Optimal climate policy under the possibility of a catastrophe

This paper concerns optimal emissions of greenhouse gases when catastrophic consequences are possible. A numerical model is presented, which takes into account both continuous climate-feedback damages as well as the possibility of a catastrophic outcome. The possibility of a climate catastrophe is a major argument for greenhouse gas abatement even in absence of continuous damage. Special attention is given to the subjective probability of a catastrophe and the pure rate of time preferences, and implicit values of these parameters are calculated if an emissions stabilisation target is assumed optimal. Finally, the expected value of perfect information about the probability of a catastrophe is estimated.     

The possibility of mixed-strategy equilibria with constant-returns-to-scale technology under Bertrand competition

Abstract. We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.     

New Phillips curve under alternative production technologies for Canada, the United States, and the Euro area

This paper shows that alternative production technologies imply two modifications to the New Phillips Curve (NPC): A specific ‘strategic complementarity parameter’ that affects the relationship between real marginal cost and inflation and a specific modification to the labour share measure of real marginal cost. Estimates of average duration of nominal price stickiness obtained conditional on the strategic complementarity parameter are substantially smaller, and therefore more plausible, relative to when this parameter is ignored. Modifications to the marginal cost measure alone have little effect on the NPC estimates. The empirical fit of the NPC under alternative production technologies is similar.     

The production of functionality by the elderly: a household production function approach

This paper extends Becker's model of the household production function of human capital to the production of elderly functionality. In this model, elderly functionality is produced with the direct inputs of assistive devices, personal assistance, and nutritional intake. Education, endowment variables (like genetic endowment and sex) and health conditions (like stroke) determine the production function environment. Data from the Survey of Asset and Health Dynamics Among the Oldest-Old (AHEAD) are used to estimate a production function of bathing functionality, using a two-stage estimation procedure. In the first stage, input demands for the endogenous functionality inputs are estimated, recognizing health heterogeneity. The results suggest that reverses in functionality caused by age and health conditions can be partially compensated for by the use of assistive devices (like grab bars and bathing equipment), secure nutritional intake, and moderate alcohol consumption. However, non-inputs like chronic health conditions, age, sex and genetic endowment exert a strong influence on the level of functionality.     

The theory of capital utilization and the putty-rubber production function

This paper extends the theory of optimal shift-work to the presumably realistic case in which the ex post elasticity of substitution between labor and capital services is neither zero nor equal to the ex ante elasticity. The paper considers both the CES and the VES as candidates for the ex post function, and gives reasons for preferring the latter. The introduction of ex post substitutability where none existed before is found to increase the profitability of shift-work.     

The impact of technical change on the aggregate production function

This study endeavours to look at both disembodied technical progress and embodied technical progress in the capital stock and in the labour force in the United States over the period 1947–80. The results suggest that disembodied technical progress has been about 3% per year, embodied technical progress in the capital stock is approximately 3–4% per year and educational attainment significantly enhances labour productivity. Finally, when the issue of structural stability of the underlying production relationship is addressed, the period 1971–80 gives rise to some inconsistency.     

Efficiency and the production function

Journal of Economics -     

VARMA modeling of the production function

This paper models the elements of the production function by VARMA methods to gain empirical insight on which element leads the other. At the same time, we look for the possibility of detecting any characteristic which could help to differentiate between developed and developing economies.     

The amenity value of the climate: the household production function approach

A basic assumption of the hedonic technique is that there are no barriers to mobility that prevent prices changing to reflect the net benefits of a given location. But climate variables are undeviating over relatively large distances and the absence of a common language coupled with the existence of political boundaries may prevent the net advantages associated with a particular region from being eliminated. Apart from in a handful of countries, methods alternative to the hedonic approach may therefore be required to estimate the amenity value of climate. Adopting the household production function approach this paper undertakes a systematic examination of the role played by climate in determining consumption patters using data from 88 different countries. Given certain assumptions the paper then proceeds to calculate the constant utility change in the cost of living for a 2.5 °C increase in globally averaged mean temperature. It is determined that high latitude countries benefit from limited climate change whereas low latitude countries suffer significant losses.     

The possibility of informationally efficient markets

A rational expectations equilibrium with positive demand for financial information does exist under fully revealing asset price—contrary to a wide-held conjecture. Whereas a continuum of investors is inconsistent with fully revealing equilibrium, finitely many investors with average portfolios demand information in equilibrium if they can adjust portfolio size in an additive signal-return model. More information diminishes the expected excess return of a risky asset so that investors who only have a choice of portfolio composition or whose asset endowments strongly differ from the average portfolio are worse off. Under fully revealing price, information market equilibria both with and without information acquisition are Pareto efficient.     

The macro production function uniquely determines the capacity distribution of the micro units

A wellknown approach to the theory of production obtains the macro production function from an integration over a distribution of capacities of micro units. An elementary proof is given for the fact that the macro production function uniquely determines the capacity distribution.     

Disentangling the demand function from the production function for local public services: The case of public safety

In this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods. We apply our approach in a study of expenditures for police protection in a cross-section of 73 U.S. cities and counties. Our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results.