Who Wins from Emissions Trading? Evidence from California

Researchers and environmental policy advocates have raised questions regarding the distributional impacts of emissions trading programs, a.k.a. “cap-and-trade”. While previous research has been careful to identify the causal effect of emissions trading on emissions reductions (Fowlie et al. in Am Econ Rev 102(2):965–993, 2012, hereafter FHM), we argue that existing estimates of differential impacts on demographic groups have relied on unrealistic assumptions regarding pollution dispersion. In this paper, we estimate the emissions reduction due to the RECLAIM cap-and-trade program in Southern California following the identification strategy of FHM, but we relax the assumption of uniform dispersion surrounding point sources. We model the transport of effluents using a state-of-the-science dispersion model to determine the areas impacted by emissions from each source. Importantly, conditional on race and ethnicity, we find that higher income areas receive larger reductions in pollution under cap-and-trade. Furthermore, conditional on income (or poverty rates), we find that Blacks benefit while Hispanics lose relative to whites under RECLAIM.     

Who benefit from government-led microfinance projects? Evidence from rural China

Drawing from a unique dataset of 2356 Chinese villages, this paper assesses the anti-poverty effect of the largest government-led microfinance project in the developing world. We find that the project can significantly increase the income level in the targeted villages. The main engine of the project lies in the expansion of access to nonfarm activities. We also highlight the importance of institutional circumstance in the effectiveness of the project. Specifically, a more democratized village with less political connection to local governments reaps more benefits from its participation.     

Why is China different from Eastern Europe? Perspectives from organization theory

We draw from recent work in organization theory to explain the differences in reform strategies between China and Eastern Europe. An experimentation approach was adopted in China whereas a big bang approach was more favored in Eastern Europe. The explanation is based on differences in the organizational structure of central planning: U-form in Eastern Europe and M-form in China. The M-form is more flexible because it makes local experiments possible, contrary to the U-form where this would give rise to major complications in coordination.     

Who benefits most from property assessment taxes? Evidence from Los Angeles County

Assessment caps on property taxes are often assumed to benefit affluent homeowners the most with little gains for low-income households. Quantile regression results for Los Angeles County show that on average effective property tax rates decrease by $1994 per year due to length of ownership in the 50th percentile because of California’s Proposition 13 assessment cap. There is evidence of both horizontal and vertical inequity across the entire sample. Low-income households do benefit from California’s assessment cap as they are typically infrequent movers but their effective tax rates decrease over time. However, the most affluent households by market value do not gain the most and there is no evidence of horizontal inequity for these homeowners. There is also no evidence of horizontal inequity for middle-income households. Property tax savings vary between $18,000 and $40,000, depending on the assessed value decile and percentage quantile.     

Message from the Managing Editor

Once again Christmas is coming to us and anotheryear is about to depart. On behalf of all the members ofthe Editorial Office, I＇d like to express our appreciationsto authors, readers and others concerned for EcologicalEconomy for your great support and encouragement. Withthe coming of the New Year, please accept our sinceregreetings and best wishes. In the past year, whether youread and contributed or made criticism and proposals forus, we are grateful for your active participation. Specially,I would like to take this opportunity to thank interna-tional friends：     

Message from the Chief Editor

On the first anniversary of the first issue of Ecological Economy, please accept our sincere greetings and best wishes for the New Year. In the past year, whether you read and contributed to Ecological Economyor made criticism and proposals for us, we are grateful for your active participation. On behalf of all the members of the editorial office, I＇d like to express our heartfelt thanks to you for your great support and encouragement, and your concern for Ecological Economy, Specially,     

Deviations from optimal corporate cash holdings and the valuation from a shareholder’s perspective

The trade-off theory of corporate cash holdings predicts that there is an optimal level of cash. We test the trade-off theory by investigating the relation between deviations from optimal cash holdings and the valuation of cash from a shareholder’s perspective. We decompose corporate cash holdings into the optimal level of cash and the deviations from the optimum. We find that the marginal value of cash for shareholders is higher when a change in cash moves corporate cash holdings towards the optimal level and that this relationship holds for both the above-optimal deviations and the below-optimal deviations. We conclude that the results are consistent with the prediction of the trade-off theory of corporate cash holdings.     

Message from Lord Mayor of Newcastle

TheCityofNewcastleistheRegionalcapitaloftheHunter,oneofAustralia'smostvaluableregions.TheHuntergeneratesmorethan4.5percentoftheGrossNationalproductandyetitrepresentsonlythreepercentofthepopulation.TheHunterproducesmorethan15percentofthisState'sexportincomewithonlyeightpercentofthepopulationandgenerates100percentoftheState'saluminium,80percentoftheelectricity,70percentofthecoaland40percentofportcargomovements.TheCityofNewcast1ehasapopulation0f132,00O;thatiswithinthelocalgoyern-mentboundar…     

Circular economy： from an institutional perspective

Circular economy （CE） has been put fonvard as an important environmental and resource strategy in China.Aiming at the high utilization rate of resources and reduction of pollutants,CE means to realize a shift of fundamental paradigm.With the mode of production and consumption from linear to recycling model,the promotion requires transdisciplinary researches which integrate technological,ecological,social-cultural and other sciences.The present study focuses on the implementation of circular economy from an institutional perspective.Institution acts as a crucial factor by providing incentives for technical innovation,leading investment orientation and determining policy effectiveness,etc.This paper mainly discusses about： firstly,the feature of institution,institutional changes and institutional innovation is articulated,together with eco-industrial park strategy,extended producer＇s responsibility and dematerialization principle as innovative institutional arrangements; secondly,as policy plays great role on institutional changing process,the mechanism of policy implementation is needed to be related; as a result,coevolution of institutions and policies is thus presented; at last,a pilot attempt is made to find out some operational avenues in accomplishment of CE through both theoretical and practical methodology,special resolutions are put forward after some projecting difficulties and dilemmas in China are described.     

Can everyone benefit from economic integration?

There is no Pareto efficient allocation rule which always encourages economic integration. Further, for any efficient rule treating indistinguishable agents identically in welfare terms, there is an economy in which a third of the agents are hurt upon integration.     

Can information and counseling help students from poor rural areas go to high school? Evidence from China

Recent studies have shown that only about two-thirds of the students from poor, rural areas in China finish junior high school and enter high school. One factor that may be behind the low rates of high school attendance is that students may be misinformed about the returns to schooling or lack career planning skills. We therefore conduct a cluster-randomized controlled trial (RCT) using a sample of 131 junior high schools and more than 12,000 students to test the effects of providing information on returns or career planning skills on student dropout, academic achievement and plans to go to high school. Contrary to previous studies, we find that information does not have significant effects on student outcomes. Unlike information, counseling does have an effect. However, the effect is somewhat surprising. Our findings suggest that counseling increases dropouts and seems to lower academic achievement. In our analysis of the causal chain, we conclude that financial constraints and the poor quality of education in junior high schools in poor, rural areas (the venue of the study) may be contributing to the absence of positive impacts on student outcomes from information and counseling. The negative effects of counseling on dropout may also be due to the high and growing wages for unskilled labor (high opportunity costs) in China’s transitioning economy. It is possible that when our counseling curriculum informed the students about the reality of how difficult were the requirements for entering academic high school, it may have induced them to revise their benefit-cost calculations and come to the realization that they are better off dropping out and/or working less hard in school.     

Are Islamic finance innovations enough for investors to escape from a financial downturn? Further evidence from portfolio simulations

Does Islamic finance constitute a promising solution for the current global financial crisis and are Islamic financial innovations enough to reassure investors, stabilize financial systems and provide them with a means of escaping from financial downturns? This article addresses these questions while investigating the dynamics of Islamic and conventional stock prices over the last few years. In particular, we apply Multivariate Vector Autoregressive (VAR) tools to test the interaction between conventional and Islamic financial products, and implement the Granger causality test to specify the dependence orientation of feedback between Islamic and conventional stock prices. Our article differs from previous work on the topic in that it develops portfolio simulations to determine whether Islamic finance can supplant conventional finance by generating investment and diversification opportunities during periods of crisis. In addition, we develop optimal portfolio strategies and investment proportions for conventional and Islamic funds to ensure the best resource allocation. Our main findings are: (i) the impact of the current crisis on the Islamic finance industry is less marked than on conventional finance, (ii) investment in Islamic products generates high returns, (iii) portfolios that include Islamic products reduce systemic risk and generate significant diversification benefits, (iv) the US crisis has led to significant changes in resource allocation through changes in investment choices.     

Do Consumers Learn from Their Own Experiences?

It is natural to think that a household may learn from its own experiences and subsequently increase savings. This paper tests empirically the hypothesis that Japanese households learn from their experiences of large expenditure and increase their targets for precautionary savings after such experiences. The results imply that households raise their targets for precautionary savings by 4–5 percent of annual income in response to such experiences. Moreover, data are consistent with the argument that targets for savings affect actual savings. Assuming this holds, the results in this paper suggest that consumers may increase their actual savings following large expenditure.     

Are banks public utilities? Evidence from Europe

The regulatory response to the global financial crisis has been to instal a myriad of new rules in order to improve bank capital and liquidity, as well as to reduce systemic risks through structural reform. All these new rules place a straightjacket around banker’s activities and inhibit their operational freedom. This new environment has made European banks look less like private free-wheeling profit-maximising firms and more like public utilities. The utility services banks provide to society means that they should be overseen even more heavily. This includes greater regulatory oversight of bank pricing, profitability and service provision.     

Does it matter where you come from? Vertical spillovers from foreign direct investment and the origin of investors

This study uses firm-level panel data from Romania to examine whether the origin of foreign investors affects the degree of vertical spillovers from FDI. Investors' origin may matter for spillovers to domestic producers supplying intermediate inputs in two ways. First, the share of intermediates sourced locally by multinationals is likely to increase with the distance between the host and the source economy. Second, the sourcing pattern is likely to be affected by preferential trade agreements. In this case, the Association Agreement between Romania and the European Union (EU) implies that inputs sourced from the EU are subject to a lower tariff than inputs sourced from the United States or Canada. This means that on average American investors may have a greater incentive than EU investors to source from Romania and hence present a greater potential for vertical spillovers. The empirical analysis produces evidence consistent with this hypothesis. The results show a positive association between the presence of American companies in downstream sectors and the productivity of Romanian firms in the supplying industries and no significant relationship in the case of European affiliates. The results also indicate that Romanian firms in sectors whose products are expensive to transport benefit more from downstream presence of American affiliates than Romanian firms in sectors with low shipping costs. No such pattern is found for European affiliates.