CO2-Stabilization May Be a 'No-Regrets' Policy

Restricting CO₂ emissions requires changing today's consumption pattern away from energy and emission intensive commodities towards cleaner goods. The cost of stabilizing CO₂ emissions at the 1990 level by the year 2000, say, as compared to a business-as-usual trend, is estimated by several researchers to be on the order of 1% of GNP. We will argue that the cost may be overestimated because of a too simple model describing the working of the economic system and the evaluation of welfare. We demonstrate that by expanding a model to include the actual tax system and negative externalities, the cost to present generations from restricting emissions by a CO₂ tax may be negative. That is, some reduction may actually correspond to a 'no-regrets' policy. The reasons are inefficiencies in today's tax system and non-optimal handling of negative externalities. Our analysis suggests that a CO₂ tax and reduced emissions will lessen such inefficiencies.     

The effects of input tariffs on productivity: panel data evidence for OECD countries

Based on a panel of 16 OECD countries and 10 manufacturing industries over 1996–2007, this paper investigates the impact of tariffs on foreign intermediate goods on productivity growth in downstream manufacturing industries. The results show that imposing tariffs on imported intermediate goods is particularly harmful for industries that operate close to the global technological frontier. We also consider the possibility that input-tariff liberalisation may have different effects depending on the technological content of imported intermediate goods. Our findings suggest that protecting imports of high-technological goods is more harmful for productivity improvements in industries that operate close to global best practice.     

Accounting for Ecosystems

Millennium Ecosystem Assessment documented the importance of ecosystem services. It is therefore important to include these services in the national system of economic accounts. This requires estimation of “accounting prices” for ecosystems, that is, the marginal value of a change in the size of the system. This raises a number of questions: What do we mean by the “size” of the system? What is the dynamics of the system? How do we quantify the impacts on services from a change in the size of the system and finally how do we value these impacts? We discuss these questions in a few examples of ecosystems, and valuation as such is not the major problem. The major problem is the lack of information of the appropriate dynamic model for most systems. We therefore suggest that economists and ecologists should set priorities on which ecosystems should be the first objects for study for these; we should test the possibilities of estimating the accounting prices.     

Cross-sectional analysis of Swedish stock returns with time-varying beta: the Swedish stock market 1983–96

This paper analyses the ability of beta and other factors, like firm size and book-to-market, to explain cross‐sectional variation in average stock returns on the Swedish stock market for the period 1983–96. We use a bivariate GARCH(1,1) process to estimate time-varying betas for asset returns. The estimated variances of these betas, derived from a Taylor series approximation, are used for correcting errors in variables. An extreme bound analysis is utilized for testing the sensitivity of the estimated coefficients to changes in the set of included explanatory variables.
Our results show that the estimated conditional beta is a more accurate measure of the true market beta than the beta estimated by OLS. The coefficient for beta is not significantly different from zero, while the variables book-to-market and leverage have significant coefficients, and the latter coefficients are also robust to model specification. Excluding the down turn 1990–92 from the sample shows that the significance of the risk premium for leverage might be considered as an industry effect during this extreme period. Finally, we find a close dependence between the risk premium for beta and that for size and book-to-market. The omission of each of these variables may cause statistical bias in the estimated coefficient for beta.     

Why Does Poor Performance Get So Much Attention in Public Policy?

Abstract: This article explores why information on poor performance often gets most of the attention in public policy. In order to illustrate the discussion this paper analyses the case of educational policy for secondary schools in Norway, and in particular the policy of participating in the OECD Programme for International Student Assessment (PISA) which measures educational outcomes for 15‐year old pupils regarding reading, mathematics and science. Governments, researchers, interest groups and the media await the regular release of the PISA results every third year with great interest, and participate in the strategy of ‘naming and blaming’ based on the relative national performances. The practice of identifying poor performance and the subsequent public discourses has become an institution. Despite the negativity‐bias the strategic use of information associated with these processes may have positive impacts on decision making, policy innovation and democratic accountability.     

Sustainability in EU Tax Law

Intereconomics - As sustainability embeds concepts of economic prosperity and growth, the idea of pursuing it through law — and through lawyers, with their tendency to focus on rights, as...     

“Squeezing R&D”: A Study of Organizational Slack and Knowledge Creation in NPD,Using the SECI Model

During new product development (NPD), functional areas such as marketing, R&D, and manufacturing work together to understand customer needs, create product concepts, and solve technical issues. NPD is dependent on the creation of new knowledge and the interplay between tacit knowledge (knowledge that is difficult to articulate and codify) and explicit knowledge (knowledge that can be codified and documented). Knowledge creation requires time and resources, and the dichotomy facing senior management is how much spare capacity in NPD teams—so‐called organizational slack—is appropriate. Too much organizational slack and precious development resources will be wasted; but when slack is eliminated, there is a danger that knowledge creation will be severely hindered. There have been very few studies of organizational slack at the project level, and so the aim of our research was to examine the impact of changes in organizational slack on knowledge creation in NPD projects. Six projects were studied at two companies, over a two‐year period. Multiple sources of data were used to determine how changes in organizational slack impacted knowledge creation, which was operationalized using Nonaka's socialization, externalization, combination, and internalization (SECI) model. It was found that the creation of knowledge in NPD projects is susceptible to changes in organizational slack. A significant finding was that every time there were changes in organizational slack, there was always some impact on knowledge creation. Increased slack enabled knowledge creation; but, importantly, the impacts of decreasing organizational slack were often very negative and disrupted the work of NPD teams, particularly at the end of projects. Managers who feel that “squeezing R&D” is important should think again—their action might disrupt knowledge creation and compromise innovation.     

Nationalism and government effectiveness

Nation-building is believed to have a positive influence on economic and political outcomes, especially in countries with ethnically fragmented populations. Yet nationalism, an indicator of successful nation-building, has been empirically linked to protectionism and intolerance, which suggests that dismal performance is a more likely outcome. This paper empirically identifies an inverted U-shaped relationship between nationalism and government effectiveness. The results suggest that the level of nationalism in the population is higher than optimal in most countries. It is further shown that nationalism may mitigate the negative effects of ethnic heterogeneity in former colonies. We find no clear linkages between nationalism and trade openness.