Reducing Start‐up Costs for New Firms: The Double Dividend on the Labor Market*

Starting a firm with expansive potential is an option for educated and high‐skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low‐wage job and hence as increasing the incentives for education. In a matching model, we show that reducing the start‐up costs for new firms results in higher take‐up rates of education. It also gives rise—through a thick‐market externality—to higher rates of job creation for high‐skilled labor as well as average match productivity. We provide empirical evidence to support our argument.     

Economic Integration and Public Provision of Education

This paper develops a model of fiscal competition in public provision of a private good: education. In this framework, the welfare enhancing effects of public education provision are shown to be reduced by increased student mobility when, like in the EU, countries are unable to set differentiated fees to foreign students. Indeed, the threat of attraction of foreigners who free-ride on the national education system may induce suboptimal levels of public education provision when (price) discrimination is forbidden. Alternatively, countries may try to escape regulation and avoid equal treatment of foreign students. The paper provides some empirical evidence of the existence of a fiscal externality in education at the EU level.     

Transfers and the Samuelson Rule in Stock Externality Provision—Why Do We Need Them Both?

This paper examines the relationship between the Samuelson rule for efficient provision of stock externality and unilateral transfers for equalization of mitigation costs among the agents. Using a generic model of stock externality provisions, we proved that the revised Samuelson rule that allows transfers is a necessary and sufficient condition for efficient provision of stock externalities. In addition, selection of social welfare weights of the agents plays a key role in directions and magnitudes of the transfers. We discuss the implications of the revised Samuelson rule in economic modeling of climate change, an empirical case of stock externality, through numerical simulations in the RICE model.     

Twin peaks: Expressive externality in group participation

We introduce a model of group behavior that combines expressive participation with strategic participation. Building on the idea that expressive voting in elections is much like rooting for a sports team, we give applications to both sporting events and elections. In our model there is an expressive externality: an individual enjoys an event more when more of her peers come out to support her preferred party or team. We show that this results in the possibility of “tipping”—that participation may jump up discontinuously when the externality becomes strong enough. We examine the implications for pricing by sports teams and for voter turnout.     

Endogenous fluctuations with procyclical R&D

The literature on endogenous growth cycles predicts the countercyclical allocation of resources to R&D. However, this prediction is not supported by empirical studies. This study considers the R&D-based growth model with endogenous fluctuations introducing population growth and a negative externality that affects the productivity of R&D. We show that this simple modification makes R&D investment procyclical along sustained business cycles using both an overlapping generation framework and an infinitely-lived agent framework.     

Present bias and the inefficiency of the centralized economy: The role of the elasticity of intertemporal substitution

We analyze an endogenous growth model considering agents with an isoelastic utility. Preferences are characterized by a utility affected by a negative externality, and a level of impatience which decays with the time distance from the present. Agents who cannot commit the actions of their future selves, play a game against them. The stationary equilibrium of this game defines a balanced growth path with a slower growth when played by subsequent central planners than when played by decision makers in the market economy. First, we prove that the fast growing market economy implies higher welfare if the negative externality is small, while the centralized economy is welfare improving above a given threshold for the externality (obtained for a specific family of non-constant discount functions). Secondly, we observe that this threshold increases with the elasticity of intertemporal substitution in consumption. Therefore, the greater this elasticity the more likely it is that the externality lies below this threshold, where policy interventions would not be adequate. Finally, as one would expect, the range of values of the externality for which the market equilibrium provides higher welfare widens the more different from constant discounting time preferences are, due either to a wider range of variation for the instantaneous discount rates or because these decay more slowly.     

Is There a Long-Term Relationship Between Agricultural GHG Emissions and Productivity Growth? A Dynamic Panel Data Approach

The paper adopts a single-country regional panel dataset to analyse the long-term relationship between agricultural greenhouse gases (GHG) emissions and productivity growth and, consequently, to assess emissions sustainability. The hypothesis of emission sustainability is assessed by estimating alternative panel model specifications with conventional and GMM estimators applied to the highly heterogeneous Italian regional agriculture, whose methane and nitrous oxide emissions are properly reconstructed for the periods 1951–2008 and 1980–2008. The modelling approach and the empirical specification include the environmental Kuznets curve (EKC) as one of the possible outcomes. Results suggest that, when a significant relationship between agricultural GHG emissions and productivity growth occurs, it is often monotonic and, though sustainability is accepted for some GHG, no univocal robust evidence of the EKC emerges across the different specifications, estimators and periods. Policy implications of this empirical evidence are finally drawn.     

Debt shifting and ownership structure

Previous theoretical studies on the debt shifting behavior of multinationals have assumed affiliates of multinationals to be wholly owned. We develop a model that allows a multinational firm to determine both the leverage and ownership structure in affiliates endogenously. A main finding is that affiliates with minority owners have less debt than wholly owned affiliates and therefore a less tax-efficient financing structure. This is due to an externality that arises endogenously in our model, where costs and benefits of debt shifting are shared asymmetrically between minority and majority owners. Our findings provide a theory framework for recent empirical findings.     

When sociable workers pay off: Can firms internalize social capital externalities?

We use an endogenous growth model to contrast the socially optimal allocation of human capital with the decentralized solution, in a context where workers make the choices that determine social capital accumulation. As social capital is expected to increase productivity but is not traded in markets, a positive social capital externality is identified. We discuss the possibility that, in response to this externality, firms subsidize social capital accumulation activities, incurring into additional costs that are recouped through productivity gains. This reaction by firms may be seen as a justification for some corporate social responsibility actions targeted at workers, although a full internalization of the externality does not look achievable in practice.     

Trade in trash: A political economy approach

We study how the opportunity to trade in trash might influence the equilibrium outcome when the tax on the externality is determined by a political economy process. In our model, individuals have heterogeneous preferences for environmental quality, and there is a wastage of real resources when funds are transferred from the pressure groups to the politicians. When hard-core environmentalists and capitalists are organized interest groups while moderate environmentalists are not organized, we find that the politically chosen tax on the externality is below the optimal Pigouvian level. The opportunity to export waste in unlimited quantities, but at a price, is not the environmentalists’ panacea and does not eliminate political social tension and suboptimal results.     

Schumpeterian Growth with Gradual Product Obsolescence

The model in this article captures several important aspects of the real world: gradual obsolescence of goods in the form of gradually declining net profit derived from each product until it is phased out, expanding variety of goods over time, and both dynamic and static internal increasing returns to scale of production. To eliminate the scale effect, Jones's specification that gives rise to a semiendogenous rate of innovation is adopted. The most interesting finding of the article is that, when the research duplication effect is small (large) relative to the intertemporal knowledge spillover effect in R and D, the decentralized market delivers insufficient (excessive) obsolescence and allocates too little (much) labor to R and D, while a small subsidy (tax) to innovation is welfare-improving. All these results hold because the positive knowledge spillover externality overwhelms (is overwhelmed by) the negative research duplication externality.     

Threshold effects in panel data stochastic frontier models of dairy production in Canada

One of the most enduring problems in econometrics is how to properly account for heterogeneity among firms. Threshold regression models are intuitively appealing methods to deal with this issue. We consider a fixed-effect panel data stochastic frontier model (Schmidt and Sickles, 1984; Martin-Marcos and Suarez-Galvez, 2000) and, relying on Hansen (1999, 2000a), we propose an estimator that accommodates multiple thresholds. Our model assumes absence of any unmeasured time invariant heterogeneity across firms as in Greene (2005, p. 277). Slope and threshold parameters can be estimated using a within estimator combined with a grid search over the threshold parameters. Testing for threshold effects is problematic because threshold parameters are not identified under the null hypothesis, a case of the so-called Davies' problem. We apply the bootstrap procedure proposed by Hansen (1999, 2000a) to test for the presence of thresholds. An asymptotic confidence set for the threshold parameter can be obtained by inverting an LR test, using the distribution result presented in Hansen (1999, 2000a). Our empirical application features a panel of Quebec dairy farms. We use farm size as the threshold variable. The presence of a trend in the specification matters for the determination of the number of thresholds. Technical efficiency scores and rankings of farms estimated from competing model specifications are highly correlated and do not vary significantly across groups of farm sizes defined by the threshold parameter values.     

Conservation: From Voluntary Restraint to a Voluntary Price Premium

This paper investigates how concern for the environment translates into predictable patterns of consumer behavior. Two types of behavior are considered. First, individuals who care about environmental quality may voluntarily restrain their consumption of goods and services that generate a negative externality. Second, individuals may choose to pay a price premium for goods and services that are more environmentally benign. A theoretical model identifies a symmetry between such voluntary restraint and a voluntary price premium that mirrors the symmetry between environmental policies based on either quantities (quotas) or prices (taxes). We test predictions of the model in an empirical study of household electricity consumption with introduction of a price-premium, green-electricity program. We find evidence of voluntary restraint and its relation to a voluntary price premium. The empirical results are consistent with the theoretical model of voluntary conservation.      

THE WAGE IMPACT OF TEACHERS UNIONS: A META‐ANALYSIS

The literature examining the impact of teachers unions on education is very large and diverse. We meta‐analyze the literature on the wage impacts of teachers unions to try to draw out general findings, the importance of empirical model specification, and samples. A key finding of this study is that the average wage impact estimated by the included papers is modest, around 2%–4.5%. Our findings also suggest that the quality of an empirical strategy significantly affects the size of the estimated impact. We find that teachers union wage impacts have varied over time. The largest impacts appear to be following the rapid expansion of teacher unionism in the 1970s. Finally, we gain new insight into the goals of teachers unions by using the increased statistical power of meta‐analytic techniques to show that unions increase the wages of new teachers and not just senior teachers. (JEL J51, I21, I30)     

Financing Higher Education: A General Equilibrium Public Choice Approach*

A public choice approach is used to examine the level of a tax-financed grant chosen by a cohort, allowing for a wide range of interdependencies, including the goverment's budget constraint The existence of an externality is necessary, but not sufficient, for support of a grant It is shown that a majority voting equilibrium exists. Comparative static analyses are carried out using a minimum of assumptions about the structure of the model An increase in government expenditure for non-higher education purposes is associated with an increase in the preferred grant while an increase in private returns to education reduces the grant     

A dynamic game for fiscal federalism with non-local externalities

We address the questions of the patterns and the efficiency of public intervention in a dynamic game model between public agencies in charge of a non-local externality. We give two examples: pollution spreading between water basins (negative externality), and non-uniform contributions from the elite and from the mass to a cultural background (positive externality). We define two extreme cases, depending on whether or not the receiving end of the externality balances the transmitting end. When both balance, the reactivity of the agency structure is strong and the need for redistribution between them is weak. When they do not balance, the externality is more markedly non-local and redistribution is required to balance the fiscal burden (or product) from pigouvian instruments among all beneficiaries. We show that, with a static rule of redistribution that allows them to compute transfers between them as a function of their own strategies, the decentralized agencies' reactivity is somewhat slowed, but they still react faster and more efficiently than a static central agency.     

Climate change and the transition to a low carbon economy – Carbon targets and the carbon budget

Carbon intensive fuels generate a significant negative externality which is quite relevant for climate change mitigation policy. We propose a dynamic growth model where output is produced using two types of energy sources: fossil fuel and renewable energy. Fossil fuel discovery, extraction, and associated costs are incorporated in our model together with the dynamics of greenhouse gas emissions and consequent damages. Consistent with the empirical facts, our numerical solutions suggest that fossil fuels, especially coal, should not be exploited to depletion. Furthermore, renewable energy should be gradually phased in to meet targets consistent with the Paris 2015 agreement. We show that adopting those policies should slow down the growth rate of cumulative emissions; but the outcome is contingent upon the carbon emission targets set for advanced countries, as distinct from those assigned to developing countries.     

Joint Production,Externalities, and the Regulation of Production Networks

Real production systems are often vertically integrated in thesense that one production process uses the unwanted joint product of another production process as input.This interrelationship links in a non-obvious way the different negative externalities stemming from theproduction processes. An empirical example is the sulphuric acid industry. Our model of a vertically integratedproduction system shows how internalising one currently existing externality may create another externalitywhich has thus far not been existent. We also discuss how environmental policy could deal with this problemwhen regulating integrated production systems.     

内生城市增长理论模型与实证研究述评

城市增长是现代经济增长理论研究和实证研究的重要内容。城市增长理论可划分为内生城市增长理论和外生城市增长理论。本文重点阐述三个城市内生增长模型即外部性城市增长模型、新经济地理城市增长模型和超边际城市增长模型及其主要思想;围绕“人力资本积累”和“产业聚集”对城市增长的影响,综述相关经验研究;简单总结和评述内生城市增长模型,为进一步研究中国城市增长提供理论借鉴和经验参考。     

Is the median voter decisive? Evidence from referenda voting patterns

This paper examines whether the voter with the median income is decisive in local spending decisions. Previous tests have relied on cross-sectional data while we make use of a pair of California referenda to estimate a first difference specification. The referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50% and 67 to 55%, respectively. We find that voters rationally consider future public service decisions when deciding how to vote on voting rules. However, the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules, especially in communities that have a large share of high-income voters with attributes that suggest low demand for public services. Based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending, we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group. This two type model implies that our low demand types (individuals over age 45 with no children) have demands that are 45% lower than other voters. Collectively, these findings are consistent with high-income voters with weak preferences for public educational services voting with the poor against increases in public spending on education.