Numerical simulation on property tax reform: evidence from China

This article analyses the property tax reform in China in a computable general equilibrium model that recognizes the interaction between and among housing markets in different provinces and macroeconomic development. Using real data in 2010, we present the benchmark equilibrium for reference property and income tax rates. Then, we examine different property and income tax policies and make a comparison of their production, consumption, welfare and national income. We find that the implementation of property tax would decrease the house production at the expense of welfare in taxed area. The expansion of the taxed regions may increase the total social welfare and national income. Even though property tax policy may not be able to change the income distribution in China, increasing income tax rate could narrow the income disparity. Finally, this article shows the reliability of the conclusions when sensitivity analysis on optimal condition of equilibrium computation is performed under varied property tax policy.     

Economic costs and impacts of climate-induced sea-level rise and storm surge in Canadian coastal provinces: a CGE approach

We estimated the economic costs and impacts of future sea-level rise (SLR) and storm surge due to climate change in Canada’s coastal provinces using regional, dynamic computable general equilibrium models that track provincial welfare, GDP, trade, prices and inputs over the 2009–2054 period. We also assessed the economic costs of coastal adaptation investments, to determine whether such investments can be justified on economic grounds. Results indicated that SLR and storm surge could cost Canada in the range of $4.6–$25.5 billion in present value welfare, and between $53.7 and $108.7 billion in present value GDP. We found significant variation in costs and impacts across coastal provinces, with some provinces such as Newfoundland and Labrador experiencing only marginal costs/impacts, and others such as British Columbia experiencing costs as high as $21 billion in welfare over the period. Coastal adaptation investments were supported on economics grounds. Overall, this study provides the first (and preliminary) provincial economic impact estimates of climate-induced SLR and storm surge, as well as adaptation investments, in Canada. Additional research is needed to refine the analysis in order to produce reliable estimates that can be used to guide coastal adaptation policies in Canada.     

Social security incentives,human capital investment and mobility of labor

Migration between countries with earnings-related and flat-rate pay-as-you-go social security systems may change human capital investments in both countries. The possibility of emigration boosts investments in human capital in the country with flat-rate benefits. Correspondingly, those expecting to migrate from the country with earnings-related benefits to a country with flat-rate benefits may reduce their investment in education. Allowing for migration may generate an intertemporal Pareto-improvement with cross-border transfers, and the contribution rates satisfying certain conditions. However, these conditions are not satisfied with those contribution rates that would arise if the governments maximize the welfare of their citizens without migration.     

Import Penetration and Domestic Process Innovation

This paper develops a model of R&D competition between domestic and foreign firms that explicitly incorporates the effect of the market structure. We focus on how differences in costs modify the effects of increases in the number of foreign firms on R&D investments of domestic firms. We show that an increase in the number of foreign firms may have a positive effect on a domestic firm's R&D investment and also show that two trade policies, tariffs or quotas, could have different effects on R&D investments of domestic firms. A welfare analysis shows that greater cost advantages increase social welfare.     

Regulating misinformation

Governments have responded to misleading advertising by banning it, engaging in counter-advertising and taxing and regulating the product. In this paper, we consider the welfare effects of those different responses to misinformation. While misinformation lowers consumer surplus, its effect on social welfare is ambiguous. Misleading advertising leads to over-consumption but that may be offsetting the underconsumption associated with oligopoly outputs. If all advertising is misinformation then a tax or quantity restriction on advertising maximizes welfare, and other policy interventions are inferior. If firms undertake quality improving investments that are complementary to misinformation, then combining taxes or bans on misleading advertising with other policies can increase welfare.     

Greenhouse Gas Abatement Cost Curves of the Residential Heating Market: A Microeconomic Approach

In this paper, we develop a microeconomic approach to deduce greenhouse gas abatement cost curves of the residential heating sector. Our research is based on a system dynamics microsimulation of private households’ investment decisions for heating systems to the year 2030. By accounting for household-specific characteristics, we investigate the welfare costs of different abatement policies in terms of the compensating variation and the excess burden. We investigate two policies: (i) a carbon tax and (ii) subsidies on heating system investments. We deduce abatement cost curves for both policies by simulating welfare costs and greenhouse gas emissions to the year 2030. We find that (i) welfare-based abatement costs are generally higher than pure technical equipment costs; (ii) given utility maximizing households a carbon tax is the most welfare-efficient policy and; (iii) if households are not utility maximizing, a subsidy on investments may have lower marginal greenhouse gas abatement costs than a carbon tax.     

Congestion management in power systems

In liberalized power systems, generation and transmission services are unbundled, but remain tightly interlinked. Congestion management in the transmission network is of crucial importance for the efficiency of these inter-linkages. Different regulatory designs have been suggested, analyzed and followed, such as uniform zonal pricing with redispatch or nodal pricing. However, the literature has either focused on the short-term efficiency of congestion management or specific issues of timing investments. In contrast, this paper presents a generalized and flexible economic modeling framework based on a decomposed inter-temporal equilibrium model including generation, transmission, as well as their inter-linkages. The model covers short-run operation and long-run investments and hence, allows to analyze short and long-term efficiency of different congestion management designs that vary with respect to the definition of market areas, the regulation and organization of TSOs, the way of managing congestion besides grid expansion, and the type of cross-border capacity allocation. We are able to identify and isolate implicit frictions and sources of inefficiencies in the different regulatory designs, and to provide a comparative analysis including a benchmark against a first-best welfare-optimal result. To demonstrate the applicability of our framework, we calibrate and numerically solve our model for a detailed representation of the Central Western European (CWE) region, consisting of 70 nodes and 174 power lines. Analyzing six different congestion management designs until 2030, we show that compared to the first-best benchmark, i.e., nodal pricing, inefficiencies of up to 4.6% arise. Inefficiencies are mainly driven by the approach of determining cross-border capacities as well as the coordination of transmission system operators’ activities.     

On Welfare Criteria and Optimality in an Endogenous Growth Model

In this paper, we explore the consequences for optimality of a social planner adopting two different welfare criteria. The framework of analysis is an overlapping generations model with physical and human capital. We first show that, when the social welfare function is a discounted sum of individual utilities defined over consumption per unit of natural labor, the precise cardinalization of the individual utility function becomes crucial for both the characterization of the social optimum and the policies that support it. Also, decentralizing the social optimum requires an education subsidy that is definitely positive, but its size depends in a determinant way on the aforementioned cardinalization. In contrast, when the social welfare function is a discounted sum of individual utilities defined over consumption per unit of efficient labor, the precise cardinalization of preferences becomes irrelevant. More strikingly, along the optimal growth path, the education subsidy is negative, i.e., the planner should tax rather than subsidize investments in human capital.     

Should the Social Security Trust Fund Hold Equities? An Intergenerational Welfare Analysis

In a stochastic economy with overlapping generations, fiscal policy affects the allocation of aggregate risks. The paper shows how to compute the welfare effects of marginal policy changes that shift risk across cohorts, in general and for an application to social security equity investments. I estimate the relevant correlations between macroeconomic shocks and equity returns from 1874–1996 U.S. data, calibrate the model, and find positive welfare effects for equity investments. Since stock returns are positively correlated with social security's wage-indexed benefit obligations, equity investments would also help to stabilize the payroll tax rate. Journal of Economic Literature Classification Numbers: E62, H55.     

延迟退休会提高社会福利水平吗?

文章基于延迟退休可能带来就业挤出和闲暇损失的现实背景,在动态一般均衡世代交叠模型框架下通过引入异质性消费者并根据中国经济校准主要参数,在控制延迟退休对中国劳动力市场冲击影响的基础上,模拟分析了延迟退休政策对企业职工福利水平的长期影响。研究分析表明：(1)无论是采用保持现有的缴费率不变的政策方式还是保持养老金待遇不变的政策方式,延迟退休均能提高城镇企业职工的社会福利水平———第一种政策会增加社会福利3.66%,第二种政策会增加社会福利1.1%;在保持养老保险缴费率不变的情况下,从长期看,延迟退休5年会使社会福利最大化。(2)最优的退休年龄与劳动力市场状态息息相关,如果当前就业形势严峻,最优退休年龄需要相应降低。     

Strategic policies and growth: an applied model of R&D-driven endogenous growth

We introduce and explore a general equilibrium model with R&D-driven endogenous growth, whose antecedents are the models of Romer (1990) [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy, 98, S71-102] and Grossman and Helpman (1991) [Grossman, G.M., Helpman E., 1991. Innovation and Growth in the Global Economy, The MIT Press, Cambridge]. Utilizing evidence from recent econometric studies on sources of growth, the model also accounts explicitly for cross-border technological spillovers. The model is specified and calibrated to data from Japan, and is solved to obtain both the transitional and the steady-state equilibria. We explore the effects of selective trade and R&D promotion policies on long-run growth and social welfare. The model results suggest that while a strategic trade policy has little effect on re-allocating resources into domestic R&D activities, it can significantly affect the cross-border spillovers of technological knowledge, which, in turn, stimulates growth. We find that trade liberalization may cause the growth rate to fall and lead to a loss of social welfare in the long-run, although it improves welfare in the short-run. R&D promotion policies stimulate growth by inducing private agents to allocate more resources to domestic R&D, as well as to take greater advantage of global R&D spillovers. Here, we find significantly high growth effects together with sizable gains in social welfare at low incidence to tax payers.     

Household Transport Demand in a CGE-framework

The main objective of this study is to improve the modelling of household demand for transport services in a Computable General Equilibrium (CGE) model. The new extended model is then used for numerical calculations to test how the Swedish economy reacts to a carbon target. Special attention will be given to distributional effects and the connection between labour supply and work journeys in a sparsely populated country like Sweden. A differentiation between trip purposes and trip length, a complementary relationship between work journeys and labour supply, and a subdivision of households by density of population and income influence the numerical results. Our main conclusions from the analysis of a carbon target are that if the carbon tax revenue is recycled by decreasing the employers’ social contribution fee, welfare costs are lower than with lump-sum replacements of tax revenue to households. The welfare cost may be reduced even further if work journeys are not additionally taxed as compared to the base year. However, the lower total welfare cost is obtained at the expense of making society more unequal, since both labour tax recycling (cuts in employers’ social contributions) and exempting tax on work journeys will make low income groups carry a higher burden. An increased carbon dioxide tax is also shown to increase welfare differences between sparsely populated areas and city regions in Sweden.      

Optimal transmission switching: economic efficiency and market implications

Traditionally, transmission assets for bulk power flow in the electric grid have been modeled as fixed assets in the short run, except during times of forced outages or maintenance. This traditional view does not permit reconfiguration of the transmission grid by the system operators to improve system performance and economic efficiency. The current push to create a smarter grid has brought to the forefront the possibility of co-optimizing generation along with the network topology by incorporating the control of transmission assets within the economic dispatch formulations. Unfortunately, even though such co-optimization improves the social welfare, it may be incompatible with prevailing market design practices since it can create winners and losers among market participants and it has unpredictable distributional consequences in the energy market and in the financial transmission rights (FTR) market. In this paper, we first provide an overview of recent research on optimal transmission switching, which demonstrates the substantial economic benefit that is possible even while satisfying standard N−1 reliability requirements. We then discuss various market implications resulting from co-optimizing the network topology with generation and we examine how transmission switching may affect locational Marginal Prices (LMPs), i.e., energy prices, and revenue adequacy in the FTR market when FTR settlements are financed by congestion revenues.     

Taking Chances: The Effect that Growing Up on Welfare Has on the Risky Behavior of Young People*

In this paper, we analyze the effect that growing up in a family with a history of welfare receipt has on young people's engagement in a variety of social and health risks. Unique administrative data matched to survey data for 18‐year‐olds and their mothers allow us to evaluate the effect of welfare receipt over the course of a young person's childhood. Much of the apparent link between family welfare history and risk taking disappears once we control for the effects of family structure, mothers’ own risk taking, and mothers’ investments in their children. We find no evidence that growing up on welfare causes young people to engage in risky behavior.     

Welfare and growth impacts of innovation policies in a small, open economy; an applied general equilibrium analysis

We explore how innovation incentives in a small, open economy should be designed in order to achieve the highest welfare and growth. The computable general equilibrium model we develop for the purpose allows for research and development (R&D)-driven endogenous technological change embodied in varieties of capital. We study policy alternatives targeted towards R&D, capital varieties formation, and domestic investments in capital varieties. Subsidising domestic investments, thereby excluding stimuli to world market deliveries, generates less R&D, capital formation, economic growth, and welfare than do the other alternatives, reflecting that the domestic market for capital varieties is limited. In spite of breeding stronger economic growth, a higher number of patents, and a higher share of R&D in total production, direct R&D support generates slightly less welfare than subsidising formation of capital varieties. The costs in terms of welfare relates to a lower production within each variety firm, which in presence of mark-up pricing results in efficiency losses.     

政府规模扩张、福利效应与政策矫正*——基于门槛效应模型的经验研究

不同于既有研究关注政府规模扩张的影响因素和经济效率,本文考察了我国政府规模扩张的社会福利效应,有两个重要发现：第一,非线性。本文使用2000-2012年省级面板数据和Hansen TM方法实证发现,2000年以来,我国省级政府规模与财政分权、转移支付、经济增长的交互作用对社会福利具有非线性影响,分别表现出N型、倒U型和N型。第二,地异性。各省份由于财政分权程度、转移支付力度和人均收入水平差异,上述非线性机制和政府规模影响社会福利的门槛效应具有典型的地区差异。在“供给侧结构性改革”背景下,为防范政府规模扩张对社会福利增进由“初始的正效应”转向“最终的负效应”,本文提出了相应的政策矫正建议。     

Welfare implications of net social security wealth

Real net social wealth (NSSW), the real present value of social security benefits received minus social security taxes paid, is frequently used as a direct proxy measure for the impact of a social security system on generation welfare. The present paper establishes to the contrary, for a class of overlapping generation economies, that NSSW can be simultaneously negatively correlated with welfare for every agent in every generation. More generally, the paper determines the extent to which social security is needed in these economies to ensure social optimality, and investigates the proper subset of economies for which NSSW and generation welfare exhibit positive correlation.     

Intergenerational Transmission of Noncommunicable Chronic Diseases

We introduce a theoretical framework that contributes to the understanding of noncommunicable chronic diseases (NCDs) epidemics: even if NCDs are noninfectious diseases, they may spread due to the social transmission of unhealthy activities such as unhealthy diet, physical inactivity, and smoking. In particular, we study the intergenerational dimension of this mechanism. We find that, due to the social transmission of NCDs, agents choose lower health conditions and higher unhealthy activities than what is socially optimal. Taxes on unhealthy activities, that may subsidize health investments, can be used to restore the social optimum. Finally, our model is consistent with the existence of regional asymmetries regarding the prevalence of obesity and NCDs.     

新技术扩散速率和量能研究——福利计算与政府政策中一个奇特的OOP思想运用

在经济学所追求的三种效率——生产效率、分配效率和动态效率中,以新技术扩散为核心组成的动态效率是最为重要的一个方面,因为它从根本上决定了社会福利所能浮动的范围。文章创新性地引入了OOP实验思想,利用JBuider动态经济环境模拟,以分析和研究新技术倡导者、旧技术维护者和社会福利促进者(政府)之间的动态博弈,对新技术扩散的动态速率和量能进行研究,尝试性地解决了经济学理论中对于新技术扩散、社会福利增进等指标的定量测算难题。     

Welfare Effects of Different Public Expenditures and Taxes in the Netherlands

This paper explores the welfare effects of public consumption, income transfers and public investment financed through different types of taxes. One surprising result is that, contrary to public consumption goods, public capital goods do not necessarily become less attractive if distortionary taxes, rather than lump-sum taxes, are necessary to finance them. The numerical simulations reveal that the net welfare effects of public investments in the Netherlands are typically positive if financed through lump-sum taxes or distortionary taxes on labor. However, if a source-based capital tax is adopted to finance public investments, the overall welfare effect may be negative.