two values as of the time of expiration of the option t cc and the absolute value of the negative impact on lev resulting from a deviation if any from the optimal rotation age i there are several serious problems associated with the tm first the tm does not recognize the landowner s forfeiture of the land use conversion option from timber production to some alternative use if the tract is converted thus the opportunity cost associated with conversion is underestimated given thomson s framework for estimating the land use conversion option s value a solution to the problem would be indeterminable if the exercise price was simply modified through the addition of an estimate of the land use conversion option a solution would be unattainable since exercise price is an input in the process of calculating the same land use conversion option zinkhan partially avoids this problem by utilizing poffo rather than levo when estimating sadj where a bid is considered by the landowner only if poff levo poffo which is subtracted from palto after necessary adjustments in order to maintain the zm analogy for underlying asset price might at least partially reflect the value of the land use conversion option in contrast the tm s lev does not reflect this option value because of the possibility that the market clearing price of the cutover timberland tract at time 0 will

a note on multiproduct economies of scale and economies of scope abstract two measures of local economies of scale for a firm producing more than two products are derived using measures of product specific economies of scale and economics of scope the latter is especially useful for econometric estimation and testing

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

conditions for economies of scope in the presence of fixed costs this article establishes necessary and sufficient conditions for economies of scope to exist while taking into account the presence or absence of both local cost complementarity and product specific fixed costs in some circumstances the test developed here could show that economies of scope to not exist despite local cost complementarity or alternatively despite the existence of fixed costs conversely the test could show that fixed costs are sufficient to generate economies of scope despite local cost anticomplementarity

multiproduct technology and market structure a recent line of research has exposed some technological determinants of the structure of industries that produce more than one good the analyses of both multiproduct perfect competition and natural monopoly require a generalized notion of average cost and in addition several newly identified technological characteristics pertinent only to joint production this paper provides an overview of these new results and suggests a unifying framework in which the theory can be further developed

on estimating the option value of preserving a wilderness area in this paper option pricing theory is used to analyse whether or not to preserve a wilderness area a numerical approach is demonstrated that can be applied to any generalized stochastic process the impact of assuming that amenity value follows a logistic process rather than geometric brownian motion is considered the calculation of critical levels for amenity value necessary to justify preserving a wilderness area such as the killarney provincial park in ontario or the headwaters forest in california is demonstrated the impact of changing the assumed growth and volatility of amenity value is also examined jel classifcation d81 q26 ce memoire utilise la theorie de la tarification d une option pour analyser si on doit preserver un espace naturel on utilise une approche numerique qui peut etre appliquee a tout processus stochastique generalise on examine l impact de possibilites que le profil de la valeur de la ressource dans la temps suive un processus logistique plutot qu un pattern geometrique de type brownien le texte montre le calcul des niveaux critiques de la valeur de la ressource qui seraient necessaires pour justifier la preservation d une espace naturel comme le parc provincial killarney en ontario ou les forets headwaters en californie l impact de postulats differents quant a la croissance et a la volatilite de la valeur de la ressource est examine

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

the implementation costs of forest conservation policies in brazil abstract tropical forest conservation is considered a low cost option for climate change mitigation but mitigation cost assessments have featured opportunity costs neglecting policy implementation costs here we use official data to identify the brazilian federal government s operational and institutional budgets related to forest conservation policies implemented from 2000 to 2014 we distinguish the allocated and executed budgets of these policies and provide scenario based estimates of their cost effectiveness on average brazil spent us 1 billion year on forest conservation policies at the federal level brazil s substantial reduction in annual forest loss after 2004 was accompanied by a higher operational budget execution of disincentive based policy instruments and an absolute increase in both allocated and executed institutional budgets the post 2004 successful mitigation effort represented additional implementation costs to the brazilian federal government of us 308 923 ha of avoided deforestation or us 0 87 2 60 tco2 of avoided emissions factoring in also approximate municipal and state expenditures these costs increase to us 385 1153 ha or us 1 09 3 25 tco2 we conclude that implementations costs are non trivial in size including compared to estimates of land users opportunity costs this has important implications for redd policy design in the sense that implementation costs need to be adequately considered

the welfare state and competitiveness in all industrial countries fiscal policy is increasingly about redistribution in this paper the authors study redistribution across different types of agents in a world characterized by the presence of labor unions and distortionary taxation they show that an increase in transfers financed by distortionary taxation has nonlinear effects on unit labor costs relative to the other countries depending on the degree of centralization of the wage setting process in the labor market the authors find considerable empirical support for the model in a sample of fourteen oecd countries copyright 1997 by american economic association

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

impacts of carbon based policy instruments and taxes on tropical deforestation the impacts of carbon payments and income taxes on curbing tropical forest loss are analyzed under a market equilibrium framework the supply of cleared forest land was derived by using a two period utility maximization model when the carbon sequestration of a private forestholder is credited the land demand was derived from the profit maximization problem of a cash crop farmer the model was applied to data from the humid chaco eco region of paraguay the results indicate that taxes on cash crop and forestry incomes may in fact be ineffective in curbing forest loss carbon payments however would effectively reduce forest clearing in the context studied a carbon payment of 30 per ton of carbon would limit deforestation to 10 of existing forest cover a reversible carbon crediting system in which a forestholder can redeem a credited forest seems to substantially increase at least in the short run the effectiveness of carbon payments carbon payments could also complement the tax on cash crop income in curbing tropical forest loss an effective policy to combat tropical deforestation should therefore jointly consider forestry and cash crop sectors

agricultural expansion and deforestation modelling the impact of population market forces and property rights abstract this paper compares four different modelling approaches to agricultural expansion and deforestation and explores the implications of assumptions about the household objectives the labour market and the property rights regime a major distinction is made between population and market based explanations many of the popular policy prescriptions are based on the population approach assuming subsistence behaviour and limited market integration within a more realistic particularly for the long term effects market approach well intentioned policies such as agricultural intensification programmes may boost deforestation many forest frontier contexts are also characterized by forest clearing giving farmers land rights deforestation becomes an investment to the farmer and a title establishment strategy land titling and credit programmes may therefore increase deforestation

options uncertainty and sunk costs an empirical analysis of land use change abstract in a real option model of land conversion incorporating return uncertainty and sunk costs optimal conversion thresholds are significantly higher than those from expected net present value models not accounting for these factors empirical tests of conversion from agriculture to forest suggest that landowners value the option to convert when making conversion decisions higher uncertainty in returns to all potential uses and lower correlation between shocks to agricultural and forest returns decreases the likelihood of conversion estimates indicate a significant impact on conversion decisions with approximations of option values ranging from 7 to 81 of the expected value of the land asset

searching for an optimal rotation age for forest stand management under stochastic log prices due to rapid change in timber prices in the japanese market most likely affected by imported timber from countries such as the u s canada and the nordic countries the domestic forest managers have been facing a large degree of future price uncertainty because of this it becomes necessary to take the future price uncertainty into account within the forest management framework in this paper the continuous time stochastic process i e the geometric brownian motion has been used to model the log price process the binomial option pricing approximation was then applied to value the sugi cryptomeria japonica and hinoki chamaecyparis obtusa forested land under stochastic log prices in order to search for an optimal rotation age our experiments with the proposed two state stochastic dynamic programming model showed that when the current log price is high enough to cover all costs an optimal rotation age from the stochastic price and deterministic price models coincides although the total expected present net value from management activities differs also it was shown that as the current log price decreases an optimal rotation age derived from the stochastic price model becomes longer than that from the deterministic price model if the current log price further decreases then forest management will be abandoned and the forest stand will be converted into alternative uses

how not to pay field experimental evidence on the design of redd payments abstract payments for ecosystem services pes can use many design features we investigate the impact of payment conditionality types i e different specifications when to pay and when not to pay for pes on deforestation and agricultural production in a lab in the field experiment our experiment also tests variations in contract period and payment volatility we designed a highly visual simulation game to characterize the decision situation of a cattle rancher in brazil the player can expand extensive pasture by deforestation or intensify existing pasture the model includes both a land and a capital constraint we applied the game in an economic framed lab in the field experiment in tocantins brazil payments conditional on forest carbon stock lead to slow but steady deforestation while payments conditional on forest carbon stock change suppressed deforestation more strongly but payments conditional on stock increase cattle production while payments conditional on stock change have no effect on production thus depending on the level of leakage either type of conditionality can be more cost effective in reducing global carbon emissions contracts with limited periods lead to strong deforestation after the end of the payment period payment volatility had no significant effect

conservation payments under uncertainty the decision of whether to retain forest or convert to another land use is affected by uncertainty over future land use returns this paper examines the design of conservation payments to landowners under uncertainty payments are either indexed to the returns from deforestation agriculture or to a market value associated with forest nonuse benefits payment size depends on the degree of correlation between payments and agricultural returns and their relative volatility market based payments for reducing emissions from deforestation and degradation redd are simulated for brazilian soybean growers payments indexed to carbon prices are larger than those indexed to international soybean prices

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

public employment and labour market performance public employment does it increase unemployment we explore the consequences of public employment for labour market performance theory suggests that public employment may not only crowd out private employment but also increase overall unemployment if by offering attractive working conditions it draws additional individuals into the labour force empirical evidence from a sample of oecd countries in the 1960 2000 period suggests that on average creation of 100 public jobs may have eliminated about 150 private sector jobs slightly decreased labour market participation and increased by about 33 the number of unemployed workers theoretical considerations and empirical evidence however suggest that the crowding out effect of public jobs on private jobs is only significant in countries where public production is highly substitutable to private activities and the public sector offers more attractive wages and or other benefits than the private labour market

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

real interest rate and labor market performance around the world this article studies the effects of the real interest rate on labor market performance using a much larger sample of countries and more indicators of labor market performance than have been used in previous articles it finds that a rise in the real interest rate increases the unemployment rate raises the share of long term unemployed and reduces the employment rate the magnitude of these effects is very small in the short run but much more pronounced though still fairly small in the long run young people are disproportionately affected the results are robust to variations in specification

arbitrage pricing capital asset pricing and agricultural assets a new asset pricing model the arbitrage pricing theory has been developed as an alternative to the capital asset pricing model the arbitrage pricing theory model is used to analyze the relationship between risk and return for agricultural assets the major conclusion is that the arbitrage pricing theory results support previous capital asset pricing model findings that the estimated risk associated with agricultural assets is low this conclusion is more robust for the arbitrage pricing theory application because it provides a better explanation of the relationship between risk and returns than does the capital asset pricing model

options on the maximum or the minimum of several assets using an intuitive approach that also provides new intuition concerning the black and scholes equation this paper extends the results of johnson and stulz to the pricing of options on the minimum or the maximum of several risky assets

government size and unemployment evidence from industrial countries using data from 19 industrial countries for the period 1985 to 2002 this paper analyzes how the size of the government sector affects unemployment controlling for the impact of the business cycle as well as for the impact of all major labor market institutions and unobserved country effects we find that a large government sector is likely to increase unemployment it appears to have a particularly detrimental effect on women and the low skilled and to substantially increase long term unemployment it seems that dominant stateowned enterprises a large share of public investment in total investment as well as high top marginal income tax rates and low income threshold levels at which they apply are particularly detrimental

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

the effect of government size on the unemployment rate recent empirical studies have revealed that the size of government is inversely related to economic growth and technical efficiency evidence is presented linking the size of government to reported unemployment rates for the industrial countries during recent years this finding helps to explain the empirical link between government size and poor macroeconomic performance

on the use of period average stumpage prices to estimate forest asset pricing models several recent papers thomson 1987 zinkhan 1988 zinkhan and mitchell 1988 cubbage harris and redmond 1988 binkley and washburn 1988a 1988b including one in this journal redmond and cubbage 1988 use either sharpe s 1963 single index market model with returns to the overall market portfolio serving as the index or the capital asset pricing model capm sharpe 1964 lintner 1965 to measure the risk and evaluate the performance of timberland investments the capm specifies an equilibrium relationship between asset i s expected rate of return eri the risk free rate of return rf and the expected risk premium on the market portfolio of all assets in the economy the expected market rate of return erm minus the risk free rate rf

on the valuation of american call options on stocks with known dividends both the roll and the geske equations for the valuation of the american call option on a stock with known dividends are incorrectly specified this note presents the corrected valuation formula explains the misspecifications and provides a numerical example

optimal forest rotation when stumpage prices follow a diffusion process a key assumption in the faustmann rule for financial maturity is that stumpage prices are constant over time timber price series however exhibit wide fluctuations over time which this paper models as a lognormal diffusion process comparing the diffusion results modeled here to the fixed price faustmann results show 1 the prescribed rotation length is generally longer 2 computed stand values are higher using the diffusion model with the greatest divergence occurring when a stand is about the midpoint of a rotation 3 as the stumpage price volatility increases the gain in computed npv increases though in a nonlinear fashion

economic freedom and unemployment around the world author affiliation horst feldmann department of economics and international development university of bath bath ba2 7ay united kingdom h feldmann bath ac uk1 datathis paper applies the economic freedom of the world efw index that has been developed by a group of north american economists under the auspices of the canadian fraser institute with the aid of a worldwide network of further economists and institutes gwartney and lawson 2005 the index has often been assessed to be a good measure of economic freedom and thus has been widely used in the empirical literature it subdivides economic freedom into five areas i size of government ii legal structure and security of property rights iii access to sound money iv freedom to trade internationally and v regulation of credit labor and business for variable definitions and sources see appendix a the two main authors of the index have explained their concept and measurement of economic freedom in each report e g gwartney and lawson 2005 and elsewhere e g gwartney and lawson 2003 economic freedom is complex and multidimensional a major advantage of the efw index is that it reflects all aspects of economic freedom and adequately groups them into five different areas to provide information on the overall linkage between economic freedom and unemployment we use the efw summary index additionally we use the five area indices this allows us to analyze which economic freedoms have the strongest effects as the correlation matrix indicates there is substantial correlation among several of the area variables appendix b therefore we estimate specifications that include these measures one at a time however the correlation matrix also indicates that the area variables are not highly correlated with each other therefore we also present specifications in which we include them jointly estimating the effects of the area variables both separately and jointly allows us to check the robustness of our results for these variables the efw index not only has the advantage that it covers all aspects of economic freedom and adequately groups them into five different areas it also has the advantage that it is based largely on objective data these data and the ratings derived on the basis thereof may be verified by anybody aspects of economic freedom that cannot be measured objectively mainly in the areas legal structure and property rights and regulations are measured using subjective data from the global competitiveness reports of the world economic forum and the international country risk guides of the prs group the data in the global competitiveness reports are based on annual surveys among approximately 4000 to 5000 senior business executives the data in the international country risk guides are computed from an in house panel of experts of the prs group in both cases the data are compiled professionally for example the selection of respondents for the world economic forum s surveys is largely representative of the structure of each economy and the respondents have excellent knowledge of their country s economy the international country risk guides are based on the assessments of experienced experts 1for each variable included in the efw index a total of 38 the relevant data are translated into ratings with the aid of a formula that is published in the reports of the fraser institute the rating scale ranges from 0 to 10 with 0 representing the lowest and 10 the highest degree of economic freedom the area ratings for each of the five areas are calculated as the arithmetic means of the ratings for their respective components in turn the summary rating is the average of the five area ratings applying the most recent methodology which was further developed over the years the efw index was calculated for every fifth year from 1970 on plus for the years 2001 2002 and 2003