Environmental externalities and regulation constrained cost productivity growth in the US electric utility industry

This paper examines whether having to comply with Phase 1 of Title IV of the 1990 Clean Air Act, and rate of return regulation, each impacted the rate of total factor productivity (TFP) growth when accounting for the production of good and bad outputs. Phase 1, effective from 1995 to 1999, requires electric utilities to reduce their emissions of sulfur dioxide and nitrogen oxide (bad outputs). Actions undertaken to reduce the emissions (using less sulfur content coal, installing equipment), may have led to higher production costs, and impacted the rate of TFP growth. Rate regulation may impact how the firm produces its selected output level, which could lead to higher cost over time, and biased estimates of TFP growth. Following the work of Ball et al. (Struct Change Econ Dyn 16(3): 374–394, 2005), who developed the standard Malmquist cost productivity (MCP) index, we develop a MCP index for a rate regulated firm (RMCP index) then use the standard and regulated indices to determine whether having to comply with Phase 1 impacted TFP growth. Empirical results indicate that (i) the RMCP index underestimated the rate at which TFP growth occurred, (ii) Phase 1 utilities on average experienced positive TFP growth from 1996 to 2000 (Phase 1 firms experienced higher TFP growth rates than the rates experienced by firms not subject to Phase 1), and operated more allocatively inefficient in complying with the Phase 1 restrictions. Complying with Phase 1 did not affect the rate at which technical change occurred or the rates of change in scale efficiency.     

Linear production function,externalities and indeterminacy in a capital-resource growth model

This paper investigates the equilibrium growth dynamics of an economy whose production is based on natural resources and which seeks to maximize welfare to the local community. This involves determining the optimal trajectories of consumption in the local area and the use of the environmental resource. Economic dynamics are affected by negative environmental externalities which are explicitly included as unfavourable effects in a linear production function. The analysis shows the existence of local and global indeterminacy.     

Aggregation across countries in stochastic population forecasts

Stochastic methods of multi-state population modeling are less developed than methods for single states for two reasons. First, the structure of a multi-state population is inherently more complex than that of a single state because of state-to-state transitions. Second, estimates of cross-state correlations of the vital processes are a largely uncharted territory. Unlike multi-state lifetable theory, in forecasting applications the role of directed flows from state to state is often less important than the overall coherence of the assumptions concerning the vital processes. This is the case in the context of the European Union. Thus, a simplified approach is feasible, in which migration is represented by state-specific net numbers of migrants. This allows the use of existing single-state software, when simulations are suitably organized, in a multi-state setting. To address the second problem, we provide empirical estimates of cross-country covariances in the forecast uncertainty of fertility, mortality, and net migration. Together with point forecasts of these parameters that are coherent across countries, this produces coherent forecasts for aggregates of countries. The finding is that models for intermediate correlations are necessary for a proper accounting of forecast uncertainty at the aggregate level, in this case the European Union.     

Selecting stochastic mortality models for the Italian population

The future revision of capital requirements and a market-consistent valuation of non-hedgeable liabilities lead to an increasing attention on forecasting longevity trends. In this field, many methodologies focus on either modeling mortality or pricing mortality-linked securities (as longevity bonds). Following Lee–Carter method (proposed in 1992), actuarial literature has provided several extensions in order to consider different trends observed in European data set (e.g., the cohort effect). The purpose of the paper is to compare the features of main mortality models proposed over the years. Model selection became indeed a primary task with the aim to identify the “best” model. What is meant by best is controversial, but good selection techniques are usually based on a good balance between goodness of fit and simplicity. In this regard, different criteria, mainly based on residual and projected rates analysis, are here used. For the sake of comparison, main forecasting methods have been applied to deaths and exposures to risk of male Italian population. Weaknesses and strengths have been emphasized, by underlying how various models provide a different goodness of fit according to different data sets. At the same time, the quality and the variability of forecasted rates have been compared by evaluating the effect on annuity values. Results confirm that some models perform better than others, but no single model can be defined as the best method.     

Vertical externalities and control of politicians

A major role of (repeated) elections is to create incentives for politicians to act in the interests of voters. This paper considers the disciplining role of elections in countries with either one or two levels of government. Simple retrospective voting strategies which are based on cut-off levels with respect to expenditure and tax rates are considered. It is shown that the power of voters is weakened if a second independent level of government is added. However, voters can partially reinforce their power by making politicians not only liable for their own policy, but also for the policy carried out at each other level of government. Received: June 30, 2000 / Accepted: April 4, 2001     

Estimation of the threshold stochastic frontier model in the presence of an endogenous sample split variable

Heterogeneity among firms has been an important issue in studying firms’ technical efficiencies. If firms do not randomly fall into different groups with different technologies but by self-selection, statistically it implies the data are subject to the sample selection bias. In this paper, we generalize the stochastic frontier (SF) model to accommodate heterogeneous technologies among firms by considering the threshold SF model with an endogenous threshold variable. We discuss the econometric techniques appropriate for the threshold SF model with panel data. To determine the optimal number of regimes, we use modified the model selection criteria of Gonzalo and Pitarakis (J Econom 110(2):319–352, 2002) and investigate their finite sample performance by some Monte Carlo experiments. Finally, we also demonstrate our approach by an empirical example.     

Separability of stochastic production decisions from producer risk preferences in the presence of financial markets

Separation results, as they are usually understood, refer to conditions under which a firm’s production decisions are independent of its risk attitudes. Well-understood situations where separation occurs typically include those where technically feasible production opportunities are replicable in financial markets. This paper gives necessary and sufficient conditions for separation that go beyond these well-understood spanning conditions. To do so, we present a unified treatment of the production and financial decisions available to a firm facing frictionless financial markets and a stochastic production technology under minimal assumptions about the firm’s technology and objective function.     

Note on positive lower bound of capital in the stochastic growth model

In the context of the classical stochastic growth model, we provide a simple proof that the optimal capital sequence is strictly bounded away from zero whenever the initial capital is strictly positive. We assume that the utility function is bounded below and the shocks affecting output are bounded. However, the proof does not require an interval shock space, thus, admitting both discrete and continuous shocks. Further, we allow for finite marginal product at zero capital. Finally, we use our result to show that any optimal capital sequence converges globally to a unique invariant distribution, which is bounded away from zero.     

Efficient growth of an agglomerating regional economy

The focus of this study is on the efficient investment policy to be pursued by a regional or local economy, respectively. Localness will be expressed in terms of varying returns to scale which are due to economies and diseconomies of agglomeration. This particular setting of regional growth enters into a neoclassical calculus of variations model of intertemporal capital stock maximization. The general properties significant of efficient growth strategies relate to the turnpike discussion. A unique set of maximum balanced expansion paths will be proved to serve as the only guideline for efficient investment in the long run.     

House prices and rents in Spain: Does the discount factor matter?

We estimate alternative price-to-rent ratios in the Spanish housing market by considering different stochastic discount factors in present value models similar to those used in the financial literature but where the higher rigidity that characterises this market is taken into account. We identify three robust across-model regularities: (i) the increase in the price-to-rent ratio since the late 1990s helped at first to restore equilibrium, (ii) further increases in house prices raised the ratio between 24% and 32% above equilibrium by 2004, although (iii) at that time the ratio was only around 2% above its short-term adjustment path towards a (new) long-run equilibrium.     

Distributional effects of imputed rents in five European countries

Most empirical distributional studies of well-being in developed countries rely on distributions of disposable income. From a theoretical point of view this practice is contentious since a household’s command over resources is determined not only by its spending power over commodities it can buy in the market but also on resources available to the household members through non-market mechanisms such as the in-kind provisions of the welfare state and the value of private non-cash incomes. In developed market economies the most important private non-cash income component is imputed rent from owner-occupied or subsidized accommodation. Employing a wider definition of imputed rent that also allows the analyst to capture income advantages among tenants living in rent-subsidized accommodations of various sorts (including rent-free or reduced-rent households), the present paper examines the differential effects of including imputed rents in the concept of resources in five European countries (Belgium, Germany, Greece, Italy and the UK). The results suggest that in almost all cases, the inclusion of imputed rents in the concept of resources leads to a decline in measured levels of inequality and poverty. The main beneficiaries are outright homeowners and households living in rent-free (or heavily subsidized) accommodation—most often older persons. The inclusion of imputed rents in the concept of resources does not lead to substantial changes in the ranking of the countries according to their level of inequality, despite widespread differences in the rates of home ownership and subsidization across the countries studied here.     

Estimation of population ratio in cluster sampling over successive sampling in the presence of non-response

Quality & Quantity - In this paper, we have discussed the problem of estimating the population ratio in cluster sampling over two occasion successive sampling in the presence of non-response....     

A stochastic dynamic model of trade and growth: Convergence and diversification

There is a growing literature that studies the properties of models that combine international trade and neoclassical growth theory, but mostly in a deterministic setting. In this paper we introduce uncertainty in a dynamic Heckscher-Ohlin model and characterize the equilibrium of a small open economy in such an environment. We show that, when trade is balanced period-by-period, the per capita output and consumption of a small open economy converge to an invariant distribution that is independent of the initial wealth. Further, at the invariant distribution, there are periods in which the small economy diversifies. Numerical simulations show that the speed of convergence increases with the size of the shocks. In the limit, when there is no uncertainty, there is no convergence and countries may specialize permanently. The paper highlights the role of market incompleteness, as a result of the period-by-period trade balance, in this setup. Through an analytical example we also illustrate the importance of country specific risk in delivering our results.     

On Lipschitz continuity of the iterated function system in a stochastic optimal growth model

This paper provides qualitative properties of the iterated function system (IFS) generated by the optimal policy function for a class of stochastic one-sector optimal growth models. We obtain, explicitly in terms of the primitives of the model (i) a compact interval (not including the zero stock) in which the support of the invariant distribution of output must lie, and (ii) a Lipschitz property of the iterated function system on this interval. As applications, we are able to present parameter configurations under which (a) the support of the invariant distribution of the IFS is a generalized Cantor set, and (b) the invariant distribution is singular.     

Existence of marginal pricing equilibria in economies with externalities and non-convexities

We consider a general equilibrium model with externalities and non-convexities in production. The consumption sets, the preferences of the consumers and the production possibilities are represented by set-valued mappings to take into account possibility of external effects. There is no convexity assumption on the correspondences of production. We propose a definition of the marginal pricing rule, which generalizes the one used in the model without externality and, which satisfies a continuity assumption with respect to the external effect.We prove the existence of general equilibria under assumptions which allow us to encompass together the works on economies with externalities and convex conditional production sets, and those on marginal pricing equilibria in economies without externalities. We provide examples to illustrate the definition of the marginal pricing rule and to show the difference with the standard case.     

The problem of population and growth: a review of the literature from Malthus to contemporary models of endogenous population and endogenous growth.

This review traces the evolution of literature on population and economic growth through the main paradigms suggested to explain the observed covariation of per capita income and population levels (or their rates of growth) over time and space, and determine which public policies will improve the human condition. As the main paradigms evolved, key variables were progressively treated as endogenous (instead of exogenous) to the growth process. After the introduction, section 2 looks at the "classical model" of Malthusian population theory and its refinements. Section 3 identifies empirical data that bears on the secular and cross-sectional association between levels of rates of growth of population and per capita income. The inconsistency of these data with the classical model helps explain declining interest in this model over time and increased interest in a more systematic type of population and growth theory. The beginning of this new interest is traced in section 4 with a look at the "neo-classical growth model" and the reformulated theory of population, which was based on Becker's work on fertility behavior. The first line of inquiry branching from these theoretical works (section 5) treats population as an endogenous variable in static and dynamic settings. The second line of inquiry (section 6) analyzes population and growth within a unified model of growth and development. In section 7, recent studies of key policy issues (population control policies, mandatory social security schemes) are surveyed. The concluding section notes that contemporary research must face the challenge of providing additional insights into longevity as an aspect of economic growth and development and of developing a model of endogenous population and economic growth based on heterogeneous agents.     

Business cycle fluctuations and learning-by-doing externalities in a one-sector model

We consider a one-sector Ramsey-type growth model with inelastic labor and learning-by-doing externalities based on cumulative gross investment (cumulative production of capital goods), which is assumed, in accordance with Arrow (1962), to be a better index of experience than the average capital stock. We prove that a slight memory effect characterizing the learning-by-doing process is enough to generate business cycle fluctuations through a Hopf bifurcation leading to stable periodic orbits. This is obtained for reasonable parameter values, notably for both the amount of externalities and the elasticity of intertemporal substitution. Hence, contrary to all the results available in the literature on aggregate models, we show that endogenous fluctuations are compatible with a low (in actual fact, zero) wage elasticity of the labor supply.     

Traffic density,congestion externalities,and urbanization in China

ABSTRACT

Although there is an abundant regional literature analyzing traffic congestion, only a few studies have explored extending such analysis with spatial effects. This study uses a dynamic spatial Durbin model and city-level panel data for the period 2003–14 to investigate the spatial spillover effects of traffic congestion on urbanization in China. The results show that there is an inverted ‘U’-shaped relationship between urbanization and traffic density in local and neighbouring cities, and congestion effects have appeared. In the short and long run, the spatial effects of traffic congestion have become an important force restricting the effective promotion of urbanization in China.