renewable natural resource management and use without markets natural resources by their nature are not readily bent to the status of private property efficient resource use is complicated by jurisdictional externalities public goods non use values and beneficiaries spatially separated from the location of resources the task is made more challenging by ecological complexity that obscures cause benefits and effects costs and dramatic time lags between individual actions and subsequent social consequences that together with substantial uncertainty introduce the chance of irreversibilities resource economists have played a major role in the literature on externalities the development of individual transferable quotas non market valuation techniques and common property management

institutions and the environmental kuznets curve for deforestation a crosscountry analysis for latin america africa and asia abstract the relationship between deforestation and income across 66 countries of latin america africa and asia is examined institutional characteristics as well as macroeconomic policies of each country are hypothesized to impact deforestation results show strong evidence of an environmental kuznets curve ekc relationship between income and deforestation for all three continents institutional structure and macroeconomic policy significantly affect the tropical deforestation process improvements in political institutions and governance significantly reduce deforestation the factors leading to deforestation differ across regions however and there is no one size fits all global policy recommendation for restraining the tropical deforestation process

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

a two person game of information transmission we consider a statistical decision problem faced by a two player organization whose members may not agree on outcome evaluations and prior probabilities one player is specialized in gathering information and transmitting it to the other who takes the decision this process is modeled as a game qualitative properties of the equilibria are analyzed the impact of improving the quality of available information on the equilibrium welfares of the two individuals is studied better information generally may not improve welfare we give conditions under which it will

global warming policy a public finance perspective in the last few years a substantial volume of research has considered the design of taxes to slow greenhouse gas emissions as well as the economic effects of such policies in this paper i summarize the insights that have emerged from this work i begin by explaining that while efficiency considerations create a presumption for using coordinated international policies to alter greenhouse gas emissions the prospects for such action are bleak then i focus on the public finance of carbon taxes at the national level considering the design of such taxes as well as their incidence across and within nations next i focus on greenhouse gas emission policies that could be enacted in less developed countries such as the elimination of fossil fuel subsidies and other policies to slow deforestation finally i suggest several promising directions for future study

how endowments accumulations and choice determine the geography of agricultural productivity in ecuador spatial disparity in incomes and productivity is apparent across and within countries most studies of the determinants of such differences focus on cross country comparisons or location choice among firms less studied are the large differences in agricultural productivity within countries related to concentrations of rural poverty for policy understanding the determinants of this geography of agricultural productivity is important because strategies to reduce poverty often feature components designed to boost regional agricultural incomes census and endowment data for ecuador are used to estimate a model of endogenous technology choice to explain large regional differences in agricultural output and factor productivity a composite error estimation technique is used to separate systemic determinants from idiosyncratic differences simulations are employed to explore policy avenues the findings suggest a differentiation between the types of policies that promote growth in agriculture generally and those that are more likely to assist the rural poor

methods of household consumption measurement through surveys experimental results from tanzania consumption expenditure has long been the preferred measure of household living standards however accurate measurement is a challenge and household expenditure surveys vary widely across many dimensions including the level of reporting the length of the reference period and the degree of commodity detail these variations occur both across countries and also over time within countries there is little current understanding of the implications of such changes for spatially and temporally consistent measurement of household consumption and poverty a field experiment in tanzania tests eight alternative methods to measure household consumption on a sample of 4 000 households there are significant differences between consumption reported by the benchmark personal diary and other diary and recall formats under reporting is particularly relevant in illiterate households and for urban respondents completing household diaries recall modules measure lower consumption than a personal diary with larger gaps among poorer households and households with more adult members variations in reporting accuracy by household characteristics are also discussed and differences in measured poverty as a result of survey design are explored the study concludes with recommendations for methods of survey based consumption measurement in low income countries

can unobserved land quality explain the inverse productivity relationship abstract an inverse relationship between both farm productivity and labor intensity and farm size is a common empirical finding in developing country agriculture the traditional explanation has been imperfect labor markets recently it has been suggested instead that the inverse relationship is a statistical artifact resulting from omitted land quality using a farm level data set from java i investigate whether omitted variable bias can explain the inverse relationship i show that the inverse relationship and accompanying wage responses are inconsistent with a model of neoclassical farm behavior that ignores omitted variable bias instrumental variables techniques yield parameter estimates in which the inverse relationship is eliminated and the estimated wage elasticities are more in line with economic theory further econometric investigation hints that a model of omitted land quality may be a possible source of the inverse relationship these results emphasize the importance of considering the sources of cross sectional variation in estimating microeconomic relationships

meaning and credibility in cheap talk games i define neologism proofness a refinement of perfect bayesian equilibrium in cheap talk games it applies when players have a preexisting common language so that an unexpected message s literal meaning is clear and only credibility restricts communication i show that certain implausible equilibria are not neologism proof in some games no equilibrium is journal of economic literature classification numbers d83 d82 c73

union power in the long run reconsidered comment the purpose of our earlier note was to establish the possibility that in the long run organized but non saving labour might be unable to improve its well being simply by restricting supply see kemp and long 1987 to reduce computational fuss to a minimum we made do with some quite primitive assumptions in particular it was assumed that capitalists consume a constant proportion of their collective income on the basis of that assumption we were able to establish the strong result that if and only if there is a nontrivial steady state a labour union can do nothing for its members in the long run with the possibility of long run labour impotence established attention switches to the scope of the phenomenon in particular one would like to know whether the strong result of our earlier paper survives the relaxation of our restrictive assumption about capitalists saving the calculations of palokangas 1989 are therefore of great interest replacing our savings assumption by a variant of the permanent income hypothesis and our linear homogeneous production function by a convex concave function palokangas has been able to show that even in the long run a labour union may be able to do something for its members however palokangas analysis leaves it unclear whether the new possibility is attributable to the change in saving behaviour or to the change in the nature of returns to scale or to each separately or to both collectively passages in his text suggest that in his opinion convexity concavity of the production function and not the permanent income hypothesis accounts for the new possibility in this comment we briefly report on some relevant further calculations of our own the calculations are based on our 1987 model modified by the requirement that capitalists save optimally in the light of a constant and positive rate of time preference and of perfect foresight of future rates of return to capital we have been able to show that depending on parameter values

deforestation in the brazilian amazon comparing the impacts of macroeconomic shocks land tenure and technological change the paper examines the current relevance of the set of variables reported in the literature as driving deforestation in the brazilian amazon the analysis uses a computable general equilibrium cge model adapted to capture regional economic structures and the environmental processes specific to tropical areas the paper compares the impact on deforestation in the brazilian amazon of changes in real exchange rate modifications in agricultural tax and support policies reductions in transportation costs arising from investment in infrastructure in the amazon changes in land tenure regimes and technological change in agriculture affecting productivity and agronomic sustainability

union power in the long run the emerging general equilibrium models of union ridden economies are static or short run they abstract altogether from the processes of capital accumulation and population change see the symposium in the scandinavian journal of economics 87 2 1985 in the present paper we offer a model of a growing union ridden economy in which union policies and the process of growth are allowed to interact in the context of such a model it is possible to pose several novel questions how does the pursuit of union objectives affect the path of economic development in particular does a union ridden economy move towards a nontrivial steady state and if so is the steady state characterized by unemployment the question may be turned about if unionists understand the implications of alternative policies for the process of capital formation how does that understanding affect the choice of union policy the salient features of our model may be mentioned at once first it is assumed that labourers earn only wages that is they are pure labourers this implies that labourers do not save and raises the possibility that collectively they may find it to their advantage to moderate their claims on the current pie in order to ensure that the future pie is larger symmetrically capitalists earn no wages that is capitalists are pure capitalists second there is a single union to which all workers belong regardless of whether or not they are

brazilian policies that encourage deforestation in the amazon this paper shows that general tax policies special tax incentives the rules of land allocation and the agricultural credit system all accelerate deforestation in the amazon these policies increase the size of land holdings and reduce the chances of the poor to become farmers the following are the key provisions i the virtual exemption of agricultural income from income taxation makes agriculture a tax shelter ii rules of public land allocation provide incentives for deforestation because the rules used in determining the security of a claim and its land area encourage land clearing iii the progressive land tax contains provisions that encourage the conversion of forest to crop land or pasture iv the tax credit scheme aimed toward corporate livestock ranches subsidizes inefficient ranches established on cleared forest land and v subsidized credit is available for sudam approved ranches

state credit programs and the peasantry under populist regimes lessons from the apra experience in the peruvian amazon abstract a study near iquitos peru finds that a national agricultural program implemented in the late 1980s which provided peasants with access to credit secure land tenure and grassroots organization promised to reduce rather than improve the welfare of intended beneficiaries new economic conditions and strategic behaviors engendered by the program threatened to combine through a process of community enclosure and competitive exclusion to undermine the subsistence viability of peasant communities general lessons are drawn for more effective rural development programs ones that pay particular attention to direct and indirect feedback effects of macroeconomic policy the factors that limit peasant economic competitiveness and to the fundamental spatiality of development processes

economic development and environmental management in the uplands of southeast asia challenges for policy and institutional development using a philippine case study site the forces driving the recent evolution of economic behavior and institutional arrangements in upland and forest margin areas of southeast asia are considered in early modern development subsistence agriculture using long phase forest fallow rotations and regulated by customary law was replaced by more intensive commercially oriented farming systems a process heavily influenced by internal migration to the agricultural frontier traditional land and resource use institutions were quickly displaced during this shift both de facto through the actions of colonists and de jure through the state s assertion of ownership over forests and uplands and the introduction of private title to agricultural lands yet the effective implementation of natural resource use constraints lagged substantially behind the pace of agricultural development and forest exploitation resulting in a period in which high demand for such resources coincided with virtually open access these processes were noticeably subject to the influence of policies and reforms affecting markets prices and institutions

informative cheap talk in elections why do office motivated politicians sometimes espouse views that are non congruent with their electorate s can non congruent statements convey any information about what a politician will do if elected and if so why would voters elect a politician who makes such statements furthermore can electoral campaigns also directly affect an elected official s behaviour we develop a model of credible cheap talk costless and non binding communication in elections the foundation is an endogenous voter preference for a politician who is known to be non congruent over one whose congruence is sufficiently uncertain this preference arises because uncertainty about an elected official s policy preferences generates policymaking distortions due to reputation career concerns we show that cheap talk can alter the electorate s beliefs about a politician s policy preferences and thereby affect the elected official s behaviour informative cheap talk can increase or decrease voter welfare with a greater scope for welfare benefits when reputation concerns are more important

disappointment in decision making under uncertainty decision analysis requires that two equally desirable consequences should have the same utility and vice versa most analyses of financial decision making presume that two consequences with the same dollar outcome will be equally preferred however winning the top prize of 10 000 in a lottery may leave one much happier than receiving 10 000 as the lowest prize in a lottery this paper explores the implications of disappointment a psychological reaction caused by comparing the actual outcome of a lottery to one s prior expectations for decision making under uncertainty explicit recognition that decision makers may be paying a premium to avoid potential disappointment provides an interpretation for some known behavioral paradoxes and suggests that decision makers may be sensitive to the manner in which a lottery is resolved the concept of disappointment is integrated into utility theory in a prescriptive model

access to capital and its impact on agrarian structure and productivity in kenya access to capital and its distribution across agents can profoundly shape the structure and performance of an agrarian market economy it is conceptually useful to distinguish between ex ante and ex post capital access ex ante capital access denotes the ability of agents to finance production costs e g labor and purchased inputs costs which must be paid ex ante that is prior to the actual realization of production ex post capital access that is access to capital after the realization of the production process is of particular importance as an insurance substitute in low income agrarian economies where contingency markets are imperfect buoyant ex post capital access would permit an individual to stabilize consumption year to year even as production fluctuates annually a number of theoretical models have ex

a theory of disappointment aversion an axiomatic model of preferences over lotteries is developed it is shown that this model is consistent with the allais paradox includes expected utility theory as a special case and is only one parameter beta richer than the expected utility model allais paradox type behavior is identified with positive values of beta preferences with positive beta are said to be disappointment averse it is shown that risk aversion implies disappointment aversion and that the arrow pratt measures of risk aversion can be generalized in a straight forward manner to the current framework copyright 1991 by the econometric society

the stork the plow rural social structure and tropical deforestation in poor countries abstract several authoritative sources attribute deforestation in poor countries to the actions of the rural poor others argue that this is tantamount to blaming the victim and directing attention away from the fundamental causes inequality in landholding tenure insecurity and landlessness of deforestation unfortunately there are no statistical tests of the impact of these rural political economy variables on deforestation this paper uses a model of deforestation based on rural household labor allocation decisions to empirically assess how those decisions interact with the structure of rural political economy to determine the extent of deforestation in poor countries cross country multiple regression equations suggest that policies to intensify smallholder agriculture can slow population movement to the agricultural frontier but regression results also show that this outcome depends on the degree of equality in the distribution of landholdings and the extent of rural rootlessness these findings have two important implications for public policy first they suggest that efforts to slow deforestation must start with an understanding of the behavior of the millions of small farmers who now deforest second they suggest that political economy interpretations of deforestation need to taken more seriously by those trying to conserve forested areas

inverse productivity land quality labor markets and measurement error abstract this paper examines the role that land quality and imperfect markets play in generating the inverse productivity relationship in the international crop research institute for the semi arid tropics icrisat data differences in land quality largely explain the inverse productivity ip relationship in the random effects profit regression but not in labor demand regressions controlling for labor and land market failures and differences in soil quality eliminates the ip relationship for male labor but not female labor in the random effects estimates the inverse relationship is much stronger in fixed effects than random effects estimates suggesting that the farm size variable may be subject to measurement error a view supported by the results of instrumental variables estimation

a model of expertise we study a model in which perfectly informed experts offer advice to a decision maker whose actions affect the welfare of all experts are biased and thus may wish to pull the decision maker in different directions and to different degrees when the decision maker consults only a single expert the expert withholds substantial information from the decision maker we ask whether this situation is improved by having the decision maker sequentially consult two experts we first show that there is no perfect bayesian equilibrium in which full revelation occurs when both experts are biased in the same direction it is never beneficial to consult both in contrast when experts are biased in opposite directions it is always beneficial to consult both indeed in this case full revelation may be induced in an extended debate by introducing the possibility of rebuttal

reference dependent risk attitudes we use koszegi and rabin s 2006 model of reference dependent utility and an extension of it that applies to decisions with delayed consequences to study preferences over monetary risk because our theory equates the reference point with recent probabilistic beliefs about outcomes it predicts specific ways in which the environment influences attitudes toward modest scale risk it replicates classical prospect theory including the prediction of distaste for insuring losses when exposure to risk is a surprise but implies first order risk aversion when a risk and the possibility of insuring it are anticipated a prior expectation to take on risk decreases aversion to both the anticipated and additional risk for large scale risk the model allows for standard consumption utility to dominate reference dependent gain loss utility generating nearly identical risk aversion across situations

bare promises an experiment abstract is truth value of a statement what lying aversion is all about we propose an experimental test and find only limited support in this context with bare promises we also test for guilt aversion and again find only limited support

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

a further note on union power in the long run kemp and long 1987 showed that in the long run non saving workers may be unable to improve their lot by controlling the effective supply of labour their proposition was interesting not least because it offered the germ of an explanation for the recent decline in unionism in some capitalist countries notably the united states and japan however the kemp long analysis was conducted in terms of a simple model economy of the solow swan type with just one product constant returns to scale and a constant savings propensity for capitalists since the appearance of their article the possibility of long run labour impotence has been reconsidered by several authors and it has emerged that an allembracing labour union might be able to do something for its members even in the long run if the production function is convex concave cf palokangas 1989 or if the union resorts to all or nothing offers cf manning and shea 1988 or if capitalists optimize over time cf kemp and long 198 9a b in all of the papers just mentioned it is assumed that the wellbeing of workers depends on their consumption of the produced commodity only however labour economists typically assume that the wellbeing of workers also depends on the amount of leisure time available to them the purpose of the present note then is to examine the implications of that assumption for the kemp long problem in all other respects our specification of the economy is the same as that of kemp and long it will be shown that if the workers marginal rate of substitution of consumption for leisure is greater than the steady state wage rate when the

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

property rights and deforestation in the brazilian amazon this paper focuses on the impact of property rights insecurity on deforestation in the brazilian legal amazon deforestation is considered as a risk management strategy property rights insecurity reduces the present value of forests and fosters forest conversion into agricultural and pasture lands moreover deforestation is the consequence of strategic interactions between landowners and squatters landowners clear the forest preventively in order to assert the productive use of land and to reduce the expropriation risk squatters invade land plots clear the forest and may afterwards gain official recognition with formal property titles a particular attention is paid to the measure of land property rights insecurity in the brazilian context it is assumed that property rights insecurity has a multidimensional character taken into account by the number of homicides related to land conflicts and expropriation procedures principal component analysis allows synthesising such information an econometric model of deforestation is estimated on a panel dataset on the 1988 2000 period and the nine states of the brazilian legal amazon the hypothesis that insecure land property rights contribute to higher rates of deforestation is not rejected when the simultaneity bias between insecure property rights and deforestation is addressed this result questions the modality of the brazilian land reform that considers forested areas as unproductive and thus open for expropriation procedures

reference dependent subjective expected utility abstract a reference dependent generalisation of subjective expected utility theory is presented in this theory preferences between acts depend both on final outcomes and on reference points which may be uncertain acts it is characterised by a set of axioms in a savage style framework a restricted form of the theory separates attitudes to end states encoded in a satisfaction function from attitudes to gains and losses of satisfaction given weak additional assumptions the restricted theory excludes cycles of choice explains observed disparities between willingness to pay and willingness to accept valuations of lotteries and predicts preference reversal

the hidden cost of raising voters expectations reference dependence and politicians credibility abstract two politicians compete to get elected each politician is characterized by a valence which is unobservable to the electorate and can take one of two values high or low the representative voter prefers politicians with high valence but random shocks may lead him to appoint a low valence politician politicians make statements concerning their valence if the voter is a standard expected utility maximizer politicians statements lack any credibility and no information transmission takes place by introducing reference dependence and loss aversion we show that truthful communication is possible in equilibrium and we characterize the conditions under which it can arise intuitively these behavioral biases introduce a cost of overstating one s valence as overstatements may shift the electorate s preferences toward better skilled opponents

determinants of smallholder commercial tree cultivation abstract this article contains a discussion of how output prices tenure information credit technology government policies and labor availability affect smallholder commercial tree cultivation output prices play the key role in smallholder commercial tree cultivation even in the face of insecure tenure output prices however are a necessary but not a sufficient condition to induce smallholders to undertake commercial fuelwood cultivation

re election incentives and deforestation cycles in the brazilian amazon abstract despite expansive research on amazonian deforestation and its drivers the role of local politics is not well understood using a panel data set that combines municipal level deforestation and election data from 2002 to 2012 i estimate the effect of an incumbent mayor running for re election on deforestation rates in election periods i find that deforestation rates increase 8 10 in election years when an incumbent mayor runs for re election an amount equivalent to four percent of the total forest lost since the 2004 elections electoral deforestation cycles do not appear to be driven by changes in agricultural policy implementation and activity but are linked to corruption and campaign finance suggesting that weak institutional constraints facilitate electoral manipulation of forest resources this phenomenon is not likely limited to amazonian forests re election incentives could very well lead to misallocation of other natural resources in alternate geographies

changing political regimes and tropical deforestation expansion of agriculture is a main cause of tropical deforestation government policies and weak property rights contribute to this process by encouraging landowners and landless to accelerate land clearing using panel data common to previous studies we add the dimension of new political regimes democratic and non democratic and investigate how the rate of agricultural land expansion in tropical countries depends on the nature and persistence of each regime we find that both new autocratic and democratic regimes have accelerated the expansion of agricultural land thus yielding support to some of the findings in the earlier literature interesting differences emerge between regions with the impact being most pronounced in latin america we interpret these results mainly in the context of increasing tenure and ownership insecurity which in turn is driven by the tendency of new regimes to implement land reforms as a form of social and economic policy or voter payback the argument is developed more formally using a simple competitive land use model that incorporates political regime dependent confiscation risk and agricultural subsidy policy

the relation between farm size and farm productivity the role of family labor supervision and credit constraints abstract the paper shows that if the performance of hired farmhands is affected by supervision from family members and if the availability of credit is dependent on the amount of land owned then a systematic positive or negative relationship between per acre yields and farm size will prevail a model with no supervision effects on labor productivity would predict that yields are unaffected by farm size the paper also investigates the relation between land utilization and owned holding size when land rental possibilities are limited results are shown to be compatible with various observed patterns in ldcs

poverty and environmental degradation a review and analysis of the nexus abstract there is much controversy surrounding the poverty environmental degradation nexus the predominant school of thought argues that poverty is a major cause of environmental degradation and if policy makers want to address environmental issues then they must first address the poverty problem another school of thought argues that a direct link between poverty and environmental degradation is too simplistic and the nexus is governed by a complex web of factors in this paper a formal structure for analyzing the complex web of factors is formulated and used to review the existing literature on the links between poverty and the degradation of four natural resource sectors the analysis highlights the important role institutional and market failure in encouraging agents from various income groups to exhibit unsustainable activities which in turn forces some of the agents to fall into poverty another important factor is the role of conflicts between different agents income groups in the povertyenvironmental degradation nexus the analysis also highlights the presence of feedback loops between environmental degradation and poverty

valuation and management of tropical forests implications of uncertainty and irreversibility this paper develops a framework for the valuation and management of tropical forests that reflects their ecological and economic characteristics the analysis demonstrates the importance of modeling the feasible use patterns and the information structure in tropical forest management decisions the model predicts that cases exist where the foresighted management of forests leads to more preservation than the traditional expected value approach an application in thailand provides evidence that such cases occur in relevant ranges of benefit flows the model focuses tropical forest management on assessments of sustainability and feasible sequences in light of uncertainty and information flows

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

the future of small farms trajectories and policy priorities summary while smallholder development has in the past led to reductions in poverty and hunger does this still apply in today s more globalized world this paper reviews the debates on the contemporary role of agriculture in development and the case for small farms in light of the rise of supermarkets lower commodity prices and liberalized trade agricultural research funding environmental change hiv aids and changing policy ideas although the answers vary greatly by context for many low income countries smallholder development remains a key option the policy agenda however has changed in addition to providing public goods the growing challenge is to overcome market failures which is largely a matter of institutional innovation

a model of electoral competition with incomplete information a model of two candidate electoral competition is developed in which voters are uncertain about the policy either candidate would implement if elected candidates simultaneously announce policy positions from which voters attempt to infer the true positions the candidates would adopt announcing a position different from the true position is costly to the winning candidate with these costs increasing as the difference between the true policy and the announced policy increases a refinement of the sequential equilibrium concept is used to describe the behavior of candidates and voters

optimal retention in agency problems this paper studies the interaction between a single long lived principal and a series of short lived agents in the presence of both moral hazard and adverse selection we assume that the principal can influence the agents behavior only through her choice of a retention rule this rule is further required to be sequentially rational i e no precommitment is allowed we provide general conditions under which equilibria exist where a the principal adopts a cut off rule under which agents are retained only when the reward they generate exceeds a critical bound and b agents separate according to type with better agents taking superior actions we show that in equilibrium a retained agent s productivity is necessarily declining over time but that retained agents are also more productive on average than untried agents due to selection effects finally we show that for each given type agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard i e when that type is the sole type of agent in the model nonetheless adding uncertainty about agent types cannot benefit the principal except in uninteresting cases

should african rural development strategies depend on smallholder farms an exploration of the inverse productivity hypothesis in africa most development strategies include efforts to improve the productivity of staple crops grown on smallholder farms an underlying premise is that small farms are productive in the african context and that smallholders do not forgo economies of scale a premise supported by the often observed phenomenon that staple cereal yields decline as the scale of production increases this paper explores a research design conundrum that encourages researchers who study the relationship between productivity and scale to use surveys with a narrow geographic reach when policy would be better served with studies based on wide and heterogeneous settings using a model of endogenous technology choice the authors explore the relationship between maize yields and scale using alternative data since rich descriptions of the decision environments that farmers face are needed to identify the applied technologies that generate the data improvements in the location specificity of the data should reduce the likelihood of identification errors and biased estimates however the analysis finds that the inverse productivity hypothesis holds up well across a broad platform of data despite obvious shortcomings with some components it also finds surprising consistency in the estimated scale elasticities

on price risk and the inverse farm size productivity relationship abstract the oft observed inverse relationship between farm size and productivity has elicited several explanations having important policy and theoretical implications using advances in the analysis of price risk effects on producer behavior and a simple two period model of an agricultural household that both produces and consumes under price uncertainty at the time labor allocation decisions are made this paper demonstrates analytically that a non degenerate land distribution and price risk can together produce an inverse relationship even absent any of the more common explanations empirical evidence from madagascar confirms the plausibility of this intuitive explanation for the phenomenon

two roles for elections disciplining the incumbent and selecting a competent candidate this paper presents a political economy model in which the voterswant to control moral hazard on the part of the incumbent andselect a competent candidate to be in office we focus on electionswhich take place repeatedly as the basic disciplinary and screeningmechanism it is shown that incomplete information of the votersabout the economic competence of the incumbent helps to overcomethe lame duck effect of a government with foreseeable end asecond finding is that economic performance strongly influences thereelection of the incumbent in particular in stationary perfectbayesian equilibrium if economic performance is bad theincumbent will not be reelected we also prove that having thepossibility of reelecting a government increases the welfare of thevoters to the no reelection benchmark

trade policies economic growth and the direct causes of deforestation by ramon lopez gregmar i galinato please send correspondence to ramon lopez 2200 symons hall university of maryland college park md 20742 email rlopez arec umd edu tel 301 405 1281 fax 301 314 9091 gregmar i galinato 2200 symons hall university of maryland college park md 20742 email ggalinato arec umd edu tel 301 405 0477 fax 301 314 9091

the impact of reelection pressures on the fulfillment of campaign promises abstract it is part of the political science folklore that candidates are inclined to keep their campaign promises out of fear of not being reelected this paper develops a multiperiod signaling model for the purpose of exploring the validity of this folklore necessary and sufficient conditions are derived for a candidate to reveal his true policy intentions during the campaign a crucial condition for campaign speeches to be informative is that voters policy preferences respond to the incumbent s performance the refining of perfect bayesian equilibria in the multiperiod signaling context is also explored journal of economic literature classification numbers d72 c73

the policy roots of socioeconomic stagnation and environmental implosion latin america 1950 2000 abstract the persistence of growth and its equity and environmental effects heavily depend on the composition of asset investments physical human and natural capital are the key assets behind the development process market failures tend to affect the accumulation of such assets asymmetrically leading to underinvestment in human and natural capital public policy in latin america has generally exacerbated such market failures by promoting physical capital investments using massive public subsidies instead of relying on the expansion of public and semipublic assets that complement physical capital the result economic stagnation deep social inequities and environmental destruction

on the gains of committing to inefficient production lobbying and low land productivity in latin america abstract we present a new explanation and empirical evidence showing that rural subsidies to large farmers tend to be associated with low land productivity and excessive deforestation we develop a lobbying model where wealthy farmers trade bribes or political contributions to government politicians in exchange for subsidies farmers are able to tilt the terms of the bargaining game with policy makers in their favor by pre committing to an inefficient choice of semi fixed inputs government proneness to accept political contributions or bribes and its willingness to provide subsidies cause farmers to adopt inefficient modes of production as a mechanism to capture such subsidies our predictions are consistent with stylized facts on land use in latin america and suggest that subsidy schemes have been counterproductive distorting and constraining development and triggering excessive depletion of natural resources we validate some of the predictions of the model through econometric analyses using a new data set for nine countries in latin america

sequential decision making in production models single equation estimates of production models usually are justified by the assumption that production inputs are chosen as part of a one period decision problem yet most production decisions in agriculture are made sequentially in this paper the farmer s optimal input choices are modeled as optimal controls in a stochastic control problem a two period cobb douglas example is used to show that sequential solutions to production problems may yield models which require either single equation or simultaneous equation estimators functional separability stochastic specification and behavior under uncertainty are discussed in the context of dynamic production models

on the intersectoral migration of agricultural labor labor is the single most important factor in determining national income as economies grow agricultural labor declines as a share of total labor and converges to a level of 2 or 3 percent off farm migration facilitates the development of nonagriculture but historically the process spans decades the authors argue that the pace of the process is a fundamental outcome of a dynamic equilibrium based on expectations of lifetime earnings and the cost of migration the authors present an empirical model of the determinants of intersectoral migration one fundamental determinant is income differences across sectors as such migration should stop when income differences reach a certain level the authors provide a method of measuring the level at which intersectoral migration will cease while there are credible reasons for a permanent difference to exist between sectoral incomes the authors find no empirical evidence of a permanent wedge

economic policy economic performance and elections this paper explores the role of reelection pressures in determining economic policy by assuming that voters are uncertai n as to the efficacy of different policies a reelection process is derived that depends on both a politician s past policies and the level of economic activity during his time in office it is shown th at the less uncertain are voters as to which policy is best the more likely is a politician to manipulate policy for reelection purposes manipulation entails implementing the policy that is more likely to be well received rather than the one that maximizes income copyright 1993 by american economic association

integration of environmental concerns into agricultural policies of industrial and developing countries abstract the question which this paper addresses concerns the types of environmental and resource related agricultural policy adjustments that could properly address the costs of resource degradation and increase long term prospects for sustainable development various public policy approaches e g polluter pays principle fiscal measures regulations etc are discussed and analyzed with regard to their environmental and resource impacts the paper provides illustrative experiences from industrial and developing nations and where possible lessons and insights of relevance to policy making in developing countries are sought

union power in the long run reconsidered considering an economy with only one wage setting union which has an infinite planning horizon and a constant rate of time preference kemp and long 1987 examined the following problem how does the pursuit of union objectives affect the path of economic development in particular does a union ridden economy move towards a nontrivial steady state and if so is the steady state characterized by unemployment their own answer was as follows the existence of a nontrivial steady state depends on the union s rate of time preference if this is strong enough the union will be content to see capital stock run down to zero if and only if there is a nontrivial steady state will the union eventually after finite time find it advantageous to refrain from using its market power that is in the long run the union is effectively impotent kemp and long s paper constituted a contribution in posing the problem correctly it relied however on the solow swan growth model with the following basic assumptions a fixed saving income ratio a fixed rate of population growth and constant returns to scale in production now let us consider this framework more closely the first two assumptions were needed to enable the existence of a nontrivial steady state in fact if kemp and long had used a saving function which compelled consumption equal to income in the steady state where there is no net investment they would very likely have obtained the same results even without population growth such a saving function can be well based on the permanent income hypothesis the diminishing marginal utility of consumption creates an incentive to even out planned consumption across future periods in the solow swan framework the crucial point is the assumption of constant returns to scale and we prefer to abolish it we then have to ignore population growth as both technically inconvenient and irrelevant to

integration of environmental concerns into economic analyses of projects and policies in an operational context abstract the efficient use of natural resources both mineral and biological as well as man made capital and human resources is a vital prerequisite for economic and social development one key role of ecological economics is to help value environmental and natural resources more precisely and internalize the cost and benefits of using such resources into the decision making process this paper reviews current economic approaches to the analysis of projects and policies and discusses possibilities for better intergrating environmental concerns into public decision making it reviews current practices as they relate to project analysis the analysis of economic policies and national income accounting a major need at present is not for more theory or techniques but for application of existing methodology and approaches to concrete problems particularly in developing countries the major objective should not be to provide fine turned numbers but to indicate orders of magnitude some project and policy alternatives can be ruled out in this fashion also one can often identify the key estimates to which the decision is sensitive and focus more refined analyses on them cost benefit analysis should be used to the extent possible alongside one needs to consider and to the extent possible rigorously analyze consequences and risks that cannot be measured in monetary terms and use for example multi criteria analysis where possible this together with sound judgement are at present the best inputs into decision making

candidates credibility and re election incentives i study elections between citizen candidates who cannot make binding policy commitments before taking office but who are accountable to voters due to the possibility of re election in each period a representative voter chooses among heterogeneous candidates with known policy preferences the elected candidate chooses the policy to implement and how much rent seeking to engage in when in office as the voter decides both which candidate to elect and subsequently whether the candidate is retained this framework integrates elements of electoral competition and electoral accountability i show that in the best stationary equilibrium when utility functions are concave over policy non median candidates are elected over candidates with policy preferences more closely aligned with the voter in this equilibrium there are two candidates who are elected at some history and the policies these candidates implement in office do not converge this divergence incentivizes candidates to engage in less rent seeking increasing voter welfare copyright 2013 oxford university press

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

loss aversion in politics we study how loss aversion affects the political equilibrium in a simple majority voting model first we show a status quo bias which leads to path dependence second loss aversion implies a moderating effect on the most extreme voters third in a dynamic setting the effect of loss aversion diminishes with the length of the planning horizon of voters however in the presence of a projection bias majorities are partially unable to understand how fast they will adapt to a new policy this makes changes less likely and induces time inconsistency policy changes are timid at the beginning while in later periods they are made progressively more radical fourth in a stochastic environment loss aversion yields a significant distaste for risk but also a smaller attachment to the status quo the application of these results to a model of redistribution leads to empirically plausible implications

the environment as a commodity all economic activity is based ultimately on re sources found in nature whether it is consumption the point in exposing the morphology of produced or production or whether it is exchange the comgoods and services is not to construct a resource moditi es which are involved are made of constitutheory of a value there are any number of natural ents provided by nature thus the ingredients of resources and this alone precludes such an at any manufactured good are other produced goods tempted theory from being coherent my purpose labour time and skills and natural resources each rather is to use it to express surprise at the fact that of these constituent produced goods is in turn made despite the centrality of natural resources in eco up from the ingredients that went into its manufacnomic activity they find little room in economics ture namely labour time and skills natural rediscourses interest in resource economics more sources and further produced goods it follows particularly environmental economics has only that any manufactured commodity is ultimately a been intermittent and if we are currently witness combination of labour and natural resources ing a resurgence and this special issue is an ex ample of it we have also just lived through a labour too is a produced good even raw labour is decade long neglect during which much valuable an output manufactured by those natural resources research could have been done 2 we are way behind which sustain life resources such as the multitude where we should have been and could have been

guilt in games a clear conscience is a good pillow why does this old proverb contain an insight the emotion of guilt holds a key psychologists report that the prototypical cause of guilt would be the infliction of harm loss or distress on a relationship partner roy baumeister arlene m stillwell and todd f heatherton 1994 245 june price tangney 1995 moreover guilt is unpleasant and may affect behavior to render the associated pangs counterfactual baumeister stillwell and heatherton state if people feel guilt for hurting their partners and for failing to live up to their expectations they will alter their behavior to avoid guilt in ways that seem likely to maintain and strengthen the relationship avoided guilt is the down of the sound sleeper s bolster how can guilt be modeled how are human interaction and economic outcomes influenced we offer a formal approach for providing answers start with an extensive game form which associates a monetary outcome with each end node say that player i lets player j down if as a result of i s choice of strategy j gets a lower monetary payoff than j expected to get before play started player i s guilt may depend on how much he lets j down player i s guilt may also depend on how much j believes i believes he lets j down we develop techniques to analyze equilibria when players are motivated in part by a desire to avoid guilt the intellectual home for our exercise is what has been called psychological game theory this framework originally developed by john geanakoplos david pearce and ennio stacchetti 1989 and recently extended by battigalli and dufwenberg 2005 henceforth b d allows players utilities to depend on beliefs about choices states of nature

international environmental problems a simple taxonomy of international environmental problems is developed based on economic considerations the unidirectional externalities are illustrated by the case of one upstream and one downstream country the main problem in this case is an informational one the analysis of regional reciprocal externalities is illustrated by the acid rains in europe it is shown that an efficient solution could be achieved by transferable export rights finally global external problems are discussed with reference to greenhouse effects and extinction of species copyright 1990 by oxford university press

strategic communication with lying costs i study a model of strategic communication between an uninformed receiver and an informed but upwardly biased sender the sender bears a cost of lying or more broadly of misrepresenting his private information the main results show that inflated language naturally arises in this environment where the sender almost always claims to be of a higher type than he would with complete information regardless of the intensity of lying cost there is incomplete separation with some pooling on the highest messages the degree of language inflation and how much information is revealed depend upon the intensity of lying cost the analysis delivers a framework to span a class of cheap talk and verifiable disclosure games unifying the polar predictions they make under large conflicts of interest i use the model to discuss how the degree of manipulability of information can affect the trade off between delegation and communication copyright 2009 wiley blackwell

the inverse relationship between productivity and farm size a test using regional data from india the farm size productivity debate for india needs little introduction it has occupied a prominent position in the agricultural economics literature since 1962 when sen observed that indian farm management data revealed an inverse relationship between farm size and yields per acre since then no fewer than twenty journal papers have appeared on this subject sen 1975 the objective of this paper is to test two hypotheses that were either not given enough attention or left unresolved in the debate the first is that the inverse relationship is valid for all of indian agriculture it is not merely a phenomenon observed in a few sample villages this means a test of the hypothesis that the small farm sector as a whole is more productive than the large farm sector in indian agriculture the second hypothesis is that the inverse relationship is true only of a traditional agriculture and that it breaks down with technical progress a methodology is developed below which uses cross sectional regional data to test the two hypotheses simultaneously on applying this methodology to indian district level data 272 districts for 1970 71 it is found that the hypothesis of the small farm sector being more productive than the large farm sector cannot be rejected at low levels of agricultural technology but can be rejected at higher levels this suggests that the inverse relationship between yields and farm size although valid for a traditional agriculture cannot be assumed to exist in an agriculture experiencing technical change

reference dependent consumption plans we develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption because changes in wealth are news about future consumption preferences over money are reference dependent if news resonates more when about imminent consump tion than when about future consumption a decision maker might to generate pleasant surprises overconsume early relative to the optimal committed plan increase immediate consumption following surprise wealth increases and delay decreasing consumption following surprise losses since higher wealth mitigates the effect of bad news people exhibit an unambiguous first order precautionary savings motive

rural market imperfections and the farm size productivity relationship evidence from pakistan the subject of this article is the relationships between farm size and productivity and between farm size and profitability in the developing countries the recent controversies over the inverse size output relationship are reviewed and a framework is provided that explains the inverse relationship based on plausible assumptions about imperfections in the markets for labor land credit and risk from this framework a set of testable hypotheses are derived the hypotheses are tested on recent farm level panel data from pakistan a strong inverse relationship between farm size and yield is present in the sample even when household fixed effects are used to account for unobserved heterogeneity moreover the suggested market imperfections framework is consistent with the data

testing household specific explanations for the inverse productivity relationship the inverse relationship between land productivity and farm size is an old and puzzling empirical regularity most explanations for this relationship rely on market imperfections that jointly determine the farm size and the household s shadow price of some productive inputs we use plot level data from the icrisat vls to assess whether these household specific theories can explain the puzzle the data exhibit plots of different sizes being simultaneously cropped by the same household the inverse relationship is shown to hold true with the same magnitude across the plots of each household thus cross household heterogeneity does not suffice to explain the puzzle