history dependence in concave economies abstract this paper investigates concave intertemporal optimization problems and derives two mechanisms either growth or control state interactions e g due to endogenous preferences that allow for multiple steady states including an unstable one therefore history dependence is possible in a perfectly governed economy subject to the law of diminishing returns if one of these two mechanisms is present this result complements a large amount of literature that attributes history dependence to convexities as a consequence lock ins into undesired evolutions are possible beyond the familiar case of increasing returns

cooperative management of groundwater resources in the presence of environmental externalities this paper investigates how cooperation among users can achieve a better management of groundwater in the presence of environmental externalities cooperation allows users to internalize the damages caused by their activities and reduce extractions the paper develops a game theoretical framework to assess the value of cooperation in an aquifer that is divided into three sub aquifers that are being overly exploited two types of externalities are modeled first water extractions in each sub aquifer impact water levels in neighboring sub aquifers extraction externality second the three sub aquifers are also connected to an ecosystem and thus decisions in each sub aquifer affect the health of the ecosystem environmental externality a cooperative game theory model is applied the model empirically shows how the uncontrolled extractions in each sub aquifer affects neighboring groundwater users but also cause severe impacts to the linked ecosystem the model is tested empirically in one of the most important aquifers in spain the eastern la mancha aquifer the results illustrate how both extraction and environmental externalities interact in affecting the likelihood of cooperation among the users the paper estimates the value of cooperation and its stability with and without the environmental externality

promoting groundwater reform in the guadiana basin in many parts of the world there is a substantial disconnect between existing water institutions and the institutions needed to ensure sustainable water supplies for the future implementing large scale institutional change is politically challenging in many cases changes must emerge from political bargaining or negotiation accordingly there is substantial literature looking at applications of negotiation theory to water policy carraro marchiori and sgobbi 2007 review this literature in detail

marginal commodity tax reforms a survey as noted 30 years ago by martin feldstein optimal taxes may be useless for practical purposes and emphasis should instead be placed on the possibility of enhancing welfare by reforming existing tax rates in this perspective marginal commodity tax reforms are gaining increasing attention due to political and economic constraints on large reforms of direct or indirect taxation in this paper we summarize the main features and results of the literature on marginal commodity tax reforms pioneered by ahmad and stern further developed by yitzhaki and thirsk and recently reinterpreted by makdissi and wodon we establish new links to other fields of research namely the literature on the use of equivalence scales and on poverty measurement we also critically examine some issues associated with the implementation of marginal tax reforms with special reference to the calculation of welfare weights and revenue effects finally we suggest directions for future research on poverty reducing commodity tax reforms

threshold management in a coupled economic ecological system abstract economic analysis of optimal ecosystem management in the presence of a threshold has typically ignored the potential for induced behavioral responses this paper contributes to the literature on non convex ecosystem management by considering the implications of a particular behavioral response in a regional economy that of amenity led growth to changes in ecosystem services generated by a lake ecosystem subject to a eutrophication threshold the essential policy challenge is to achieve optimal levels of lake nutrients and urbanization given that improvements to water quality will induce additional migration and urbanization in the region with attendant ecological impacts we show that policies that ignore the recursive relationship between urbanization and water quality unintentionally exacerbate boom bust cycles of regional growth and decline and risk pushing the system towards long run economic decline in contrast the optimal policy accounts for the behavioral feedbacks to improved ecosystem services and balances regional growth and ecological degradation

estimating the effect of campaign spending on senate election outcomes using instrumental variables o examine the traditional view that challenger spending is more effective than incumbent spending 7 i reestimate the effects of spending using instrumental variables that affect a candidate s ability to raise campaign funds such as candidate wealth levels hhen the endogeneity of candidate spending levels is properly taken into account the marginal effects of incumbent and challenger spending are roughly equal in contrast to previous research showing that because of higher marginal returns to challenger spending the incumbent s spending advantage cannot explain high incumbent reelection rates this article shows that in an average senate election the incumbent s spending advantage yields a 6 increase in the incumbent s vote share that incumbent spending wins elections has direct implications regarding the consequences of campaign finance reform my findings imply that equalizing spending levels may significantly increase incumbent defeat rates and caps on candidate spending may improve the chances of challengers in american congressional elections incumbents routinely win reelection even in the 1994 republican landslide change in the partisan makeup of congress occurred mainly through open seats switching from the democrats to the republicans a common explanation for high congressional reelection rates is the large campaign spending advantage enjoyed by incumbents it is widely believed that challenger spending is very important but there is surprisingly little evidence in the academic literature that incumbent campaign spending has an important effect on congressional election outcomes in light of the substantial effort incumbents devote to fundraising as well as some nagging methodological questions about existing academic studies the effect of incumbent spending on election outcomes remains an unresolved issue accurately measuring how incumbent spending leads to votes is of obvious importance politicians want to win elections and so if money matters then this will influence their behavior if campaign spending effects are trivial then concerns about politicians being

renewable resource management with stochastic recharge and environmental threats abstract exploitation diminishes the capacity of renewable resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of extreme environmental conditions and on the resource state determining its resilience when the former is uncertain and the latter evolves stochastically the uncertainty regarding the event occurrence is the result of the combined effect of these two uncertain components we study optimal management in this setting the environmental threat renders the single period discount factor policy dependent and as a result the compound discount factor becomes history dependent existence of an optimal markovian deterministic stationary policy is established and the optimal state process is shown to converge to a steady state distribution

welfare measurement under threats of environmental catastrophes abstract welfare measures under threats of environmental catastrophes are studied using the parable apparatus of weitzman and lofgren on the welfare significance of green accounting as taught by parable j environ econ manage 32 1997 139 153 the occurrence probability of the catastrophic events is driven at least partly by anthropogenic activities such as natural resource exploitation without external effects the green nnp is a genuine welfare measure vis a vis a particular parable economy often however the occurrence hazard constitutes a public bad treated as an externality by agents who ignore their own contribution to its accumulation in such cases the green nnp although accounting for the event hazard rate per se fails to properly internalize future effects on the hazard rate of current economic activities and as a result overestimates welfare the bias term associated with the green nnp is derived and expressed in a simple and interpretable form

optimal pest control in agriculture abstract based on economic methodology we model an ecosystem with two species in predator prey relationship mice feed on grain and grain feeds on a resource with optimizing behavior of individual organisms a short run ecosystem equilibrium is defined and characterized that depends on the farmer s use of fertilizer and pesticide and on the mice population which in turn is affected by pesticides in that way a microfounded agricultural production function is derived linking a sequence of short run ecosystem equilibria yields the growth function of the mice population which is thus derived rather than assumed in each period the farmer harvests all grain in excess of some given amount of seed if she maximizes her present value profits optimal farming is characterized by either using no pesticide or a moderate amount of pesticide or by applying a chattering control pest eradication is never optimal on the other hand if the farmer takes into account steady state mice populations only it may be optimal to eradicate mice or to use no or a moderate amount of pesticide depending on prices as well as on the shape of the grain production function which is determined by microparameters of grain reproduction

natural vs anthropogenic risk reduction facing invasion risks involving multi stable outcomes abstract natural resources important to economic systems are managed in the presence of event uncertainty marking the transition from a more desirable ex ante state to a less desirable ex post state the risks of this transition are endogenous and depend on state of the natural resource system and human behavior in designing least cost policies of risk reduction policy makers should consider the optimal mix of natural and human risk reduction decisions about the best risk reduction mix matter most for systems vulnerable to ex post multi stability in which the natural resource system has the potential to begin in one of multiple locally optimal basins of attraction this is because ex ante decisions can affect the initial conditions for the ex post system thereby determining the ex post basin of attraction and the optimal ex post state in this paper we find that an ex ante system that is convex and uniquely stable without risk may become non convex and multi stable in the presence of endogenous risks and ex post multi stability this result arises because ex post non convexities and the uncertainties associated with the invasion and its magnitude can create ex ante non convexities that generate multiple optimality candidates

distributed photovoltaic power generation possibilities benefits and challenges for a widespread application in the mexican residential sector mexico plans to implement a national program to support the adoption of distributed photo voltaic generation dpvg among qualified households the main objectives of such a program would be to reduce the burden of the substantial federal energy subsidy and increase the share of renewable energy sources used to generate electricity in this paper we assess the current conditions under which the mexican residential electricity sector operates and quantify the potential effects that the massive adoption of dpv systems would have on household expenditure and welfare subsidy reduction pollution and water resource usage based on the positive results in terms of both economic and environmental effects our paper provides a significant support for further design and implementation of a dpvg program

the management of fragile resources a long term perspective excessive exploitation diminishes the capacity of natural resources to withstand environmental stress increasing their vulnerability to extreme conditions that may trigger abrupt changes the onset of such events depends on the coincidence of random environmental conditions and the resource state determining its resilience examples include species extinction ecosystem collapse disease outburst and climate change induced calamities the policy response to the catastrophic threat is measured in terms of its effect on the long term behavior of the resource state to that end the l methodology developed originally to study autonomous systems is extended to non autonomous problems involving catastrophic threats

econometric modeling of fisheries with complex life histories avoiding biological management failures abstract economics of the fishery has focused on the wastefulness of common pool resource exploitation pure open access fisheries dissipate economic rents and degrade biological stocks biologically managed fisheries also dissipate rents but are thought to hold biological stocks at desired levels we develop and estimate an empirical bioeconomic model of the gulf of mexico gag fishery that questions the presumptive success of biological management unlike previous bioeconomic life history studies we provide a way to circumvent calibration problems by embedding our estimation routine directly in the dynamic bioeconomic model we nest a standard biological management model that accounts for complex life history characteristics of the gag biological intuition suggests that a spawning season closure will reduce fishing pressure and increase stocks and simulations of the biological management model confirm this finding however simulations of the empirical bioeconomic model suggest that these intended outcomes of the spawning closure do not materialize the behavioral response to the closure appears to be so pronounced that it offsets the restriction in allowable fishing days our results indicate that failure to account for fishing behavior may play an important role in fishery management failures

evaluation of biodiversity policy instruments what works and what doesn t w e review and confirm the claim that credible evaluations of common conservation instru ments continue to be rare the limited set of rigorous studies suggests that protected areas cause modest reductions in deforestation however the evidence base for payments for ecosystem services decentralization policies and other interventions is much weaker thus we renew our urgent call for more evaluations from many more biodiversity relevant locations specifically we call for a programme of research conservation evaluation 2 0 that seeks to measure how programme impacts vary by socio political and bio physical context to track economic and environmental impacts jointly to iden tify spatial spillover effects to untargeted areas and to use theories of change to characterize causal mechanisms that can guide the collection of data and the interpretation of results only then can we usefully contribute to the debate over how to protect biodiversity in developing countries

energy populism and household welfare we study a cycle of subsidized energy prices and estimate its welfare impact on households in the buenos aires metropolitan region a simple framework explains its emergence in terms of the preference of a median household voter for receiving transfer gains followed by a future flow of transfer losses we evaluate actual transfers and welfare effects that a departure of prices of natural gas and electricity generation from opportunity costs since 2003 had on households and explore the impact of a way back to opportunity cost pricing

coping with multiple catastrophic threats we study intertemporal policies for dealing with multiple catastrophic threats with endogenous hazards allowing inter alia for gradual mitigation efforts that accumulate to reduce occurrence risks the long run properties of the optimal policies are characterized in terms of the key parameters damage hazard sensitivity and natural degradation rate associated with each type of catastrophic threat effects of background threats on the optimal response to a potential catastrophe are illustrated numerically

diffusion induced instability and pattern formation in infinite horizon recursive optimal control this paper develops local stability analysis for deterministic optimal control theory for recursive infinite horizon intertemporal optimization problems where there is a continuum of spatial sites and the state variable can diffuse over these sites we identify sufficient conditions for a type of local instability which emerges from the interaction of the discount rate on the future the curvature of the hamiltonian and the spatial features of the problem we call this phenomenon optimal diffusion induced instability odi we illustrate our analytical methods with three stylized applications the first application is the optimal management of spatially connected human dominated ecosystems the second and third applications are harvesting of spatially interconnected renewable resources jel classification c6 q2

money and votes reconsidered congressional elections 1972 1982 the evolution of congressional campaign finance over the past decade is characterized by steady growth in campaign spending and other notable changes in campaign finance practices the main purpose of the research reported here was to determine whether these changes have altered the effects of campaign spending on election outcomes this required reexamination of auxiliary questions concerning how sending effects operate and can be measured it also required facing the limits of what analysis of aggregate campaign spending data can tell us about money in elections replication of ols and 2sls analyses of campaign spending effects produced solidly consistent results over the six congressional elections held between 1972 and 1982 taken at face value the evidence is overwhelming that the challenger s level of spending has a strong impact on the vote whereas that of the incumbent has virtually no impact at all but the evidence remains open to doubt on two grounds one is the probable inadequacy of the 2sls model or perhaps any possible model leaving the issue of simultaneity bias unsettled if bias remains the estimates exaggerate the electoral effects of the challenger s campaign expenditures the issue cannot be resolved with more of the same data but rather requires data of a different sort surveys taken over the course of a sample of campaigns would do the trick meanwhile i think it would be foolish to make policy on the assumption that bias is in fact substantial the greatest likelihood remains that restrictions on campaign money will have the general effect of hurting challengers jacobson 1979 the other doubtful albeit equally stable finding is that incumbents do not gain votes by spending in campaigns no incumbent seems to believe it and there is at least circumstantial evidence from for example the 1982 elections that their skepticism is quite justified if so the problem lies in the limits of what aggregate data of the kind analyzed here can tell us few incumbents do not spend heavily when they are strongly challenged if both candidates spend beyond the point needed to become thoroughly familiar to voters then the substance of the campaigns the contents of campaign messages become the dominant factors incumbents may need to spend money in order to change the message as new circumstances arise to frame new issues that would help them most or damage them least to win the battle of establishing the real issues like nonincumbents sitting members may sometimes need to spend beyond a certain threshold to remain competitive but nearly all of them do so when the necessity arises so aggregate spending data are largely uninformative how the money is spent rather than how much is what matters the two most notable developments in congressional campaign finance have opposing implications national party organizations particularly the republican have assumed an increasingly important role in financing campaigns greater central control leads to a more efficient distribution of the party s collective campaign resources which among other things promises to raise the overall level of electoral competition it also leads to more coordinated campaigning with greater emphasis on national themes and programs thus it should foster more cooperation and loyalty among fellow partisans in congress but pacs have also grown in numbers and in financial importance because most concentrate on gaining access to incumbents they do little to make elections more competitive because they usually pursue narrowly defined interests their influence fragments the congress and weakens party coalitions in this and other ways parties and pacs are natural rivals the most consequential decisions taken in the next round in campaign finance policy will be those which affect the relative importance of parties and pacs see u s congress 1984 for comments on this and other current campaign finance issues

economic growth population theory and physiology the bearing of long term processes on the this lecture sketches a theory of the secular decline in morbidity and mortality that takes account of changes induced in physiological functioning since 1700 the synergism between technological and physiological improvements has produced a form of human evolution biological though not genetic rapid culturally transmitted and not necessarily stable which is still ongoing in both oecd and developing countries thermodynamic and physiological aspects of economic growth are defined and their impact on growth rates is assessed implications of this theory for population forecasting measurement of national income demand for leisure pension policies and demand for health care are considered excerpt

equivalence scale relativities and the extent of inequality and poverty most inequality and poverty theory analyzes equivalent income distributions for homogeneous populations incomes are assumed to be deflated by an equivalence scale that accounts for differences in needs between households yet in practice there is no consensus about what the appropriate equivalence scale is the authors analyze how the choice of equivalence scale affects inequality and poverty measures and show that there is a systematic relationship between equivalence scale generosity and the extent of inequality and poverty they consider most of the measures in common use and provide some empirical illustrations copyright 1992 by royal economic society

the distributional impact of price changes in hungary and the united kingdom in soviet type economies commodity prices were distorted as part of the redistributive system of the state but with the transition prices have been liberalized and taxes made more uniform has this change adversely affected the distribution of purchasing power this paper develops a new method of measuring the distributional impact of price changes by computing the distributional characteristics of commodities from household budget survey data and applies it to hungary and the united kingdom finding that the distributional impacts over the past decade were negligible and not significantly different from zero in both cases copyright 1995 by royal economic society

equilibria in campaign spending games theory and data we present a formal game theoretic model to explain the simultaneity problem that makes it difficult to obtain unbiased estimates of the effects of both incumbent and challenger spending in u s house elections the model predicts a particular form of correlation between the expected closeness of the race and the level of spending by both candidates which implies that the simultaneity problem should not be present in close races and should be progressively more severe in the range of safe races that are empirically observed this is confirmed by comparing simple ols regression of races that are expected to be close with races that are not using house incumbent races spanning two decades

a democratic measure of household income growth theory and application to the united kingdom this paper develops a price and quantity system of indicators structured round atkinson s concept of inequality aversion a democratic indicator of income growth weighting each household s growth experience equally is shown to result when prais democratic price index is used to deflate the geometric mean of equivalised household income a welfare interpretation of the democratic indicator of income growth is provided and it is shown that with heterogeneous but homothetic preferences the deflator can serve as a common scaling social cost of living index when applied to income as well as to consumption application to united kingdom household data suggests that over the interval 2005 6 2015 6 democratic real equivalised household income grew by 0 20 per cent per annum while the plutocratic equivalent grew by 0 52 per cent per annum

incorporating resilience in the assessment of inclusive wealth an example from south east australia this paper explores the consequences of changes in a system s resilience on the sustainability of resource allocation decisions as measured by inclusive wealth iw arrow et al in environ resour econ 26 647 685 2003 we incorporate an estimate of resilience in iw by taking account of known or suspected thresholds that can lead to irreversible or practically irreversible changes in the productivity and value of assets and hence social welfare these thresholds allow us to identify policies or projects that may be leading to an increased risk of decline in capital stocks the wealth of the region such risks are not reflected through usual measures of current system performance e g agricultural production we use the goulburn broken catchment in south eastern australia as a case study to explore the significance and practicality of including resilience in inclusive wealth estimates

inertia risk improving economic models of catastrophes we model endogenous catastrophic risk in a new way we call it inertia risk which accounts for delays between physical variables and the hazard rate a characteristic often observed in reality the added realism significantly affects optimal policies relative to the standard model of catastrophic risk the probability of a catastrophe occurring at some point in time can span the entire interval 0 1 and is not 0 or 1 as is typical in standard models inertia risk can also generate path dependences we illustrate the implications for policy in a simple model of climate change

uncovering regulator s implicit social welfare weights under price cap regulation abstract this paper provides a simple procedure that can be used in empirical works aimed at uncovering the preferences of regulators over consumers the inverting procedure proposed by ross 1984 ross t w 1984 uncovering regulator s social welfare weights rand journal of economics 15 152 155 is adapted to a regulatory situation characterised by price cap regulation

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

opportunity cost estimation of ecosystem services land use changes rank among the most significant drivers of change in ecosystem services worldwide the enhancement of important services such as biodiversity and carbon sequestration requires modifications in land use that can lead to the decline in other ecosystems services targeting the most suitable areas for particular land uses based on comparative advantages requires opportunity cost information across large regions this is a demanding task because the input output relations are ill defined and determined by spatially heterogeneous operational and environmental conditions to address this methodological challenge this paper presents a two stage semiparametric technique that enables multi dimensional production possibility frontiers to be estimated from data provided by biophysical models specific advantages of the proposed frontier approach are its flexibility with regard to assumptions on the convexity of the production possibility set and its freedom from any separability assumptions for the input output space and the space of the heterogeneous background variables the method is illustrated for a case study of 18 central and eastern european countries results show that opportunity costs of changes in ecosystem services provision differ substantially between regions those areas having already relatively high levels of carbon sequestration have a comparative advantage in sequestering carbon opportunity costs of biodiversity are generally positively related with the level of biodiversity up to a turning point after which they are negatively related to illustrate the policy consequences of the observed economies and diseconomies of scope we compare two management regimes to illustrate the potential gains from smart land management

linking common property resource management to human capital outcomes in regions where common pool resources provide significant support to their surrounding communities any climate change related shock could produce multiple livelihood repercussions in this paper a model explores how the health of common pool resources could impact upon human capital outcomes for communities that struggle to find alternate livelihood options when traditional means such as agriculture become unsustainable the management of common pool resources is modeled as a strategic interaction process between two heterogeneous communities that are directly or indirectly dependent upon it an unconstrained harvesting of common resources such as forestry not only depletes its stocks but it also indirectly affects crop output through soil degradation a number of situations are constructed where communities are able to successfully finance human capital accumulation through proper management of their common pool resources however results also warn that communities that are faced with limited opportunities towards accumulating human capital must plan ahead to prevent the depletion of their common resources below critical levels when non linear feedbacks to soil degradation emanate from low levels of common pool stocks human capital outcomes as well as future livelihoods of such communities are threatened

development ecological resources and their management a study of complex dynamic systems abstract human well being depends to a large extent on services provided by ecological systems in poor countries this dependence is more transparent than in industrialised countries where the dependence is more indirect effective management of these systems requires a good understanding of their properties and in particular a knowledge of the dynamics of the systems in the article the dynamics of one simple system is analysed economically the system is a lake and the interaction between the run off of nutrients into the lake and the growth of either algae eutrophication in lakes in northern europe and north america or water hyacinths in lakes in southern and eastern sfrica is studied it turns out that the dynamics exhibit bifurcation points so that there are two basins of attraction if the system flips to one basin and it is regarded desirable to return to the other basin there will be hysteresis assuming that there are different users of the lake a differential game is constructed that captures the strategic interests of the users the resulting equilibrium shows first the conventional negative externality that will force the system to a different basin od attraction finally we investigate the use of a tax for bringing back the system to a pareto optimum

catastrophes and ex post shadow prices how the value of the last fish in a lake is infinity and why we should not care much abstract catastrophic risk is currently a hotly debated topic this paper contributes to this debate by showing two results first it is shown that for a certain class of optimal control problems the derivative of the value function with respect to the initial state may approach infinity as the state variable goes to zero even when the first order partial derivatives of the integrand and transition functions are finite in the process it is shown that standard phase diagrams used in optimal control theory contain more information than generally recognized and that the value function itself may be easily illustrated in these diagrams second we show that even if the value function has an infinite derivative at some point it is not correct to avoid this point in finite time at almost any cost the results are illustrated in a simple linear quadratic fisheries model and proven for a more general class of growth functions

allocating resources in an uncertain world water management and endangered species instream flows may be essential in protecting aquatic species that are threatened or endangered an economic model of the optimal allocation of water under pure uncertainty is developed with particular attention paid to the situation when a species characterized by critical depensation is affected by instream flows we adopt the notion of pure uncertainty that frank knight and daniel ellsberg intended which applies when decision makers cannot reduce their uncertainty to a unique probability distribution following recent work by hansen sargent and others we employ robust control as a way to deal with this problem copyright 2008 oxford university press

provision of a public good with multiple dynasties carbon emissions create externalities across countries and generations these externalities depend on the degree of contemporaneous cooperation and intergenerational altruism i study the relative importance of these features in determining equilibrium climate policy by imbedding an olg framework with intergenerational altruism into a differential game among dynasties each representing a coalition of nations there is an isomorphism between pure and paternalistic altruism i illustrate the multiplicity of equilibria using an analytic linear in state model equilibrium steady states are more sensitive to small changes in cooperation than altruism consideration of large changes in altruism and cooperation can reverse this ranking

biology as a source of non convexities in ecological production functions generating ecological production functions including harvest yield functions is a high priority research area most yield functions used in economics and ecology rely on convexity properties of species growth functions but convexity is shown here to depend on whether realistic biology is incorporated optimizing behavior by individual organisms is connected with species population dynamics in order to derive growth functions in a general equilibrium ecosystem model non convexities are shown to be an inherent property of the growth functions owing to familiar biological processes including predator prey and competitive relations predator satiation and prey substitution the growth functions generate yield functions that are problematic for management because they exhibit kinked average revenue curves discontinuous marginal revenue curves and knife edge optimum effort levels where a small increase above the optimum effort can rapidly deplete the stock these phenomena can be explained entirely by the underlying biological processes

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

optimal pricing of environmental and natural resource use with stock externalities abstract underlying some of the most pressing environmental problems are the interlinked resource and environmental stock externalities with threshold effects using a simple dynamic model it is shown how in the face of such externalities the static market based policy instruments such as pigouvian taxes should be modified it is shown that even if for an initial period there is going to be no pollution stock damage the optimal policy still requires that abatement begins immediately and at increasing rates simulation of the model for the case of fossil fuel burning and the consequent global warming shows that the optimal carbon tax and therefore the optimal control strategy is particularly sensitive to changes in the marginal abatement cost and the level of fossil fuel demand policy simulations contrast the optimal control policy with and estimate the welfare losses from alternative policies deriving from arbitrary tax paths the latter include i a no tax policy ii a constant carbon tax rate iii the european community s proposed carbon tax path and iv a delayed optimal tax path

optimal tax rates and tax design during systemic reform abstract budgets in eastern europe are under strain as taxes are reformed and receipts fall should expenditure be maintained or should personal taxes be cut this paper asks how optimal tax rates might respond to a transition in which the government becomes less averse to inequality but the inequality in skills increases these are roughly offsetting and less important than falling enterprise revenue and the decline in the efficiency of personal taxation both of which cause a sharp fall in optimal transfers tax design consists of balancing the diffeiing inefficiencies of incompleteness in indirect tax coverage against evasion prone direct taxes

ecological threshold and ecological economic threshold implications from an ecological economic model with adaptation abstract this paper investigates ecological threshold and ecological economic threshold by developing an ecological economic model an extension of a population resource dynamics model developed by brander and taylor 1998 the model reflects three critical issues regarding an ecological economic system system boundary non convexity and adaptation the paper elucidates six main findings ecological economic threshold may come before ecological threshold the ecological economic threshold may exhibit a highly context dependent and dynamic nature which suggests the precautionary principle markets do not respond sufficiently to maintain resiliency under an external shock as prices do not reflect thresholds the system can be restored by intervention even after crossing the ecological economic threshold various transitional paths are possible in restoring the system and adaptation affects resilience to a somewhat significant effect which suggests the importance of better information and education because of the complexity of the model i adopt a system dynamics approach for the development and analysis of the model

inequality as a determinant of malnutrition and unemployment policy this paper explores the policy implications that are obtained once it is recognized that at low nutrition intakes a person s productivity is an increasing function of intake in the context of a fully general equilibrium model it is shown that if aggregate assets in an economy are neither large nor small certain patterns of lorenz improving asset redistributions or nutrition transfers increase aggregate output and reduce the volume of involuntary unemployment and the incidence of undernourishment copyright 1987 by royal economic society

accounting for global warming risks resource management under event uncertainty abstract optimal management of atmospheric pollution is discussed with a special emphasis on the uncertainty concerning the occurrence of undesirable events associated with the greenhouse effect the uncertainty considered here stems from our ignorance of the exact pollution level required to trigger the event rather than from the genuinely stochastic nature of the processes involved taking atmospheric pollution level as the state variable it is found that uncertainty implies the existence of an equilibrium interval within which the emission rate of the greenhouse gases should be kept equal to the natural removal rate of these gases processes initiated outside the equilibrium interval must converge monotonically to its nearest endpoint the determination of the interval requires no knowledge of the optimal policy in contrast ignoring event occurrence risk implies a single equilibrium level attracting the optimal process from any initial level

the economics of non convex ecosystems introduction the word convexity is ubiquitous in economics but absent from economics in this paper we explain why and show what difference it makes to economic analysis if ecosystem non convexities are taken seriously a simple proof is provided of the connection between self similarity and power laws we also provide an introduction to each of the papers in the symposium and draw out the way in which they form a linked set of contributions

carbon prices for the next hundred years this paper examines the socially optimal pricing of carbon emissions over time when climate change impacts are unknown potentially high consequence events the carbon price tends to increase with income but learning about impacts or their absence decouples the carbon price from income growth the price should grow faster than the economy if the past warming is not substantial enough for learning the true long run social cost it grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so a quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years

optimal management with potential regime shifts we analyze how the threat of a potential future regime shift affects optimal management we use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics and exogenous versus endogenous probabilities of regime shift prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock we show that all other cases yield unambiguous results in particular with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels

current issues in the economics of groundwater resource management the issue of groundwater management remains a practical concern in many regions throughout the world while water managers continue to grapple with the question of how to manage this resource in this article we attempt to bring the most advanced and appropriate tools to bear on the issue of resource allocation involving groundwater our objective is to demonstrate the state of the art in the literature on ways to think about this complex resource and to deal with the important economic issues emanating from its complexity we present the conceptual framework within which economists examine the elements interacting in the management of groundwater resources indicate why the role of the market is limited with respect to the price of this very complex resource and point to the mechanisms that can pull competitive groundwater price and quality graded quantity of groundwater in line with their equilibrium levels in particular we critically review economic models of groundwater use examine the potential for groundwater management discuss the difficulties encountered in the estimation of the relevant control variables of such models and identify the advantages and limitations of the instruments devised for the efficient use allocation of this resource finally we argue that devised regulatory schemes usually ignore the information and knowledge needed for their implementation and we suggest a core of conditions necessary for successful groundwater management reforms

strategic exploitation of a common resource under environmental risk abstract we study the effect of environmental risk on the extraction of a common resource using a dynamic and non cooperative game in which an environmental event impacts the renewability and the quality of the resource we show that the anticipation of such an event has an ambiguous effect on extraction and the tragedy of the commons a risk of a reduction in the renewability induces the agents to extract less today while a risk of a deterioration in the quality has the opposite effect moreover when environmental risk induces conservation the tragedy of the commons is worsened

uncertainty and irreversibility in groundwater resource management abstract optimal exploitation of renewable groundwater resources when extraction affects the probability of occurrence of an irreversible event is studied the term irreversible signifies that the event occurrence renders the resource obsolete it is found that uncertainty concerning the event occurrence has a profound effect under certainty when the stock level below which the event occurrence has a profound effect the optimal state process converges to a unique equilibrium state under uncertainty when the event occurrence level is unknown we identify equilibrium intervals and show that optimal processes initiated elsewhere converge to a boundary of one of these intervals inside an equilibrium interval the expected loss due to the event occurrence is so high that it does not pay to extract in excess of recharge even though under certainty doing so would be beneficial

economic land use ecosystem services and microfounded species dynamics abstract in an integrated economy ecosystem model humans choose their land use and leave the residual land as habitat for three species forming a food chain the size of habitat determines the diversity and abundance of species that biodiversity generates in turn a flow of ecosystem services with public good characteristics for human consumption the ecosystem submodel yields rather than assumes population growth functions with each species growth depending on the size of habitat first the relationship between habitat and species growth sustenance decline and extinction is explored the laissez faire economy is shown to result in an underprovision of habitat making the case for land use restrictions for nature protection the optimal land use policy is characterized with full regard of ecosystem dynamics finally labor augmenting technical change is introduced to generate ever increasing pressure towards further habitat reductions in the laissez faire economy the habitat is consequently squeezed to zero in the long run so that all species are doomed social optimality demands however to refrain from using all land for economic purposes despite ever growing labor productivity

competitive versus efficient extraction of a common property resource the groundwater case abstract in this paper socially optimal and private extraction of a common property aquifer are compared open loop equilibrium and feedback equilibrium in linear strategies have been computed to characterize private extraction the use of these two equilibrium concepts allows us to distinguish between cost and strategic externalities as long as the open loop solution captures only the cost externality and the feedback solution captures both the results show that strategic behaviour increases the overexploitation of the aquifer compared to the open loop solution however if the groundwater storage capacity is large the difference between the socially optimal and private extraction the latter characterized by a feedback equilibrium is negligible

the campaign value of incumbency a new solution to the puzzle of less effective incumbent spending a puzzle in research on campaign spending is that while expenditure is positively related to votes won this effect is far more strongly or even exclusively enjoyed by challengers rather than by incumbents we unearth a new explanation for the puzzle focusing on the hidden yet variable campaign value of office perquisites which incumbents deploy in their campaigns to win votes when these variable office benefits are unobserved then the effect is to make observed incumbent spending less effective than spending by challengers using data from the 2002 irish general election where incumbency was assigned a variable campaign value and included in declared campaign spending we are able to demonstrate this hidden incumbency effect and estimate its relationship to electoral success in terms of overall votes share of votes and probability of winning a seat contrary to previous research showing ineffective incumbent spending we find that when the campaign value of office is also measured public office value spending is not only very effective in winning votes but also seems to be more effective than regular incumbent spending

using repeat challengers to estimate the effect of campaign spending on election outcomes in the u s house previous studies of congressional spending have typically found a large positive effect of challenger spending but little evidence for effects of incumbent spending those studies however do not adequately control for inherent differences in vote getting ability across candidates high quality challengers are likely to receive a high fraction of the vote and have high campaign expenditures even if campaign spending has no impact on election outcomes to avoid that bias this paper examines elections in which the same two candidates face one another on more than one occasion differencing eliminates the influence of any fixed candidate or district attributes estimates of the effects of challenger spending are an order of magnitude below those of previous studies campaign spending has an extremely small impact on election outcomes regardless of who does the spending campaign spending limits appear socially desirable but public financing of campaigns does not

campaign spending in proportional electoral systems incumbents versus challengers revisited this article a argues that campaign spending is no more effective for challengers than incumbents in congressional elections using candidate centered forms of proportional representation pr b develops a new method to estimate spending effects in poly candidate elections and c demonstrates that spending benefits incumbents as much as challengers in the congressional elections of three separate countries brazil ireland and finland this article also offers a theory of campaign spending effectiveness that emphasizes a candidate s relative potential to attract new electoral support as determined by both precampaign familiarity and personal partisan and ideological attributes challengers and incumbents obtain similar returns to spending under pr because its permissiveness encourages challengers who are limited in their abilities to build electoral support even when they spend heavily the theory and findings have important implications for understanding the effects of campaign finance and cam

adjusting to climate change implications of increased variability and asymmetric adjustment costs for investment in water reserves abstract in this paper we study the determination of optimal water storage capacity in a region taking into account that the supply of the resource the flow into the reserve is uncertain that a measure of the uncertainty the variance is likely to increase with climate change that building capacity is costly and that the development of water resources may entail alsoenvironmental costs we find that water storage capacity in the long run ispositivelyrelated to increases in uncertainty if the marginal benefit of water withdrawal isconvexand that for the case of costly reversibility of investment a range of inaction for investment appears and the stability of water storage capacity with respect to changes in variance increases

pollution control in an uncertain environment abstract the effects of the threat of occurrence of environmental catastrophes on optimal pollution control are considered recent analysis of irreversible events is extended to two types of reversible events single occurrence and multiple occurrence recurrent events while it is possible that the threat of irreversible events induces more pollution we show that reversible events under quite general conditions induce more conservation less pollution the analysis is carried out via a simple method the h method to identify optimal steady states by comparing steady state policies with small variations from them for recurrent events the optimal state process must approach a unique steady state from any initial level in this case the h method characterizes the dynamic behavior of the optimal state process without actually solving for it

life expectancy and the environment we present an olg model in which life expectancy and environmental quality dynamics are jointly determined agents may invest in environmental care depending on how much they expect to live in turn environmental conditions affect life expectancy as a result our model produces a positive correlation between longevity and environmental quality both in the long run and along the transition path eventually multiple equilibria may also arise some countries might be caught in a low life expectancy low environmental quality trap this outcome is consistent with stylized facts relating life expectancy and environmental performance measures we also discuss the welfare and policy implications of the inter generational externalities generated by individual choices finally we show that our results are robust to the introduction of growth dynamics based on physical or human capital accumulation c 2009 elsevier b v all rights reserved

catching up with the economy in his presidential address five years ago zvi griliches 1994 called attention to the severe difficulties that beset current attempts to measure the growth of labor productivity in the american economy because of these difficulties it is likely that the true rate of economic growth is substantially underestimated the root of the problem is the difficulty in measuring output in the service sector which now represents two thirds of the economy in such sectors as health care and information services the contribution to gross domestic product gdp is measured by inputs rather than outputs a procedure that makes it impossible to gauge accurately improvements in the quality of output thus in the case of computers which are transforming american society economists have been unable so far to find a measurable contribution of computers to the rise in labor productivity an astonishing paradox i want to follow up on this problem of mismeasurements my thesis is that the profession

the effects of campaign spending in house elections new evidence for old arguments the question of how campaign spending affects election results remains open because the simultaneity problem has proven so intractable green and krasno s 1988 recent attempt to solve the problem and to demonstrate that marginal returns on spending are as great for incumbents as for challengers again comes up short a panel feature of the abc newslwashington post congressional district poll conducted during the 1986 elections offers a fresh perspective on the question analysis of changes in voting intentions during the final six weeks of the campaign shows that as the tainted ols studies have invariably suggested the amount spent by the challenger is far more important in accounting for voter s decisions than is the amount spent by the incumbent

strategic behavior and efficiency in the common property extraction of groundwater groundwater has always been regarded as a common property resource where entry is restricted by land ownership and private exploitation is inefficient in 1980 gisser and sanchez presented a first estimation of this inefficiency cornparing socially optimal exploitation with private competitive exploitation using a model with linear water demand average extraction cost independent of the rate of extraction and linearly decreasing with respect to the water table level they characterized the private exploitation of the aquifer assuming that farmers are myopic and choose their rate of extraction to maximize their current profits whereas optimal exploitation is obtained by maximizing the present value of the stream of aggregate profits their results show that if the storage capacity of the aquifer is relatively large the difference between the two systems is so small that it can be ignored for practical consideration this result has been called the gisser sanchez rule by nieswiadomy 1985 and it has and important policy implication regulation of the resource does not seem justified since the profits it brings are not very high 1

data watch research data from transition economies ten years into the transition from communism in the countries of the former soviet union and central and eastern europe a cursory search of the econlit database turns up hundreds of empirical studies published in refereed journals that deal with various issues in transition economies even so we suspect that many economists are prevented from making full use of the possibilities offered by the transition by the difficulties of obtaining and interpreting data from the region the purpose of this brief essay is to indicate some possible sources for data that can be used for economic analysis as well as some cautions regarding the use of these data

how much does money matter buying votes in japan 1967 1990 japanese elections are notorious for the money that flows between contributors politicians and voters to date however nobody has estimated statistically the impact of this money on electoral o

tinbergen and tipping points could some thresholds be policy induced abstract thresholds and tipping points that are characteristic of dynamic multi stability are increasingly prominent touchstones of the science policy interface prior economic work has shown thresholds arising in convex concave ecological models that exclude humans may disappear in models of coupled economic ecological systems when economic agents are included as part of the system less well understood is how this result may depend on the ability of humans to manage complex systems we examine the role of institutions that condition the available management choices we find institutional restrictions do not generate non convexities when the ecological system is well behaved but that these restrictions may generate non convexities when the ecological system is convex concave these results are tied to the concept of path controllability which is when managers have sufficient controls to guide the system across the state space path controllability is the dynamic version of the tinbergen rule and generally requires separate controls to manage each possible ecological externality we link the concepts of ecosystem externalities thresholds and path controllability to provide new economic insights into problems with the potential for multi stability and we illustrate the importance of institutions for managing convex concave systems

regulating environmental threats environmental consequences of natural resource exploitation often entail threats of future occurrences of detrimental abrupt events rather than or in addition to inflicting a damage gradually the possibility of abrupt occurrence of climate change related calamities is a case in mind the uncertainty associated with the realization of these threats and their public bad nature complicate the design of optimal economic response we derive a pigouvian hazard tax schedule that implements the socially optimal outcome the tax is based on the expected cost of the hazard generating activities and serves to reduce hazardous emissions well in advance of the catastrophic occurrence a numerical example illustrates possible effects of the proposed regulation scheme implications for climate policy are discussed

economic incentives for managing filterable biological pollution risks from trade infectious livestock disease problems are biological pollution problems prior work on biological pollution problems generally examines the efficient allocation of prevention and control efforts but does not identify the specific externalities underpinning the design of efficiency enhancing policy instruments prior analyses also focus on problems where those being damaged do not contribute to externalities we examine a problem where the initial biological introduction harms the importer and then others are harmed by spread from this importer here the externality is the spread of infection beyond the initial importer this externality is influenced by the importer s private risk management choices which provide impure public goods that reduce disease spillovers to others making disease spread a filterable externality we derive efficient policy incentives to internalize filterable disease externalities given uncertainties about introduction and spread we find efficiency requires incentivizing an importer s trade choices along with self protection and abatement efforts in contrast to prior work that targets trade alone perhaps surprisingly we find these incentives increase with importers private risk management incentives and with their ability to directly protect others in cases where importers can spread infection to each other we find filterable externalities may lead to multiple nash equilibria

optimal adaptation strategies to face shocks on groundwater resources we consider an exogenous and reversible shock to a groundwater resource namely a decrease in the recharge rate of the aquifer we compare optimal extraction paths and the social costs of optimal adaptation in two cases under certainty i e when the date of occurrence of the shock is known and under uncertainty when the date of occurrence of the shock is a random variable we show that an increase in uncertainty leads to a decrease in precautionary behavior in the short run and to an increase in precautionary behavior in the long run we apply our model to the particular case of the western la mancha aquifer in spain we show that in this context it is advantageous for the water agency to acquire information on the date of the shock especially for high intensity and intermediate risk events

using fast and slow processes to manage resources with thresholds economists have relied on convexity assumptions for a long time but many natural resources that stem from ecosystems have non convexities in their dynamics this article illustrates the consequences of relaxing convexity assumptions for management and the role of fast and slow variables the paper presents a general framework to handle systems with fast and slow variables and illustrates the method using a model of coral reefs subject to fishing pressure the insights obtained are used to discuss alternative management strategies

welfare impacts of electricity generation sector reform in the philippines abstract this paper reports an empirical investigation into the welfare impacts of the introduction of private sector participation into the philippines electricity generation sector by liberalizing the market for independent power producers ipps during the power crisis of 1990 1993 this study uses a social cost and benefit analysis the main benefits came from ipps who contributed to resolving the crisis and promoted economic and social development consumers and investors were net gainers while the government lost and there was an air pollution cost the paper concludes that the reform with private sector participation increased social welfare