Privatizing Climate Change Policy: Is there a Public Benefit?

The Chicago Climate Exchange (CCX) and the Carbon Disclosure Project (CDP) are two private voluntary initiatives aimed at reducing carbon emissions and improving carbon management by firms. I sample power plants from firms participating in each of these programs, and match these to plants belonging to non-participating firms, to control for differences between participating and non-participating plants. Using a difference-in-differences model to control for unobservable differences between participants and non-participants, and to control for the trajectory of emissions prior to program participation, I find that the CCX is associated with a decrease in total carbon dioxide emissions for participating plants when non-publicly traded firms are included in the sample. Effects are produced largely by decreases in output. CCX participation is associated with increases in carbon dioxide intensity. The CDP is not associated with a decrease of carbon dioxide emissions or electricity generation, and program participation is associated with an increase in carbon dioxide intensity. I explore these results within the context of voluntary environmental programs to address carbon emissions.     

Is the EU ETS a Just Climate Policy?

The European Union Emissions Trading System (EU ETS) is in dire straits. Prone to design problems and suffering from the effects of the economic crises the scheme is criticised for its poor achievements. In this paper we will analyse some of the features of this situation from an ethical perspective. The major part is dedicated to the complications within each phase of the EU ETS and to the recent developments it has undergone. We will briefly discuss the remedies suggested by prominent commentators. Furthermore, any policy tool to tackle climate change should be evaluated in view of the profound equity issues that are inherent to the climate problem. We will evaluate the EU ETS according to two justice-based criteria, related to effectiveness and the distribution of the duties involved in climate change, respectively. We will conclude that the EU ETS, in its current form, clearly lacks fairness on both criteria. However, the biggest problem is the unwillingness of EU leaders to mend, what could be, a commendable climate policy tool. To that extent, we argue, those leaders are acting unjustly.     

Unilateral Climate Policy: Harmful or Even Disastrous?

This paper deals with possible foreign reactions to unilateral carbon demand reducing policies. It differentiates between demand side and supply side reactions as well as between intra- and inter-temporal shifts in greenhouse gas emissions. In our model, we integrate a stock-dependent marginal physical cost of extracting fossil fuels into Eichner and Pethig’s (Int Econ Rev 52(3):767–805, 2011) general equilibrium carbon leakage model. The results are as follows: Under similar but somewhat tighter conditions than those derived by Eichner and Pethig (Int Econ Rev 52(3):767–805, 2011), a weak green paradox arises. Furthermore, a strong green paradox can arise in our model under supplementary constraints. That means a “green” policy measure might not only lead to a harmful acceleration of fossil fuel extraction but to an increase in the cumulative climate damages at the same time. In some of these cases there is even a cumulative extraction expansion, which we consider disastrous.     

Is There a Win–Win Situation in Household Energy Policy?

To achieve environmental goals, most governments aim to reduce consumption of the most polluting energy goods by taxation. Often, the authorities not only aim to change the consumption of the regulated good by the taxation, but also to change the consumption of close substitutes (hereafter referred to as win–win effects). The size of the win–win effects depend not only on how close substitutes the goods are, but also on the price sensitivity of the taxed good and on the budget effects of the regulation. We use a conditional demand model to decompose the cross-price effect to discuss which criteria that must be fulfilled in order for substantial win–win effects to occur, using Norwegian stationary energy consumption as an empirical example.     

Policy Forum: Designing a Carbon Price Policy: Is the Australian Climate Plan Fair to Australia's Energy‐Intensive,Trade‐Exposed Industries?

The implications of Australia's unilateral carbon‐pricing plan for its energy‐intensive, trade‐exposed industries are analysed. While a priori arguments for protecting such industries make good theoretical sense, empirically significant levels of support for such protection centre on the non‐ferrous metal industry alone.     

Is Fiscal Policy Procyclical in the Euro Area?

We test the relationship between the cyclically adjusted primary balance and alternative indicators of cyclical conditions for the euro area and 18 OECD countries over the period 1970–2009. A countercyclical stance of discretionary fiscal policy is found during bad times after 1999 in the euro area as a whole and in a few member countries only (France, Ireland and The Netherlands). It is also associated with high public deficits or low public debts. There is no significant case of procyclical fiscal policy after 1999, neither in good times nor in bad times.     

Currency Exposure to Downside Risk: Which Fundamentals Matter?

I study whether or not countries' macroeconomic characteristics are systematically related to their currencies' exposure to the downside market risk. I find that the currency downside risk is strongly associated with the local inflation rate, real interest rate and net foreign asset position. Currencies of countries with high inflation and real interest rates and negative net foreign asset position (debtor countries) are more exposed to the downside risk whereas currencies of countries with low inflation and real interest rates and positive net foreign asset position (creditor countries) exhibit “safe haven” properties. The local real interest rate has the highest explanatory power in accounting for the cross‐section of currency exposure to the downside risk. This suggests that the high currency exposure to the downside risk is a consequence of investments in high‐yield risky countries and flight from them in “hard times”.     

Idiosyncratic Risk in the United States and Sweden: Is There a Role for Government Insurance?

We examine the effects of government redistribution schemes in an economy where agents are subject to uninsurable, individual specific productivity risk. In particular, we consider the trade-off between positive insurance effects and negative distortions on labor supply and saving. We parameterize the model by estimating productivity processes on Swedish and U.S. data. The estimation results show that agents in the United States are subject to more idiosyncratic risk than agents in Sweden. Although distortions are significant, the welfare benefits of government redistribution and insurance systems can be substantial. Journal of Economic Literature Classification Numbers: E20, H21.     

Matching Economic Development Policy to the Local Context: Must We?

This paper examines 2013 data on high-tech manufacturing employment across metropolitan statistical areas in the United States. The purpose is to discover how a broad set of social/demographic/economic variables relate to varying densities of high-tech manufacturing employment. Two questions are asked: Do social and industrial circumstances evolve together, as suggested by institutionalist theories? Is there any evidence to suggest that economic development policy is likely to be effective at creating the conditions that might invite local development of high-tech manufacturing?     

Is it better to be mixed in group lending?

This paper shows that, in a group‐lending scheme with joint liability, a microfinance institution can achieve a Pareto improvement by promoting negative assortative matching among borrowers. The main results are: (i) borrowers may be better off in heterogeneous groups; and (ii) a heterogeneous group equilibrium is possible when individual or homogeneous group equilibria do not exist.     

The Political Economy of Policy Reform in the Philippines: 1992–1998

Accurately measuring Turkey's informal sector is important for policymaking. We utilize household income‐expenditure surveys to examine this sector's income underreporting. The Pissarides‐Weber approach hypothesizes that data would reflect such underreporting as “excess food consumption”. Our results suggest informal sector members spend more than their formal sector counterparts with comparable reported income levels. Using this information, we estimate the average size of the true informal sector to be about 1.25 times the official estimate. The informal sector accounts for around 83% of officially reported disposable income. Therefore, true Turkish disposable income is (25%)?(83%), roughly 21% larger than the officially estimated magnitude.     

Dancing to the Donors' Tune? Policy Choice in Aid‐Dependent Countries

Current aid rhetoric emphasizes the selective allocation of otherwise unconditional funds in support of the recipients' own plans, in contrast to the old donor practice of bundling money and policies. I show that when recipients have private information, policies reflecting their preferences and knowledge might result in such a regime. However, generous transfers can also induce them to conform to the outcome‐oriented expectations of donors at the expense of lower aid impact. Such behaviour is consistent with an abundance of case‐study evidence. Moderate disagreements over what the optimal policy is could actually produce better results. Certain forms of both donor competition and coordination might also eliminate this distortion, while a donor concern for need only removes incentives for aid‐seeking in the least needy countries. In summary, optimal aid policies are highly context‐specific, and donors should thus concentrate their efforts to practise more informed selectivity.     

A Tacit Monetary Policy of the Gulf Countries: Is There a Remittances Channel?

The strong economic ties between the Gulf Cooperation Council (GCC) economies and the USA are manifested in three ways: currency peg, coupling of monetary policy, and the adoption of the US dollar as the trading currency for oil. This paper examines how these dynamics result in a misalignment of the US monetary policy with the business cycles of the GCC economies. The study shows how the staggering amount of remittances outflow of the GCC economies plays a stabilizing role as a tacit monetary policy tool. Incorporating remittances in the money‐demand equation results in a more robust model than otherwise. We further find that the effect of the Federal Funds rate on money demand in these countries diminishes in significance during the period of oil boom between 2002 and 2009. However, the transmission effect of the recession periods in the USA into the demand for money in the GCC countries is not statistically significant.     

Is emigration of workers contributing to better schooling outcomes in Nepal?

This paper presents evidence on how emigration for work affects schooling outcomes for primary and secondary school‐age children in Nepal. Using an instrumental variable strategy exploiting past migration network, we show that the identified effects critically depend on how schooling outcomes are measured. While conventional measures of school attendance indicate no impact, our new set of schooling status and schooling gap measures reveals significant impacts. Schooling status measures reveal favorable impacts for girls, and for emigration to India. Schooling gap measures reveal favorable effects of all emigration on schooling outcomes for girls and of emigration to other countries for boys.     

Analyzing the Interaction of Monetary and Fiscal Policy: Does Fiscal Policy Play a Valuable Role in Stabilisation?

This paper provides an overview of recent papers which use estimatedNew Keynesian models to study the extent to which fiscal policycan be used to stabilize the economy. We use a variety of differentNew Keynesian models, estimated on data for both the US andfor the Euro area, and highlight the diverse transmission channelsthrough which fiscal policy acts in these models. Although wefind that fiscal policy can provide a useful complement to monetarypolicy, especially in models where consumers have finite horizons,there are important limitations to the value added of fiscalpolicy. (JEL E58, E62, E63)     

Regional debt in monetary unions: Is it inflationary?

This paper studies the inflationary implications of interest bearing regional debt in a monetary union. Is this debt simply backed by future taxation with no inflationary consequences? Or will the circulation of region debt induce monetization by a central bank?We argue here that both outcomes can arise in equilibrium. In the model economy, there are multiple equilibria which reflect the perceptions of agents regarding the manner in which the debt obligations will be met. In one equilibrium, termed Ricardian, the future obligations are met with taxation by a regional government while in the other, termed Monetization, the central bank is induced to print money to finance the region's obligations. The multiplicity of equilibria reflects a commitment problem of the central bank. A key indicator of the selected equilibrium is the distribution of regional debt holdings. We show that regional governments, anticipating central bank financing of their debt obligations, have an incentive to create excessively large deficits. We use the model to assess the impact of some policy measures within a monetary union as well as dollarization.