Valuing ecosystem services: A shadow price for net primary production

We analyze the contribution of ecosystem services to GDP and use this contribution to calculate an empirical price for ecosystem services. Net primary production is used as a proxy for ecosystem services and, along with capital and labor, is used to estimate a Cobb Douglas production function from an international panel. A positive output elasticity for net primary production probably measures both marketed and nonmarketed contributions of ecosystems services. The production function is used to calculate the marginal product of net primary production, which is the shadow price for ecosystem services. The shadow price generally is greatest for developed nations, which have larger technical scalars and use less net primary production per unit output. The rate of technical substitution indicates that the quantity of capital needed to replace a unit of net primary production tends to increase with economic development, and this rate of replacement may ultimately constrain economic growth.     

Welfare Impacts of the Canada-U.S. Softwood Lumber Trade Dispute: Beggar Thy Consumer Trade Policy

The welfare impacts of the 1987–91 Canadian "voluntary" 15% lumber export tax and the current 6.51 % U. S. import duty are analyzed using a simultaneous equations model of the softwood lumber market. The results show that U.S. consumers suffer losses 35% to 45% of those endured by Canadian producers. Canadian national welfare was much higher under the voluntary export tax, indicating the Canadian government erred in unilaterally terminating the agreement. In both instances, the U.S. government pursued policies that benefited domestic producers at the expense of U.S. lumber consumers, with no attempt or discussion of compensation. Thus, this appears to be a case of "beggar thy consumer" trade policy.     

ALTERNATIVE CHARACTERIZATIONS OF AMERICAN PUT OPTIONS

We derive alternative representations of the McKean equation for the value of the American put option. Our main result decomposes the value of an American put option into the corresponding European put price and the early exercise premium. We then represent the European put price in a new manner. This representation allows us to alternatively decompose the price of an American put option into its intrinsic value and time value, and to demonstrate the equivalence of our results to the McKean equation.