the public choice of superior sanctions this paper analyzes the public choice of specific forms of sanctions current sanctions are essentially quantity constraints q sanctions which are like quotas in that they might bestow benefits on certain special interest groups in the target country revenue sanctions r sanctions may be able to recapture such benefits in the form of sender government revenue which could either compensate for the costs of sanctions to the sending country or finance other sanction enhancing activities aimed at the target country hence r sanctions may be superior to q sanctions in general or on the basis of target efficiency however public choice analysis suggests that q sanctions will generally be chosen over r sanctions by democratic countries

energy disruptions interfirm price effects and the aggregate economy in an economy with many imperfect competitors monopolistic competition firms that pass through higher oil prices during a disruption will affect the demand for firms in other industries firms that charge higher prices for their final product will include the effect on their own final product in their private decisions but will exclude the effect on the final products of other firms although a pecuniary externality these actions will reduce society s welfare unlike the case of a perfectly competitive market this situation creates a societal risk that is much wider than an externality in any single market policy interest shifts from one of punishing persian gulf oil producers to one of cushioning an industrialized economy from sudden disruptions caused by political and military conflicts although the value of reducing oil use depends upon a number of unknown parameters with wide distributions a representative numerical example suggests that it may approach 5 per barrel

lifting the us crude oil export ban a numerical partial equilibrium analysis the upheaval in global crude oil markets and the boom in shale oil production in north america brought scrutiny on the us export ban for crude oil from 1975 the ban was eventually lifted in early 2016 this paper examines the shifts of global trade flows and strategic refinery investments in a spatial game theoretic partial equilibrium model we consider detailed oil supply chain infrastructure with multiple crude oil types distinct oil products as well as specific refinery configurations and modes of transport prices quantities produced and consumed as well as infrastructure and refining capacity investments are endogenous to the model we compare two scenarios an insulated us crude oil market and a counter factual with lifted export restrictions we find a significant expansion of us sweet crude exports with the lift of the export ban in the us refinery sector more imported heavy sour crude is transformed countries importing us sweet crude gain from higher product output while avoiding costly refinery investments producers of heavy sour crude e g the middle east are incentivised to climb up the value chain to defend their market share and maintain their dominant position

the geographical dimension of the development effects of natural resources we study the contribution of natural resource intensity to long term development along different dimensions per capita income institutional quality and education we allow natural resources to affect these dimensions differently in different regions of the world the evidence suggests that natural resources are generally a positive driver of development but in sub saharan africa ssa their contribution is almost negligible if not even negative we explain these cross regional differences with the fact that in ssa more than anywhere else large resource endowments are combined with a particularly bad disease environment some historical evidence and formal econometric results support this hypothesis

oil supply risk and affecting parameters associated with oil supplementation and disruption abstract the fossil fuel energy carriers significantly affect the energy security the oil security has turned to one of the main political agenda by considering the two world s oil crises in this study an index of oil supply vulnerability has been developed to compare the world s top fifteen oil importing south asian countries the index includes comprehensive set of indicators like imported oil over gdp ratio market liquidity gdp per capita geopolitical risk diversification the ratio of oil importation over consumption transportation risk oil price volatility and us volatility two popular techniques composite indicator ci and the principal component analysis pca were used to combine all the aforesaid indicators although numerous techniques have been used to assess the oil vulnerability index for example dea like models and markowitz theory of portfolio none of them incorporated the principal component analysis and composite indicator together to develop an oil vulnerability index results shows that the south asian countries have highest economic supply and overall oil vulnerability risk whereas the second group countries belgium thailand spain netherlands japan korea india and china are in a relatively less risky as compared to south asian countries contrary to this third group of countries are canada singapore uk and france italy germany and us are considered as a least vulnerable country

all displaced workers are not created equal the political economy of worker adjustment assistance in france this paper analyzes the political economy of adjustment assistance benefits paid to selected groups of displaced workers several competing theories of income redistribution are discussed including social insurance motives and political support motives a dichotomy laid out by hillman 1988 and baldwin 1989 the becker 1983 hypothesis concerning the role of dead weight loss factors is addressed based on descriptive and empirical analysis of an original french data set it is argued that the politico economic characteristics that render an industry and its workforce more likely to receive these benefits are those associated with the olson 1982 model of the logic of collective action some evidence is found however that social insurance factors play a partial role the pattern of income redistribution does not appear to be strongly influenced by the deadweight loss factors that becker stresses

valuing the impact of co2 emissions valuing the impacts of co2 emissions to the atmosphere has been widely debated with various studies suggesting very different costs when expressed in units of dollar per tonne of carbon emitted there are many complex issues involved and it is often difficult to determine the reasons for the wide range of costs proposed in this paper models based on two very different approaches the page and intera models are considered by applying these models to calculating the marginal impact of co2 emissions it is shown that what appear initially to be divergent estimates can be reconciled this process illustrates some of the key issues in this area and a perspective is provided on which marginal costs are appropriate for different policy decisions

income inequality and colonialism this paper proposes that colonialism is a major explanation behind today s differences in income inequality across countries we argue that income inequality has been higher in the colonies where the percentage of european settlers to total population was higher as long as europeans remained a minority the countries where europeans became the majority of the population did not suffer from high inequality these initial differences continue to hold today the empirical evidence we provide strongly supports our thesis

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

institutions and agricultural productivity in sub saharan africa agricultural productivity in 41 sub saharan africa ssa countries from 1960 to 1999 is examined by estimating a semi nonparametric fourier production frontier over the four decades the estimated rate of productivity change was 0 83 per year although the average rate from 1985 99 was a strong 1 90 per year former uk colonies exhibited significantly higher productivity gains than others while liberia and countries that had been colonies of portugal or belgium exhibited net reductions in productivity we measure a significant reduction in productivity during political conflicts and wars and a significant increase in productivity among those countries with higher levels of political rights and civil liberties

tax compensation schemes misleading advice in a rent seeking society the central message of this paper was captured by kipling when he wrote of the dane s conquest of his country more than a thousand years ago he added to the passage at the head of the paper qu and that is called paying the dane geld but we ve proved it again and again that if once you have paid him the dane geld you never get rid of the dane

world oil market or mayhem the world oil market is regarded by many as a puzzle why are oil prices so volatile what is opec and what does opec do where are oil prices headed in the long run is peak oil a genuine concern why did oil prices spike in the summer of 2008 and what role did speculators play any attempt to answer these questions must be informed and disciplined by economics such is the purpose of this essay to illuminate recent developments in the world oil market from the perspective of economic theory

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

oil prices and the terms of trade abstract the combination of substantial terms of trade variability and unstable correlation patterns of trade prices with output and trade volumes has led some to suggest a break in the link between trade volumes and prices we find that oil accounts for much of the variation in the terms of trade over the last twenty five years and its quantitative role varies significantly over time and since our dynamic general equilibrium model predicts that the economy responds differently to oil supply shocks than to other shocks changes in their relative importance helps to account for the unstable correlations in the data

a comparison of the effects of exogenous oil supply shocks on output and inflation in the g7 countries a comparison of the effects of exogenous shocks to global crude oil production on seven major industrialized economies suggests a fair degree of similarity in the real growth responses an exogenous oil supply disruption typically causes a temporary reduction in real gdp growth that is concentrated in the second year after the shock inflation responses are more varied the median cpi inflation response peaks after three to four quarters exogenous oil supply disruptions need not generate sustained inflation or stagflation typical responses include a fall in the real wage higher short term interest rates and a depreciating currency with respect to the dollar despite many qualitative similarities there is strong statistical evidence that the responses to exogenous oil supply disruptions differ across g7 countries for suitable subsets of countries homogeneity cannot be ruled out a counterfactual historical exercise suggests that the evolution of cpi inflation in the g7 countries would have been similar overall to the actual path even in the absence of exogenous shocks to oil production consistent with a monetary explanation of the inflation of the 1970s there is no evidence that the 1973 1974 and 2002 2003 oil supply shocks had a substantial impact on real growth in any g7 country whereas the 1978 1979 1980 and 1990 1991 shocks contributed to lower growth in at least some g7 countries jel e31 e32 q43

the social cost of imported oil abstract this article analyses the social cost of imported oil from both a conceptual and empirical perspective a conceptual framework of the oil import premium the difference between social and private marginal cost of imported oil is developed it is argued that there are two components to the premium the long run effect of changes in import demand on the world oil price and the external costs of oil supply disruption as related to changes in oil use using this framework as a reference point an evaluation of quantitative estimates of the premium is presented the estimates span a wide range from near zero to well over 100 per barrel and are shown to be highly sensitive to behavioural assumptions about the world oil market the article concludes by noting that an oil import fee is likely to be the best policy instrument to capture the first component of the premium and a strategic petroleum reserve the best policy instrument to capture the second component

historical legacies a model linking africa s past to its current underdevelopment abstract recent studies have found evidence linking africa s current under development to colonial rule and the slave trade given that these events ended long ago why do they continue to matter today i develop a model exhibiting path dependence which provides one explanation for why these past events may have lasting impacts the model has multiple equilibria one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production i show that external extraction when severe enough causes a society initially in the high production equilibrium to move to a low production equilibrium because of the stability of low production equilibria the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends the model provides one explanation why africa s past events continue to matter today

measuring energy security can the united states achieve oil independence stochastic simulation of the direct economic costs of oil dependence in an uncertain future is proposed as a useful metric of oil dependence the market failure from which these costs arise is imperfect competition in the world oil market chiefly as a consequence of the use of market power by the organization of the petroleum exporting countries opec cartel oil dependence costs can be substantial it is estimated that oil dependence costs to the us economy in 2008 will exceed 500 billion other costs such as military expenditures or foreign policy constraints are deemed to be largely derivative of the actual or potential economic costs of oil dependence the use of quantifiable economic costs as a security metric leads to a measurable definition of oil independence or oil security which can be used to test the ability of specific policies to achieve oil independence in an uncertain future

politics institutions and trade lessons of the interwar era recent studies cast doubt on the value added of international trade agreements and institutions using a new data set that consists of about 35 000 observations on the trade of fifty four nations between 1919 and 1938 we examine whether this skepticism also applies to the infamous interwar trade blocs traditional historical accounts attribute to them a large drop in international trade and a rise in the political tensions that would later erupt in world war ii in this study we show that no bloc raised trade among its members as a whole or decreased trade between members and nonmembers however our findings are not wholly consistent with the skepticism recent studies express we argue that conflicts of interest among the great powers encouraged the emergence of the bloc system and also gave rise to intrabloc trade shifts consistent with the political interests of their great power hubs the political military alliances these conflicts created also reduced trade between their signatories and we argue more generally that the causal chain runs from politics to trade as a result measuring only the effect of agreements and institutions on aggregate trade between their members can generate inaccurate estimates of their value added

international migration and the role of institutions we study the determinants of international migration with special attention to the role of institutional factors other than economic and demographic fundamentals we evaluate the impact of political institutions and of those institutions specifically targeted at attracting migrants for a dataset on 19th century migration we find that economic and demographic differentials play a major role but that the quality of institutions also matter we produce evidence that both political and migration institutions represent significant factors of attraction even after controlling for their potential endogeneity through a set of instruments exploiting colonial history and the institutions inherited from the past

did colonization matter for growth an empirical exploration into the historical causes of africa s underdevelopment we investigate the impact of 20th century european colonization on growth we 5nd that colonial heritage as measured by the identity of the metropolitan ruler and by the degree of economic penetration matters for the heterogeneity of growth performances in africa colonial indicators are correlated with economic and sociopolitical variables that are commonly employed to explain growth and there are growth gains from decolonization colonial indicators also add signi5cant explanatory power to worldwide growth regressions and are correlated with the sub saharan africa and the latin america dummies c

efficient user charges in a rent seeking model efficient user charges in a rent seeking model this paper examines efficient user charges on governmentally provided facilities in the presence of rent seeking we find that the efficient user charge depends upon the relative slopes of the demand curve for the use of the facility and the corresponding marginal cost curve as well as the level of rent seeking over the revenue raised except for a special case the efficient user charge is found to differ from the charge indicated by the intersection of demand and marginal cost curves examples show that actual user charges on government facilities are often set at inefficient levels i introduction governments control access to many services facilities and resources for which either no charge or only a token charge is imposed on users under the prompting of concerns over budgetary deficits and utilization efficiency there is increased interest in user charges on a wide array of government facilities 1 by placing charges on government facilities or by increasing existing charges toward efficient levels significant amounts of revenue can be raised and consumption decisions made more responsive to cost conditions this paper concentrates on the efficiency justification of user charges in particular the question of what is the efficient user charge to impose on access to an existing facility controlled by government is addressed abstracting from problems associated with incomplete information on the relevant demand and cost conditions the answer to this question may seem obvious the standard analysis indicates that the efficient price for a good whether imposed by market forces or by government authorities is determined by the intersection of the demand curve and the marginal cost curve this answer is clearly correct in the case of market prices however the intersection of the demand and marginal cost curves will determine the efficient governmentally imposed user charge only if there are no efficiency relevant differences between government prices and market prices by recognizing a fundamental difference between government prices and market prices the analysis in this paper qualifies the standard view on efficient user charges the distinction between government and market prices arises from the fact that a market price generates revenue that is privately owned while a government price generates revenue that is commonly owned the claimants of revenue from a market price are generally well specified as is the extent of their claims this is not the case with revenue from a government price additional revenue raised by government typically goes into the general fund which is then allocated among rival claimants through competition for political influence even when government revenues are earmarked they are typically earmarked to a function where specific claimants are not well specified earmarking may reduce but surely does not eliminate the competition for political influence 2 competition for political influence requires the use of real resources and to a large extent represents pure waste since it is primarily concerned with distributing existing wealth rather than creating new wealth this waste is referred to as a rent seeking cost and has to be recognized as inextricably associated with government revenue although some of what is perceived as cost by rent seekers is from a social perspective a costless transfer the fact remains that raising government revenue with a user charge will motivate socially costly rent seeking and the amount of this cost will be positively related to the amount of revenue raised 3 one might argue that an increase in government revenue from a user charge may not result in additional rent seeking cost since total government revenue may remain constant as other charges or taxes are reduced even if this is the case however interest groups will compete to have their charges or taxes reduced

a theory of infrastructure led development abstract this paper proposes a theory of long run development based on public infrastructure as the engine of growth the government in addition to investing in infrastructure spends on health services which in turn raise labor productivity and lower the rate of time preference infrastructure affects the production of both commodities and health services as a result of network effects the degree of efficiency of infrastructure is nonlinearly related to the stock of public capital itself provided that governance is adequate enough to ensure a sufficient degree of efficiency of public investment an increase in the share of spending on infrastructure financed by a cut in unproductive expenditure or foreign grants may facilitate the shift from a low growth equilibrium characterized by low productivity and low savings to a high growth steady state

co2 emissions control comparing policy instruments we use a global model to compare the economic performance of three policy instruments for controlling co2 emissions period specific emission limits limit policy period specific taxes tax policy and a cumulative emissions limit cumulative limit policy with known costs and benefits of control tax and limit policies are equivalent and either is better than a cumulative limit policy with uncertain benefits of emission reduction tax and limit policies are equivalent however with uncertain costs of emission reduction a tax policy may be better a cumulative limit policy may occasionally perform well under uncertainty but this is not generally the case

the long term effects of africa s slave trades can part of africa s current underdevelopment be explained by its slave trades to explore this question i use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during africa s slave trades i find a robust negative relationship between the number of slaves exported from a country and current economic performance to better understand if the relationship is causal i examine the historical evidence on selection into the slave trades and use instrumental variables together the evidence suggests that the slave trades have had an adverse effect on economic development

u s oil dependence 2014 is energy independence in sight abstract the importance of reducing u s oil dependence may have changed in light of developments in the world oil market over the past two decades since 2005 increased domestic production and decreased oil use have cut u s import dependence in half the direct costs of oil dependence to the u s economy are estimated under four u s energy information administration scenarios to 2040 the key premises of the analysis are that the primary oil market failure is the use of market power by opec and that u s economic vulnerability is a result of the quantity of oil consumed the lack of readily available economical substitutes and the quantity of oil imported monte carlo simulations of future oil market conditions indicate that the costs of u s oil dependence are likely to increase in constant dollars but decrease relative to u s gross domestic product unless oil resources are larger than estimated by the u s energy information administration reducing oil dependence therefore remains a valuable goal for u s energy policy and an important co benefit of mitigating greenhouse gas emissions

colonialism and modern income islands as natural experiments abstract using a new database of islands throughout the atlantic pacific and indian oceans we find a robust positive relationship between the number of years spent as a european colony and current gdp per capita we argue that the nature of discovery and colonization of islands provides random variation in the length and type of colonial experience we instrument for length of colonization using variation in prevailing wind patterns we argue that wind speed and direction had a significant effect on historical colonial rule but do not have a direct effect on gdp today the data also suggest that years as a colony after 1700 are more beneficial than earlier years we also find a discernable pecking order among the colonial powers with years under u s british french and dutch rule having more beneficial effects than spanish or portuguese rule our finding of a strong connection between modern income and years of colonization is conditional on being colonized at all since each of the islands in our da

protectionist responses and declining industries abstract this paper employs a three factor ricardo viner model of a small economy to analyse the effect of a falling world import price on the domestic price of the economy s importable good in the presence of an endogenously determined tariff the outcome is seen to depend on a the way in which the recycled tariff revenue is allocated to the three factor groups and b differences in relative risk aversion across those groups however under reasonable assumptions hillman s 1982 result that a declining industry will continue to decline is seen to hold in our general equilibrium framework

energy security externalities and policies abstract in this paper we review conceptual arguments and empirical evidence related to two potential sources of market failure involving energy security in doing so we consider several questions involving the distinction between externality and market inefficiency and the distinction between market failures that are amenable or not amenable to correction given our current understanding of the workings of an economy several conclusions follow from our analysis regarding the potential sources of market failure and possible remedies the problem of excess wealth transfer from exporter market power may be an issue but current knowledge of oil market behaviour is too weak to support a strong conclusion other supposed costs of oil import dependence also are not well grounded including externalities related to the vulnerability of the economy to energy price shocks

aid poverty reduction and the new conditionality the paper examines the effect of aid on poverty rather than on economic growth we devise a pro poor public expenditure index and present evidence that together with inequality and corruption this is a key determinant of the aid s poverty leverage after presenting empirical evidence which suggests a positive leverage of aid donors on pro poor expenditure we argue for the development of conditionality in a new form which gives greater flexibility to donors in punishing slippage on previous commitments and keys aid disbursements to performance in respect of policy variables which governments can influence in a pro poor direction

a sketch of the economics of the greenhouse effect over the last decade scientists have studied extensively the greenhouse effect which holds that the accumulation of carbon dioxide co2 and other greenhouse gases ghgs is expected to produce global warming and other significant climatic changes over the next century see stephen schneider 1989 the present study presents an economic approach for analyzing policies to slow climate change

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

price differences among crude oils the private costs of supply disruptions i quantify the causes for price differences among crude oils that are set by the law of one price with a special emphasis on country risk for crude oils that are part of the same market i estimate cointegrating relations which represent their long run relation and error correction models which represent the rate at which the market eliminates disequilibrium in their prices results indicate that positive values of country risk impose a 0 51 price penalty on a barrel of crude oil from an unreliable supplier that increases with the variance in risk and the price of crude oil these price penalties are the first empirical estimates for how the market values the private costs of oil supply disruptions beyond country risk the price effects of sulfur content density distance between supply ports and opec membership confirm the importance of oil supply choke points opec s ability to influence prices and differences in refinery technology because private costs of a supply disruption attach only to nations with a non zero country risk previous estimates for the social costs of a supply disruption may be too large

growth the external terms of trade and endogenous trade liberalization we study the effects of growth and changes in the external terms of trade on protection there are two sectors an urban sector and a rural sector and trade policy is used to redistribute income between them we show that growth precedes trade liberalization in addition we find that trade reform is triggered by falls in the world prices of primary exports or intermediate imports these results are shown to hold for tariffs and quotas

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

oil supply shocks and the u s economy an estimated dsge model abstract we develop and use a medium sized dsge model of the u s economy to evaluate how u s real gdp responds to oil price movements that originate from global oil supply shocks the core of the model is a standard macroeconomic dsge framework that includes nominal and real frictions the model includes oil as an input in multiple domestic sectors consumption intermediate goods and transportation services we include a domestic oil production sector for the united states to reflect the recent development in shale oil technology the model also captures international trade in goods and oil the model parameters are set through a combination of calibration and bayesian estimation using quarterly data for 1991 through 2015 baseline estimation of the model finds the elasticity of u s real gdp with respect to an oil price shock of 0 015 which is among the less elastic estimates in the literature using the model to conduct counterfactual analysis we find that decreasing steady state u s oil consumption substantially reduces the response of real gdp to oil prices increasing u s domestic oil production only modestly reduces the response of real gdp to oil prices

exogenous oil supply shocks how big are they and how much do they matter for the u s economy abstract the paper proposes a new measure of exogenous oil supply shocks the timing the magnitude and the sign of this measure may differ greatly from current state of the art estimates it is shown that only a small fraction of the observed oil price increases during oil crisis periods can be attributed to exogenous oil production disruptions exogenous oil supply shocks cause a sharp drop of u s real gdp growth after five quarters rather than an immediate and sustained reduction in economic growth and a spike in cpi inflation after three quarters overall exogenous oil supply shocks made remarkably little difference for the evolution of the u s economy since the 1970s although they did matter for some historical episodes

new estimates of the security costs of u s oil consumption abstract in recent years the united states has become much more self reliant in producing oil and a newer economics literature suggests that oil demand may be more elastic and u s gdp may be less sensitive to world oil price shocks than was previously estimated these developments suggest somewhat lower security costs may be associated with u s oil consumption this analysis provides updated estimates of the security premiums for u s consumption of imported oil u s consumption of domestically produced oil and the substitution of imported oil for domestically produced oil estimates of the expected security costs of u s oil consumption are provided over the time horizon from 2015 to 2040 while taking into account projected world oil market conditions the probabilities and sizes of world oil supply disruptions the response of world oil prices to those supply disruptions and the response of u s real gdp to those oil price shocks the estimated oil security premiums suggest that u s oil security has become less of a policy concern

the impact of energy price uncertainty on macroeconomic variables abstract this paper evaluates the macroeconomic implications of energy price volatility through the lens of a dynamic stochastic general equilibrium dsge model in an open economy the model develops a small open economy in which households consume energy products and firms use energy as productivity inputs where the country is so small that it needs to import energy the price of which is determined abroad whereas positive energy price shocks cause an economic slowdown due to higher costs for consumers and firms energy price volatility shocks generate an increase in gdp in the short run and a reversal in the long run these findings are empirically supported by estimates from a panel var model applied to 10 asian economies where energy price volatility has a positive impact on gdp in the short run moreover the paper finds that increasing demand or supply uncertainty also affect energy prices with amplified fluctuations relative to a model that abstracts from energy market volatility leads households to cut consumption for precautionary savings motives which in turn increases investment both energy price and uncertainty fluctuation lead to high macroeconomic volatility in the business cycle policy makers should encourage investment in energy security and renewable energy such that households and firms would become less responding to fluctuations in the non renewable energy market

how much do european households pay for green energy abstract the price of electricity for european end users typically fell until development of wind and solar energy began but has increased since then we estimate the savings in co2 emissions due to solar and wind energy and calculate what end users pay per tonne co2 assuming that price increases since the introduction of solar and wind power are due to these types of energy these payments are in most cases well above even high and unlikely estimates of the cost of carbon and in some cases several times as high

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

carbon price and wind power support in denmark abstract this paper aims at characterizing the conditions of wind power deployment in order to infer a carbon price level that would provide wind power with comparable advantage over fossil fuel technologies as effective wind support policies the analysis is conducted on denmark after the electricity market liberalization probit and tobit techniques are employed to take account of a potential threshold effect i find that the level and type of the support policy are the dominant drivers of deployment a feed in tariff significantly brings more wind power in than a premium policy the additional capacity installed monthly increases by more than 1 mw for each additional mwh of support this is compared to the effect of the electricity price investment cost interest rate and general economic activity if the policy is a premium i find that 23 mwh of support in addition to electricity price is needed to observe the connection of new turbines to the grid with a 0 5 probability i convert this support level into a carbon price of 27 ton if wind power competes with coal and 48 t if it competes with gas

the economic effects of energy price shocks large fluctuations in energy prices have been a distinguishing characteristic of the u s economy since the 1970s turmoil in the middle east rising energy prices in the u s and evidence of global warming recently have reignited interest in the link between energy prices and economic performance this paper addresses a number of the key issues in this debate what are energy price shocks and where do they come from how responsive is energy demand to changes in energy prices how do consumers expenditure patterns evolve in response to energy price shocks how do energy price shocks affect u s real output inflation and stock prices why do energy price increases seem to cause recessions but energy price decreases do not seem to cause expansions why has there been a surge in the price of oil in recent years why has this new energy price shock not caused a recession so far have the effects of energy price shocks waned since the 1980s and if so why as the paper demonstrates it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets when answering these questions

why has africa grown slowly we distinguish between policy and destiny explanations of africa s slow growth during the past three decades policies were poor high export taxation and inefficient public service delivery and destiny was adverse landlocked tropical locations and terms of trade deterioration during the 1990s africa s economic policies improved although with considerable variation both between countries and between policies trade and exchange rate policies improved much more than service delivery thus the differing explanations of past slow growth imply different predictions for growth in the coming decade we argue that poor public economic services are likely to be the binding constraint

state capacity and repression a model of colonial rule abstract state capacity in colonial regimes can have spillover effects on the welfare of citizens if the colonizer is removed this work shows that when spillovers are positive investments in state capacity and repression by the colonizer are strategic complements the colonizer needs a larger repression when state capacity is high because the latter increases the incentives of the colonized to rebel therefore determinants of investment in repression such as geographic factors or idiosyncratic features of the colonizer can affect state capacity this work contributes to explain the heterogeneous levels of state capacity in non settler colonies and has policy implications for present autocratic regimes

colonial legacies and economic growth much of the work on colonialism has been theoretical or anecdotal in this paper i close the gap between the literature on development and new growth theory by testing the effect of colonization on subsequent growth and development in a sample of 63 ex colonial states from 1961 1990 i find that colonies that were held for longer periods of time than other countries tend to perform better on average after independence finally i show that the level of education at the time of independence can help to explain much of the development gap between the former british and french colonies in africa

combining rent seeking and public choice theory in the analysis of tariffs versus quotas economists continuing criticisms of protectionism make a valuable contribution to the general interest element of the forces which operate to keep propensities to protect somewhat in check mckenzie rightly warns however that proposals by economists for giving protection in more efficient forms run the danger of increasing the total supply of protection thus we agree that serious consideration should be given to the political economy responses which may be induced before one advocates ways of doing more efficiently what one believes should not be done in the first place it does not follow however that all such policies will have net negative unanticipated consequences in the case of tariffs versus quotas we do not believe that we have yet sufficient knowledge of all of the relevant political economy considerations to predict about the full effects of legislation which allowed trade protection to only take the form of tariffs we are doubtful however that such a measure would increase the total quantity of protection through the channels outlined by mckenzie we believe that the same type of basic public choice analysis of the individual incentives to lobby which suggests that consumer taxpayers will not force the political process to operate so as to maximize aggregate economic efficiency with respect to the level of protection also suggests that the net lobbying for quotas is likely to be higher on average than the net lobbying for tariffs political effectiveness and ability to overcome free riding on the part of tariff revenue seekers is likely to be low at the margin furthermore issues of visibility and institutional structure are likely to lessen the ability of anti protection forces to lobby against quotas placed within a broader framework public choice and rent seeking theory is consistent with the empirical evidence that where quotas are used protection is high

economic institutions and comparative economic development a post colonial perspective summary existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post colonial institutional environment which in turn has impacted long run economic development these two potential identification strategies have been treated as substitutes we argue that the two factors should instead be treated as complementary and develop an alternative and unified iv approach that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real gdp per capita for a sample of former colonies using population density in 1500 as a proxy for settlement conditions we find that the impact of settlement conditions on institutional development is much stronger among former british colonies than colonies of the other major european colonizers conditioning on several geographic factors and ethno linguistic fractionalization our baseline 2sls estimates suggest that a standard deviation increase in economic institutions is associated with a three fourth standard deviation increase in economic development our results are robust to a number of additional control variables country subsample exclusions and alternative measures of institutions gdp and colonizer classifications we also find evidence that geography exerts both an indirect and direct effect on economic development

opec and world oil security abstract on the margin the effectiveness of policy to enhance the stability of world oil market oil conditions greatly depends on which countries supply what economists would call the marginal barrels that is the barrels whose production responds to changes in demand if the countries dominating the production of the marginal barrels are relatively unstable policies to reduce world oil consumption or boost oil production from stable suppliers will provide the additional benefit of reducing the contribution of unstable producers to the world oil market if the countries dominating the marginal barrel are relatively stable however policies to reduce world oil consumption or boost oil production from stable suppliers will be less effective in promoting oil market stability typically we think of the highest cost producers as supplying the marginal barrel of oil but our assessment finds it quite likely that opec dominates production of the marginal barrel of world oil moreover opec members have been among the more unstable producers on a historical basis hence reducing world oil consumption and promoting oil production in stable non opec countries will enhance world oil security policies to promote stability in opec countries also would enhance world oil security

evaluating u s oil security and import reliance abstract we examine the literature that considers the consequences of u s reliance on imported oil we take an approach that covers many ideas about the costs arising from u s reliance on imported oil and we identify which of those ideas have broad support in the economics literature and which ideas have only limited support we also quantify the costs of u s reliance on imported oil using two approaches one is fairly narrow conforms to the economics view of externalities and yields small cost estimates the other is relatively expansive is favored by some policy analysts and yields much larger cost estimates we estimate these costs as expected u s economic losses over a time horizon from 2010 through 2035 while taking into account world oil market conditions market power probable oil supply disruptions and the oil market response to those supply disruptions

research on a single policy or policy mix in carbon emissions reduction abstract existing literature on the optimal type of carbon mitigation policy and whether it is better to apply a policy mix instead of a single policy is still unclear this paper assesses the policy effectiveness under exogenous shocks by applying a dynamic stochastic general equilibrium dsge model comparing the differences between the carbon mitigation and economic impacts of a policy mix versus a single policy carbon tax or carbon trading scheme the results showed that energy demand is rigid in response to technological shocks therefore there is no significant difference for the energy consumption related carbon emissions in response to the technological progress under three different policy scenarios a carbon tax scenario i a carbon trading scheme scenario ii and a carbon policy mix scenario iii overall carbon emissions policy has a negative impact on the economy compared to the other two policies a carbon trading scheme has a relatively slight impact on the economy a mandatory carbon price would have a more significant impact than would a market based carbon price the policy mix formed by a carbon tax and a carbon trading is comprehensive in terms of both price flexibility and coverage scope

why does capital flow to rich states abstract the magnitude and the direction of net international capital flows do not fit neoclassical models the fifty u s states comprise an integrated capital market with very low barriers to cap

measuring oil supply disruptions a historical perspective abstract an oil supply disruption in opec member countries or in the persian gulf region may have unusually large effects on crude oil prices because such a disruption may escalate into wider disruptions within these volatile regions this analysis reviews and updates several past studies to identify specific events that can be linked to oil supply shocks that remove oil production while increasing world oil prices using historical data it finds that a 10 cut in world oil supplies arising from abrupt and large monthly disruptions of opec and persian gulf crude oil production correlates with a 35 43 increase in inflation adjusted crude oil prices the data also reveal that almost all sudden and large oil supply disruptions occurred prior to 2004 which raises some interesting issues about how to interpret the evidence from studies evaluating the impact of future oil disruptions on either prices or the economy

assessing the u s oil security premium abstract world oil supply disruptions lead to u s economic losses increased oil consumption increases the vulnerability of the economy to oil supply disruptions but it matters where the additional oil is produced increased production from stable producers can dampen future oil price shocks whereas increased production from unstable producers can exacerbate future oil price shocks because oil is fungible u s pricing and import policies can differentiate only between domestic and imported oil rather than between stable and unstable sources the economic losses associated with oil supply disruptions gdp losses and some transfers abroad are externalities that can be quantified as oil security premiums we estimate these premiums by taking into account projected world oil market conditions probable oil supply disruptions the market response to oil supply disruptions and the resulting u s economic losses

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model