All-pay war

We study a model of conflicts and wars in which the outcome is uncertain not because of luck on the battlefield as in standard models, but because countries lack information about their opponent. In this model expected resource levels and production and military technologies are common knowledge, but realized resource levels are private information. Each country decides how to allocate its resources to production and warfare. The country with the stronger military wins and receives aggregate production. In equilibrium both comparative and absolute advantages matter: a larger resource share is allocated to warfare by the country with a comparative advantage in warfare at relatively low realized resource levels, and by the country with an absolute disadvantage in warfare at relatively high realized resource levels. From an ex-ante perspective the country with a comparative advantage in warfare is more likely to win the war unless its military potential is much lower.     

Introducing the Longitudinal Multi‐Agency Data Integration Project and Its Role in Understanding Income Dynamics in Australia

The opening up of access to data from the Multi‐Agency Data Integration Project provides an opportunity to fill a number of research gaps on inequality in Australia. Our paper begins the external validation of these data, focusing on what the data can tell us about the distribution, dynamics and determinants of income in Australia. It has the potential to shed new light on these aspects, but the dataset should be used with caution, taking into account some key limitations, including incomplete linkage and more limited income information for those who do not complete a tax return.     

Effects of instantaneous groundwater availability on irrigated agriculture and implications for aquifer management

Groundwater is an important input for agricultural production in many parts of the world. Aquifer depletion has been shown to affect the rate that groundwater can be extracted from an aquifer. In this paper, we develop an analytical framework that accounts explicitly for the effects of limited instantaneous groundwater extraction rate (well capacity) on a producer's irrigation decisions. We show that limited well capacities can affect the producer’s groundwater use and profit. We draw three important insights from these findings. First, we demonstrate that the price elasticity of demand for groundwater is higher for lower well capacities. Second, farmers’ irrigation decisions are non-monotonic with respect to well capacity and climate conditions. Under a drier climate, producers with greater well capacities increase their groundwater use, and producers with lower well capacities reduce their water use. Third, through numerical analysis, we show that considering spatial heterogeneity in well capacities is important for estimating the cost-effectiveness and distributional impacts of groundwater management policies. Our results shed new light on the importance of extraction capacity for groundwater management policies and the potential impacts of climate change on agricultural production.     

Coordination in Oligopoly

The private and social efficiency of two "behavioral" coordination mechanisms is examined in this paper. In Cournot oligopoly, firms prefer immediate coordination on the Nash equilibrium (interpreted as a preplay communication) over the best-reply dynamics (and fictitous play) which converge to the equilibrium, but with delay (interpreted as a decentralized learning process). In Bertrand oligopoly, firms prefer the learning process. These results indicate that firms have incentives to create institutions, such as trade associations or informal meetings, to facilitate coordination of production capacities, but not prices. Moreover, quantity agreements may even increase social welfare.     

我国海峡西岸经济区市域农业综合生产能力评价分析

构建了市域农业综合生产能力评价指标体系,采用层次分析法确定评价指标的权重。在此基础上,对我国海峡西岸经济区20个地市的农业综合生产能力进行了评价,得出各市农业综合生产能力的评价结果及二级指标评价结果的排名,进一步指出各市所处的梯队,各市农业综合生产能力二级指标的长、短板属性,并分析了评价结果。最后,提出提高市域农业综合生产能力的建议。     

Wealth constraint and contractual arrangements

Abstract .  We examine how a project owner optimally selects a project operator and motivates him to deliver an unobservable effort when potential operators are wealth constrained. We show that, when potential operators' abilities are common knowledge, an operator's share of realized profit can be increasing, invariant, or decreasing in his ability depending on the nature of production technology. However, when potential operators are privately informed about both their abilities and their effort supply, a bunching contract arises in equilibrium for a general class of production technology. In the case of bunching, all potential operators are selected equally often and awarded an equal share of realized profit. The finding provides an explanation for the relative uniformity of contract terms in many practical settings.     

Firm routines,customer switching and market selection under duopoly

This paper explores the dynamics of market selection for an industry in which firms employ relatively simple pricing, production and investment routines and in which consumers switch between rival firms in response to price differentials but do not all do so instantaneously. The key issue is whether market processes result in the elimination of less efficient firms by their more efficient rivals. That is to say, do such processes unfailingly increase the efficiency with which available economic resources are used? In the context of duopoly, we show that the survival of the more efficient firm is not guaranteed and that, more generally, the outcome depends upon the speeds with which firms adjust prices and capacities and with which customers switch between rival firms.     

Liberalizing the energy markets of Western Europe – a computable equilibrium model approach

Using a computable equilibrium model, the short-run effects of a radical liberalization of the West European natural gas and electricity markets are examined. In each model country, oil, gas, coal and electricity are produced, traded and consumed. There are world markets for oil and coal, and well-integrated competitive markets for gas and electricity in Western Europe. Gas and electricity are transported and traded across markets under the assumption of ideal third-party access regimes for transportation and limited capacities in the transportation networks. It is found that relative to the data year 1996, radical liberalization reduces the average end-user price of natural gas by around 20%, and the average end-user price of electricity by around 50%. The supply of electricity increases by around 20%, mainly due to increased coal power production. After such liberalization, coal power emerges with the largest market share of electricity production in Western Europe.     

Import sensitive products and perverse tariff‐rate quota liberalization

Abstract This paper shows that a Tariff‐Rate‐Quota's (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over‐quota tariffs to mimic import quotas in providing minimum market access. In the WTO's Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.     

Modeling economic and agro-environmental dynamics of potato production systems

Crop rotation and other input management practices are of particular interest for their potential impacts on economic and agro-environmental components of potato production. Although crop yield and experimental impacts of rotations of grains, oilseed and legume crops have been published for several experimental studies in Canada there are few models related to the economic and environmental dynamics of potato production. We describe a dynamic model which integrates environmental and economic processes in potato production. The potato rotation model consists of interconnected modules of irrigation and precipitation, soil characteristics, soil erosion, soil water, phosphorus, nitrogen, soil organic matter, farming operations, crop yield and the related calculation of economic return. While not all aspects of crop production have been interlinked, including nitrogen carry-over, this model is the first step in the analysis of experimental data for irrigated potato rotations conducted in southern Manitoba.      

Learning from processing trade: Firm evidence from China

Processing export plays a significant role in international trade. In this paper, focusing on firm-level dynamics, we show that firms learn from their processing export experience to improve their subsequent ordinary export outcomes. Using transaction-level trade data and firm-level production data, we show that firms’ ordinary export performance, at both extensive and intensive margins, is enhanced by their own processing experience. Firms also export products with improved quality after engaging in processing exports of similar products. Furthermore, we investigate potential channels through which firms learn from processing experience. We find that firms potentially learn from processing experience to enhance production efficiency, to better understand how to improve product appeal to cater to specific markets, and to gain better and easier access to inputs. Moreover, we find that exporters benefit more from processing experience for larger markets with fiercer competition. Similarly, stronger learning effects are also observed when processing experience is associated with products that embody less diffused knowledge and are more differentiated. Also, firms learn more from processing experience when they are more actively engaged in processing imports. Lastly, we verify the economic significance and quantify the importance of these potential channels.     

Can Non-point Phosphorus Emissions from Agriculture be Regulated Efficiently Using Input-Output Taxes?

In many parts of Europe and North America, phosphorus loss from cultivated fields is threatening natural ecosystems. Though there are similarities to other non-point agricultural emissions like nitrogen that have been studied extensively, phosphorus is often characterized by the presence of large stocking capacities for phosphorus in farm soils and long time-lags between applications and emission. This makes it important to understand the dynamics of the phosphorus emission problem when designing regulatory systems. Using a model that reflects these dynamics, we evaluate alternative regulatory systems. Depending on the proportions of different types of farms in the agricultural sector, we find that an input-output tax system can be the core element of a close to efficient regulatory policy.     

Socioeconomic dimensions of mercury pollution abatement: Engaging artisanal mining communities in Sub-Saharan Africa

In recent years, strategies to tackle mercury pollution from artisanal gold mining have mainly included restrictions — banning mercury trade internationally, prescribing alternate technologies and tightening regulations on mining (e.g. banning mercury use). However, artisanal mining communities in Africa are often trapped in cycles of poverty that make it difficult for workers to improve technologies and reduce mercury pollution. This article assesses problems with narrow pollution abatement discourses and top-down regulations, examining the need for integrated approaches to address pollution and socioeconomic challenges in low income mining communities. It advances the hypothesis that pollution abatement strategies fail if they do not explicitly address local socioeconomic capacities for improving environmental management, informed by an adaptive understanding of labor dynamics. Case studies in Mozambique and Tanzania are examined where United Nations pilot projects sought to address local challenges. These combined training on improved technologies and environmental risk mitigation with efforts to empower miners by enhancing access to microfinance services and fairer gold marketing arrangements. These case studies demonstrate adaptive ways of engaging local concerns in mining areas, highlighting lessons that are especially urgent now that recent policy commitments from Europe and the United States to ban mercury exports have specifically sought to make mercury more expensive for African mining communities. Ultimately, the analysis suggests how regionally focused ecological economics research has a vital role to play in (a) revealing how narrowly conceived responses to pollution can yield counterproductive results as well as exacerbate exploitative labor conditions in low income contexts; and (b) stimulating analytic focus on innovative ways of integrating pollution reduction strategy with grassroots socioeconomic empowerment strategies.     

Service quality in Brazilian mobile telephony: an efficiency frontier analysis

The mobile telephony sector is characterized by the dynamic interplay of rapid changes in technology and an apparently growing competition, as indicated by the fierce nonprice competition, and is yet associated with the entry of new operating companies in some cases. In this context, a relevant and neglected issue is the assessment of how service quality responded to an increasingly competitive environment. This study utilizes data envelopment analysis to assess the quality efficiency of mobile telephony companies in Brazil during the 2000–2003 period. Window analysis was conducted for the entire period, taking as reference different quality indicators pertaining to different forms of complaints and calls completed and interrupted. The efficiency measurement was made feasible by interpreting the indicators reflecting a positive dimension of quality as outputs and those reflecting negative aspects of quality as inputs. Given potential heterogeneities across firms that relate to the frequency band and to the technology (time division multiple access technology and code division multiple access technology among others), this article considered adjusted efficiency scores. The Tobit model for censored data was estimated to control for the aforementioned aspects. Rescaled residuals from the econometric estimation produced efficiency scores for service quality. The evidence indicated an overall improvement in efficiency over time. Nonparametric tests were consistent with a positive evolution of quality over time even for shorter subperiods.     

Socioeconomic dimensions of mercury pollution abatement: Engaging artisanal mining communities in Sub-Saharan Africa

In recent years, strategies to tackle mercury pollution from artisanal gold mining have mainly included restrictions — banning mercury trade internationally, prescribing alternate technologies and tightening regulations on mining (e.g. banning mercury use). However, artisanal mining communities in Africa are often trapped in cycles of poverty that make it difficult for workers to improve technologies and reduce mercury pollution. This article assesses problems with narrow pollution abatement discourses and top-down regulations, examining the need for integrated approaches to address pollution and socioeconomic challenges in low income mining communities. It advances the hypothesis that pollution abatement strategies fail if they do not explicitly address local socioeconomic capacities for improving environmental management, informed by an adaptive understanding of labor dynamics. Case studies in Mozambique and Tanzania are examined where United Nations pilot projects sought to address local challenges. These combined training on improved technologies and environmental risk mitigation with efforts to empower miners by enhancing access to microfinance services and fairer gold marketing arrangements. These case studies demonstrate adaptive ways of engaging local concerns in mining areas, highlighting lessons that are especially urgent now that recent policy commitments from Europe and the United States to ban mercury exports have specifically sought to make mercury more expensive for African mining communities. Ultimately, the analysis suggests how regionally focused ecological economics research has a vital role to play in (a) revealing how narrowly conceived responses to pollution can yield counterproductive results as well as exacerbate exploitative labor conditions in low income contexts; and (b) stimulating analytic focus on innovative ways of integrating pollution reduction strategy with grassroots socioeconomic empowerment strategies.     

Capacities,innovation and feedbacks in production networks in Argentina

This paper is based on an application of the complex systems approach to economics with the objective of exploring the micro- and meso-mechanisms of development. Under this approach, innovation can be seen as an emergent property that depends on micro interaction and on specificities of macro structure. This study emphasizes that the micro interactions can be described by the feedback mechanisms between the absorption and connectivity capacities of firms, and the macro structure by processes of creative destruction, knowledge appropriation and structural change. The paper presents empirical evidence on the feedback loops between absorption and connectivity capacities in production networks in Argentina and their impact on innovation results. This paper concludes that the restrictions on absorption capacity and mainly on connectivity capacity in several production networks in Argentina condition the development of positive feedbacks between the two capacities, and hence the scope of the innovation path.     

The effects of abandonment options on operating leverage and forward hedging

This paper examines the behavior of the competitive firm under output price uncertainty when the firm is endowed with an abandonment option and has access to a forward market for its output. When the realized output price is less than its marginal cost, the firm optimally exercises its abandonment option and ceases production. The firm lets its abandonment option extinguish, thereby producing up to its capacity, only when the realized output price exceeds its marginal cost. The ex post exercising of the abandonment option as such convexifies the firm's ex ante profit with respect to the random output price. We show that neither the separation theorem nor the full-hedging theorem holds in the presence of the abandonment option. The firm under-hedges its output price risk exposure in the forward market wherein the forward price contains a nonpositive risk premium. When the set of hedging instruments is expanded to include options, we show that both the separation and full-hedging theorems are restored. We further show that the firm prefers options to forwards for hedging purposes when both types of contracts are fairly priced.     

Cereal production,undernourishment, and food insecurity in South Asia

South Asia remains one of the major strongholds of hunger in the world, despite the fact that, following the Green Revolution, cereal production in the countries of this region tripled during the second half of the 20th century. This study examines the role played by this increase in cereal production in improving the region’s nutrition and food security situation. We study the association between the different aspects of food security and cereal production in South Asia that have prevailed over the past 25 years. We find a beneficial role of the production and yield of cereals in lowering the extent of undernourishment. A 1% increase in cereal production and yield is associated with up to 0.84% decrease in the prevalence of undernourishment. The impact is significant over a period of 3 years. The positive effect is particularly evident in the case of rice and maize production. An improvement is seen in the aspects of availability, stability, and utilization of food security but not in the aspect of access. These findings are robust to alternative specifications and techniques. The results explain, in part, the means by which South Asian nations have managed to stall relative increases in extreme hunger and food insecurity.     

Optimal Lending Contracts and Firm Dynamics

We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing constraints. In fact, borrowing constraints must satisfy a dynamic consistency requirement: the value of outstanding debt restricts current access to short-term capital, but is itself determined by future access to credit. This dynamic consistency is not guaranteed in models of exogenous borrowing constraints, where the ability to raise short-term capital is limited by some prespecified function of debt. We characterize the optimal default-free contract—which minimizes borrowing constraints at all histories—and derive implications for firm growth, survival, leverage and debt maturity. The model is qualitatively consistent with stylized facts on the growth and survival of firms. Comparative statics with respect to technology and default constraints are derived.     

Sectoral Patterns of Interactive Learning: An Empirical Exploration of a Case in a Dutch Region

This paper pursues the development of a theoretical framework that explains interactive learning between innovator firms and external actors in both the knowledge infrastructure and the production chain. The research question is: What kinds of factors explain the interactive learning of innovator firms with distinct external actors? Our theoretical framework extends the resource-based perspective, which is predominant in network theory, with both an activity-based and a structural account of interactive learning. We contend basically that higher technological dynamics induce more complex innovative activities. But, more complex innovative activities increase the probability of internal resource deficits/shortages in the innovator firms. The lower the alignment of the innovative activities with the quality of the internal resource base, the higher the resource deficits/shortages and the more likely the search for complementary resources externally, which increases the likeliness of external relationships. In order to test the generality of our theoretical claims we analyse our models in four sectors with distinct technological dynamics as distinguished by Pavitt. For each sector we explore five models of the level of interactive learning of innovator firms with: (1) the public knowledge infrastructure (difficult to access, demands high internal competencies to utilize scientific knowledge), (2) the production chain (easy to access), (3) their users, (4) their suppliers, (5) their competitors. These analyses allow for a comparison between interactive learning with different external actors and give deeper insights into the differentiated interaction patterns involving innovation. Our findings show that patterns of interactive learning between sectors differ. Some are more resource based and others are more affected by the complexity of innovative activities. Particularly the patterns of interactive learning between, on the one hand, firms and the knowledge infrastructure, and on the other hand of firms with the production chain show important differences.