Information age to genetic revolution: Embodied technology transfer and assimilation — A tale of two technologies

In this paper, a fifteen regions-fifteen sectors global Computable General Equilibrium (CGE) model is calibrated. It offers quantitative enumeration of 5% exogenous biotechnological invention in USA in genetically modified crops namely, maize grains and soybean. Consequently, it results in endogenously transmitted productivity gains via traded intermediates in user sectors in donor and recipient regions. Sustained absorption and domestic usability of transgenic varieties depend on constellation of: human capital-induced absorptive capacity, governance, and structural congruence between source and recipients contingent on technology infrastructure and socio-institutional parameters. Such innovations result in higher production, welfare and global trade. Also, concomitant 4% exogenous productivity shock in information technology along with 5% productivity growth in the agro-biotech sectors further enhances such simulated impacts on global production and welfare. Regions with larger extent of technology capture aided by higher human capital, better governance, conducive institutional-structural features, and superior technological expertise perform better.     

Trade Liberalization and Environmental Regulation on International Transportation

Incorporating pollution emissions from international transportation into a model of strategic trade and environmental policies, we investigate the effect of trade liberalization and environmental regulation on national welfare and the environment. Our model includes imperfectly competitive markets for international transportation and final products. We find that trade liberalization may reduce each country's welfare unless some level of environmental regulation on international transportation is in place. When international trade is liberalized initially, a mutual increase in the common emission tax rates may improve each country's welfare. However, when international trade is highly protected initially, imposing an emission tax may reduce welfare.     

Natural capital, subjective well-being, and the new welfare economics of sustainability: Some evidence from cross-country regressions

The measurement of natural capital and its management during the economic development process are important aspects of the capital approach to sustainable development. However, the assessment of social welfare in terms of genuine savings (or changes in total wealth per capita) is arguably too limited. This paper tries to make a case for the incorporation of subjective well-being measures in debates about sustainable development by exploring the macro-level relationship between subjective well-being and natural capital in a cross-country setting. It is tested whether natural capital per capita is correlated with subjective well-being in a sample of fifty-eight developed and developing countries, using natural capital data from the World Bank's Millennium Capital Assessment. Bivariate regressions indicate that it is. When multiple regression models are estimated that include (a) major country-level determinants of subjective well-being (GNI per capita, social capital, income distribution, unemployment, inflation), and (b) regional dummy variables for ex-Soviet Union and Latin American countries, the positive correlation remains. The role of data outliers is carefully explored, and the sensitivity of the results to the use of alternative subjective well-being measures (i.e. life satisfaction, happiness, and a combined life satisfaction and happiness index) is investigated. This does not change the nature of the results. The findings arguably strengthen the case for a ‘new welfare economics of sustainability’ that takes subjective well-being measures into account.     

How well do tree plantations comply with the twin targets of the Clean Development Mechanism? — The case of tree plantations in Tanzania

The Clean Development Mechanism (CDM) of the Kyoto Protocol is supposed to provide both carbon mitigation and poverty reduction. This article reports from a model based study of market related carbon leakage and poverty reduction in the wake of a CDM tree-planting project in Tanzania. A tree plantation was incorporated in a computable general equilibrium (CGE) model with income differentiated household segments. The study focused on sensitivity of carbon leakage and income distribution to different project ownerships and carbon premium allocations. It turned out that the project value in terms of carbon premium has clear shortcomings as indicator of induced GDP growth and poverty alleviation. The non-poor rural and urban households benefit considerably more than the poor households. However, rising household income in all domestic project ownership arrangements increases demand for food, raises use of fertilizer and crop yields. A carbon cycle module for agricultural land use was incorporated in the CGE model, showing an increased carbon sequestration in agricultural soil, representing a negative leakage through markets in the range of 60-120% of the certified emissions reductions as registered in the CDM tree plantation project.     

Strategic environmental policy and the accumulation of knowledge

In dealing with a transnational pollutant-emitting duopoly welfare-maximising policy makers face two negative externalities: imperfect competition and unpriced emissions. Strategic environmental policy models show that these externalities involve a trade-off between reducing pollution and allowing for rent-seeking of the respective firm. This dilemma usually results in a suboptimal internalisation of the negative externality emerging from emissions. Indeed, the conventional model setup includes an R&D stage that enables the firms to mitigate regulation costs. But the typical one period configuration ignores that R&D expenditures create knowledge capital which is, due to its inherent cumulativeness, also effective in following periods. Our model analyses the established trade-off in a two period setting and therefore allows for an investigation of intertemporal knowledge accumulation. We find that the intertemporal effects provide an incentive for a policy maker to set a higher tax rate compared to a one-period setup which lessens the magnitude of the suboptimal internalisation of emissions. Under certain conditions even a tax rate above the Pigouvian level is possible in period 1.     

The impact of piped water provision on infant mortality in Brazil: A quantile panel data approach

We examine the impact of piped water on the under-1 infant mortality rate (IMR) in Brazil using a recently developed econometric procedure for the estimation of quantile treatment effects with panel data. The provision of piped water in Brazil is highly correlated with other observable and unobservable determinants of IMR — the latter leading to an important source of bias. Instruments for piped water provision are not readily available, and fixed effects to control for time-invariant correlated unobservables are invalid in the simple quantile regression framework. Using the quantile panel data procedure in Chen and Khan [Chen, S., Khan, S., Semiparametric estimation of non-stationary censored panel model data models with time-varying factor. Econometric Theory 2007; forthcoming], our estimates indicate that the provision of piped water reduces infant mortality by significantly more at the higher conditional quantiles of the IMR distribution than at the lower conditional quantiles (except for cases of extreme underdevelopment). These results imply that targeting piped water intervention toward areas in the upper quantiles of the conditional IMR distribution, when accompanied by other basic public health inputs, can achieve significantly greater reductions in infant mortality.     

Deforestation and the real exchange rate

Deforestation is a phenomenon that has largely been concentrated in the developing world. We construct a theoretical model of deforestation that focuses on the factors affecting the incentives to transform forested land into agricultural land. We show that: (i) lower discount rates and stronger institutions decrease deforestation; (ii) a depreciation in the real exchange rate increases deforestation in developing countries whereas the opposite obtains in developed countries; (iii) paradoxically, better institutions may exacerbate the deleterious impact of a depreciation in developing countries. These hypotheses are tested on an annual sample of 101 countries over the 1961–1988 period, and are not rejected by the data. Our results suggest that short-term macroeconomic policy, institutional factors, and the interaction between the two, are potentially important determinants of environmental outcomes.     

Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China

At the center of the pollution haven debate is the claim that foreign investors from industrial countries are attracted to weak environment regulations in developing countries. Some recent location choice studies have found evidence of this attraction, but only for inward FDI in industrial countries. The few studies of inward FDI in developing countries have been hampered by weak measures of environmental stringency and by insufficient data to estimate variation in firm response by pollution intensity. This paper tests for pollution haven behavior by estimating the determinants of location choice for equity joint ventures (EJVs) in China. Beginning with a theoretical framework of firm production and abatement decisions, we derive and estimate a location choice model using data on a sample of EJV projects, Chinese effective levies on water pollution, and Chinese industrial pollution intensity. Results show EJVs in highly-polluting industries funded through Hong Kong, Macao, and Taiwan are attracted by weak environmental standards. In contrast, EJVs funded from non-ethnically Chinese sources are not significantly attracted by weak standards, regardless of the pollution intensity of the industry. These findings are consistent with pollution haven behavior, but not by investors from high income countries and only in industries that are highly polluting. Further investigation into differences in technology between industrial and developing country investors might shed new light on this debate.     

Economic and environmental impacts of trade liberalization: The case of Indonesia

In recent years, there has been a growing interest in the environmental impacts of trade liberalization. This paper provides further discourse in this area with a study on Indonesia and its trade agreements with Japan (IJEPA) and ASEAN (AFTA). A static global CGE model, known as the Global Trade Analysis Project, was used to project the Indonesian economy to the year 2022, with and without tariff reforms agreed under the agreements. Environmental impacts are assessed using different pollution indicators—air, water and waste. The study suggests that Indonesia would grow rapidly over the period considered with a large deterioration in its environment. Following these, however, the agreements only have a marginal positive impact on Indonesia's output but with a noticeable increase in trade flows and signs of trade diversion. Overall AFTA has a greater impact on the Indonesian economy compared to IJEPA. Similarly, the impact of trade liberalization on the environment is marginal. On the whole, tariff reform is inducing air pollution and reducing water pollution. In conclusion, the study suggests that Indonesia's participation in the AFTA and IJEPA agreements is not likely to bring drastic changes to her economic and environmental performance.     

Is economic rebalancing toward consumption “greener”? Evidence from visibility in China, 1984–2006

The Chinese government has adopted a rebalancing strategy since 2011, shifting from an investment- to consumption-oriented growth model. An aim of this reform is for a “greener” development mode, but relevant empirical evidence is slim. In this study, we propose an innovative methodology to shed light on the environmental externalities of economic rebalancing. First, we use air visibility across China to reflect air quality during 1984–2006. Second, with the daily visibility data, we propose a weekend-effect regression model to difference out city-specific unobserved heterogeneity. Third, we approximate local consumption intensity with the portion of the residential electricity usage in the total electricity usage. To our surprise, the estimates suggest that the pollution intensity of consumption activities has not only been significant, but also exceeded that of production since the mid-1990s. Hence, rebalancing toward consumption is not necessarily more environmentally friendly according to the recent development experience of China.     

Exchange Rate Unification Under Non-Credibility: The Haïtian Economy

This paper builds on three strands of literature—Early Warning Systems (EWS), parallel exchange rates, and collapsing exchange rate regimes—by addressing the issue of credibility in the context of unification of the exchange rate in the Haïtian economy. It takes the view that when policymakers are perceived as non-credible, economic agents resort to observation of the economy's performance to assess the imminence of reforms. They then readjust their own behavior, particularly in the area of asset holdings. This paper models the adjustment process using the EWS ratios. Data supports the idea that credibility of the reform mounts over time reaching 85 percent on the eve of the reform.Winston-Salem State University—U.S.A. I would like to thank Mina Baliamoune and an anonymous referee of this journal for helpful comments and suggestions. All remaining errors are my responsibility.     

Modelling the world wool market: A hybrid approach

We present a model of the world wool market that merges two modelling traditions: the partial-equilibrium commodity-specific approach and the computable-general-equilibrium approach. The model captures the multistage nature of the wool production system, and the heterogeneous nature of raw wool, processed wool and wool garments. It also captures the important wool producing and consuming regions of the world. We illustrate the utility of the model by estimating the effects of tariff barriers on wool products using partial- and general-equilibrium solutions. We find that either solution generates similar wool industry results, whereas the macroeconomic effects differ significantly with the partial-equilibrium estimates significantly overestimating the benefits of the tariff changes.     

Aiding violence or peace? The impact of foreign aid on the risk of civil conflict in sub-Saharan Africa

This paper considers the impact of foreign aid flows on the risk of civil conflict. We improve on earlier studies on this topic by addressing the problem of the endogenous aid allocation using GDP levels of donor countries as instruments. A more structural addition to the literature is that we efficiently control for unobserved country specific effects in typical conflict onset and conflict continuation models by first differencing. The literature often overlooks the dynamic nature of these types of models, thereby forcing unlikely i.i.d. structures on the error terms implicitly.¹ As a consequence, malfunctioning institutions, deep-rooted political grievances, or any other obvious, yet unobserved and time persistent determinants of war are simply assumed away. We find a statistically significant and economically important negative effect of foreign aid flows on the probability of ongoing civil conflicts to continue (the continuation probability), such that increasing aid flows tends to decrease civil conflict duration. We do not find a significant relationship between aid flows and the probability of civil conflicts to start (the onset probability).