Monopoly Power and Distribution in Fragmented Markets: The Case of Groundwater

This paper examines monopoly power in the market for groundwater (irrigation water extracted by private tubewells), a market characterized by barriers to entry and spatial fragmentation. In Pakistan's Punjab region, groundwater and tenancy contracts are often interlinked, with share-tenants gaining access to water through the use of their landlord's tubewell. An analysis of groundwater transactions shows that tenants of tubewell owners are charged lower prices than other customers. Tubewell owners and their tenants also use considerably more groundwater on their plots than other farmers. Using detailed price and quantity data, the efficiency and distributional implications of this monopoly power are explored.     

A bibliometric account of the evolution of EE in the last two decades: Is ecological economics (becoming) a post-normal science?

In ecological economics the debate on formalism and formalization has been addressed in the context of a lively discussion on ecological economics as a ‘post-normal’ (versus ‘normal’) science. Using ecological economics (EE) as a ‘seed’ journal and applying bibliometric techniques to all (2533) the articles published in EE from January 1989 to December 2009, we analyze the evolution of the field of ecological economics aiming to shed light on this debate. We observe the predominance (and increased relevance) of certain research topics: ‘Methodological issues’, ‘Policies, governance and institutions’ and ‘Valuation’. Moreover, ‘Collective action’, ‘Technical change and the environment’ and ‘Values’ stand as emergent themes of research. Finally, we note that ecological economics experienced an ‘empirical turn’ reflected in a shift away from exclusively formalized papers towards exclusively empirical and, to a larger extent, ‘formal and empirical’ ones. The combination of the prominent and emergent topics and the ‘empirical turn’ mirrors the increasing awareness among researchers in the field of the need to address a key specificity of ecological economics — the interdependence of the economic, biophysical and social spheres. On this basis, we argue that at least through the lens of EE, ecological economics has evolved towards a post-normal science.     

Raising juveniles

This paper investigates how families decide how juveniles use their time. The problem is analyzed in three variations: (i) a ‘decentralized’ scheme, in which parents control the main budget, but their children dispose of their time as they see fit, together with any earnings from work on their own account; (ii) ‘hierarchy’, in which parents can enforce, at some cost, particular levels of schooling and supervised work contributing to the main budget; and (iii) the cooperative solution, in which resources are pooled and the threat point is one of the non-cooperative outcomes. Adults choose which game is played. While the subgame perfect equilibrium of the overall game is pareto-efficient, it may yield less education than ‘hierarchy’. Restrictions on child labor and compulsory schooling generally affect both the threat point and the feasible set of bargaining outcomes. Families may choose more schooling than the legal minimum.     

Removed preferences

In formalizing a ‘veil of ignorance’ type procedure, this paper considers how an agent?s preferences over a set of alternatives change as he is placed at an increasing ‘distance’ from the consequences of his choices. A definition for such ‘removed preferences’ is presented and its properties studied. As an application, it is demonstrated that present biased agents are ‘essentially’ exponential when distanced from the present, and that rank-dependent expected utility agents are ‘essentially’ expected utility when distanced from risk.     

Migration, unemployment and discrimination

This paper uses a dynamic efficiency-wage model to analyze the consequences of immigration for a small country when there is discrimination against immigrants in a dual labor market with unemployment. Discrimination is of the type ‘equal pay for equal work, but unequal work’ which is characteristic of economies with ‘guest-worker’ systems. The model exhibits three regimes for rising immigration levels. Immigration is most beneficial for natives in the intermediate regime. An analysis of regime switches shows that changes attributable to ‘globalization’ and technical progress are consistent with growing opposition to immigration.     

A review on cost-effectiveness analysis of agri-environmental measures related to the EU WFD: Key issues, methods, and applications

The European Water Framework Directive (WFD) explicitly integrates economics into water management and water policy in Europe. Specifically, Article 11 and Annex III of the Directive call for a cost-effectiveness analysis (CEA) of alternative mitigation measures as a requirement in formulating Programme of Measures (PoMs) to achieve ‘good ecological status’ for all waters in Europe. As agriculture is supposed to be the major contributor to diffuse water pollution, CEA of agri-environmental measures has been given paramount importance in establishing the PoMs. This paper summarises the status, significance, and methodological limitations of WFD-related CEA studies in Europe. Cases from the United Kingdom, countries surrounding the Baltic Sea and central and southern Europe were included in the review. Review results indicate that most WFD-related CEA studies: (1) were based on models of ‘representative’ farms without capturing the variability among real-world farms; (2) concentrate on a single ecological effect of measures or are based on cost estimates of the sectors directly involved in the pollutant-reduction programme (i.e., co-benefits, trade-offs, and external costs were not examined); and (3) did not incorporate uncertainties in both cost and effectiveness estimates. Based on the review results, the paper suggests policy implications and recommendations for future research in the field.     

Arenas of expectations for hydrogen technologies

Technological development is often described as an evolutionary process of variation, selection and retention. Different technologies are seen as variations, while the market and other institutions operate as a selection environment. It is less understood, however, how variation and selection relate in the case of emerging technologies. In this paper we introduce the concept of arenas of expectations to examine the relationship between variation and selection processes. Expectations are of particular interest in a pre-market phase of innovation, when performance, cost and other market criteria are less articulated and not stable. In arenas of expectations ‘enactors’ of particular technological variations voice and maintain expectations, while ‘selectors’ will compare and assess the competing claims. We analyse the expectations work of both parties in a case study on metal hydrides for the on-board storage of hydrogen for automotive applications. The paper concludes with a framework of ‘arenas of expectations’ as the linchpin between the processes of variation and selection of emerging technologies.     

The impact of trade costs on exports: An empirical modeling

Studies, which have discussed some of the important issues concerning the measurement of trade costs, have conceded that the literature is still in the early stages of understanding and measuring what the real costs are. It is in this context, decomposing trade costs into ‘natural’ costs, ‘behind the border’ costs, ‘explicit beyond the border’ costs, and ‘implicit beyond the border’ costs, this paper suggests a method to measure the impacts of these components on changes in exports between countries in the absence of complete information on all the components of trade costs in home and partner countries. Empirical measurement has been demonstrated using 1999 and 2004 trade data from Pakistan. The results show that Pakistan's export growth between 1999 and 2004 came mainly from the reduction in both ‘explicit and implicit beyond the border’ trade costs in partner countries.     

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.     

An efficiency and welfare classification of rationing by waiting in the presence of bribery

Governments often allocate commodities at low prices and on a first-come-first-served basis (rationing by waiting), while bureaucrats who distribute the commodities usually take bribes. A model is developed to classify the efficiency implications of bribery, and socially optimal pricing schemes in rationing by waiting. If the rationed good and individual income spent on other goods (‘other’ income) are ‘complements’, then bribery may enhance allocative efficiency, and a ‘dual pricing’ scheme can augment social welfare. However, if the rationed commodity and ‘other’ income are ‘substitutes’, then bribery may not improve allocative efficiency, and distributing the rationed commodity free is socially optimal.     

Agglomeration, integration and tax harmonisation

Consideration of agglomeration reverses standard theoretical propositions in international tax competition. We show greater economic integration may lead to a ‘race to the top’ rather than a race to the bottom. Also, ‘split the difference’ tax harmonisation may harm both nations, a result that may explain why real-world tax harmonisation is rare. The key is that industrial concentration creates ‘agglomeration rent.’ The ‘core’ region can thus charge a higher tax rate without losing capital. The size of such rent is a bell-shaped function of the level of integration, so the tax gap first widens before narrowing as integration increases.     

Regular Effective Demand Systems (REDS)

Empirical demand analysis is usually conducted on the basis of either ‘regularity’ or ‘flexibility’. This paper takes a middle ground between ‘regularity’ and ‘flexibility’, offering a compromise in the form of a new specification termed ‘REDS’.     

Local public goods, inter-regional transfers and private information

Suppose that the centre wishes to make transfers between member states of a federation to reduce inequality. However, it lacks precise information concerning the cost differences that are responsible for the initial income inequality. We examine the implications of asymmetric information for the design of the transfer scheme. We show that if member states’ inherent cost levels as local public good providers take discrete values, the first best, or ‘complete information’, transfer scheme may or may not violate incentive compatibility. If inherent cost is a continuous random variable, such a scheme certainly violates incentive compatibility. We also explore the possibility of binding participation constraints. In our model, a binding incentive compatibility constraint leads to a reduction in effort devoted to cost reduction, and a binding participation constraint will also lead to a violation of Samuelson's optimality condition for public good provision.     

Antidumping duties, undertakings, and foreign direct investment in the EU

We study the effects of EU antidumping policy when foreign firms can ‘jump’ antidumping duties through foreign direct investment (FDI) in the EU. We show that duty jumping or duty pre-empting FDI occurs if the EU administration has broader objectives than protecting EU industry's profitability and if cost advantages of foreign firms are transferable abroad. The (expectation of) price undertakings reduces the incentives to engage in FDI and may even discourage FDI as long as products are not too differentiated. The results are consistent with recent empirical findings on antidumping jumping FDI.     

A heuristic procedure to identify the most valuable chain of patent priority network

In this study, we provide support for the argument that patents are at their maximum value at those times when they are under litigation. We develop a heuristic procedure to determine the way in which such patents under litigation form a network of patent family members, and then go on to examine the priority patents involved. We subsequently attempt to develop a simple procedure to further identify both the ‘critical’ and ‘significant’ chains within our proposed patent priority network. We suggest that the ‘critical’ and ‘significant’ chains that are created within the above network provide companies with important information which will ultimately provide them with valuable support for the subsequent decision of their patent portfolio strategies.     

The origins of the concept of ‘foresight’ in science and technology: An insider's perspective

This article explores how the term ‘foresight’ originally came to be used in connection with science and technology by the author and SPRU colleagues in 1983. It analyses how the rationale for its use evolved over time, first providing a ‘catchy’ title for a study (‘Project Foresight’), and then a convenient shorthand for the focus of that study, before eventually coming to formally signify a new approach to looking systematically into the future of science and technology, an inclusive and wide-ranging process that differed appreciably from that of traditional ‘technology forecasting’. The paper reflects on the importance of concepts and terminology in the field of science policy research, providing examples of how an inappropriate term or phrase can damn the prospects of the research having an impact on policy, while a more politically astute use of terminology can greatly enhance the probability of making a significant impact. The paper also examines other early uses of the concept of ‘foresight’ in the United States and Canada at about the same time. In addition, it highlights the conceptual similarities between foresight and la prospective, a novel approach developed in France not just for looking into the future but also for shaping or even ‘constructing’ the future of our choice, an ambitious aspiration that it shares with foresight. This case-study on the origins and early evolution of ‘technology foresight’ illustrates the essential importance of terminology in differentiating key concepts in social sciences (where it sometimes gives rise to unfortunate priority disputes), and particularly in the case of policy research.     

Bertrand equilibrium with subadditive costs

We show here, in contrast to recent results, that if firms have different cost functions (that are strictly subadditive), such that the ‘monopoly breakeven prices’ are different, then in a homogeneous product duopoly there is always a Bertrand equilibrium (either in pure strategies or in mixed strategies).     

Proposed changes to the Index of Sustainable Economic Welfare: An application to Belgium

This paper presents the results of a Belgian case study on the Index of Sustainable Economic Welfare (ISEW). The index is first compiled using the standard methodology applied in other international studies. Owing to the short period in which Belgium's ‘traditional’ ISEW has recently declined, it is not possible to draw any solid conclusion regarding Max-Neef's ‘threshold hypothesis’. After a brief review of the criticism that the ISEW has attracted over the years, the paper then explains and discusses the rationale for omitting the ‘net capital growth’ and ‘change in net international investment position’ items. It is argued that these items do not comply with the theoretical foundation underpinning the ISEW. The paper also puts forward new valuation methods for several items within the index: the escalation factor in the valuation of natural capital depletion is dropped, long-term environmental damage is valued using a stock-based approach and considerably more government expenditures are considered to be non-defensive. The results of the ‘revised’ ISEW show significant improvements in sustainable economic welfare over the entire study period. These findings are not in line with the ‘threshold hypothesis’. Finally, the paper offers some guidelines for communicating about the ISEW — namely that (a) all methodological assumptions should be made explicit and (b) all raw (unadjusted) data used should be included in any final ISEW report so as to enable the reader to make his or her own assessment about the assumptions the researcher has employed.     

From necessities to imaginary worlds: Structural change,product quality and economic development

In this paper we explore how innovation and structural change affected economic development in the long run, by which we mean a period such as the one between the industrial revolution and the present. We separate the period since the industrial revolution into two sub periods, which we call ‘necessities’ and ‘imaginary worlds’ and focus on three trajectories, increasing productive efficiency, increasing output variety, and increasing output quality and differentiation. In the paper we show how a combination of the three trajectories gave rise to the transition between ‘necessities’ and ‘imaginary worlds’ and propose a mechanism of economic development which could have given rise to the type of economic system which we can observe today. To create growing output quality and differentiation higher competencies were required. These higher competencies required higher levels of education and demanded higher wages, which contributed to raise consumers' purchasing power. These phenomena, combined with the income effect of the creation of new sectors, generated the disposable income with which consumers could purchase the new, higher quality, non necessities, goods and services generated by innovation. In the paper we study the impact of several model parameters on the stability of the virtuous circle previously described.     

General equilibrium models of monopolistic competition: A new approach

We analyze a class of ‘large group’ Chamberlinian monopolistic competition models by applying different concepts of functional separability to the same set of first-order conditions for utility maximization. We show that multiplicatively quasi-separable (MQS) functions yield ‘constant relative risk aversion’ (CRRA), and, therefore ‘constant elasticity of substitution’ (CES), functions, whereas additively quasi-separable (AQS) functions yield ‘constant absolute risk aversion’ (CARA) functions. We then show that the CARA specification sheds new light on: (i) pro-competitive effects, i.e., profit-maximizing prices are decreasing in the mass of competing firms; and (ii) a competitive limit, i.e., profit-maximizing prices converge to marginal costs when the mass of competing firms becomes arbitrarily large.