Consumer support for environmental policies: An application to purchases of green cars

This paper focuses on how consumer motivation can be tapped in order to encourage the adoption of cleaner technologies. Consumers are heterogeneous — they may be guided by intrinsic motivation or extrinsic motivation. While information provision policies (such as the energy label for cars) may be effective in encouraging certain consumers to adopt green cars, financial incentive schemes (such as subsidies or fines) may be more persuasive for extrinsically-motivated consumers. We develop a dynamic theory of adoption of environmental innovations, in which information-provision policies are followed by financial incentives (first ‘carrot’, then ‘stick’ incentives). Analysis of a survey dataset of Swiss households observes considerable heterogeneity in terms of support of information-provision or financial incentive policies, in line with our conjectures. Our results will be of particular interest to policymakers interested in guiding consumers towards cleaner technologies.     

Natural resource extraction and civil conflict

Based on evidence linking natural resources to civil conflict, this paper studies two armed groups fighting to control a resource and possibly a second prize. Labor is used in the agricultural, resource extraction and conflict sectors, and the groups also buy a capital input to conflict subject to the constraint that capital spending cannot exceed resource earnings. I find that exogenous shocks can have different effects on conflict intensity depending on whether the credit constraint binds. In particular, international policies to ban natural resource exports from conflict zones (e.g. ‘blood diamonds’), raise agricultural productivity or limit the import of weapons will limit conflict intensity if the credit constraint binds. However, if the credit constraint does not bind, then the first two policies promote conflict, and so could even the third policy. The results therefore suggest some caution in international policymaking.     

Does farmer economic organization and agricultural specialization improve rural income? Evidence from China

This paper builds simultaneous equations model based on survey data of 2445 Chinese villages to do empirical analysis of the relationship among farmer economic organization, agricultural specialization and rural income. It finds that raising the level of agricultural specialization can improve rural income significantly, and the development of farmer economic organization is an effective way to raise the level of agricultural specialization; The factors, which affect whether farmers participating in farmer economic organization, are characteristics of farmers, situation of farmer economic organization and relevant policies promoting the development of farmer economic organization. Therefore, it has great significance to agricultural specialization and rural income growth for government to take measures to promote development of farmer economic organization.     

With exhaustible resources, can a developing country escape from the poverty trap?

This paper studies the optimal growth of a developing non-renewable natural resource producer. It extracts the resource, and produces a single consumption good with man-made capital. Moreover, it can sell the extracted resource abroad and use the revenues to buy an imported good, perfect substitute of the domestic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We show that the extent to which the country will escape from the poverty trap depends on the interactions between its technology and its impatience, the characteristics of the resource revenue function, the level of its initial capital stock, and the abundance of the natural resource.     

Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?

This paper estimates, using a large panel data set from rural Bangladesh, the effects of health shocks on household consumption and how access to microcredit affects households’ response to such shocks. Households appear to be fairly well insured against health shocks. Our results suggest that households sell livestock in response to health shocks and short term insurance is therefore attained at a significant long term cost. However microcredit has a significant mitigating effect. Households that have access to microcredit do not need to sell livestock in order to insure consumption. Microcredit organizations and microcredit therefore have an insurance role to play, an aspect that has not been analyzed previously.     

Irreversible abatement investment under cost uncertainties: tradable emission permits and emissions charges

A major concern with tradable emission permits is that stochastic permit prices may reduce a firm’s incentive to invest in abatement capital or technologies relative to other policies such as a fixed emissions charge. However, under efficient permit trading, the permit price uncertainty is caused by abatement cost uncertainties which affect investment under both permit and charge policies. We develop a rational expectations general equilibrium model of permit trading and irreversible abatement investment to show how cost uncertainties affect investment under permits. We compare the resulting investment incentive with that under charges. After controlling for the assumption that random shocks affect the abatement cost linearly, we find that firms’ investment incentive decreases in cost uncertainties, but more so under emissions charges than under permits. Therefore, tradable permits in fact may help maintain firms’ investment incentive under uncertainty.     

Property rights imperfections and asset allocation: Co-ownership in Bulgaria

This paper analyzes how imperfections of property rights affect households’ allocation of assets using micro-survey data from Bulgaria. Co-ownership of assets is widespread in many countries due to inheritance. Central and Eastern Europe offers an interesting natural experiment to assess the effects of this type of property rights imperfection because of the asset restitution process in the 1990s. In Bulgaria, where co-ownership is very prominent and land is strongly fragmented, the land reform and inheritance legislation allows identifying the impact of co-ownership by taking advantage of a discontinuity created by a minimum plot size law. We find that land in co-ownership is more likely to be used by less efficient farm organizations or to be left abandoned, and that it is related to significant welfare losses. The paper hence provides evidence of sub-optimal land allocation following a privatization that established formal but imperfect property rights.     

Training Novice Investors to Become More Expert: The Role of Information Accessing Strategy

Considerable research has examined how securities information, once accessed, is cognitively processed to arrive at buy, sell or hold decisions. In contrast, this paper examines whether training novice investors to simply apply the information accessing strategies used by better-performing security analysts, prior to actual cognitive processing of the information, would improve their performance. We obtain performance differences by comparing trained subjects who used the recommended strategies with untrained subjects. Notably, these differences emerged even during a significant market downturn during the simulation. Implications of the findings and directions for future research are discussed.     

Insurance,credit, and technology adoption: Field experimental evidencefrom Malawi

Does production risk suppress the demand for credit? We implemented a randomized field experiment to ask whether provision of insurance against a major source of production risk induces farmers to take out loans to adopt a new crop technology. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and groundnut seeds for planting in the November 2006 crop season. The other half of farmers were offered a similar credit package, but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take-up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0% for farmers who were offered the uninsured loan. There is suggestive evidence that reduced take-up of the insured loan was due to farmers already having implicit insurance from the limited liability clause in the loan contract: insured loan take-up was positively correlated with farmer education, income, and wealth, which may proxy for the individual's default costs. By contrast, take-up of the uninsured loan was uncorrelated with these farmer characteristics.     

The effects of insider trading on insiders effort in good and bad times

We analyze the effects of insider trading on insiders' effort decisions and on the value of firms. We consider a situation in which the final output of a firm and the productivity of managerial effort will depend on whether the firm is in a good or a bad state. When the state is not verifiable, the managerial contract cannot be made explicitly contingent on it: consequently, a contract that does not allow for insider trading would lead to the insiders' facing the same incentive scheme in good and bad times. Under a contract that allows for insider trading, however, insiders will buy shares on receiving (ahead of the market) good news and will sell shares on receiving bad news; consequently, they will end up facing different incentive scheme in good and bad times. Whether this effect is desirable depends on how the marginal productivity of managerial effort in good times compares with that in bad times. In particular, we show that allowing insider trading may improve managers' effort decisions and consequently may increase corporate value and benefit shareholders.     

An evolutionary model of recycling and product lifetime extension

This paper presents a model-based analysis of the development and diffusion of so-called ‘green’ products, i.e. those which are easily recyclable and which have a long lifetime. We address this problem by developing an evolutionary simulation model to identify the impact of the environmental R&D strategies of business firms on the economy and the environment. The simulation results show that R&D investment both in product recyclability and in product lifetime extension can be positive for the firm. Adopting such a strategy means that the firm can then market green products, which provides it with a competitive advantage on firms investing mainly in product recyclability whatever consumers' preferences. From an environmental point of view, the diffusion of green products will reduce both waste flows in the economy and pressure on virgin resources. However, diversifying R&D investment to develop both product recyclability and lifetime can mean slowing down the flow of recycled materials and may lead to even greater quantities of unrecycled waste. Our results suggest introducing regulation policies aiming at encouraging firms to invest both in product recyclability and lifetime in order to benefit from their complementarities. Furthermore, simulations show that it should be better to direct environmental policies on firms' environmental innovation strategies than on demand attributes because significant changes in these strategies would provide much more radical environmental changes.     

The desire for land: Strategic lending with adverse selection

This paper deals with a setting in which borrowers and lenders place different values on an asset that can be used as collateral. Under adverse selection, lenders may rationally choose credit contracts with the object of attracting a relatively risky group of clients, so raising their chances of gaining possession of the asset through default. Contracts of differing attractiveness to borrowers can also coexist in equilibrium. When an ‘inside’ and an ‘outside’ lender compete, the latter placing a lower value on the collateral, and their loanable funds are sufficiently limited, a separating equilibrium may exist in which the insider offers a contract which attracts risky borrowers, whereas the outsider's contract is aimed at a safer group. If loanable funds are ample, the only equilibrium will involve pooling contracts, but the insider may still offer more attractive contracts in an entry game.     

A natural experiment for identifying the impact of ‘natural’ trade barriers on exports

The paper investigates the relative importance of trade policy and ‘natural’ sources of export taxation in Malawi, a landlocked African economy. These sources of export taxation are in turn used to explore how export supply would respond to trade liberalisation as opposed to measures which lower other international trade costs. The findings indicate that trade policy barriers are now only a limited source of ‘true’ export taxation and that trade policy reform needs to be complemented with reforms to reduce international trade, including transport, costs.     

完善社会主义市场经济体制问题研究

完善社会主义市场经济体制,就是要使各类企业所使用的生产要素和它们所生产的产品,能在全国的社会主义市场上,自由流通,自由买卖,也就是企业的各种生产要素和产品在买卖或流通过程中,不受任何阻碍,企业需要的各种生产要素能够及时购买到,能很快把它们投入到生产过程中;生产出的商品,也能很快销售出去,以便把出售商品所得的货币资金,投入到再生产过程中去。完善社会主义市场经济体制,必然会加速我国国民经济的发展。     

The welfare costs of unreliable water service

Throughout the developing world, many water distribution systems are unreliable. As a result, it becomes necessary for each household to store its own water as a hedge against this uncertainty. Since arrivals of water are not synchronized across households, serious distributional inefficiencies arise. We develop a model describing the optimal intertemporal depletion of each household's private water storage if it is uncertain when water will next arrive to replenish supplies. The model is calibrated using survey data from Mexico City, a city where many households store water in sealed rooftop tanks known as tinacos. The calibrated model is used to evaluate the potential welfare gains that would occur if alternative modes of water provision were implemented. We estimate that most of the potential distributional inefficiencies can be eliminated simply by making the frequency of deliveries the same across households which now face haphazard deliveries. This would require neither costly investments in infrastructure nor price increases.     

Learning or lock-in: Optimal technology policies to support mitigation

We investigate conditions that amplify market failures in energy innovations, and suggest optimal policy instruments to address them. Using an intertemporal general equilibrium model we show that ‘small’ market imperfections may trigger a several decades lasting dominance of an incumbent energy technology over a dynamically more efficient competitor, given that the technologies are very good substitutes. Such a ‘lock-in’ into an inferior technology causes significantly higher welfare losses than market failure alone, notably under ambitious mitigation targets. More than other innovative industries, energy markets are prone to these lock-ins because electricity from different technologies is an almost perfect substitute. To guide government intervention, we compare welfare-maximizing technology policies including subsidies, quotas, and taxes with regard to their efficiency, effectivity, and robustness. Technology quotas and feed-in-tariffs turn out to be only insignificantly less efficient than first-best subsidies and seem to be more robust against small perturbations.     

A monopolistic market for information

We analyze a model where traders buy information from a monopolistic seller, which is subsequently used in a speculative market. In order to overcome the dilution in the value of information due to its leakage through informative prices, the seller of information may prefer to sell noisier versions of the information he actually has. Moreover, to obtain higher profits, it is desirable for the seller to sell different signals to different traders, so that the added noise realizations do not affect equilibrium prices. One way of doing so, which does not require discrimination, is to sell identically distributed personalized signals to each of a large number of traders.     

Household coping in war- and peacetime: Cattle sales in Rwanda, 1991–2001

The economic literature has given due attention to household coping strategies in peacetime. In contrast, little is known about such strategies in wartime. This paper studies the use of cattle as a buffer stock by Rwandan households during 1991–2001, a period characterized by civil war and genocide. It is found that the probability of selling cattle increases upon the occurrence of both peacetime and wartime covariant adverse income shocks. The peacetime cattle sales are largely explained by shifts in the household asset portfolio. In contrast, in 1994, the year of the genocide, almost half of the cattle sales were motivated by the need to buy food. However, we argue that the effectiveness of this coping strategy was severely reduced due to the wartime conditions. First, during the year of ethnic violence, cattle prices plummeted to less than half of their pre-genocide value. Second, we find that households most targeted in the violence did not sell cattle. We discuss several explanations for this latter finding.     

"What Goes Up Must Come Down"-How Charts Influence Decisions to Buy and Sell Stocks

Five experiments examine how charts depicting past stock prices influence investing decisions. We expected investors to use extreme past prices depicted in charts as comparison standards to which expectations about future prices are assimilated. Investors should thus expect stocks depicted in a chart with a salient high to perform better than stocks depicted in a chart with a salient low. And as a consequence, investors should be more likely to buy and less likely to sell stocks depicted in a chart with a salient high than a low. Results of five experiments support this reasoning. Whether investors are private or professional and whether background information about the stock was limited or abundant, expectations about future prices assimilated to extreme past prices. Consequently, investors buy more and sell less when the critical chart is characterized by a salient high than a low. The implications of these findings for the core role comparison processes play in investing decisions are discussed.     

Herding by foreign investors and emerging market equity returns: Evidence from Korea

This paper studies the effect of herding by foreign investors on stock returns in the Korean market. We conduct both pre and post-liberalization analyses and utilize a three-stage least squares analysis in order to control for the simultaneous relationship. We find evidence of a significant impact of foreign investor herding on stock returns in addition to intra-year positive feedback trading by foreign investors. However, changes in domestic institutional ownership do not have any significant effect on stock returns. In addition, foreign investors tend to buy/sell shares that domestic institutions sell/buy in the herding year.