Elasticity of substitution and technical efficiency: evidence from the US electricity generation

ABSTRACT

The implications of national or regional energy policies for technical efficiency and environmental outcomes in electricity generation depend on fossil fuel input substitution. This study uses state level data to examine fossil fuel (coal and natural gas) substitution in electricity generation under increased availability of natural gas in the United States. We observe that changes in elasticities of substitution from pre-2009 to post-2009 differ across states suggesting that the effects of increased availability of inexpensive natural gas on electricity generation have been spatially heterogeneous. We rely on the observed heterogeneity to assess the effects of fossil fuel input substitution on technical efficiency and CO₂ emissions. The results reveal that state level elasticity of substitution between natural gas and coal has a positive effect on technical efficiency and a negative effect on CO₂ emissions. Therefore, future policy design and analyses should reflect the implications for regional elasticities of fossil fuel substitution and associated environmental outcomes.     

Primary and secondary pest management in agriculture: balancing pesticides and natural enemies in potato production

Natural enemies (NEs) provide an important ecosystem service by preying on variety of pests in agricultural crop production systems. Current management practices of both primary and secondary pests in agricultural production principally rely on the use of pesticides with associated negative social and environmental consequences/externalities. Excessive use of pesticides against primary pets can remove NEs from the agro‐ecosystem and amplify susceptibility of the system to outbreaks of secondary pests. The combined effect of NEs on primary and secondary pests has received limited attention. This study uses an intraseasonal bioeconomic model to explicitly take into account biological interactions among primary pests, secondary pests, and NEs assuming decision makers’ profit maximizing behavior. The model explicitly captures the opportunity cost of injury to NE in terms of both primary and secondary pest suppression by NE. The results show that in the context of the green peach aphid (primary pest) and two‐spotted spider mite (secondary pest) in potato production, inclusion of NE into pest mitigation strategy can increase returns by 2%.     

Youth leisure careers during post‐communist transitions in the South Caucasus

This paper reports findings from interview surveys with 1215 respondents, split between the capital cities (Yerevan, Baku and Tbilisi) and one non‐capital region (Kotayk, Aran‐Mugan and Shida Kartli) in each of the three South Caucasus countries – Armenia, Azerbaijan and Georgia. The respondents, who were drawn from households in larger representative household social surveys, were all born between 1970 and 1976 and were aged 31–37 at the time of the fieldwork in 2007. Their life stage transitions from childhood to adulthood had roughly coincided with their countries’ transitions from communism to post‐communism. Data was collected on the samples’ participation in selected leisure activities from age 16 to 30. Similar data was collected on the samples’ careers in education, the labour market, housing and family relationships. This information enables us to identify typical leisure careers and how their development was affected by events in other life domains, all in the context of the macro‐changes that were in process in each of the research locations. The evidence enables both personal leisure careers and aggregate leisure trends in different socio‐demographic groups to be identified This shows that changes in leisure behaviour between age 16 and 30 were neither widening nor narrowing the differences between the leisure of males and females, or those who married and became parents on the one hand, then, on the other, those who were still single and childless at age 30. In contrast, differences by place, and by social class, grew progressively wider, thus raising the social costs of geographical and social mobility. Changes in leisure behaviour between age 16 and 30 were separating young adults into those who participated in little, if any, structured out‐of‐home leisure, whose main leisure spending, if any, was on alcohol and tobacco (typically consumed in homes and neighbourhoods), and those whose leisure was characterised by relatively high and sustained participation in sport, consumption of high culture, and going out to bars, cafes, cinema, discos, etc.     

The Adding-Up Test in an Incentivized Value Elicitation Mechanism: The Role of the Income Effect

In the context of testing the construct validity of stated preference studies, some researchers advocate the use of an “adding-up test” designed to gauge whether elicited values are sufficiently sensitive to a change in the scope (i.e. size) of a good. Crucial to the applicability of this test in practice, which relies on endowing a subsample of respondents with a good free of charge, is that the income effects due to endowment are negligible. In this study, we apply the adding-up test in an experimental value elicitation format to examine the potential effect of endowment as part of the test design on the adding-up property of elicited values. The results show that the adding-up property can be affected by free provision of part of the bundle.     

The Neural Inhibition of Learning Increases Asset Market Bubbles: Experimental Evidence

The authors tested a leading theory of bubble formation, insufficient learning, in a laboratory asset market using a drug, Naltrexone, which inhibits reinforcement learning. We found that asset price bubbles in Naltrexone sessions were larger compared with placebo sessions, averaging 60% higher in amplitude and 77% larger in the deviation from fundamental value in the final 12-period trading round. There was no difference between conditions in understanding of the trading rules, overconfidence, or confusion. Participants on Naltrexone appeared unable to determine appropriate trading strategies as prices changed. The findings indicate that specific neural mechanism of reinforcement learning is involved in the formation of asset market bubbles.     

Have the Implications of Twin Deficits Changed?: Sudden Stops over Decades

Over the last three decades, many developing countries have experienced severe currency crises. This paper presents a study of how the importance of twin deficits (budget and current account deficits) has changed in predicting sudden stops from the 1970s to the mid-2000s using data from 42 developing countries. Results show that the explanatory power of twin deficits has declined over the decades but that deficits of these kinds remain important factors for predicting sudden stops. Our results imply that a large current account deficit is an issue even when it is not accompanied by a budget deficit. This finding contradicts Lawson’s Doctrine.     

Value elicitation for multiple quantities of a quasi‐public good using open ended choice experiments and uniform price auctions

Choice experiments and experimental auctions have become popular mechanisms for estimating willingness to pay (WTP). However, these methods have primarily been used for estimating WTP for single units of goods. We analyze the results from experimental auctions and choice experiments in the context of multiple quantities of a quasi‐public good (animal welfare product). We show that the use of WTP values for a single unit of a product, a common practice in experimental valuation literature, can result in underestimation of aggregate demand. We use and compare open ended choice experiments (OECE), second price Vickrey auctions, and random Nth price auctions as mechanisms for valuing WTP. Our results also suggest that individual level demand estimates from OECE are less elastic than demand estimates from uniform price auctions.     

Willingness to Pay for Multiple Quantities of Animal Welfare Dairy Products: Results from Random Nth‐, Second‐Price,and Incremental Second‐Price Auctions

Nonhypothetical experimental auctions are used to elicit willingness to pay for humane animal care‐certified dairy products: cheese and ice cream. We use second‐price, random Nth‐price, and incremental second‐price auctions in multiproduct, multiquantity, and multiround contexts. The results contrast participants’ bids across different auction mechanisms and different products. Differences in bidding patterns are detected across auction mechanisms as well as products. Our results suggest that subjects on average are only willing to pay a premium price for one unit of humane animal case‐certified ice cream but not for multiple quantities.     

Partial equilibrium analysis of vaccination as an avian influenza control tool in the U.S. poultry sector

The study addresses the economic effectiveness of vaccination in the case of highly pathogenic avian influenza (HPAI) outbreaks. The effectiveness is evaluated in a U.S. case study comparing the outbreak costs under the currently recommended HPAI control practice versus one which also includes vaccination. An integrated economic‐epidemic partial equilibrium model is used to empirically simulate HPAI outbreaks in three different poultry regions within the State of Texas. The simulation results show that the effectiveness of vaccination depends on flock density in the region and risk aversion preferences of the decision maker. In regions with high flock densities, if the decision maker is less risk averse the currently recommended strategy—which includes depopulation, movement restrictions, and flock testing—is more cost‐effective than the same strategy supplemented with vaccination. Addition of vaccination improves cost effectiveness only if the decision maker is highly risk averse or if surveillance, carcass disposal, and cleaning costs are high. In regions with medium and low flock densities, adding vaccination to the currently recommended strategy is not cost‐effective except in the case of high surveillance, carcass disposal, and cleaning costs.     

Patterns and drivers of post-socialist farmland abandonment in Western Ukraine

Farmland abandonment restructures rural landscapes in many regions worldwide in response to gradual industrialization and urbanization. In contrast, the political breakdown in Eastern Europe and the former Soviet Union triggered rapid and widespread farmland abandonment, but the spatial patterns of abandonment and its drivers are not well understood. Our goal was to map post-socialist farmland abandonment in Western Ukraine using Landsat images from 1986 to 2008, and to identify spatial determinants of abandonment using a combination of best-subsets linear regression models and hierarchical partitioning. Our results suggest that farmland abandonment was widespread in the study region, with abandonment rates of up to 56%. In total, 6600 km² (30%) of the farmland used during socialism was abandoned after 1991. Topography, soil type, and population variables were the most important predictors to explain substantial spatial variation in abandonment rates. However, many of our a priori hypotheses about the direction of variable influence were rejected. Most importantly, abandonment rates were higher in the plains and lower in marginal areas. The growing importance of subsistence farming in the transition period, as well as off-farm income and remittances likely explain these patterns. The breakdown of socialism appears to have resulted in fundamentally different abandonment patterns in the Western Ukraine, where abandonment was a result of the institutional and economic shock, compared to those in Europe's West, where abandonment resulted from long-term socio-economic transformation such as urbanization and industrialization.