Economic Implications of Alternative Allocation Schemes for Emission Allowances*

For reasons of political feasibility, emission trading systems may have to rely on free initial allocation of emission allowances in order to ameliorate adverse production and employment effects in dirty industries. Against the background of an emerging European‐wide emission trading system, we examine the trade‐off between such compensation and economic efficiency under output‐based and emissions‐based allocation rules. We show that the emissions‐based allocation rule is more costly than the output‐based rule in terms of maintaining output and employment in energy‐intensive industries. When the international allowance price increases, the inferiority of emissions‐based allocation vis‐à‐vis output‐based allocation becomes more pronounced, as emission subsidies drastically restrict efficiency gains from international trade in emission allowances.     

Water accounting for the Orange River Basin: An economic perspective on managing a transboundary resource

The framework for water accounting is applied to an international river basin, the Orange River Basin, which is shared among Botswana, Namibia, Lesotho and South Africa. Each of the riparian states faces water constraints and relies increasingly on shared international water resources. The countries have adopted the principle of an economic approach to water management, once basin human needs are met, and all but Lesotho have constructed national water accounts to assist in water management. The water accounts for the Orange River Basin bring an economic perspective to water management at the regional level. The accounts include supply and use tables, which are used to compare the contribution to water supply from each riparian state to the amount used. The water accounts are then linked to economic data for each country to calculate water use and productivity by industry and country. There are considerable disparities in water productivity among the countries, which should be taken into account in future decisions about water allocation, pricing and infrastructure development.     

Workplace bargaining in hospitals and schools: threat or opportunity for the unions?

Government policy has aimed to encourage the development of workplace bargaining in both the education and health services. This article traces those developments and looks at trade union opposition to the shift from national to workplace bargaining     

A Brief Survey of Modern Optimization for Statisticians

Modern computational statistics is turning more and more to high‐dimensional optimization to handle the deluge of big data. Once a model is formulated, its parameters can be estimated by optimization. Because model parsimony is important, models routinely include non‐differentiable penalty terms such as the lasso. This sober reality complicates minimization and maximization. Our broad survey stresses a few important principles in algorithm design. Rather than view these principles in isolation, it is more productive to mix and match them. A few well‐chosen examples illustrate this point. Algorithm derivation is also emphasized, and theory is downplayed, particularly the abstractions of the convex calculus. Thus, our survey should be useful and accessible to a broad audience.     

On the self-interested use of equity in international climate negotiations

We discuss self-interested uses of equity arguments in international climate negotiations. Using unique data from a world-wide survey of agents involved in international climate policy, we show that the perceived support of different equity rules by regions may be explained by the ranking of their economic costs. Despite being self-interested, equity arguments may be perceived as being used for different reasons, for example, out of fairness considerations or in order to facilitate negotiations. Consistent with experimental and behavioral studies on fairness perceptions, we find that individuals are more likely to state reasons with positive attributes if they evaluate their own region or regions that support the individual's personally preferred equity rule. Negotiators perceive the use of equity by regions as less influenced by pressure from interest groups.