Is Environmental Protection Beneficial for the Environment?

We analyze a simple endogenous growth model with environmental interactions. Economic production generates emissions of pollutants whose environmental impact is mitigated by abatement activities financed by government expenditure; environmental quality affects preferences but does not play any productive role. We show that government intervention, by reallocating resources from capital accumulation to environmental preservation activities, allows the economy to achieve a sustainable balanced growth path. Along such a path, softer environmental policy regimes lead to win–win outcomes, fostering economic growth and improving environmental quality. Such a result needs to be interpreted as a long run outcome, but it clearly shows that the compatibility between economic growth and environmental improvement is far from automatic. Indeed, in the long run it could paradoxically be the case that both the economy and the environment benefit from low levels of environmental protection.     

Is increased agricultural protection beneficial for South Africa?

Using a top down computable general equilibrium microsimulation model of South Africa, this paper explores the impact on household well being of an increase in agricultural protection. This issue is of broader relevance to developing countries that may be contemplating the use of World Trade Organisation permissible trade barriers so as to achieve a domestic policy objective. The model predicts that gross domestic product would be unaffected while real private consumption falls. The real exchange rate appreciates while unemployment levels are unaffected. Food, other manufactures, trade and hotels are the clear losers. All other industries experience small positive gains or no impact on their output. The impact on households depends on their factor endowments and their consumption patterns. The impacts on poverty reduction are very small. Poverty indicators increase more in urban areas than in rural areas. Poverty increases slightly more among Asian households, followed by White and then Coloured households. African households experience small declines in poverty.     

Charitable Donations: Evidence of Demand for Environmental Protection?

Using data from the 2001 Giving and Volunteering in the United States survey, I examine household charitable donations to environmental organizations. Household income has a positive impact on environmental giving. While the tax price affects overall charitable contributions, it does not affect environmental giving. More education, being female, homeownership, and voting are also associated with a greater likelihood of contributing to the environment. African-Americans and Latinos are less likely to contribute to the environment, although conditional on giving, Latinos give more. Retired persons and households with children are less likely to contribute to the environment. Larger households give less to the environment. Households from the Northeast are the most likely to make environmental contributions while households from the South are the least likely.

Offset carbon emissions or pay a price premium for avoiding them? A cross-country analysis of motives for climate protection activities

This article contributes to the economic literature on pure and impure public goods by considering two alternatives for contributing to the public good climate protection: offsetting carbon emissions from conventional consumption or paying higher prices for climate-friendly products. We empirically examine a wide range of motives and their impact on individuals’ choice in favour of these two alternatives relying on data from representative international surveys. Our results indicate that environmental awareness, warm glow motives and the desire to set a good example have the most robust effects on both climate protection activities in Germany and the United States. However, some motives differ considerably between both alternatives and the two countries. A green identity enhances the willingness to pay a price premium for climate-friendly goods or services in Germany, while social norms seem to be of much higher relevance in the United States. Our results further suggest that the choice of climate protection activities, especially of carbon offsetting, entails a high degree of uncertainty.     

Asking for Individual or Household Willingness to Pay for Environmental Goods?

The aggregate welfare measure for a change in the provision of a public good derived from a contingent valuation (CV) survey will be higher if the same elicited mean willingness to pay (WTP) is added up over individuals rather than households. A trivial fact, however, once respondents are part of multi-person households, it becomes almost impossible to elicit an “uncontaminated” WTP measure that with some degree of confidence can be aggregated over one or the other response unit. The literature is mostly silent about which response unit to use in WTP questions, and in some CV studies it is even unclear which type has actually been applied. We test for differences between individual and household WTP in a novel, web-administered, split-sample CV survey asking WTP for preserving biodiversity in old-growth forests in Norway. Two samples are asked both types of questions, but in reverse order, followed by a question with an item battery trying to reveal why WTP may differ. We find in a test between samples that the WTP respondents state on behalf of their households is not significantly different from their individual WTP. However, within the same sample, household WTP is significantly higher than individual WTP; in particular if respondents are asked to state individual before household WTP. Our results suggest that using individual WTP as the response unit may overestimate aggregate WTP. Thus, the choice of response format needs to be explicitly and carefully addressed in CV questionnaire design and further research in order to avoid the risk of unprofitable projects passing the benefit-cost test.

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Does Mill's case for infant industry protection capture Hamilton's and List's arguments for promoting industrial development?

Abstract

Mill's case for infant-industry protection is widely regarded as capturing the arguments by Hamilton and List. This paper argues that they are actually analytically different. While all three were influenced by Smith's Wealth of Nations, Mill took from it something different than the other two. His endorsement passage for protection refers to a standalone industry. Hamilton and List attached significance to the pin-making type of division of labor at the economy-level but they emphasized the development of that division as the activation of backward and forward production linkages, à la Hirschman, with increasing diversification and differentiation of occupations and industries. Mill only considered employing customs duties in his passage, although in some personal correspondence in the 1860s he mentioned a subsidy. Contrary to mainstream misrepresentations, Hamilton and List did not restrict themselves to proposing customs duties, but suggested both trade and non-trade interventions to activate linkages. Mill's formulation focuses attention on very simple learning by doing to establish the standalone industry. Thanks to their conception of the development process, Hamilton and List appreciated the complexity of technology acquisitions and devoted far more attention to that subject. The implications of these differences for future research and policy considerations are briefly discussed.     

Is social protection a necessity or a luxury good? New multivariate cointegration panel data results

The aim of this paper is to test the claim that social protection is a luxury good. Therefore, GDP elasticity of selected social protection expenditure is estimated using a new econometric approach developed first by Kao and Chiang (Advances in Econometrics, 15, 179–222, 2000). Time series properties of selected social expenditure in 18 OECD countries from 1981 to 1998 are examined. Using panel data cointegration tests and OLS, FMOLS and DOLS estimators, results were found which differ from previous analyses reporting substantially higher income elasticities. With the FMOLS, selected social expenditure has income elasticities smaller than one but greater than one with the DOLS. It is noteworthy that whether selected social expenditure is stationary or nonstationary may have critical implications for researchers and policy makers desiring to model and explain the impact of this expenditure on a country economic system.     

International fragmentation: Boon or bane for domestic employment?

In this paper, we introduce the fairness approach to efficiency wages into a standard model of international fragmentation. This gives us a theoretical framework in which wage inequality and unemployment rates are co-determined and therefore the public concern can be addressed that international fragmentation and outsourcing to low wage countries lead to domestic job-losses. We develop a novel diagrammatic tool to illustrate the main labour market effects of international fragmentation. We also explore how preferences for fair wages and the size of unemployment benefits govern the employment effects of outsourcing and critically assess the role of political intervention that aims to reduce unemployment benefits under internationally fragmented production.     

Salt or Sludge? Exploring Preferences for Potable Water Sources

Decision makers often use information about public preferences to guide public policy. Several disciplines gather information on preferences through surveys by asking respondents to make hypothetical choices over potential policies. However the context of the choice question differs between approaches, with some failing to make the full consequences of the respondent’s choice explicit in the question. In this study we investigate whether question context matters, by exploring whether economic and psychology approaches yield a similar understanding of community preferences towards a large-scale recycled wastewater scheme. We find that stated preferences differ depending on whether the preference question is contextualised using economic incentives. The findings provide insight into the implications of inappropriately contextualised preference questions, methodological considerations in attitude identification and estimation, and the diversity of values and public attitudes towards recycled wastewater.     

Medicare for all or medicare for none? A macroeconomic analysis of healthcare reform

In this study, I develop a novel general equilibrium life cycle model composed of finitely-lived households that differ according to age, skill level, and access to employer-provided health insurance. After introducing a “Medicare for all” health insurance system to the model, I examine how the welfare response to this policy change will differ according to household characteristics. Then, I compare this system to a completely privatized health insurance system that achieves universal health insurance coverage through the creation of utilization-based premium subsidies. In general, both systems tend to improve the welfare of young households at the expense of old households. However, when using average value-of-life as the primary measure of welfare, Medicare for all either benefits unskilled households at the expense of skilled households, or makes both worse off. In contrast, the privatized system improves the average value-of-life of all household groups, regardless of skill level or prior access to employer-provided health insurance.     

Easter Island: historical anecdote or warning for the future?

Two standard solutions for the ‘Malthusian Trap’ involve institutional reforms and technological progress. Using Easter Island as an example, we investigate the hypothetical role that technological progress and population management reform might have played in preventing the collapse of the island's civilization. The model includes a composite manufactured good and a composite harvested renewable resource. Fertility is assumed to rise with per capita income. The resource's carrying capacity and intrinsic growth rate as well as labor's harvesting productivity are subject to technological progress. Fertility is subject to population management reform. The model yields a system of two simultaneous, nonlinear, non-autonomous differential equations. We first study the system's steady states. The system is then parameterized for Easter Island and its comparative dynamics are investigated in simulations. We find that technological progress can generate large fluctuations in population, renewable resources, and per capita utility, sometimes resulting in system collapse. With high fertility rates, the population and the resource vanish. None of the simulations investigated here exhibit a constantly growing per capita utility over time. Finally, we evaluate the applicability of these results to contemporary societies.     

Price or Quantity? A New Irrelevance Result for Mixed Markets

Earlier studies for mixed markets have established a series of so‐called irrelevance results. While previous results relate to the attainment of the first‐best allocation for welfare, we provide a new irrelevance result in terms of the choice of strategic variable in the product market. We show that regardless of whether a public or private firm is the market leader, the leader always chooses the price contract whereas the follower is indifferent between the price contract and the quantity contract. The identity of the leader and the follower firm is therefore irrelevant for the equilibrium mode of competition. Implications for economic models in mixed market settings emerge, which are also discussed.     

Dual track or academic route for auditors: does it matter?

In the Netherlands auditors can be trained in a part-time educational track in which students combine working and studying or in a full-time educational track. The former training is relatively firm-specific whereas the latter training is relatively general. Applying human capital theory, we expect higher wage growth for full-time educated auditors than for dual-educated auditors. Furthermore, full-time educated auditors may have better outside options than part-time educated auditors. This may make it easier for them to switch employers than for the part-time educated auditors. The predictions on tenure and wages of differently educated auditors are supported by the estimation results in this paper. The part-time, dual track appears an important route for students from a lower socioeconomic background.     

Does rising landlessness signal success or failure for Vietnam's agrarian transition?

In the wake of reforms to establish a free market in land-use rights, Vietnam experienced a pronounced rise in rural landlessness. To some observers this is a harmless by-product of a more efficient economy, while to others it signals the return of the pre-socialist class structure, with the rural landless at the bottom of the economic ladder. We study the issue empirically using four household surveys spanning 1993–2004. Although we find rising landlessness amongst the poor, the post-reform landlessness rate tends to be higher for the non-poor. We find no support for the claim that the process of rising landlessness has been poverty-increasing in the aggregate.     

“Haircuts” for the EMU periphery: virtue or vice?

We use a dynamic game model of a two-country monetary union to study the impacts of an exogenous fall in aggregate demand, the resulting increase in public debt, and the consequences of a sovereign debt haircut for a member country or bloc of the union. Two different scenarios for such a haircut are assumed: an expected and an unexpected haircut. In the union, the governments of participating countries pursue national goals when deciding on fiscal policies whereas the common central bank’s monetary policy aims at union-wide objective variables. The union considered is asymmetric, consisting of a “core” with lower initial public debt, and a “periphery” with higher initial public debt. The “periphery’’ may experience the haircut due to the high level of its sovereign debt. We calculate numerical solutions of the dynamic game between the governments and the central bank using the OPTGAME algorithm. We show that a haircut as modeled in our study is disadvantageous for both the “core” and the “periphery” of the monetary union, both when expected and when unexpected.     

Is the shadow economy a bane or boon for economic growth?

This paper uses the theoretical framework developed by Feder (1983) and Ram (1986) to examine interactions (i.e. externalities and intersectoral factor productivity differentials) between the official and unofficial sectors of the economy. Results from the empirical analysis, using data on over 100 countries from 1970 to 2008, suggest that the marginal externality effect of growth in the unofficial sector on the official sector is positive. Further, input productivities are higher in the unofficial sector relative to the official sector. These results are robust using alternate measures of the (unobserved) unofficial economy and across level of development.     

Unreformed or Hybrid? Accounting for Pension Arrangements Diversity in the EU

EU27 pension systems are diverse and different from textbook ideal-type. They are hybrids because they combine public and private pension features. Over a century, public and private pensions have been designed and reformed simultaneously. We examine how the history of those reforms can explain the emergence of existing hybrid pension arrangements.     

Renewable energy subsidies: Second-best policy or fatal aberration for mitigation?

This paper evaluates the consequences of renewable energy policies on welfare and energy prices in a world where carbon pricing is imperfect and the regulator seeks to limit emissions to a (cumulative) target. The imperfectness of the carbon price is motivated by political concerns regarding distributional effects of increased energy prices. Hence, carbon prices are considered to be temporarily or permanently absent or endogenously constrained by their effect on energy prices. We use a global general equilibrium model with an intertemporal fossil resource sector and calculate intertemporally optimal policies from a broad set of policy instruments including carbon taxes, renewable energy subsidies and feed-in-tariffs, among others. If carbon pricing is permanently missing, mitigation costs increase by a multiple (compared to the optimal carbon pricing policy) for a wide range of parameters describing extraction costs, renewable energy costs, substitution possibilities and normative attitudes. Furthermore, we show that small deviations from the second-best subsidy can lead to strong increases in emissions and consumption losses. This confirms the rising concerns about the occurrence of unintended side effects of climate policy – a new version of the green paradox. Smart combinations of carbon prices and renewable energy subsidies, however, can achieve ambitious mitigation targets at moderate additional costs without leading to high energy price increases.     

New market socialism: a case for rejuvenation or inspired alchemy?

The aim of this paper is to examine the relative merits anddrawbacks of two recent models of market socialism proposedby Bardhan and Roemer. This is done, first, by putting thesemodels into the perspective of the history of economic thought.Thus, after presenting the basic elements of the early Langemodel as well as the Austrian and ‘new information economics’critiques, the necessary comparisons and contrasts are madeto see what new light these new models bring into this debate.In addition, the internal consistency and coherence of thesemodels is checked in terms of their own proclaimed goals. Last,a more radical methodological critique is provided.