renegotiation on incomplete procurement contracts abstractthis article examines the impact of incomplete contracts on procurement costs in road construction auctions ex ante contracts in these auctions often fail to specify all of the potential construction contingencies and consequently changes in scope are necessary after construction begins using vermont road construction contract data this study finds evidence that there is a statistically significant difference in costs of firms between auctions with and without extra work adjustments substantial adaptation costs are responsible for the higher procurement outlays in incomplete contract i also find that bidders inflate their bids to incorporate risk premiums in incomplete contracts however my estimates suggest that this bidding behaviour does not affect their profit margins

deciding between competition and collusion we develop an approach to identify and test for bid rigging in procurement auctions first we introduce a general auction model with asymmetric bidders second we study the problem of identie cation in our model we state a set of conditions that are both necessary and sufe cient for a distribution of bids to be generated by a model with competitive bidding third we discuss how to elicit a prior distribution over a e rm s structural cost parameters from industry experts given this prior distri bution we use bayes s theorem to compare competitive and collusive models of industry equilibrium finally we apply our methodology to a data set of bidding by construction e rms in the midwest the techniques we propose are not computationally demanding use e exible functional forms and can be programmed using most standard statistical packages

prices and the winner s curse we usually assume that increases in supply allocation by rationing and exclusion of potential buyers reduce prices but all these activities raise the expected price in an important set of cases when common value assets are sold furthermore when we make the assumptions needed to rule out these anomalies for symmetric buyers small asymmetries among the buyers necessarily cause the anomalies to reappear our results help explain rationing in initial public offerings and outcomes of spectrum auctions we illustrate our results in the wallet game and in another new game we introduce the maximum game

empirical implications of equilibrium bidding in first price symmetric common value auctions this paper studies federal auctions for wildcat leases on the outer continental shelf from 1954 to 1970 these are leases where bidders privately acquire at some cost noisy but equally informative signals about the amount of oil and gas that may be present we develop tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values we also use data on tract location and exposr values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition we find that bidders are aware of the winner s curse and their bidding is largely consistent with equilibrium

subcontracting and the survival of plants in the road construction industry a panel quantile regression analysis this paper investigates how subcontracting parts of contracted work shapes entrants success and survival we find that newly developed quantile regression approaches can be adapted to study survival of firms competing for government contracts in road construction the method is applied on a data set that includes patterns of firm entry exit and auction related information we find an apparent increase in the business life of firms who subcontract out part of their projects in texas these subcontracting effects appear to be more pronounced for firms with few or no options outside the industry and among firms who contract out part of their work to disadvantaged business enterprises

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

an empirical analysis of entrant and incumbent bidding in road construction auctions this paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions we find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents the differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant s costs exhibits greater dispersion than that of an incumbent s and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs we also find that more efficient firms bid on average more aggressively and firms with greater backlogs bid less aggressively

procurement contracting with time incentives theory and evidence in public procurement social welfare often depends on how quickly the good is delivered a leading example is highway construction where slow completion inflicts a negative externality on commuters in response highway departments award some contracts using scoring auctions which give contractors explicit incentives for accelerated delivery we characterize efficient design of these mechanisms we then gather an extensive data set of highway projects awarded by the california department of transportation between 2003 and 2008 by comparing otherwise similar contracts we show that where the scoring design was used contracts were completed 30 40 faster and the welfare gains to commuters exceeded the increase in procurement costs using a structural model that endogenizes participation and bidding we estimate that the counterfactual welfare gain from switching all contracts from the standard design to the efficient apb design is nearly 22 of the total contract value 1 14 billion copyright 2011 oxford university press

how much climate policy has cost for oecd countries abstract high economic cost of climate policy has attracted critical debate since the kyoto protocol however reliable empirical evidence of the abatement cost of green house gases across countries remains scant in this study we estimate the average yearly green house gas abatement costs per capita for a panel of 28 oecd countries in years 1990 2015 the marginal abatement costs are estimated using a novel data driven approach based on convex quantile regression compared to traditional frontier estimation methods the quantile approach takes into account a broader set of abatement options and is more robust to inefficiency noise and heteroscedasticity in empirical data the comparison of oecd countries shows that the actual abatement cost per capita has been very modest much lower than predicted in the late 1990s this result has profound policy implications calling for more ambitious climate change mitigation strategy in the future

mitigation of adverse effects on competitiveness and leakage of unilateral eu climate policy an assessment of policy instruments the european union eu has developed a strategy to mitigate climate change by cutting greenhouse gas ghg emissions and fostering low carbon technologies however the risk of implementing unilateral policies is that distortive effects are generated at the global scale affecting world energy prices international competitiveness and the geographical allocation of carbon intensive production processes using a dynamic cge model we assess the rate of carbon leakage and adverse impacts on competitiveness in a number of scenarios over the period 2010 2050 according to the model results we highlight two major issues first in the case of a unilateral eu climate policy carbon leakage and negative effects on competitiveness are quite serious anti leakage measures can only mitigate leakage and adverse economic impacts on competitiveness in a limited way on the contrary an optimality analysis addressing the environmental effectiveness cost effectiveness and political feasibility of alternative policy solutions reveals that the eu long term decarbonisation strategy by investing in energy efficiency and renewable energy might ensure protection of vulnerable manufacturing activities while enhancing the competitiveness of technologically advanced industries

the effect of information on the bidding and survival of entrants in procurement auctions in government procurement auctions of construction contracts entrants are typically less informed and bid more aggressively than incumbent rms this bidding behavior makes them more sus ceptible to losses aecting their prospect of survival in april of 2000 the oklahoma department of transportation started releasing the internal cost estimates to complete highway construction projects using newly developed quantile regression approaches this paper examines the impact of the policy change on aggressive entrants first we nd that the information release eliminates the bidding dierential between entrants and incumbents attributed to informational asymmetries second we argue that the policy change aects the prospects of survival of entrants in the market we nd that those who used to exit the market relatively soon are now staying 37 percent longer while at the median level bidding duration increased by roughly 68 percent the policy has the potential to encourage entry in government procurement auctions and thus increase competition

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

efficiency in auctions with private and common values an experimental study this discussion has resulted in a publication in the american economic review 2002 92 3 625 43 auctions are generally not efficient when the object s expected value depends on private and common value information we report a series of first price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders while some subjects fall prey to the winner s curse they weigh their private and common value information in roughly the same manner as rational bidders with observed efficiencies close to predicted levels increased competition and reduced uncertainty about the common value positively affect revenues and efficiency the public release of information about the common value also raises efficiency although less than predicted

moral hazard incentive contracts and risk evidence from procurement deadlines and late penalties are widely used to incentivize effort tighter deadlines and higher penalties induce higher effort but increase the agent s risk we model how these contract terms affect the work rate and time to completion in a procurement setting characterizing the efficient contract design using new micro level data on minnesota highway construction contracts that includes day by day information on work plans hours worked and delays we find evidence of ex post moral hazard contractors adjust their effort level during the course of the contract in response to unanticipated productivity shocks in a way that is consistent with our theoretical predictions we next build an econometric model that endogenizes the completion time as a function of the contract terms and the productivity shocks and simulate how commuter welfare and contractor costs vary across different terms and shocks accounting for the traffic delays caused by construction switching to a more efficient contract design would increase welfare by 22 5 of the contract value while increasing the standard deviation of contractor costs a measure of risk by less than 1 of the contract value

model uncertainty learning and the gains from coordination this paper considers gains from international economic policy coordination when there is uncertainty concerning the functioning of the world economy but also learning about the true model on the part of policymakers the paper reports estimates of plausible alternative versions of a standard two country model activist policy either coordinated or uncoordinated may produce large welfare losses in the absence of learning if policymakers behave in the wrong model hence exogenous money targets and freely flexible exchange rates may be best however model learning from observations on macroeconomic variables causes coordinated policies to dominate activist uncoordinated policies or exogenous money targets copyright 1991 by american economic association

can the seller benefit from an insider in common value auctions abstract in existing models of first price common value auctions heterogeneous bidder information characterized by a well informed insider is detrimental to the seller s revenue we show that this is not a general principle the linkage effect of increased information identified by milgrom and weber has force in our model of heterogeneous bidders and dominates any adverse effects of an insider on revenues in addition a bidder with garbled information can profit in a first price auction if his information is private and an inside bidder may prefer to have less information about the outside bidder s signal journal of economic literature classification numbers d44 d82

estimating aid allocation criteria with panel data in 1990 the net amount of economic aid or official development assistance to all recipients from all multilateral and bilateral sources was about 62 billion an amount that exceeded the gdps of greece and portugal despite the size of this yearly transfer there has been no rigors modeling and estimation of the criteria by which it occurs as a result there is little agreement about the extent to which oda is allocated according to the needs of the recipient countries the purpose of this paper is to develop a rigorous theoretical model of oda allocation that can be used to provide consistent estimates of the importance of recipient needs copyright 1994 by royal economic society

environmental and economic effects of post kyoto carbon regimes results of simulations with the global model ginfors abstract using the extensive and disaggregated global ginfors model consequences of different possible post kyoto regimes on the german and european economy and other major economies in the medium run until 2020 are depicted the approach is very extensive and detailed in comparison to already existing analyses this holds for the number of explicitly modelled countries 50 and 2 regions and 41 economic sectors input output tables the bilateral trade flows the detailed coverage of behavioural parameters the coverage of energy balances and co 2 emissions as well as for the number and precise economic political design of simulation runs global emissions will double until 2030 compared to 1990 levels without the existence of a far reaching climate regime after 2012 a unilateral commitment of the eu would only be a drop in the bucket which solely strengthens the credibility of the eu in international negotiations a stabilisation of global emissions in 2020 compared to 2010 which is consistent with the 2 target of the eu can only be achieved if all developed and at least the large emerging economies participate and if all possible existing market ready reduction technologies are used

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

policy bargains and the problem of model selection abstract parameter uncertainty and disagreements about model specification pose a particular difficulty for economic policy design frankel and rockett argue that if model uncertainty is not explicitly taken into account policy coordination is as likely to decrease welfare as increase it this paper therefore looks at the scope for reducing errors by making strategic model choices part of the overall policy selection procedure it shows that alternative definitions of the policy bargain produces decisions which are robust against disagreements about the correct model while alternative choices of model produce policies which are robust against model uncertainty hence fixed i e model free policy rules are no substitute for making strategic model choices

regulating bidder participation in auctions regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry we show that the relative performance of two such mechanisms a standard first price auction with free entry and an entry rights auction depends nonmonotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism as an empirical application we estimate parameters from first price auctions with free entry for bridge building contracts in oklahoma and texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly

subcontracting and competitive bidding on incomplete procurement contracts this article examines the impact of incomplete contracts on subcontracting and the design of procurement auctions i estimate the effect of ex post contract revisions on unit costs for both subcontracted and in house performed work items on bridge projects procured by the california department of transportation i model a scoring auction showing how ex post revisions skew bidding decisions and estimate unit costs from bid data using the method of sieve estimation the results highlight the cost implications of incomplete contracting frictions subcontracting decisions and bidding distortions in conclusion i propose alternative auction mechanisms that could improve outcomes

predicting bid prices by using machine learning methods abstractit is well known that empirical analysis suffers from multicollinearity and high dimensionality in particular this is much more severe in an empirical study of itemized bids in highway pr

the simultaneous use of rival models in policy optimisation an important problem in macroeconomic policy design that has hitherto received little attention is the uncertainty of model structure by that we mean that more than one model fits the data reasonably well however each model is based on a different school of economic thought and thus has a different structure hence our analysis is based on non nested models when statistical inference cannot reject one model in favour of the other in this paper we discuss a way in which policy optimisation can be used to derive policies that are compatible with more than one model structure this is accomplished by extending an optimisation algorithm for a single nonlinear model of the economy to handle simultaneously more than one model and objective function the algorithm is designed to be efficient and relatively modest in its storage requirements a minimax extension is also considered for optimal policies robust to model choice when any one of the models turns out to represent the real economy two large scale nonlinear models of the uk economy are used simultaneously to obtain policies which are optimal with respect to a combined cost function this cost function is a combination of the cost functions associated with the individual models the models used are the h m treasury model and the model of the national institute of economic and social research

alternative common value auction procedures revenue comparisons with free entry the logic of revenue comparisons for different types of common value auctions is substantially altered if the number of participants rather than being fixed responds endogenously to the expected profitability from participating in a thoroughly symmetric model a seller may prefer that competition be indirect an auction procedure in which fewer participants are needed to drive the expected profitability from participating down to the level obtainable in other auctions in the economy can attain higher expected revenue if a sale is sufficiently likely this insight allows a complete revenue ranking of standard auction procedures with endogenous entry

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

interfuel substitution a meta analysis interfuel substitutability has been of longstanding interest to the energy economics and policy community however no quantitative meta analysis has yet been carried out of this literature this paper fills this gap by analyzing a broad sample of studies of interfuel substitution in the industrial sector manufacturing industry or subindustries or macro economy of a variety of developed and developing economies publication bias is controlled for by including the primary study sample size in the meta regression results for the shadow elasticities of substitution between coal oil gas and electricity for forty six primary studies show that at the level of the industrial sector there are easy substitution possibilities between all the fuel pairs with the exception of gas electricity and coal electricity substitution possibilities seem more constrained at the macro level and less constrained in sub industries estimates also vary across countries publication bias does not seem to be present but model and data specification issues very significantly affect the estimates derived by each individual study estimates from cross section regressions are generally largest fixed effects panel estimates intermediate in magnitude and time series estimates are mostly much smaller econometric research suggests that the fixed effects estimates are likely the best among the existing studies though biased downwards

multilateral and bilateral loans versus grants issues and evidence this paper examines a wide range of issues relating to the mix between loans and grants as well as the degree of concessionality of loans a number of empirical tests are carried out based on annual panel data over 1970 to 1999 for 22 donor countries and 72 recipient countries based on the tests we observe that for bilateral donors past grant loan mix and hence reflows from past transfers do not influence the volume of current resource transfers our tests also show that the rate of official borrowing by the recipients and by deduction the extent of their past debt burden is positively influenced by the extent of the concessionality of such loans irrespective of whether it is in the form of subsidised interest rates or longer grace periods the paper concludes with a review of the circumstances in which grants soft loans and non concessional loans might have their respective comparative advantage as well as a discussion of the need so as to overcome the negative incentive problems of soft loans for a typical concessional loan package to be separated into two constituent parts this would enable the recipient to be given the grant component and the option to take from the non concessional loan component as much as desired

the impact of r d investment on productivity new evidence using linked r d lrd data the impact of r d investment on productivity new evidence using linked r d lrd data this paper uses confidential census longitudinal microdata to examine the association between r d and productivity for the period 1972 1985 these data allow for significant improvements in measurement and model specification yielding more precise estimates of the returns to r d our results confirm the findings of existing studies 1 positive returns to r d investment 2 higher returns to company financed research 3 a productivity premium on basic research these results are robust to adjustments for influential outliers also our evidence suggests that the return to company financed r d is an increasing function of firm size i introduction robert solow s studies in the late 1950s dramatically changed perceptions of the sources of economic growth until this time the commonly held view was that improvements in economic welfare were achieved primarily through the use of more inputs in particular capital input however solow 1957 reported that only 10 percent of the twofold rise in u s per capita output during the years 1909 1949 was due to growth in the capital labor ratio the remainder was attributed to more efficient use of inputs or technological change solow also established a framework for estimating technological change a productivity residual or a measure of changes in output that could not be explained by changes in input use the solow residual in modified form has become virtually synonymous with the measurement of total factor productivity tfp growth jorgenson and griliches 1967 demonstrated that under the assumptions of constant returns to scale and competitive factor pricing changes in total factor productivity measure shifts in a production function rather than treat technological change as exogenous or manna from heaven many economists have explored its determinants r d investment is generally regarded as having a strong impact on productivity growth empirical analysis of the r d productivity connection has often been based on estimation of reduced form equations derived from the r d capital stock model griliches 1979 which extends the solow model to include the stock of technical knowledge or knowledge capital as a factor of production in addition to the standard factors of production physical capital labor intermediate materials and energy if the rate of depreciation of knowledge capital is assumed to be negligible tfp growth dtfp is a function of the intensity of r d investment rdint which is usually measured as the ratio of r d expenditure to sales 1 dtf p sub t alpha beta rdin t sub t u sub t where u sub t is a classical disturbance term the coefficient on r d intensity beta is interpreted as both the marginal product of knowledge capital and the rate of return to r d investment 1 estimates of beta at the company or line of business level are interpreted as measures of the private rate of return to r d or those that accrue to the firm or its investors due to incomplete appropriability or other factors this return may not equal the social return to this activity most empirical studies especially those based on aggregate and sectoral data have found evidence of a strong positive correlation between tfp growth and r d investment however results using firm level data have been mixed the finding that these two variables are uncorrelated is cause for concern because it implies that firms may not be able to earn significant returns on their investment in r d making them less likely to undertake this investment in the future even if it is socially desirable for them to do so we believe that it is important to reestimate this relationship because it is highly likely that existing firm level studies have been based on measures of tfp that are crude imprecise and unrepresentative

information disclosure as a matching mechanism theory and evidence from a field experiment market outcomes depend on the quality of information available to its participants we measure the effect of information disclosure on market outcomes using a large scale field experiment that randomly discloses quality information in wholesale automobile auctions we argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality this implies that information disclosure helps match heterogeneous buyers to cars of varying quality causing both good and bad news to increase competition and revenues the data confirm these hypotheses these findings have implications for the design of other markets including e commerce procurement auctions and labor markets jel c93 d44 d82 l15

price adjustment policies in procurement contracting an analysis of bidding behavior the fluctuations in fuel prices over the past decade led a number of government agencies to introduce price adjustment clauses in procurement contracting those clauses were primarily designed to reduce contractors uncertainty without considering the impact of such initiatives on bidding and the budget we analyze a newly constructed detailed panel of observations on bids for construction contracts and compare bidding behavior across periods and projects and across items within projects estimates from a difference in differences approach indicate that bidding becomes more aggressive and less dispersed after the implementation of this policy the difference is more pronounced when we consider itemized bids than overall project bids alternative techniques of regression discontinuity and nonparametric estimation are applied and yield consistent results

donors mechanisms for financing international and national public goods loans or grants this paper investigates whether three classes of donors multilateral organisations regional institutions and bilateral donors tailor their mix of grants and loans to reflect international benefit spillovers and recipient specific benefits derived from aid funded activities in developing and transition countries to account for recipient benefit shares donors should use a greater share of grants when supported activities yield a larger portion of international public benefits a greater reliance on loans is appropriate when a large portion of recipient specific benefits are associated with the assistance by reflecting recipient benefit shares in the grant loan mix donors assistance also promotes allocative efficiency using the credit reporting system crs database from oecd for 1980 2000 our analysis establishes that various donor classes apply different grant loan mixtures when supporting the environment health knowledge and governance sectors of recipient countries we employ analysis of variance and other statistical comparisons of the means to investigate differences among donor classes we demonstrate that bilateral donors do the best job in tailoring their grant loan mix to accord with the extent of international public good benefits embodied in the aid supported activity multilateral organisations grant loan mix is intermediate of the three types of donors with some evidence of them relying more on grants to finance activities that possess a larger share of international public good spillovers regional institutions however do not discriminate their grant loan mix by either sectors or the associated public good spillovers this finding suggests that regional development banks need to adjust their grant loan mix to better account for international benefit spillovers if these institutions are to warrant the increased funds to underwrite regional public goods that they have been seeking if however their mix is institutionally set then the stakeholders must give these institutions greater flexibility to tailor their grants and loans to who benefits from the aid supported public goods this is the first paper to empirically ascertain whether the grant loan mix is tied to the inherent publicness of the aid funded activities

income redistribution in a federal system the question of the appropriate level of government to undertake income redistribution is receiving renewed attention from economists the standard argument about the issue might be summarized as follows 1 interstate migration of taxpayers and transfer recipients raises the cost to voters of income redistribution at the state level above the cost at the federal level 2 statewide redistribution confers spillover benefits to residents of other states 3 therefore as compared with a national system decentralized responsibility for income redistribution yields both less redistribution and less than the socially optimal amount of income redistribution the purpose of this paper is only to question step 1 of the above argument of course readers who accept the assumptions of the standard argument may conclude that the possible weakening of step 1 of that argument reduces the likelihood that its conclusion holds the paper argues that the cost of redistribution faced by state residents may in fact be lower at the state level than at the national level because their federal tax obligations fall as the state redistributes more income thus part of the cost of redistribution at the state level can be exported to residents of other states the state s federal tax bill falls when taxable incomes in the state are reduced by increased redistribution deductibility of state taxes enhances this result but is not necessary for it to demonstrate the proposition without adding unnecessary complication a simple model of income redistribution is described in which governments at all levels use linear tax transfer schedules to redistribute income the single government case is considered first then two levels of government are introduced and finally migration is allowed it is shown that without migration state costs are never greater than national costs of redistribution as long as redistribution reduces total money income when migration is allowed the result depends on the elasticity of migration responses compared with the elasticity of labor supply responses

exploring the schemes for green climate fund financing international lessons summary as a key issue in recent international climate summits the green climate fund gcf is confronted with the problem of insufficient financing this paper intends to explore several schemes for raising the public finance of the gcf among developed countries lessons from three main ongoing international financing mechanisms have been drawn including the united nations un membership dues official development assistance oda and the global environment facility gef the indexes that reflect historical emission responsibility hr and ability to pay ap are also used to share the burden results reveal that the ongoing international financing mechanisms vary in their burden sharing results and the shares of existing donors are driven by highly complex reasons weighting the hr un and gef approaches with the preference score compromises psc method could yield a compromise scheme in which the regional contributions are highly similar to those under the gcf initial resource mobilization from 2015 to 2018 gcf financing heavily depends on contributions from the developed countries even if the donor parties are extended to emerging economics this paper also finds that the decision of the united states to withdraw from climate finance will significantly increase the burden for other donors particularly for the european union the contribution share of which is predicted to increase to nearly 14 percentage points the schemes proposed in this study can provide a useful reference for gcf financing

validating energy oriented cge models although cge models have received heavy usage they are often criticized as being insufficiently validated key parameters are often not econometrically estimated and the performance of the model as a whole is rarely checked against historical outcomes as a consequence questions frequently arise as to how much faith one can put in cge results in this paper we employ a novel approach to the validation of a widely utilized global cge model gtap e by comparing the variance of model generated petroleum price distributions driven by historical demand and supply shocks to the model with observed five year moving average price distributions we conclude that energy demand in gtap e is far too price elastic over this time frame after incorporating the latest econometric estimates of energy demand and supply elasticities we revisit the validation question and find the model to perform more satisfactorily as a further check we compare a deterministic global general equilibrium simulation based on historical realizations over the 2001 2006 period during which petroleum prices rose sharply along with growing global energy demands as anticipated by the stochastic simulations the revised model parameters perform much better than the original gtap e parameters in this global general equilibrium context

marginal abatement costs of co2 emission reductions geographical flexibility and concrete ceilings an assessment using the poles model abstract the kyoto protocol envisage the setting up of flexibility mechanisms allowing annex b countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency the current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for annex b countries and also of introducing ceilings to trade this paper analyses the stakes and economic potential of adopting this instrument both for those countries that made commitments in kyoto and for developing countries it is based on a formal approach that allows for a consistent framework of analysis the emission permit market is in fact simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the poles model after analysing these marginal abatement cost curves and comparing them with those produced by other models we explore two different configurations for a competitive market a market limited to the annex b countries and a world market the results produced by the model show that widening the market to include developing countries is more effective than the annex b market solution it reduces the cost of implementing kyoto for oecd countries and at the same time allows the countries of the south to benefit from selling the permits this research also shows that introducing restrictions on exchanges for annex b countries could have a counter productive redistribution effect with the ethical argument that underlies that particular measure

disadvantaged business enterprise goals in government procurement contracting an analysis of bidding behavior and costs programs that encourage the participation of disadvantaged business enterprises dbe as subcontractors have been a part of government procurement auctions for over three decades in this paper we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to dbe firms we study how dbe subcontracting requirements affect bidding behavior in federally funded projects within a symmetric independent private value framework we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals we then use nonparametric estimation methods to uncover and compare the cost of firm bidding on a class of asphalt projects related to surface treatment in texas the analysis shows little differences in the cost structure between projects that have subcontracting goals and those that do not

equilibria in open common value auctions abstract a sufficient condition for uniqueness of nash equilibrium in second price common value auctions is identified we establish that there exists a continuum of equilibria in irrevocable exit common value auctions for the case of two bidders we provide plausible sufficient conditions under which the expected seller revenue is maximized at the symmetric equilibrium an example in which the auctioneer s revenue at the symmetric equilibrium in a second price auction is strictly greater than the revenue at many asymmetric equilibria in the corresponding irrevocable exit auction is provided

efficiency improving fossil fuel technologies for electricity generation data selection and trends abstract this paper studies patenting dynamics in efficiency improving electricity generation technologies as an important indicator of innovation activity we build a novel database of worldwide patent applications in efficiency improving fossil fuel technologies for electricity generation and then analyse patenting trends over time and across countries we find that patenting has mostly been stable over time with a recent decreasing trend oecd countries represent the top innovators and the top markets for technology some non oecd countries and particularly china are also very active in terms of patenting activity in this sector the majority of patents are first filed in oecd countries and only then in bric and other non oecd countries bric and other non oecd countries apply for patents that are mostly marketed domestically but bric countries represent important markets for patent duplication of oecd inventions these results are indicative of significant technology transfer in the field of efficiency improving technologies for electricity production

conditionality and aid effectiveness re evaluated this paper evaluates aid by considering how effective aid has been in exerting leverage on policy choices it is rather easy to demonstrate that if a country is unwilling to implement policy reforms attaching conditions to aid will not ensure sustained reform in this sense conditionality does not work this ignores the fact that donors through aid and conditions can influence recipient policies the argument of this paper is that if the analysis focuses on channels of influence one can better identify ways to enhance aid effectiveness reform is a slow and difficult process and donors would be more effective development partners if they see their role as being to support rather than force this process in simple terms donors should provide the information and technical assistance to help governments to make policy choices rather than dictating choices by imposing conditions

bidder behavior in multiunit auctions evidence from swedish treasury auctions we analyze a unique data set on multiunit auctions which contains the actual demand schedules of the bidders as well as the auction awards in over 400 swedish treasury auctions first we document that bidders vary their prices bid dispersion and the quantity demanded in response to increased uncertainty at the time of bidding second we find that bid shading can be explained by a winner s curse driven model in which each bidder submits only one bid despite the fact that the bidders in our data set use much richer bidding strategies third we explore the extent to which the received theories of multiunit auctions are able to offer insights into the bidder behavior we observe our empirical evidence is consistent with some of the predictions of the models of auctions that emphasize private information the winner s curse and the champion s plague while the models of multiunit auctions serve as useful guideposts our empirical findings also point to several new areas of research in multiunit auctions

decarbonisation perspectives for the polish economy abstract in the coming decades the energy sector in poland will undergo a substantial transition towards low carbon usage which will have a predominant impact on the economy several modernization scenarios for energy policy are currently being discussed by the government and not yet concluded the main objective of this paper is to provide a tool that allows to simulate such scenarios and to show the impact of decarbonisation on the whole economy we propose an intertemporal hybrid general equilibrium modeling that incorporates energy technologies bottom up approach directly into a macroeconomic structure top down approach by accounting for wide adjustments in the economy while controlling for all major constraints the model gives a unique and detailed insight into the future shape of the energy sector and prospects of low carbon economy in poland our simulation results suggest that there are no free lunches no realistic energy mix allows to achieve sustainable positive economic growth when considerable emission reduction is to be achieved the price on co2 will exceed eur 100 for 30 emission reduction with respect to business as usual scenario gradual phase out of coal requires focusing on biomass technology the first best nuclear and wind power the second best

equity in climate change an analytical review how global emissions reduction targets can be achieved equitably is a key issue in climate change discussions this paper presents an analytical framework to encompass contributions to the literature on equity in climate change and highlights the consequences in terms of future emissions allocations of different approaches to equity progressive cuts relative to historic levels for example 80 percent by industrial countries and 20 percent by developing countries in effect accord primacy to adjustment costs and favor large current emitters such as the united states canada australia oil exporters and china in contrast principles of equal per capita emissions historic responsibility and ability to pay favor some large and poor developing countries such as india indonesia and the philippines but hurt industrial countries as well as many other developing countries the principle of preserving future development opportunities has the appeal that it does not constrain developing countries in the future by a problem that they did not largely cause in the past but it shifts the burden of meeting climate change goals entirely to industrial countries given the strong conflicts of interest in defining equity in emission allocations it may be desirable to shift the emphasis of international cooperation toward generating a low carbon technology revolution equity considerations would then play a role not in allocating a shrinking emissions pie but in informing the relative contributions of countries to generating such a pie enlarging revolution

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

increasing competition and the winner s curse evidence from procurement we assess empirically the effects of the winner s curse which in common value auctions counsels more conservative bidding as the number of competitors increases first we construct an econometric model of an auction in which bidders preferences have both common and private value components and propose a new monotone quantile approach which facilitates estimation of this model second we estimate the model using bids from procurement auctions held by the state of new jersey for a large subset of these auctions we find that median procurement costs rise as competition intensifies in this setting then asymmetric information overturns the common economic wisdom that more competition is always desirable

international policy design and the sustainability of policy bargains events of the past decade and the persistence of the worldwide recession have underlined the interdependence of the major economics competitive devaluations first illustrated the dangers of unilateral decisions and politicians have regularly called for concerted policies since the bonn economic summit in 1978 economic theory has shown that coordinated policies can bring gains but the question of whether those gains will be significant and how they will be distributed remains unanswered remarkably few empirical results on how interdependence should affect policy design or even on the signs of spillovers between economies have been produced this paper estimates the costs of uncoordinated policies to the us and eec economies and also the potential gains and risks in cooperation it focuses particularly on the process of determining rational policy bargains and whether in an international context such bargains are likely to be sustainable

the impact of public information on bidding in highway procurement auctions a number of papers in the theoretical auction literature show that the release of information regarding the seller s valuation of an item can cause bidders to bid more aggressively this widely accepted result in auction theory remains largely untested in the empirical literature recent theoretical work has also shown that this effect can be more pronounced in auctions with larger common cost uncertainty we examine the impact of a policy change by the oklahoma department of transportation that led to the release of the state s internal estimate of the costs to complete highway construction projects we perform a differences in differences analysis comparing bidding in texas a state that had a uniform policy of revealing the same information all throughout the period of analysis to bidding in oklahoma our results show that in comparison to texas auctions the average bid in oklahoma fell after the change in engineers cost estimate ece policy this decline in bids was even larger for projects where the common uncertainty in costs is greater moreover the within auction standard deviation of bids fell after the change in ece policy with the most significant decline observed again in projects with greater common cost uncertainty

analyzing trade offs in international climate policy options the case of the green climate fund summary we investigate the trade offs between economic growth and low carbon targets for developing and developed countries in the period up to 2035 policy options are evaluated with an original version of the dynamic cge model gdyne abatement costs appear to be strongly detrimental to economic growth for developing countries we investigate options for reducing these costs that are consistent with the current negotiations we show that the green climate fund financed through a levy on carbon taxation can benefit all parties and large benefits are associated with investment of the green climate fund to foster energy efficiency in developing countries

capacity constraints and information revelation in procurement auctions i introduction procurement auctions are one of the most widely used mechanisms in modern economies to disburse funds for public works projects a substantial portion of these funds are spent on the construction and maintenance of roads and highways an activity on which the u s government for instance spends 160 billion annually in this article we examine the bidding behavior of experimental participants in order to shed light on the strategic incentives generated by these auctions our investigation is centered on two observations made in the existing literature in a typical state level procurement auction held in the united states firms submit sealed bids for a particular project that has been advertised in advance by the state s department of transportation subject to some qualifications the lowest bidder wins the project and is paid the amount of its bid empirical work analyzing these auctions has found that construction firms suffer from capacity constraints whereby a firm with a larger backlog of preexisting work commitments finds it more costly to add new work to its roster de silva dunne and kosmopoulou 2003 jofre bonet and pesendorfer 2003 1 bidders with larger backlogs therefore tend to submit higher bids and win fewer auctions because a typical department of transportation auctions off hundreds of such projects a year capacity constraints create an intertemporal linkage between adjacent auctions a bidder that wins a given auction incurs an opportunity cost in terms of forgoing expected profits in future auctions on account of its anticipated higher costs our first research question therefore is how does the presence of capacity constraints affect the bidding behavior of experiment participants our second research question is inspired by the fact that procurement markets have been found to be vulnerable to collusion by bidders bajari and ye 2003 porter and zona 1993 in most states contracts are typically won by a small set of firms that interact repeatedly in procurement auctions over the course of the year this can provide an ideal setting for a bid rigging scheme in procurement auctions where firms compete by setting prices observing the prices set by one s rivals can be crucial to the feasibility of any collusive scheme porter 2005 if bidders are not colluding and if past bids are not correlated with current costs then observing a rival s past bids will not lead to observable variation in a firm s bids if however firms are attempting to collude a change in the bid revelation policy of the procurer might lead to a measurable change in bids thus revealing the past bids of players can influence their strategic behavior as it alters the ways in which they can provide information to each other about their strategies even in the absence of explicit collusion when all bids are revealed a firm may be able to signal its desire to tacitly collude by submitting noncompetitive bids 2 this leads us to the question what is the effect of varying the amount of information revealed about past bids on the current bids of experimental participants competing in dynamic auctions the answer to this question may be useful for policy makers given that currently most state departments of transportation in the united states publicize all the bids from past auctions the central contribution of our article is to answer the two questions posed with evidence collected from laboratory economic experiments in the experimental sessions bidders play one shot two round and infinite horizon procurement auction games where winning an auction can increase a bidder s cost in the next auction in half of the experimental sessions only the winning bid is revealed after each auction this is done to restrict the amount of information that is shared between bidders explicit communication is not allowed in the other half of the sessions we reveal winning and losing bids at the conclusion of each auction

the potentials of a reverse auction in allocating subsidies for cost effective roof top photovoltaic system deployment abstract photovoltaic pv has developed to one of the most promising technologies for renewable electricity generation the austrian government currently provides subsidies for roof top pv systems through a constant administratively determined feed in tariff or an investment co funding in both subsidy schemes applications are approved on a first come first served basis there are concerns about i the selection of suitable roofs for pv systems and ii allocating subsidies among applicants to deploy roof top pv systems cost effectively thus we analyze the potentials of a simple discriminative first price reverse auction application scheme applicants define individually the required level of subsidy and those with the lowest request for subsidies are selected in an ex post analysis we evaluate the potentials of such a scheme in increasing power output and saving public spending for the federal state of vorarlberg in austria results indicate a potential increase of cumulated produced electricity between 15 and 18 in comparison to the current policy in addition a reverse auction based system would lead to savings of public spending per kwh between 20 and 41

international macroeconomic policy coordination when policymakers do not agree on the true model the authors relax the assumption of the literature on international coordination that policymakers know the true model t wo countries will still be able to agree on a cooperative policy pack age that each believes will improve the objective function relative t o the nash noncooperative solution however the bargaining solution may move the target variables in the wrong direction these points ar e illustrated with monetary and fiscal multipliers taken from simulat ions of ten leading econometric models out of 1 000 possible combina tions of models that could represent u s beliefs non u s beliefs and the true model monetary coordination improves u s welfare in on ly 546 cases copyright 1988 by american economic association

equity and distributional implications of climate change this paper looks at the climate change problem from an equity perspective it compares utilitarian approaches with ones based on rights or capabilities it argues that few of the proposals that have been discussed in the literature have an ethical basis while those that do have a number of problems the paper looks at the practicalities of addressing the equity problem in international negotiations two specific dimensions of the equity problem in the context of climate change are explored further in the paper those relating to uncertainty and those relating to discounting

bidding off the wall why reserve prices may be kept secret abstract this note shows by means of an example that in a common value auction a seller with a random reservation value can increase her ex ante expected profits by following a policy of conducting an auction in which her reserve price is kept secret compared to an auction in which the reserve price is announced by keeping the reserve price secret the seller is able to encourage greater participation from the bidders and can therefore increase the linkage of the price paid to the value of the purchased object journal of economic literature classification numbers d82 d44

information returns and bidding behavior in ocs auctions 1954 1969 this paper examines federal auctions for leases on the outer continental shelf in the light of the predictions of the first price sealed bid common values model of auctions the authors find that the data strongly support the model for auctions in which one bidder is better informed than the other bidders the evidence for auctions in which bidders have noisy but qualitatively similar information is less conclusive but is consistent with a model in which each bidder does not know either the actual or potential number of bidders on a lease copyright 1987 by blackwell publishing ltd

a re examination of the use of ability to pay taxes by local governments abstract the orthodox view of local finance in the u s is that local governments should abstain from using ability to pay taxes because migration would result in a misallocation of resources and would nullify any attempt to redistribute income this paper uses a general equilibrium model of a metropolitan area to examine the efficiency and redistributive properties of local income taxation relative to local head taxes contrary to the orthodox assertion the results indicate that local governments can use income taxation without substantially misallocating resources in addition some redistribution results from the use of local income taxes

how did highly indebted poor countries become highly indebted reviewing two decades of debt relief how did highly indebted poor countries become highly indebted after two decades of debt relief efforts a set of theoretical models predict that countries with unchanged long run savings preferences will respond to debt relief with a mixture of asset decumulation and new borrowing a model also predicts that a high discount rate government will choose poor policies and impose its inter temporal preferences on the entire economy reviewing the experience of highly indebted poor countries compared with that of other developing countries the author finds direct and indirect evidence of asset decumulation and new borrowing associated with debt relief the ratio of the net present value of debt to exports rose strongly over 1979 97 despite the debt relief efforts average policies in highly indebted poor countries were generally worse than those in other developing countries nor were wars more likely in highly indebted poor countries over time there has been an important shift in financing for highly indebted poor countries away from private and bilateral nonconcessional sources to the international development association and other sources of multilateral concessional financing but this implicit form of debt relief also failed to reduce debt in net present value terms although debt relief is done in the name of the poor the poor are worse off if debt relief creates incentives to delay reforms needed for growth