Environmental policy implications of extreme variations in pollutant stock levels and socioeconomic costs

This paper uses a real options approach to examine the impact of abrupt increases in carbon dioxide emissions and pollutant-related socio-economic costs. It derives optimal investment rules in the form of critical values for both pollutant stock levels and social costs, above which environmental policies should be adopted. Moreover, it determines the optimal emissions abatement level. Our analysis extends the methodology of Pindyck (2000) using jump diffusion processes. We show that if the stock of pollutant is subject to extreme variations and the emissions abatement level is chosen exogenously by the policymaker, then lower levels of the pollutant stock are required to trigger policy adoption. A similar, yet more prominent, effect is observed under the assumption that pollutant-related socio-economic costs and benefits are expected to exhibit abrupt changes. However, different results are obtained when we examine simultaneously the two interrelated decisions, namely, the optimal threshold of emissions abatement and the optimal abatement level. In this case, an increase in the size and/or probability of a jump increases the critical values of both pollutant stock levels and socio-economic costs but leads to higher optimal abatement.     

OPTIMIZING PRODUCTION IN THE GREEK ECONOMY: EXPLORING THE INTERACTION BETWEEN GREENHOUSE GAS EMISSIONS AND SOLID WASTE VIA INPUT–OUTPUT ANALYSIS

We explore an input–output based framework for optimizing production in the Greek economy, under constraints relating to energy use, final demand, greenhouse gas emissions and solid waste. Using empirical data, we consider the effects on the maximum attainable gross value of production when imposing various pollution abatement targets. Our results quantify those effects as well as the magnitude of economic sacrifices required to achieve environmental goals, in a series of policy scenarios of practical importance. Because air pollution and solid waste are not produced independently of one another, we identify the settings in which it is meaningful to institute a separate policy for mitigating each pollutant, versus those in which only one pollutant needs to be actively addressed. The scenarios considered here represent a range of options that could be available to policy makers, depending on the country's international commitments and the effects on economic and environmental variables.     

An assessment of China's joint prevention and control policy on sulfur dioxide emissions reduction: A spatial econometric analysis

Sulfur dioxide (SO₂) is a typical pollutant that affects human health, climate, and environmental and ecological conditions. China has been experiencing high concentrations of SO₂, particularly in urban areas, since the 1990s. In 2010, a “joint prevention and control” (JPC) policy was issued to address air pollution problems and strengthen the regulation of SO₂ emissions. This study aimed to describe the mitigation effects of this policy on SO₂ emissions in 116 Chinese cities from 2003 to 2017. We applied global and local Moran's I indices to confirm the presence of significant spatial autocorrelation in SO₂ emissions and constructed four spatial models to assess the effect of the JPC policy in reducing SO₂ emissions and its transmission mechanism. We found that the policy decreased SO₂ emissions by 1.89 × 10⁴ tons, SO₂ intensity by 1.70 tons per km², and SO₂ per capita of 158.49 tons per 10,000 people in each city, on average, all of which are significant changes. The empirical results also show that population growth, economic structure, and environmental protection significantly decrease SO₂ emissions. Finally, we recommended policies to encourage regional cooperation under the JPC policy, with the aim of promoting further reductions in SO₂ emissions.     

Freedom and gross in-migration: an empirical study of the post-great recession experience

Determinants of migration, including policy variables such as tax rates, have been extensively studied by regional scientists over the past several decades. The development of the Economic Freedom of North America Index has allowed researchers to test the relationship between migration patterns and economic freedom, with recent studies finding that net in-migration is positively related to economic freedom. Using a new cross-section measure of economic and personal freedom at the state level, we investigate the relationship between gross in-migration and economic freedom on the one hand and then between gross in-migration and total freedom on the other hand. This empirical study of domestic U.S. migration during the post-Great Recession period finds clear evidence that migrants prefer to move to those states affording higher levels of economic freedom and higher levels of total freedom.     

An optimal stochastic control framework for determining the cost of hedging of variable annuities

An implicit partial differential equation (PDE) method is used to determine the cost of hedging for a Guaranteed Lifelong Withdrawal Benefit (GLWB) variable annuity contract. In the basic setting, the underlying risky asset is assumed to evolve according to geometric Brownian motion, but this is generalised to the case of a Markov regime switching process. A similarity transformation is used to reduce a pricing problem with K regimes to the solution of K coupled one dimensional PDEs, resulting in a considerable gain in computational efficiency. The methodology developed is flexible in the sense that it can calculate the cost of hedging for a variety of different withdrawal strategies by investors. Cases considered here include both optimal withdrawal strategies (i.e. strategies which generate the highest possible cost of hedging for the insurer) and sub-optimal withdrawal strategies in which the policy holder׳s decisions depend on the moneyness of the embedded options. Numerical results are presented which demonstrate the sensitivity of the cost of hedging (given the withdrawal specification) to various economic and contractual assumptions.     

Evidence on agglomeration economies,diseconomies, and growth

Conventional urban economic analysis suggests that a local economy's size is closely related to a number of features, including levels of human capital and the availability of specialized inputs, which are likely to influence positively the rate at which it accumulates further economic activity. At the same time, urban theory also suggests that once cities reach a certain level of size, these agglomeration benefits begin to peter out, while diseconomies rise rapidly. Consequently, we should see an ‘inverted U‐shaped’ pattern of growth with respect to economic size—rates of growth first rise, then fall as size increases. This paper shows that, while such a pattern is largely absent from recent data on growth in metropolitan area population and employment, it emerges strikingly in county‐level data. Copyright © 2002 John Wiley & Sons, Ltd.     

The effects of an environmental accountability system on local environmental governance and firms’ emissions

The Chinese central government introduced the environmental accountability system (EAS) policy in 2006 to encourage local governments to execute environmental policies appropriately. However, the effects of this EAS policy have not been investigated at the firm level. In this study, we first measured the environmental governance intensity of local governments by calculating the environment word portion (EWP) of the annual governments’ work reports and found that local governments increased their efforts after the EAS policy implementation. We then constructed a continuous difference-in-difference (DID) strategy to estimate the effect of the EAS on firms’ emission and found that firms significantly reduced their sulphur dioxide (SO₂) emission under the regulation intensity of local governments after the EAS policy. The reductions are mainly because of the private, non-export, labour- and capital-intensive firms. The EAS policy may encourage firms to reduce coal usage, design more products, decrease capacity investment and even withdraw from the market, thus reducing pollutant emission. Finally, we tested firms’ response in various polluting sectors and found that the EAS policy may cause local governments to fail in distinguishing low pollution sectors from high pollution sectors.     

Old homes, externalities, and poor neighborhoods. A model of urban decline and renewal

This paper investigates urban decline and renewal in the United States using three panels that follow neighborhoods on a geographically consistent basis over extended periods of time. Findings indicate that change in neighborhood economic status is common, averaging roughly 13 percent per decade; roughly two-thirds of neighborhoods studied in 1950 were of quite different economic status fifty years later. Panel unit root tests for 35 MSAs indicate that neighborhood economic status is a stationary process, consistent with long-running cycles of decline and renewal. In Philadelphia County, a complete cycle appears to last up to 100 years. Aging housing stocks and redevelopment contribute to these patterns, as do local externalities associated with social interactions. Lower-income neighborhoods appear to be especially sensitive to the presence of individuals that provide social capital. Many of the factors that drive change at the local level have large and policy relevant effects.     

Growth vs. level effect of population change on economic development: An inspection into human-capital-related mechanisms

This paper studies the different mechanisms and the dynamics through which demography is channeled to the economy. We analyze the role of demographic changes in the economic development process by studying the transitional and the long-run impact of both the rate of population growth and the initial population size on the levels of per capita human capital and income. We do that in an enlarged Lucas–Uzawa model with intergenerational altruism. In contrast to the existing theoretical literature, the long-run level effects of demographic changes, i.e. their impact on the levels of the variables along the balanced growth path, are deeply characterized in addition to the more standard long-run growth effects. We prove that the level effect of the population rate of growth is non-negative (positive in the empirically most relevant case) for the average level of human capital, but a priori ambiguous for the level of per capita income due to the interaction of three transmission mechanisms of demographic shocks, a standard one (dilution) and two non-standard (altruism and human capital accumulation). Overall, the sign of the level effects of population growth depends on preference and technology parameters, but numerically we show that the joint negative effect of dilution and altruism is always stronger than the induced positive human capital effect. The growth effect of population growth depends basically on the attitude to intergenerational altruism and intertemporal substitution. Moreover, we also prove that the long-run level effects of population size on per capita human capital and income may be negative, nil, or positive, depending on the relationship between preferences and technology, while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long term.     

基于复合实物期权的煤炭绿色开采项目风险管理

针时煤炭资源开采造成的严重环境问题提出煤炭绿色开采,在分析绿色开采所面临的技术、市场、政策等风险以及这些风险与复合实物期权种类的对应关系后,结合煤炭绿色开采项目的特点对项目所含的复合实物期权进行设计构造,选取期权价值最大者,以此规避风险,取得最佳的经济效益,环境效益和社会效益.     

Exploring the development trend of internet finance in China: Perspective from club convergence

We first employ β-conditional convergence and log t regression tests based on nonlinear time-varying factor model and club clustering algorithm to analyze the convergence characteristics of the development level of Internet finance in 335 prefecture-level cities in China. The result of log t regression test illustrates that there is no convergence as a whole in the development level of China's Internet finance. However, seven convergence clubs and a divergent group have been formed, and the development level and growth rate of Internet finance among these convergence clubs have shown obvious differences. Moreover, we also employ the Ordered Probit to explore the formation mechanism of the convergence clubs. The results reveal that the regions with a higher level of economic development, traditional financial development, economic openness and Internet development are more inclined to converge in a club with a higher Internet finance development level. Alternatively, the regions that are interfered with more by the government or that have a lower degree of marketization, tend to converge in a club with a lower level. Finally, according to the conclusions, we propose corresponding policy recommendations for promoting the regional coordinated development of China's Internet finance.     

A new sub-national multi-region input–output database for Indonesia

ABSTRACT

As a large archipelago with significant geographical variation and economic diversity, Indonesia requires detailed regional information when subjected to economic modelling. While such information is available, it however has not been integrated and harmonised into a comprehensive input–output database, thus preventing economic, social, and environmental modelling for investigating sub-national regional policy questions. We present the new IndoLab, a collaborative research platform for Indonesia, enabling input–output modelling of economic, social, and environmental issues in a cloud-computing environment. Within the IndoLab researchers are for the first time able to generate a time series of regionally and sectorally detailed and comprehensive, sub-national multi-region input–output (MRIO) tables for Indonesia. By integrating a multitude of economic, social, and environmental data into a single standardised processing pipeline and harmonised data repository, the IndoLab is able to generate MRIO tables capturing up to 1148 sectors, and 495 cities and regencies. Researchers can freely choose from this detail to construct tables with customised classifications that suit their own research questions. First results from the IndoLab clearly demonstrate the unique characteristics of regions in terms of their sectors’ employment intensity. Thus, the IndoLab has great potential for investigating policy questions that cannot be comprehensively addressed using a single national database.     

Investigating the role of emissions trading policy to reduce emissions and improve the efficiency of industrial green innovation

Rapid economic development usually leads to serious environmental pollution problems. In order to solve the problem of pollutant emission in sustainable industrial development, it is urgent to examine the implementation effect of emissions trading policy (ETP) and its impact on green industrial development. This study adopts China's ETP as a case study and selects provincial panel data from 2004 to 2018. We first use a non-radial, non-directed, slack-based measure-directional distance function (SBM-DDF) to measure industrial green innovation efficiency. Then we use a difference in differences (DID) model to empirically test the emissions reduction effect of China's policy and whether it promotes industrial green innovation. Thereafter, results show that: (1) the ETP reduces sulfur dioxide (SO₂) emissions indicating the effectiveness of the policy; (2) the policy significantly improves industrial green innovation efficiency, meaning it promotes the sustainable development of the economy; (3) heterogeneity analysis highlights that ETP produces greater benefits for the most polluted regions of China which have more strict environmental regulations. The study examines the effect of emissions trading policy implementation from a new perspective. The study also provides a reference point for China to further refine its policy mechanisms and for other countries to formulate suitable ETP.     

A unified approach to Bermudan and barrier options under stochastic volatility models with jumps

Many financial assets, such as currencies, commodities, and equity stocks, exhibit both jumps and stochastic volatility, which are especially prominent in the market after the financial crisis. Some strategic decision making problems also involve American-style options. In this paper, we develop a novel, fast and accurate method for pricing American and barrier options in regime switching jump diffusion models. By blending regime switching models and Markov chain approximation techniques in the Fourier domain, we provide a unified approach to price Bermudan, American options and barrier options under general stochastic volatility models with jumps. The models considered include Heston, Hull–White, Stein–Stein, Scott, the 3/2 model, and the recently proposed 4/2 model and the α-Hypergeometric model with general jump amplitude distributions in the return process. Applications include the valuation of discretely monitored contracts as well as continuously monitored contracts common in the foreign exchange markets. Numerical results are provided to demonstrate the accuracy and efficiency of the proposed method.     

An industrial ecology virtual framework for policy making in China

ABSTRACT

This study develops a multi-regional input–output (MRIO) laboratory for policy-relevant applications in China. The Chinese IELab features unique flexibility and advances the previous state of the art in terms of three novel aspects. First, it can generate regionally and sectorally very detailed MRIO tables based on users’ own research questions. Second, it covers the entire territorial economic boundary and has the longest and most up to date annual time series from 1978 to 2015. Third, it can be used to provide insight to a wide range of research and policy questions including social, economic, and environmental issues, thus significantly improving all applications that rely on input–output tables. These features are illustrated by generating a Beijing–Tianjin–Hebei multi-regional supply and use table for 2014 at city level and applying it to the case study of transferring Beijing’s non-capital functions according to The Beijing-Tianjin-Hebei Coordinated Development Strategy set by the Chinese government.     

The role of the elasticity of substitution in economic growth: A cross-country investigation

Although the importance of the elasticity of substitution between capital and labor (σ) has long been recognized in several branches of economics, it has not received enough attention in the growth literature. de La Grandville (1989) showed theoretically that at any stage of an economy's development, the growth rate of income per capita is increasing with σ. The higher is σ, the greater the similarity between capital and labor in the production function, and thus diminishing returns set in very slowly. To the best of our knowledge, this is the first paper that tests the hypothesis that growth rate is increasing with the value of σ at the cross-country level. We estimate σ for 90 countries from direct estimation of the normalized CES production function and then include these estimators as an explanatory variable in cross-country growth regression. We investigate the sign and significance of the coefficient of σ conditioning on country characteristics, initial conditions, and a set of policy variables. After accounting for endogeneity and the fact that σ is a “generated” regressor, we find strong support for the hypothesis. The result is robust to both Leamer's (1983) extreme value analysis and Bayesian model averaging. About a fifth to a quarter of the growth rate differential between East Asia and Sub-Saharan Africa can be explained by σ alone.     

Defining and measuring the development of a country over time: a proposal of a new index

This paper introduces the concept of harmonic growth as an extended acceptation of the notion of development, and discusses its measurement via the Harmonic Growth Index (HGI). The growth is seen as harmonic when the behaviour of a benchmark time series, which here is a measure of wealth, such as per capita GDP, is followed by a similar pattern in socio-economic series. Unlike most widely used indicators in the literature, which take into account the measurement of development over a single time, HGI measures the degree to which a social indicator’s time series pattern matches with the GDP’s. The index is a function, ranging in [0, 1], of the coefficients of the uniform B-splines fitted to each time series, according to the functional data framework. A case study on Mediterranean welfare countries (Greece, Italy, Portugal, and Spain), in the period 1996–2007, shows critical differences in the selected indicators which can be ascribed to their dissimilar specific development models. HGI can be also considered as a general index to measure the similarity between time patterns, or as an alternative to correlation for (non-necessarily linear) time series.     

Why avoiding ‘Japanification’ could be a massive task

• ? 'Japanification risk’ is back on the agenda in the context of a slowing world economy. Japan's struggle to drag its economy out of an entrenched deflationary cycle offers a cautionary tale for other economies such as the eurozone, demonstrating the enormity of the policy effort needed.
• ? Low inflation and low growth in Japan are linked to demographic and monetary factors, against which Japan has intensified policy efforts since 2011–12. Japan can claim some success in boosting workforce participation but productivity growth has stalled while monetary policy efforts have delivered limited gains.
• ? The eurozone has avoided some of the early policy errors made by Japan and taken a number of steps to tackle ‘Japanification’ risks. But productivity growth has flagged even more than Japan's in the 1990s, and parts of the eurozone still risk sliding into deflation if the global downturn worsens.
• ? The eurozone's policy options to fight ‘Japanification', particularly at the individual country level, are more limited than was the case in Japan. Further ‘heavy lifting’ by the ECB would be required – implying downside risks for the euro and bond yields staying low, if not compressing further.

     

Growth,speculation and sprawl in a monocentric city

An economic theory of sprawl in a growing, monocentric city is presented. Where decision-makers have perfect foresight, leapfrog development and discontinuous land-rent functions may occur and be efficient in both an ex post and ex ante sense. Where the extent of future growth is uncertain, decision-makers become speculators and the spatial pattern of development is more complicated. Ex post inefficiency generally occurs.     

The economic consequences of environmental regulation in China: From a perspective of the environmental protection admonishing talk policy

Environmental regulation may lead to undesired economic consequences. China has tightened its environmental policies to deal with severe environmental pollution in recent years, but existing studies pay little attention to the economic consequences of China's environmental policies. Using the panel data of 211 prefecture‐level and above cities in China from 2003 to 2016, we for the first time estimate the economic impact of the environmental protection admonishing talk (EPAT) policy, a newly implemented environmental regulation policy in China. We use the difference‐in‐differences strategy to identify the economic effects of the EPAT policy combined with the propensity score matching method to control a potential selection problem. The results show that a relative decline occurs in gross domestic product per capita in target cities after the implementation of the EPAT, and the negative impact is exerted on the secondary industry rather than the tertiary industry. Furthermore, we find that target cities respond to the environmental protection requirements of higher authorities through a one‐size‐fits‐all approach of limiting the production activities of industrial enterprises. Meanwhile, the EPAT policy does not improve environmental efficiency. Such findings are instructive for policymakers who need to trade off economic welfare and environmental quality when formulating and implementing new environmental policies.