Dollarising Indonesia

The rupiah's record of instability, both recently and over the long term, suggests it is worthwhile to investigate options for radical monetary reform. An option currently receiving attention elsewhere is official dollarisation, under which a country ceases to issue a domestic currency and makes a foreign currency its official currency. This paper discusses the costs and benefits of dollarisation in Indonesia, the steps involved in dollarisation, and some economic and political implications of dollarisation.     

From ecological footprint to ecological rent: An economic indicator for resource constraints

This paper takes as a starting point a combination of an input-output model with a national Ecological Footprint account for Germany in the spirit of Wiedmann et al. [Wiedmann, T., Minx, J., Barrett, J., Wackernagel, M., 2006. Allocating ecological footprints to final consumption categories with input-output analysis. Ecological Economics. 56, 28-48]. Footprint as well as Biocapacity is dealt with at the industry level. Gross output of each industry and final demand for each industry can then be split up into a share that is reconcilable with Biocapacity and another share that corresponds to the ‘Ecological Deficit’. The Ecological Footprint concept is extended in this study by introducing the additional biocapacity necessary for sustaining the given level of economic activity. It is assumed that each industry had to rent the corresponding areas and to apply a given technology in order to make this additional land biophysically productive. That results in an additional technology for each industry leading to an increase in costs and prices. The new price level is directly linked to the share of output that corresponds to Biocapacity overshooting, which is defined by the ‘Ecological Deficit’. Economic indicators can be derived by measuring the income difference brought about by the price increase. This difference corresponds to a Ricardian rent which is due to resource constraints on output growth.     

Efficiency out of disorder: Contested ownership in incomplete contracts

In many situations, irreconcilable disagreements between players lead to costly ownership disputes over assets—for example, in case of joint ownership. This article studies the role of such disputes in a situation where two players have to make a transaction‐specific investment and when contracts are incomplete. I show that potentially contested ownership may mitigate the inefficiency of investments due to the incompleteness of contracts generating an exchange surplus that comes closer to the first‐best surplus as compared to any other ex ante distribution of ownership typically discussed in the literature following the influential work by Grossman, Hart, and Moore. If the contest is an all‐pay auction, each player makes a transaction‐specific investment as if he or she owns the asset. This article can explain why shared ownership—as for example in equity joint ventures, family firms, start‐up partnerships, and so on—is an important part of today's corporate landscape.     

Maximising,Satisficing, Weights and the Evaluation of Macroeconomic Comparisons

The success or failure of macroeconomic policy over time and in comparison to other countries is an important item in political discussions. The present paper discusses the relative advantages and disadvantages of different forms of indices which aim at an aggregated picture for macroeconomic evaluations. Maximising, satisficing, and weights in multi-item indices are discussed on a principal level. In the final section a simple numerical example comparing different countries serves as an illustration of some of the main aspects. It is shown that alternative forms can yield important differences in ranking and offer alternative insights.     

The economic agent as rule maker and rule user: <Emphasis Type="BoldItalic">Homo Sapiens Oeconomicus</Emphasis>

The paper discusses the micro foundations of evolutionary economics, introducing a unified concept of the economic agent as a rule maker and rule user. Based on recent findings of the neuronal, cognitive and behavioral sciences, Homo Sapiens Oeconomicus emerges as an alternative to Homo Oeconomicus. A taxonomy of rules distinguishing between cognitive, behavioral and blueprint rules and a set of theoretical propositions related to the structure and evolution of those rules are suggested.JEL Classification: A 12, B 41, B 52, B 53, D 00, D 64, D 80, D 83, E 11, L20The present paper had its origin in a research project on The Interdisciplinary Foundations of Economic Decision Making supported by the Swiss National Science Foundation during 1978-1980. The core of that work was a brain model whose architecture also serves as a corner stone for this paper. Since then there have been substantial developments in the respective areas; some of the major findings of the more recent research in the neuronal, cognitive and related sciences are discussed and integrated into the present paper. - I gratefully acknowledge insightful comments and criticisms from Georg D. Blind. Some ideas were discussed during my tenure as a Visiting Professor in the Department of Economics at the University of Queensland, in fall 2003, and I wish to record my appreciation of the hospitality during that visit. Particular thanks for the inspiring discussions go to Peter Earl, John Foster, and, as always, Jason Potts. Special thanks are due to Juli Lessmann and Charles R. McCann for their thoughtful corrections of my English prose and their editorial help. The usual disclaimer applies.     

Income segregation and local progressive taxation: Empirical evidence from Switzerland

This study investigates spatial income segregation in fiscally decentralized urban areas. The theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation. The empirical part studies how income tax differentials across municipalities affect the households' location decisions. I use data from the Swiss metropolitan area of Basel that contains tax information on all moving households in 1997. The location choice of the households is investigated within the framework of the random utility maximization model. Different econometric specifications of the error term structure, such as conditional logit, nested logit and multinomial probit, are compared. The empirical results show that rich households are significantly and substantially more likely to move to low-tax municipalities than poor households. This result holds after controlling for alternative explanations of segregation. Social interactions and distance from the central business district are established as other major factors for income segregation. Households in general tend to choose locations close to other households like themselves.     

A Real Options Approach to Abatement Investments and Green Goodwill

In this paper we adopt the green goodwill argument as to why firms voluntarily invest in abatement capital. We investigate the effects on the abatement investment decision of changes in uncertainty about future green goodwill, competitor abatement investments, regulations, etc., using a real options framework. Our results indicate that increased uncertainty about consumers' willingness to pay for green products in the future discourage voluntary abatement investments. The model also suggests that voluntary abatement investments are promoted by an increased threat of regulation and competitor abatement investments. Furthermore, the benefit-cost ratio of the abatement investment project, at the point where it is optimal to invest, is independent of what regulatory regime (stringent or lenient) the firm operates in. We also conclude that despite the fact that voluntary abatement investment exists, there may still be room for environmental policy.     

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