effort and wages evidence from the payroll tax this is a pre copy editing author produced pdf file of an article accepted for publication canadian journal of economics following peer review this accepted manuscript is being archived under the conditions specified in the bu open access policy

negotiating an agreement on global warming a theoretical analysis abstract the outcome of international negotiation on combatting global warming is derived and analyzed using a two country bargaining model it is shown that while side payments between countries will generally be part of an agreement some of these payments are made purely as a result of asymmetry in bargaining power and have nothing to do with the polluter pays principle or the victim pays principle factors affecting the outcome of negotiation include a country s size of population the welfare level at the disagreement point and the order of making offers the enforcement issue is also discussed

cooperative action on greenhouse gas emissions and the distribution of global output and damage this paper compares the performance of two allowance allocation rules in an international climate change treaty i construct a model in which countries differ according to both gdp and an idiosyncratic damage parameter that links global emissions to damage for an individual country allowances are allocated to treaty members according to an allocation rule based on a single allocation parameter the model can be solved analytically to determine upper and lower bounds on this allocation parameter that ensure that a treaty of any given composition is internally and externally stable i focus on grand coalition treaties the first treaty examined uses a simple proportional rule in which allocations are set as some fraction of emissions in the non cooperative equilibrium the second treaty adds a coverage contingent element to the allocation rule such that the emissions reduction required of each treaty member is weighted by the fraction of global emissions that treaty members as a whole emit in the non cooperative equilibrium i show that the coverage contingent treaty outperforms the simpler treaty except when all countries have the same emissions intensity in the non cooperative equilibrium in which case neither treaty can reduce emissions

climate policy with tied hands optimal resource taxation under implementation lags in the presence of implementation lags announced pigouvian taxation leads to fossil fuel prices that are too low from society s perspective this results in excessive emissions and reduced incentives for green innovation such effects are compounded by the presence of pre existing subsidies to fossil fuel use we show that the intertemporal resource tax path may need to be modified to optimally take into account the perverse incentives from policy lags and pre existing policies we find that it might be optimal to subsidize rather than tax resource extraction at the instant of implementation

shiftable externalities a market solution in this paper we propose a regulatory scheme for what has become known as shiftable externalities not in my backyard type garbage location problemswhere the externality is characterized by the absence of jointness in supply the scheme facilitates the establishment of a market for the externality and it isfeasible for a wider class of regulation problems and more information efficientthan the other regulatory schemes that have been proposed for this type ofexternality finally we show that it is possible to decentralize the participationdecision so as to take account of verification costs

should we be worried about the green paradox announcement effects of the acid rain program this paper presents the first empirical test of the green paradox hypothesis according to which well intended but imperfectly implemented environmental policies may lead to detrimental outcomes due to supply side responses we use the introduction of the acid rain program in the u s as a case study the theory predicts that owners of coal deposits expecting future sales to decline would supply more of their resource between the announcement of the acid rain program and its implementation moreover the incentive to increase supply would be stronger for owners of high sulfur coal this would all else equal induce an increase in sulfur dioxide emissions using data on prices heat input and sulfur content of coal delivered to u s power plants we find strong evidence of a price decrease and of an increase in the sulfur premium some indication that the amount of coal used might have increased and no evidence of fuel switching towards higher sulfur coal overall our evidence suggests that while the mechanism indicated by the theory might be at work market conditions and concurrent regulation largely prevented a green paradox from arising these results have implications for the design of climate policies

uncertain climate change and the international policy response abstract the implications of alternative policy responses to uncertain climate change are analyzed within the context of a simple dynamic economic model the analysis emphasizes two sources of uncertainty that surround climate change scientific uncertainty about how greenhouse gas emissions affect the climate and natural climatic variability the analysis also incorporates an economy s ability to mitigate climate changes through emissions reductions as well as its ability to adapt to such changes through adjusting production decisions while the model is very stylized and excludes some broader issues of social optimality and the allocation of rights to resources across generations basic implications of uncertainty in a dynamic world are highlighted that have not been previously discussed these results suggest that analysts will have a difficult time trying to determine whether a certain emissions strategy improves economic efficiency whether the benefits are greater than the costs when uncertainty is explicitly incorporated into the analysis

the transferability and depletability of externalities abstract this paper is concerned with symmetry and asymmetry in pollution pricing as conditions for the attainment of a pareto optimum in pollution pricing it has already been claimed freeman j environ econom manage 8 321 329 1984 that for both depletable and undepletable externalities pollution pricing should be asymmetric it is shown in this paper that the relevant distinction is not between depletable and undepletable externalities rather it is between transferable and non transferable externalities the effects of which can or cannot be transferred by the recipient to another party optimality requires symmetric pricing for transferable externalities and asymmetric pricing for non transferable externalities

announcing climate policy can a green paradox arise without scarcity unintended consequences of a pre announced climate policy are studied within a framework that allows for competition between polluting and clean energy sources we show that early announcement of a carbon tax gives rise to a green paradox in that it increases emissions in the interim period between announcement and actual implementation irrespective of the scarcity of fossil fuels the paradoxical outcome is driven by consumption saving tradeoffs facing households who seek to smooth consumption over time and holds both when the announced implementation date is taken as a credible threat and when households are skeptical about the political will or capability of the government to implement the policy as announced

an interim evaluation of sulfur dioxide emissions trading ide iv of the 1990 clean air act amendments established the first large scale long term environmental program to rely on tradable emissions permitscalled allowances in this program to control pollution this program was designed to cut acid rain by reducing sulfur dioxide so2 emissions from electric generating plants to about half their 1980 level beginning in 1995 it is of interest both as a response to an important environmental issue and as a landmark experiment in environmental policy this experiment comes at a particularly important time since emission trading is under serious consideration with strong u s backing for use to deal with global climate change by curbing emissions of carbon dioxide co2 the economic stakes in climate change surpass those in acid rain by several orders of magnitude intergovernmental panel on climate change 1996 this article summarizes the results to date of our ongoing empirical analysis of compliance costs and allowance market performance under the u s acid rain program

coalition stability in public goods provision testing an optimal allocation rule we test the canonical model of international environmental agreements ieas in a laboratory setting with asymmetric agents iea participation represents coalition formation and public good provision where there are gains to cooperation but an incentive to free ride we test four competing methods of dividing the coalition s worth a recently proposed optimal rule which accounts for subjects payoffs as a single free rider the shapley value the nash bargaining solution and an equal split each treatment generates the theoretically predicted coalition size more often than not the shares of the potential gains to cooperation achieved by each rule are 51 36 40 and 13 respectively these results highlight the importance of using an optimal rule to improve ieas and more broadly for voluntary public good provision

the control of invasive species on private property with neighbor to neighbor spillovers invasive pests cross property boundaries property managers may have private incentives to control invasive species despite not having sufficient incentive to fully internalize the external costs of their role in spreading the invasion each property manager has a right to future use of his own property but his property may abut others properties enabling spread of an invasive species the incentives for a foresighted property manager to control invasive species have received little attention we consider the efforts of a foresighted property manager who has rights to future use of a property and has the ability to engage in repeated discrete control activities we find that higher rates of dispersal associated with proximity to neighboring properties reduce the private incentives for control controlling species at one location provides incentives to control at a neighboring location control at neighboring locations are strategic complements and coupled with spatial heterogeneity lead to a weaker link public good problem in which each property owner is unable to fully appropriate the benefits of his own control activity future use rights and private costs suggest that there is scope for a series of coase like exchanges to internalize much of the costs associated with species invasion pigouvian taxes on invasive species potentially have qualitatively perverse behavioral effects a tax with a strong income effect e g failure of effective revenue recycling can reduce the value of property assets and diminish the incentive to manage insects on one s own property

can wage increases pay for themselves tests with a production function efficiency wage theories predict that companies that pay high wages will have higher productivity from high work effort low turnover and other efficiency enhancing effects this paper uses the pims line of business data set to test whether high wage businesses are more productive relative wages were measured by managers assessments of their relative compensation holding worker quality constant a positive relation was found between changes in relative wages and changes in total factor productivity the elasticity of output with respect to wages was of the magnitude predicted by efficiency wage theories also consistent with efficiency wage theories the relationship between changes in wages and changes in productivity was weaker at businesses with high unionization results from two additional data sets imply that high wages are not merely measuring high human capital copyright 1992 by royal economic society

efficiency wages and industry wage differentials a comparison across methods of pay efficiency wage considerations should be less important for piece rate pay than for time wages therefore if industry wage differentials reflect efficiency wage factors then these pay differences should be less sizable and have less explanatory power for piecework than for timework we test this proposition using wage data for male production workers employed in the swedish metalworking industries in 1985 the data are partitioned into two groups of workers in our preferred sub sample of workers who received pay under both piece rates and time wages our results are uniformly consistent with efficiency wage implications for industry wage differentials for the subsample of workers who received pay under either piece rates or time wages industry wage differentials are of equal importance under either pay scheme these latter results however may also be influenced by unaccounted for sorting of workers and employers across methods of pay overall our examination of industry wage differentials across m

environmental consciousness and moral hazard in international agreements to protect the environment abstract a group of countries that can potentially commit to cooperation to protect the environment are identified as environmentally conscious countries conditions are examined under which they can provide self financing side payments too a second group of less environmentally conscious countries so that the two groups form a global or partial stable coalition that agrees to reduce emissions a mechanism that detects cheating is also developed in order to induce the desired emissions even when the emissions level of an individual country cannot be observed by the rest of the participating countries

the effect of taxes on labour in efficiency wage models abstract this paper analyses the effects of labour taxation on wage and employment in a moral hazard efficiency wage model where effort is a continuous variable and workers are risk averse in the model examined ad valorem and specific taxes on labour do not have the same consequences on the real wage both taxes have a negative effect on employment but the imposition of a specific tax causes an increase in the net real wage including firms to raise the quality of their workers these results are compared with those obtained in other versions of the shirking efficiency wage model

depletable externalities and pigouvian taxation abstract in their book baumol and oates the theory of environmental policy externalities public outlays and the quality of life prentice hall englewood cliffs n j 1975 argue that whether an externality is depletable private or undepletable public is the key characteristic in determining the optimal pricing pattern they argue that unlike the undepletable case a negative depletable externality requires not only a charge or tax on the generator of the externality but a payment or compensation to the victim in order to achieve pareto optimality it is shown that the key characteristic determining whether compensation of victims is required for efficiency is not the depletability of the externality but whether the victim can costlessly control or limit the amount of the damaging substance received

strategy proof uniform effort sharing schemes for transfrontier pollution problems uniform effort sharing rules for transfrontier pollution problems like the popular equal percentage reduction arrangement do not result in a cost efficient allocation of emission abatement efforts in addition they may violate voluntary participation constraints if the uniform effort level is decided upon by means of ordinary majority vote in contrast to ordinary majority vote i consider in this paper the so called conservative mechanism by moulin 1994 which picks the smallest revealed effort level in stead of the median the conservative mechanism always respects a weak participation constraint moreover it is coalitionally strategy proof meaning that no individual player or group of players can achieve a better outcome by misrepresenting its preferences for environmental quality in order to remedy the cost inefficiency of the equal percentage arrangements i propose to apply the conservative mechanism to the choice of a uniform emission tax rate simulations for the greenhouse effect indicate that the latter mechanism does considerably better than the traditional equal percentage arrangement

ordering the extraction of polluting nonrenewable resources energy markets are often characterized by the use of multiple nonrenewable resources such as coal and natural gas with different pollution characteristics the same resource may have different qualities as when high and low sulfur coal is used to generate electricity multiple resources are used in providing transportation services such as cars running on gasoline or plug in hybrids that may be fueled by electricity produced from coal when these nonrenewable resources contribute differentially to pollution what is the opti mal sequence of extraction over time harold hotelling 1931 developed the classical theory of extraction of a nonrenewable resource orris c herfindahl 1967 extended the hotelling model by considering many resources with different unit costs of extraction and proposed the least cost first principle extraction must be ordered by cost with the cheapest resource used first others have examined whether herfindahl s model remains valid in a variety of situations in a general equilibrium setting see murray kemp and ngo v long 1980 tracy r lewis 1982 in the presence of setup costs g rard gaudet moreaux and stephen w salant 2001 under het erogeneous demands chakravorty and darrell l krulce 1994 and when the extraction rate is constrained jean pierre amigues et al 1998 stephen p holland 2003 in these studies following hotelling and herfindahl resources were differentiated by cost alone in this paper we abstract from cost considerations and focus on how the sequence of extraction may be affected when resources are differentiated only by their pollution character istics we consider two resources one more polluting than the other without loss of generality consider coal to be the dirty resource and natural gas the clean one both may be used to generate electricity environmental regulation is imposed through a cap on the stock of pollution this may be a stylized approximation of an international agreement such as the kyoto protocol which aims to stabilize the concentration of greenhouse gases in the atmosphere 1 with heterogeneity in pollution the results are nonintuitive and do not depend on the emis sion rates of the resources when the economy is already at its allowable stock of pollution the clean natural gas is used first and use of the dirty coal is postponed to the future this is what one would expect armed with insights from the herfindahl model however when the economy starts from below the ceiling and accumulates pollution coal may be used first and use of the clean natural gas is postponed the optimal strategy is to benefit from natural dilution by build ing the stock of pollution as quickly as possible this is done by burning coal rather than natural

equilibrium wage dispersion and interindustry wage differentials this paper develops a search theoretic explanation of interindustry wage differentials given coordination problems in the labor market the probability of filling a vacancy is an increasing function of the wage offered in equilibrium firms that find vacancies more costly will offer higher wages the model thus explains the persistence of interindustry wage differentials and their correlation with industry average capital labor ratio and profitability additionally the model predicts that high wage firms will receive more applications per job opening and that wages in the labor market will behave as strategic complements

green expectations current effects of anticipated carbon pricing i report evidence that an anticipated strengthening of environmental policy increased emissions i find that the breakdown of the u s senate s 2010 climate effort generated positive excess returns

the welfare implications of climate change policy abstract the response to three different climate change policies is measured within a general equilibrium model of world output technological change greenhouse gas emissions and climate driven changes in productivity the proposed policies including an approximation to the kyoto protocol are shown to differ greatly in how they mitigate climate change support economic growth and allocate rents across generations benefits of alternative policies relative to the status quo do not necessarily accrue to the generations that bear the costs the results also show that the chosen rent distribution rule has a profound effect on policy evaluation in particular policies which allocate rents on a per capita basis are shown to be systematically welfare preferred to situations where emissions rights are grandfathered to emitting firms this implies that both the optimal level of emissions and the welfare cost of reaching a given target of emissions or atmospheric concentration would be lower under a per capita allocation of emissions permits or carbon tax revenues

supervision and wages across industries this paper uses supervision data from a supplement to the 1977 wave of the panel survey of income dynamics to examine differences in supervision and wages across industries and to evaluate relationships between supervision practices and interindustry wage differentials the results demonstrate that workers in high wage industries are supervised with equal or greater stringency than secondary sector workers further the results offer no evidence that interindustry differences in monitoring contribute to interindustry wage differentials such findings appear to contradict explanations for industry wage premiums that are motivated by efficiency wage models of shirking copyright 1993 by mit press

international equity and differentiation in global warming policy ne of the major obstacles to reaching a comprehensive agreement on global warming is the setting of greenhouse gas emission reduction targets for individual countries long standing tensions between industrialized and developing countries have raised the issue of equity in burden sharing moreover individual industrialized nations have pleaded special circumstances and have sought differentiation in their obligations this paper analyzes alternative rules for distributing tradable carbon dioxide emissions permits a non linear programming model which distinguishes between allocation based and outcome based rules is used to analyze the relative welfare outcomes the model is applied to the world body of nations and yields several important policy implications

averting expenditure and the cost of pollution the paper considers the relationship between the willingness to pay for environmental quality and averting expenditures that is the costs of measures undertaken in efforts to counteract the consequences of pollution the models used assume perfect mobility among locations with different levels of environmental quality the major results are i averting expenditures are not in general a good measure of willingness to pay 2 averting expenditures are not always even a lower bound on willingness to pay 3 even when averting expenditures are a lower bound the difference between the level of such expenditures and willingness to pay carmot be attributed to the unavertible aesthetic consequences of pollution for almost every kind of environmental unpleasantness we face there are averting expenditures we can make to reduce and sometimes completely remove the damage for air pollution house paint air conditioners soap for water pollution wells bottled water purifiers for noise pollution storm windows thicker walls economists have long been aware that averting behavior is both possible and practiced and they have often suggested that expenditures on such behavior can be used as a measure of the costs imposed on society by various forms of pollution the literature on this subject is difficult to characterize but to the extent that a consensus has been reached it is that averting expenditures provide a lower bound estimate of the total costs imposed by pollution and the divergence between averting expenditures and the total costs of pollution arises from the fact that some consequences of pollution e g the simple unpleasantness of breathing dirty air cannot be averted 2 3 in this note we develop two simple models of the response of utility maximizing consumers to small changes in the level of pollution which they face in the first model we assume that environmental quality is desired solely because it reduces the need for averting expenditure we show that 1 the level of averting expenditure may be either a lower bound or an upper bound estimate of the consumer s

climate policy and the optimal extraction of high and low carbon fossil fuels we study how restricting co2 emissions affcts resource prices and depletion over time we use a hotelling style model with two nonrenewable fossil fuels that differ in their carbon content e g coal and natural gas and that are imperfect substitutes in final good production we study both an unexpected constraint and an anticipated constraint both shocks induce intertemporal substitution of resource use when emissions are unexpectedly restricted it is cost effective to use high carbon resources relatively more less intensively on impact if this resource is relatively scarce abundant if the emission constraint is anticipated it is cost effective to use relatively more less of the low carbon input before the constraint becomes binding in order to conserve relatively more less of the high carbon input for the period when climate policy is active in case the high carbon resource is relatively scarce abundant

can international environmental cooperation be bought in this paper a two stage game of international environmental agreement formation with asymmetric countries is analytically solved the equilibrium of the game makes it possible to determine the size and composition of a stable agreement two cases are studied in the first case countries differ only in abatement costs while in the second case they differ in environmental damages in both cases two different institutional settings one without transfers and another with transfers are considered the results establish that the asymmetry assumption has no important effects on the scope of cooperation in comparison with the symmetric case if transfers are not used or abatement costs represent the only difference among countries however when the only difference is in environmental damages the level of cooperation that can be bought through a self financed transfer scheme increases with the degree of asymmetry

incentives to diffuse advanced abatement technology under the formation of international environmental agreements we analyse the incentives for polluting firms to diffuse and adopt advanced abatement technology in a framework in which governments negotiate an international environmental agreement these incentives crucially depend on whether the underlying environmental policy instrument is an emission tax or an emission quota the results for the international setting fundamentally differ from those for the national setting that have been elaborated upon in the earlier literature in particular equilibrium diffusion and adoption of advanced abatement technology are not necessarily optimal under the tax regime and may be even lower than those under the quota regime

greenhouse gas emission controls in an open economy to examine how greenhouse gas emission controls affect a country s industrial and trade structures this article presents an open economy model that has both ricardian and heckscher ohlin features we specifically compare emission quotas emission taxes and emission standards the patterns of production and trade critically hinge on those policy tools it is shown that a domestic emission control may lead to carbon leakage and may not reduce the world emissions and that emission standards may work as a hidden production subsidy toward an emission intensive industry

a conjectural variation approach to strategic tariff equilibria abstract this paper examines tariff equilibria in a static two country trade model under a general class of conjectures regarding foreign retaliation we assume that each country chooses its optimum tariff given some conjecture in this class and derive the associated conjectural tariff equilibrium which can be thought of as a nash equilibrium conditional on each country s conjecture about how the foreign country will retaliate our main contribution is to show that when marginal propensities to consume imports are sufficiently small increased expectation of retaliation results in lower equilibrium tariffs for both countries since countries in general probably do expect some retaliation it therefore appears that the traditional cournot nash analysis probably overstates the trade restrictiveness of tariff wars

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

feasible climate targets the roles of economic growth coalition development and expectations the analysis presented here follows the design specified by the energy modeling forum emf transition scenarios study on achieving climate stabilization goals with delayed participation by developing countries we use the merge model to evaluate the core emf scenarios for both the international and the us specific studies our results indicate that a radiative forcing target equivalent to 450 ppmv co2 e cannot be met even allowing for full participation and overshoot during the entire 21st century with delayed participation of developing countries a target of 550 ppmv co2 e is only attainable with pessimistic assumptions about economic growth and even then only at very high cost a target of 650 ppmv co2 e can be met with delayed participation for a more affordable cost we highlight sensitivities to the core scenarios in two key dimensions i the effect of the unfolding global financial crisis on the rate of economic growth and ii the willingness of initially non participating countries to agree at the beginning of the next commitment period i e 2012 to join the coalition at a pre specified date in the future we find that while the recession does not fundamentally change the crucial role of developing country involvement advance agreement on their part to future targets could substantially reduce costs for all countries

stability of international climate coalitions a comparison of transfer schemes abstract this paper studies the impact of pragmatic and optimal transfer schemes on the incentives for regions to join international climate agreements with an applied model that comprises twelve world regions we investigate i a benchmark without transfers ii scenarios with allocation based rules where coalition members receive tradable emission permits proportional to initial or future emissions iii scenarios with outcome based rules where the coalition surplus is distributed proportional to emissions and iv a scenario based on an optimal sharing rule where the coalition surplus is distributed proportional to outside option payoffs we find that well designed transfer schemes can stabilise larger coalitions and increase global abatement levels in our applied setting we find that for allocation based and outcome based rules only small coalitions are stable and in the case of grandfathered emission permits there is no stable coalition at all some obstacles associated with grandfathered emission permits can be overcome by incorporating the expected growth of emissions in developing countries in the distribution of emission permits for the optimal transfer scheme we find that larger coalitions which include key players such as the united states and china can be stable but no transfer scheme is capable of stabilising the grand coalition

carbon leakage the green paradox and perfect future markets policies of lowering carbon demand may aggravate instead of alleviate climate change green paradox in a two period three country general equilibrium model with finite endowment of fossil fuel one country enforces an emissions cap in the first or second periods when that cap is tightened the extent of carbon leakage depends on the interaction of various parameters and elasticities conditions for the green paradox are specified all determinants of carbon leakage resulting from tightening the first period cap work in the opposite direction when the second period cap is tightened tightening the second period cap does not necessarily lead to the green paradox

fossil fuels stock externalities and backstop technology the hotelling exhaustible resource model is extended to include stock pollution and nonpolluting backstop technology it is shown that an optimal energy consumption strategy typically includes a regime in which the two energy sources are consumed simultaneously along this regime fossil fuel consumption decreases and backstop consumption increases together fossil fuel and backstop consumption may form eleven optimal regime combinations a decrease in the backstop price decreases the initial level of optimal emission tax

international cooperation for sale abstract this paper shows that strong asymmetry among countries warrants a change in the rules of the game of global public goods provision with the consequence that cooperation by some countries is bought by others and aggregate welfare is increased perhaps substantially side payments on their own have virtually no effect on the outcomes that can be sustained by self enforcing cooperative agreements but when the rules of the game are changed by strong asymmetry when some countries are effectively committed to being non signatories to an agreement eschewing money transfers side payments become the vehicle for increasing participation in a cooperative agreement

optimal early action on greenhouse gas emissions in this paper i argue that early action policies that focus on early actual emission reductions will tend to distort abatement investment decisions and thereby inflate the national compliance cost of a greenhouse gas emissions reduction target compliance cost savings stem from well planned early action that may or may not yield early actual emission reduc tions thus policies that target actual emission reductions such as credit for early action or an aggressive early cap and trade program have the potential to be highly distorting sim ulation results from a model calibrated to the canadian economy suggest that the associated welfare losses could be many billions of dollars action optimale dans les debuts quand il s agit de 1 effet de serre ce memoire suggere que des politiques qui tres tot s attaquent a la reduction des emissions de gas creant l effet de serre vont tendre a distorsionner les decisions d investissement pour les reduire et ce faisant accroitre le couit qu il y aura pour le pays a se conformer a des objectifs cibles de reduction des emissions de gas creant l effet de serre la reduction des couits qu il y a a se conformer vient d actions bien planifiees qui peuvent engendrer des reductions des emissions dans les debuts ou non ainsi des politiques qui visent des le depart des reductions au plus vite comme les programmes de credit pour action rapide ou cap and trade peuvent creer de fortes distorsions les resultats d un modele de simulation calibre pour s arrimer a l economie canadienne suggerent que les pertes de bien etre associees a ces distorsions pourraient s elever a des milliards de dollars

international environmental agreements the case of costly monetary transfers most existing international environmental agreements to resolve transboundary pollution problems appear constrained in the sense that either monetary transfers accompany uniform abatement standards agreements based on a uniform standard with monetary transfers or differentiated abatement standards are established but without monetary transfers agreements based on differentiated standards for two asymmetric countries facing the challenge of a transboundary pollution problem we compare the relative efficiency of these two second best agreements we study especially the role of the costs associated with transfer payments across countries in the choice of these agreements to conduct this analysis we use a negotiation game and the generalized nash bargaining solution nash in econometrica 21 128 140 1953 as the equilibrium for total welfare our findings show that countries collectively prefer the uniform to the differentiated agreement if the cost of transfers is sufficiently low compared to the ratio for countries of the difference of the abatement costs between the two agreements in the analysis of individual welfare we also discuss the reluctance of one country to sign a specific type of agreement even if it is better off than in the case of non cooperation

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

ownership agency and wages an examination of franchising in the fast food industry this paper estimates the difference in compensation between company owned and franchisee owned fast food restaurants the contrast is of interest because contractual arrangements give managers of company owned outlets less of an incentive to monitor and supervise employees estimates based on two data sets suggest that employee compensation is slightly greater at company owned outlets than at franchisee owned outlets the earnings gap is 9 percent for assistant and shift managers and 2 percent for full time crew workers furthermore the tenure earnings profile is steeper at company owned restaurants these findings suggest that monitoring difficulties influence the timing and generosity of compensation

harmonization and side payments in political cooperation for two districts or countries that try to internalize externalities i analyze a bargaining game under private information i derive conditions for when it is efficient with uniform policies across regions with and without side payments and when it is efficient to prohibit side payments in the negotiations while policy differentiation and side payments allow the policy to better reflect local conditions they create conflicts between the regions and thus delay the results also describe when political centralization outperforms decentralized cooperation and they provide a theoretical foundation for the controversial uniformity assumption traditionally used by the fiscal federalism literature

a hotelling model with a ceiling on the stock of pollution abstract environmental agreements such as the kyoto protocol aim to stabilize the amount of carbon in the atmosphere which is mainly caused by the burning of nonrenewable resources such as coal we characterize the solution to the textbook hotelling model when there is a ceiling on the stock of emissions we consider both increasing and decreasing demand for energy we show that when the ceiling is binding both the low cost nonrenewable resource and the high cost renewable resource may be used jointly a key implication is that if energy demand were to decline in the long run we may supplement energy supply through clean renewables to meet the environmental standard but then revert back to using only dirty fossil fuels in the future when the ceiling has become non binding that is the much heralded societal transition to clean energy resources may be short lived

bargaining between benevolent jurisdictions or when delegation induces inefficiencies this paper considers the problem of bargaining between benevolent jurisdictions about local public goods and head taxes it is shown that delegation to benevolent jurisdictions will in general induce distortions away from efficiency where efficiency means an efficient provision of local public goods and an efficient distribution of consumers this distortion is caused by 1 the divergence between social and jurisdictional objectives and 2 the impossibility for jurisdictions to realize side payments without modifying either the provision of local public goods or the distribution of consumers

non renewable resources in the long run we model a competitive economy in which production is dependent on labor and a non renewable resource the stock of which is inhomogeneous we solve the model analytically and show how in infinite time the economy moves away from an initial balanced growth path b g p and towards a mature b g p the characteristics of the initial b g p match historical observations of slowly declining resource price and consumption growth tracking global product the mature b g p depends on the nature of the stock the more steeply cross sectional area declines with depth the faster the rate of price increase we show how the theoretical model may be adapted and parameterized to explain and predict the evolution of markets for specific resources applying the model in two cases copper and petroleum c 2016 elsevier b v all rights reserved

the resistibility and shiftability of depletable externalities abstract in their recently revised book baumol and oates the theory of environmental policy 2nd ed cambridge univ press cambridge uk 1988 accept bird s argument on the optimal taxation policy when externalities are shiftable and depletable their conclusion is that the standard pigouvian tax which is placed upon the generator of a negative externality can be extended to tax the victims who shift the externality to others or extended to compensate recipients in order to achieve pareto optimality it is shown in this paper that their conclusion is not free from error because the possibility of resisting a shifted externality and conjectural variations by recipients is not recognized whether an externality is shiftable depends not only on the shifting activity of the original victim but also the resisting activity of his neighbors and their conjectures about each other s action as such the shifters should be taxed and the recipients should be compensated at the same rate per unit of externality shifted if the tax base is the output of the shifting and resisting activities on the other hand if the tax base is the input which produced the shifting of the externality then both the shifters and the recipients should be subject to a tax or subsidy per unit of input that they have engaged in whether it is a tax or a subsidy depends on the direction and magnitude of the conjectural variation the model and its policy implication can be generalized to cover the omnipresent and wasteful rent seeking activities

strategic environmental disclosure evidence from the doe s voluntary greenhouse gas registry abstract although mandatory disclosure programs have been studied extensively strategic voluntary environmental disclosures by firms are not well understood we study the motivations for and impacts of firms strategic disclosure of greenhouse gas reductions to the us government we first model firms joint abatement and disclosure decisions incorporating both economic and political incentives we then use data from the department of energy s voluntary greenhouse gas registry to compare reported reductions to actual emissions we find that participants in the program engage in highly selective reporting in the aggregate they increase emissions over time but report reductions in contrast non participants decrease emissions over time participants tend to be large firms facing strong regulatory pressure pressure from environmental groups reduces the likelihood of participation suggesting such groups viewed the program as a form of greenwash participating in the 1605 b program had no significant effect on a firm s changes in carbon intensity over time

are uniform solutions focal the case of international environmental agreements the application of uniform solutions has several drawbacks notably their lack of cost efficiency and their inability to guarantee individual rationality a proper specification of uniform solutions however reveals that uniform solutions that satisfy individual rationality always exist when all countries hold private information about their own reduction costs there only exists one solution that always satisfies individually rationality without use of side payments and the requirement of dominant strategy implementation the solution that selects the smallest individually preferred uniform reduction which also give a theoretical explanation of the lowest common denominator effect

an empirical analysis of the green paradox in china from the perspective of fiscal decentralization abstract while it is generally recognized that the introduction of environmental policy can effectively control carbon emissions the green paradox hypothesis puts forth a new warning about the validity of this policy s implementation this study uses panel data on 29 chinese provinces from 1995 to 2012 to investigate the impact of fiscal decentralization on the functional mechanisms of environmental policy while controlling for the spatial correlations of carbon emission the empirical results indicate that environmental policy alone can achieve the objective of reducing carbon emissions however the chinese style fiscal decentralization makes the environmental policy significantly promote carbon emissions leading to a green paradox moreover we find that the impact of fiscal decentralization on environmental policy varies greatly among different geographical regions and the direct controlled municipalities in addition our study confirms the spatial correlations in china s carbon emissions by using a spatial integration term finally we recommend that emission reduction efforts should be incorporated into the local government s performance evaluation system to improve the institutional environment further differentiated environmental policies and measures should be considered for different provinces to maximize the emission reduction potential

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

efficient co2 emissions control with emissions taxes and international emissions trading abstract we consider a stylized model of the hybrid co 2 emissions control in the eu a group of countries operates a joint emissions trading system ets covering only part of each country s economy the countries levy an emissions tax in the rest of their economy and possibly an additional tax in their ets sectors welfare maximizing governments are shown to lack incentives for group efficient policies preexisting taxes overlapping with the ets lead policy makers to allocate more permits to their ets sectors than cost effectiveness would suggest the cases of small and large countries exhibit significantly different efficiency implications

absolute abundance and relative scarcity environmental policy with implementation lags we study the effectiveness of environmental policy in a model with nonrenewable resources and an unavoidable implementation lag we find that a time lag between the announcement and the implementation of an emissions quota induces an increase in emissions in the period between the policy s announcement and implementation since a binding constraint on emissions restricts energy use during the implementation phase more of the resources must be extracted outside of it we call this the abundance effect in the case of multiple resources that differ in their pollution intensity a second channel emerges since cleaner sources are relatively more valuable when the policy is implemented it is optimal to conserve them before the cap is enforced this ordering effect tends to induce a switch to dirtier resources before the policy is implemented compounding the increase in emissions via the abundance channel using the announcement lag in title iv of the 1990 caaa as a case study we are able to empirically show that the abundance effect and ordering effect are both statistically and economically significant we discuss a number of alternative policy options to deal with these undesirable side effects of policy announcements