General equilibrium impact of an energy-saving policy in the public sector

We analyse a disregarded environmental policy instrument: a switch in government expenditure away from energy (or other natural resources) and toward a composite good which includes energy-saving expenditure. We first develop two variants of an analytical general equilibrium model. A composite good is produced with constant returns to scale, and energy is imported or produced domestically with diminishing returns, yielding a differential rent to its owners. The government purchases energy and composite goods from private firms. Such a policy unambiguously increases employment. It also raises private consumption and welfare under two conditions: (i) it is not too costly and (ii) the initial share of the resource is smaller in public spending than in private consumption, or the difference is small enough. We then run numerically a model featuring both importation and domestic production of energy (oil, gas and electricity), for the OECD as a whole. Simulations show that employment, welfare and private consumption rise. We provide magnitudes for different parameter values. Earlier versions of this paper have benefited from conference participants at the European Council for an Energy-Efficient Economy, International Society for Ecological Economics World Congress, CIRED seminar and EUREQua environmental economics seminar. We especially thank Michèle Sadoun and two anonymous referees. The usual disclaimer applies.     

Threshold models for trended time series

This paper presents the theoretical development of a new threshold autoregressive model based on trended time series. The theoretical arguments underlying the model are outlined and a nonlinear economic model is used to derive the specification of the empirical econometric model. Estimation and testing issues are considered and analysed. Additionally we apply the model to the empirical investigation of U.S. GDP.This paper is the result of work carried out for the author's Ph.D. thesis. I would like to thank Hashem Pesaran for his help, encouragement and insights during the preparation of this paper. I also thank Gary Koop and Sean Holly for helpful comments. Financial assistance from the Economic and Social Research Council is gratefully acknowledged.     

Noisy chaotic dynamics in commodity markets

The nonlinear testing and modeling of economic and financial time series has increased substantially in recent years, enabling us to better understand market and price behavior, risk and the formation of expectations. Such tests have also been applied to commodity market behavior, providing evidence of heteroskedasticity, chaos, long memory, cyclicity, etc. The present evaluation of futures price behavior confirms that the resulting price movements can be random, suggesting noisy chaotic behavior. Prices could thus follow a mean process that is dynamic chaotic, coupled with a variance that follows a GARCH process. Our conclusion is that models of this type could be constructed to assist in forecasting prices in the short run but not over long run time periods.First version received: June 2001/Final version received: March 2003     

Hedonic models and air pollution: Twenty-five years and counting

This paper reports a meta analysis of how effectively hedonic property models have detected the influence of air pollution on housing prices. Probit estimates are reported describing how data, model specification, and local property market conditions in cities represented in thirty-seven studies influence the ability of hedonic models to uncover negative, statistically significant relationships between housing prices and air pollution measures.Partial support for this research was provided by the Russell Sage Foundation. Thanks are due David Cordray, Heidi Hartman, and Larry Hedges of the Foundation's Meta-Analysis Panel for constructive comments, to Ray Palmquist for suggestions and assistance in assembling the results from his studies, to Rick Freeman and Tom Tietenberg and two anonymous referees for comments on the research, and to Barbara Scott for constructive editing of earlier drafts of this paper.     

The Economics Of Partner Out Trading in Sexual Markets

This paper derives a model of participation in what is commonly known as ‘adultery’. Arguably the best sex survey in the world is used to produce estimates of participation functions. The results show a great deal of support for bioeconomic models and reveal some interesting similarities and differences between the male and female equations. This revised version was published online in July 2006 with corrections to the Cover Date.     

Optimization of Harvesting Return from Age-Structured Population

Synopsis Maximization of the net profit from harvesting in a one-species age-structured population is analyzed. One of the control functions is the age of harvested individuals. The constructed mathematical model is similar to vintage capital models used in economics for optimal capital replacement. The optimization technique developed by authors for the capital replacement is disseminated to the formulated problem. A qualitative analysis of the problem is provided and the interpretation of results is given. Such economic topics as a zero-investment period, optimal balanced growth, and turnpike properties are discussed.     

Norwegian Emissions of CO2 1987–1994 A Study of Some Effects of the CO2 Tax

Several countries have introduced taxes on fossil fuels with the aim of reducing atmospheric emissions, partly because of local environmental goals (SO₂, NO_x) and partly to participate in a global effort to reduce emissions of greenhouse gases. Many macroeconomic studies, based on both global and national models, have been made of how emissions can be reduced with the help of taxes and the consequent reduction in GDP following the introduction of such taxes. Norway has had a CO₂ tax for five years, thereby providing a unique opportunity to evaluate the effects of this tax on emissions. The paper provides a counterfactual analysis of energy consumption and emissions if no CO₂ taxes had been introduced, compared with the actual situation in which such taxes exist. The effect of a CO₂ tax on oil consumption, and thus CO₂ emissions is studied on the basis of partial economic models for various sectors of the Norwegian economy. The study indicates that the CO₂ tax has had an impact on CO₂ emissions in Norway.     

Forecasting the diffusion of photovoltaic systems in southern Europe : A learning curve approach

Most analysts disagree upon whether photovoltaic systems (PV) will be able to play an important role in the energy scenarios of the future. A few scholars also question the appropriateness of policies that envisage the use of public subsidies to stimulate the growth of this industry and to accelerate market penetration. This paper contributes to this debate by examining whether carefully designed policies may initiate a process of large-scale diffusion of grid-connected PV, even without the deployment of external subsidies. Building upon a disaggregated characterization of the electricity market, it takes endogenously into account the learning curve phenomenon and simulates the diffusion of PV building-integrated systems in five European countries. The analysis is restricted to crystalline silicon systems and is repeated under four different macroeconomic scenarios corresponding to four different energy policies. The results suggest that already today there are opportunities for PV diffusion in many islands of the Mediterranean region, which may trigger sufficient scale economies to render the technology competitive in larger markets. They also show that the diffusion process could be accelerated through the implementation of carbon-tax policies that support initial penetration. The environmental benefits (net avoided CO₂ emissions over the system life cycle) associated with the forecasted penetration are also evaluated.     

The long-run effects of the real exchange rate on employment and wages in Canadian manufacturing

ABSTRACT

The literature on real exchange rate effects on the labour market is dominated by short-run analysis showing that there is heterogeneity in the responses of firms or industries to a real exchange rate shock. Analysing data on Canadian manufacturing industries, I conclude that there is a common long-run equilibrium across all manufacturing industries controlling for their openness to trade after varying adjustments to a real exchange rate shock have taken place. This conclusion is important from the perspective of policy making because it helps to form expectations about the effects of a real exchange rate movement on the labour market. The results suggest that real appreciation leads to economically significant reductions in employment in manufacturing in the long run. Real wages decrease in industries that are highly engaged in international trade and somewhat increase in industries that are relatively closed to international trade. Both employment and real wages converge quickly to the long-run equilibrium.     

Public policies as specification errors

Treating public policies as computable dynamic general equilibrium model specification errors offers computational and conceptional advantages for comparing models with data. The set of policies calculated to rationalize observed behaviors raises the substantive economic question whether, in any particular market, actual public policies sufficiently coincide with the model's behavior-rationalizing policies, or whether the model offers correct hypotheses about the determinants of demand and supply. As illustrations, public policies are calculated to rationalize, with respect to the stochastic neoclassical growth model, capital market behavior since WWII and labor market behavior in 1929–1950. One conclusion is that capital taxation drives a wedge between consumption growth and the expected pre-tax capital return, in the direction and amount predicted by the theory, and that capital taxation is the major intertemporal distortion in the postwar capital market. Second, a good theory of the Great Depression labor market must explain why measured MRS and MPL diverged so dramatically in 1929–1933 and why the wedge persisted.