the tail index of exchange rate returns in the literature on the empirical distribution of foreign exchange rates there is now consensus that exchange rate yields are fat tailed three problems however persist 1 which class of distribution functions is most appropriate 2 are the parameters of the distribution invariant over subperiods 3 what are the effects of aggregation over time on the distribution in this paper we employ extreme value theory to shed new light on these questions we apply the theoretical results to ems data

improvement of technical efficiency of firm groups abstract cooperation between firms can never improve the technical efficiency of any firm coalition the directional distance function by virtue of its additive nature is a useful tool that outlines this impossibility in this paper the additive aggregation scheme of input output vectors is generalized according to an aggregator accordingly cooperation between firms may increase the technical efficiency of the firm group this improvement is shown to be compatible with nonjoint semilattice technologies that bring out either output or input weak complementarity firm games are investigated to show that firms may merge on the basis of their inputs due to constraints imposed on outputs conversely they may merge with respect to the outputs they can produce because of limitations imposed on inputs

is economic growth good for the poor tracking low incomes using general means in this paper we propose the use of an alternative methodology to track low incomes based on atkinson s 1970 family of equally distributed equivalent income functions which are called general means here we provide a new characterization of general means that justifies their use in this context our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living the ordinary mean and a bottom sensitive general mean the motivating question is to what extent is growth in the ordinary mean accompanied by growth in the general mean a key indicator in this approach is the growth elasticity of the general mean or the percentage change in the general mean over the percentage change in the usual mean our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century among other results we find that the growth elasticity of bottom sensitive general means is positive but significantly smaller than one this suggests that the incomes of the poor do not grow one for one with increases in average income

the pricing of protected areas in nature based tourism a local perspective abstract this paper extends the literature on optimal pricing of recreation in protected areas by introducing price discrimination between groups of visitors and given that the agency charges different prices to subsets of visitors by including a distributional dimension that is particularly relevant for a national park agency receiving visitors from different origins other issues related to optimal entrance fees including negative ecological impacts and positive spillover effects on local communities resulting from changes in visitation are also discussed based on this model the paper provides an estimation of optimal entrance fees and revenues for the costa rican system of protected areas

discounting risk and inequality a general approach the common practice consists in using a unique value of the discount rate for all public investments endorsing a social welfare approach to discounting we show how different public investments should be discounted depending on the risk on the returns on investment the systematic risk on aggregate consumption the distribution of gains and losses and inequality we also study the limit value of the discount rate for very long term investments we highlight the type of information that is needed about long term scenarios in order to evaluate investments

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

price independent welfare prescriptions and population size abstract this note investigates the extension of roberts price independent welfare prescriptions to alternatives in which population size and composition can vary we show that ethically unsatisfactory orderings result suppose that a single person is to be added to a population that is unaffected in utility terms either all such additions must be regarded as bad or some expansions in which the added person s life is not worth living must be ranked as social improvements journal of economic literature classification number d63

ethical social index numbers and the measure ment of effective tax benefit progressivity in this paper we propose a general method for constructing measures both relative and absolute of effective tax benefit progressivity from social welfare functions relative measures compare the after tax or benefit distribution of income with the distribution that would result if the burden were imposed proportionally absolute measures use the equal taxation of individuals as a benchmark these indices are related to relative and absolute indices of inequality our relative indices are generalizations of the gini index based musgrave thin measure of effective progressivity we compare our general indices to the proposals of kakwani khetan and poddar and suits

welfare specifications and optimal control of climate change an application of fund the sensitivity of the optimal control of carbon dioxide emissions to the specification of the social welfare function is systematically explored using the fund model increasing risk aversion emphasises climate change damages relative to emission reduction costs but at the same time increases the discount rate of consumption without international co operation the discount rate effect dominates so that optimal control decreases with increasing risk aversion with international co operation optimal control first increases then decreases with increasing risk aversion since climate change falls heaviest on the poor optimal control increases with increasing inequity aversion full fledged intergenerational welfare functions on the one hand emphasise climate change damages but on the other hand place more weight on current poorer generations in fund the two tendencies almost cancel

is global social welfare increasing a critical level enquiry abstract we assess whether global social welfare has improved in the last decades despite or because of the substantial increase in global population we use for this purpose a relatively unknown but simple and attractive social evaluation approach called critical level generalized utilitarianism clgu clgu posits that social welfare increases with population size if and only if the new lives come with a level of living standards higher than that of a critical level despite its attractiveness clgu poses a number of practical difficulties that may explain why the literature has left it largely unexplored we address these difficulties by developing new procedures for making partial clgu orderings the headline result is that we can robustly conclude that world welfare has increased between 1990 and 2005 if we judge that lives with per capita yearly consumption of more than 1 248 necessarily increase social welfare the same conclusion applies to sub saharan africa if and only if we are willing to make that same judgment for lives with any level of per capita yearly consumption above 147 otherwise some of the admissible clgu functions will judge the last two decades increase in global population size to have lowered global social welfare

pricing policies for outdoor recreation mands there has been a growing concern with methods of rationing recreation use and covering the cost of providing recreation opportunities stankey and baden 1977 rosenthal loomis and peterson 1984 cullen 1985 the method of rationing that is usually recommended by economists is pricing rosenthal loomis and peterson 1984 cullen 1985 specifically marginal cost pricing is often recommended because it rations in such a way as to meet the goal of economic efficiency rosenthal loomis and peterson 1984 that is resources are allocated so as to maximize net benefits to society however when marginal cost prices will not cover costs then they must either be supplemented by another method of raising funds or replaced entirely but if the method via which costs are covered is not part of the maximizing problem the resultant set of prices may or may not maximize net benefits to society in the presence of the necessity to cover costs

the statistical properties of daily foreign exchange rates 1974 1983 abstract this paper examines the statistical properties of daily rates of change of five foreign currencies from 1974 to 1983 the main purpose is to discriminate between two competing explanations for the observed heavy tails of the distribution that the data are independently drawn from a heavy tail distribution which remains fixed over time and that the data come from distributions which vary over time evidence point to the rejection of the first hypothesis further investigations show that the rejection can be attributed to changing means and variances in the data which can be described by a simple statistical model

the statistical distribution of exchange rates empirical evidence and economic implications the abundant evidence that changes in exchange rates have distributions with fatter tails than the normal distribution has led researchers to consider non normal distributions including the student the stable paretian and mixtures of distributions this paper compares the empirical fits of three non normal candidates and the normal distribution for daily changes in the logarithms of exchange rates using maximum likelihood estimation of the parameters and chi square goodness of fit tests the student and mixture of two normals provide the best fits but there is evidence that the distribution parameters may vary over time

foreign aid and population policy some ethical considerations abstract this paper analyzes a two period foreign aid model where assistance can be given in the form of consumption or population control aid population size in period 2 is endogenous using the family of ethical principles called critical level utilitarianism clu we examine the properties of ethically optimal resource allocations our results show that the direction of the ethical response of population size to changes in the cost of population control and the size of the grant depends on the relationship between the critical level of well being an ethical parameter and the standard of living in the recipient country

quality quantity and duration of lives the evaluation of development processes and of public policies often involves comparisons of social states that differ in income distributions population sizes and life longevity this may require social eva luation principles to be sensitive to the quality the quantity and the duration of lives this paper 1 reviews some of the normative issues at stake 2 proposes and discusses some specific methods to address them in a generalized utilitarian framework and 3 briefly illustrates the application of som e of these methods to the global distribution of incomes population sizes and longevity over the last century depending on the approach taken it is found inter alia that global social welfare in 2010 can be deemed to be between 1 8 and 407 times that of 1910 the role given to the quantity of lives bei ng particularly important in that assessment

relative price changes and inequality in the size distribution of various components of income this article uses a comprehensive model of economic inequality to examine the impact of relative price changes on inequality in the marginal distributions of various income components in which the marginal distributions are derived from a multidimensional joint distribution the multidimensional joint distribution function is assumed to be a member of the pearson type vi family that is it is assumed to be a beta distribution of the second kind the multidimensional joint distribution is so called because it is a joint distribution of components of income and expenditures on various commodity groups gini measures of inequality are devised from the marginal distributions of the various income components the inequality measures are shown to depend on the parameters of the multidimensional joint distribution it is then shown that the parameters of the multidimensional joint distribution depend on the relative prices of various commodity groups and several other specified exogenous variables thus knowle

birth date dependent population ethics critical level principles abstract this paper investigates birth date dependent principles for social evaluation in an intertemporal framework in which population size may vary we weaken the strong pareto principle in order to allow individuals birth dates to matter in establishing a social ordering using the axiomindependence of the utilities of the dead we characterize population principles with a recursive structure if the individual substitution principle and an individual intertemporal equivalence axiom are added birth date dependent generalizations of the critical level generalized utilitarian principles result stationarity leads to the special case of geometric discounting journal of economic literatureclassification numbers d63 d71

social criteria for evaluating population change abstract many applications of economic analysis require social evaluations of alternatives involving different numbers of people in this paper we use the tools of social choice theory to provide an axiomatic formulation of this problem it yields a class of social criteria called critical level generalized utilitarianism this class and its implications are compared with other criteria and are found to yield intuitively appealing results

consumption needs and inequality most empirical studies demonstrating a u turn in inequality in the united states are based on the distribution of income however utility is derived from the consumption of goods and services and there are many reasons to expect the distribution of expenditure to be different from the distribution of income the author demonstrates that consumption based inequality indexes actually decrease over the postwar era this conclusion differs from the stylized facts because of differences in the income and expenditure distributions differences also arise from the inclusion of equivalence scales to account for the different needs of heterogeneous households copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

quadratic social welfare functions john harsanyi has provided an intriguing argument that social welfare can be expressed as a weighted sum of individual utilities his theorem has been criticized on the grounds that a central axiom that social preference satisfies the independence axiom has the morally unacceptable implication that the process of choice and considerations of ex ante fairness are of no importance this paper presents a variation of harsanyi s theorem in which the axioms are compatible with a concern for ex ante fairness the implied mathematical form for social welfare is a strictly quasi concave and quadratic function of individual utilities

comparing futures a positional approach to population ethics abstract major questions in environmental economics concern choices about the future sensible decisions thus require rules for comparing the well being of potentially different sets of people in terms of both numbers and identities under different futures the central problem of normative population theory is that basic ethical principles that individually claim widespread acceptance yield unpalatable conclusions when combined no approach currently on offer is able to overcome all theoretical objections but decision making goes on and needs ethical guidance this paper proposes a practical approach to the welfare comparison of competing futures as a matter of expedience it accepts that some choices may be incommensurable and therefore unrankable but its defining characteristic is its recognition that the evaluation of well being is typically a momentary phenomenon dependent on an individual s position or reference frame a critical positional change arises from the very act of being brought into existence social welfare thus has to be continually re evaluated and the welfare basis for new decisions is subject to a ratchet effect although this approach abandons time consistency it does so without apology and since time flows in one direction without inconsistency in decision making

the value of limited altruism abstract discounting the utilities of future people or giving smaller weights to groups other than one s own is often criticized on the grounds that the resulting objective function differs from the ethically appropriate one this paper investigates the consequences of changes in the discount rate and weights when they are moved toward the warranted ones using the utilitarian value function it is shown that except in restrictive special cases those moves do not necessarily lead to social improvements we suggest that limitations to altruism are better captured by maximizing the appropriate value function subject to lower bounds on some utilities journal of economic literature classification numbers d63 d71

some welfare theoretic implications of endogenous fertility this paper explores the implications of endogenous fertility for inter and intragenerational equity and for intergenerational efficiency considering equity requires social welfare criteria with respect to the issue of intragenerational equity 2 possible criteria in relation to the laissez faire solution are 1 total utility across generations and 2 average or per capita utility when population size is not fixed the 2 are not the same when fertility is not endogenous it is possible to consider noncoercive policies for achieving socially optimal population size or rate growth in general child allowances or taxes and subsidies to future consumption are sufficient to achieve the desired outcome with respect to within generation income distribution a system of child allowances and tax exemptions designed to alleviate poverty and reduce inequality may actually worsen the situation when both fertility and labor supply are endogenous discussing the issue of efficiency for members of the current generation does not require a social welfare function neither diminishing returns nor the existence of public goods unless financed by distortionary taxes leads to market failure from this point of view but the inability of parents to enforce transfers among their offspring or to bargain with the families of the potential spouses of their children may indeed lead to market failure finally the paper examines the implications for fertility of the inefficiency in an economy resulting from the absence of a capital market for transferring from present to future consumption in this case the welfare improving introduction of a capital market may increase the rate of growth of population when parents value children for themselves as well as a means of providing sustenance in old age

population ethics and the existence of value functions abstract this note provides a corrected version of a representation theorem in population ethics while it is true that the fixed population axioms continuity and weak pareto are sufficient for the existence of an ordering of population size representative utility pairs that can be used to rank social alternatives we show that in order to obtain the existence of a real valued representation continuity must be strengthened

efficient firm groups allocative efficiency in cooperative games abstract the concept of efficiency in groups postulates that a coalition of firms has to record a smaller distance toward the aggregate technology frontier compared with the sum of individual distances efficiency analysis either allocative or technical is defined with respect to cooperative firm game in order to provide operational distance functions the so called pseudo distance functions these pseudo distances belong to the core interior of the allocative firm game in other terms any given firm coalition may always improve its allocative efficiency we prove that such a result is impossible for technical efficiency i e the technical efficiency cannot increase for all possible coalitions

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

an aspect of variable population poverty comparisons abstract this paper demonstrates that the property of replication invariance generally considered to be an innocuous requirement for the extension of fixed population poverty comparisons to variable population contexts is incompatible with other plausible variable and fixed population axioms this fact raises questions about what constitutes an appropriate headcount assessment of poverty in terms of whether one should focus on the proportion or the absolute numbers of the population in poverty this observation in turn has important implications for tracking poverty and setting targets for its reduction or elimination

bilateral trade flows the linder hypothesis and exchange risk bilateral trade flows are used to examine the linder hypothesis and the effect of exchange rate variability in a gra vity type trade model derived from an underlying demand and supply mo del a behavioral model is used to justify examining these issues joi ntly the model performs well empirically using a sample of seventeen countries for the period 1974 82 the authors find overwhelming supp ort for the linder hypothesis and this version of the gravity model moreover they find strong support for the hypothesis that increased exchange rate variability affects bilateral trade flows copyright 1987 by mit press

the pay as you go pension system as fertility insurance and an enforcement device a paygo system may serve as insurance against not having children and as an enforcement device for ungrateful children who are unwilling to pay their parents a pension in fact the latter was bismarck s historic motive for introducing this system it is true that the paygo system reduces the investment in human capital but if it is run on a sufficiently small scale it may nevertheless bring about a welfare improvement if on the other hand the scale of the system is so large that parents bequeath some of their pensions to their children it is overdrawn and creates unnecessarily strong disincentives for human capital investment

a normative approach to industrial performance evaluation and concentration indices abstract in this paper we present a normative theory of industrial evaluation our framework provides a foundation for the notion of the equivalent number of equal sized firms which is an inverse measure of concentration from an axiomatic basis we develop a particular functional form for the evaluation of industry performance a cobb douglas function of the equivalent number of equal sized firms and total output

social criteria for evaluating population change an alternative to the blackorby donaldson criterion abstract an ethical objection is raised against the blackorby donaldson criterion of optimum population maximizing the sum total of utilities in excess of some critical level since it may disprefer a social state with more people and with more worthwhile lives however the criterion may serve as a practicably reasonable compromise between maximizing total and average utility nevertheless an alternative compromise the maximization of number dampened total utility is proposed that is free from the above objection

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

the scope for taxation and public expenditure in an open economy in this survey of some central issues of tax and expenditure policy in an open economy we consider the implications for policy of free although not necessarily perfect international mobility of commodities capital and labour we examine the issues both from a positive and a normative point of view trying to identify both the incidence and welfare effects of international mobility one general conclusion is that tax distortions may increase in magnitude in comparison with a closed economy but they may also increase in kind as when otherwise neutral taxes become distortionary because of factor mobility

social evaluations when populations differ in size assessments of social welfare do not usually take into account population sizes this can lead to serious social evaluation flaws particularly in contexts in which policies can affect demographic growth we develop in this paper a little known though ethically attractive approach to correcting the flaws of traditional social evaluations an approach that is sensitive to population sizes and that is based on critical level generalized utilitarianism clgu traditional clgu is extended by considering arbitrary orders of welfare dominance and ranges of poverty lines as well as values for the critical level of how much a life must be minimally worth to contribute to social welfare we apply these social evaluation methods to rank canada across 1976 1986 1996 and 2006 and to estimate normatively and statistically robust lower and upper bounds of critical levels over which these rankings can be made

robust non parametric measures of exchange rate variability changes in exchange rates are well known to possess non gaussian distributions yet in testing for differences in exchange rate volatility few researches have examined measures that do not assume gaussian data this paper develops a robust non parametric measure for comparing exchange rate variability across time the measures are applied to monthly exchange rate data to test for differences in exchange rate variability across different monetary policy regimes the comparison show inconsistencies between conclusions based on the classical f test and the robust non parametric equivalent using the robust test for changes in exchange rate variability we do not conclude that variability has increased over time increases in variability do occur but usually only in specific percentiles of the data