The effect of ambiguous risk, and coordination on farmers' adaptation to climate change — A framed field experiment

The risk of losses of income and productive means due to adverse weather can differ significantly among farmers sharing a productive landscape, and is of course hard to estimate, or even “guesstimate” empirically. Moreover, the costs associated with investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explore the implications of these characteristics on farmer's decisions to adapt to climate change using a framed field experiment applied to coffee farmers in Costa Rica. As expected, we find high levels of risk aversion, but even using that as a baseline, we further find that farmers behave even more cautiously when the setting is characterized by unknown or ambiguous risk (i.e. poor or non-reliable risk information). Secondly, we find that farmers, to a large extent, coordinated their decisions to secure a lower adaptation cost, and that communication among farmers strongly facilitated coordination.     

The impact of climate on life satisfaction

We analyse the influence of climate on average life satisfaction in 79 countries using data from the World Values Survey. Climate is described in terms of ‘degree-months’ calculated as the cumulated monthly deviations from a base temperature of 65 °F (18.3 °C). Our results suggest that countries with climates characterised by a large number of degree-months enjoy significantly lower levels of life satisfaction. This finding is robust to a wide variety of model specifications. Using our results to analyse a particular climate change scenario associated with the IPCC A2 emissions scenario points to major losses for African countries, but modest gains for Northern Europe.     

An international agreement with full participation to tackle the stock of greenhouse gases

Greenhouse gas emissions build up an atmospheric stock which depreciates over time. We identify weakly renegotiation-proof equilibria with full participation in a game of international emission reduction. Treaties are easier to reach for long-lived than for short-lived gases.     

On the role of social wage comparisons in gift-exchange experiments

This study extends a bilateral gift-exchange experiment by Clark et al. (2010). We investigate how the provision of either quantitative or qualitative information on the average wage paid in all worker-employer relationships impacts the wage set by employers and worker performance. We find that information on the average wage reduces (increases) both wage offers and effort levels in one-shot (repeated) relationships.     

The effects of public infrastructure on the cost structure of Spanish industries

This paper examines the impact of public infrastructures on the performance of Spanish private business at a disaggregated industry level. We use duality theory to recover the productivity effects of public capital by calculating the cost saving effects that are associated to public services. Using a translog cost function we present panel estimates for 14 Spanish industries during the period 1980–1991. Our results strongly suggest that public capital formation can be considered to be an instrument to improve competitiveness by reducing production costs. However, the results also indicate that there is a technologically induced labor saving effect through higher public investment. Furthermore, our estimates suggest that a distinction among industries is of importance because the effects of public infrastructures vary across industries considerably.     

Foreign aid and weakest-link international public goods: An experimental study

In this paper, we investigate efficiency differences between income and in-kind transfers as distribution mechanisms of foreign aid to weakest-link international public goods in a laboratory environment. We find that if there is relatively small difference in country size, then income transfers seem to provide a higher provision of the international public good, and thus higher overall welfare level than that of in-kind transfers. However, if there is a large disparity in country size, then in-kind transfers appear to provide a higher level of IPG provision and higher accompanying global welfare.     

The effect of climate change on optimal wetlands and waterfowl management in Western Canada

Warmer temperatures and a decrease in precipitation in the 21st century could severely deplete wetlands in the prairie pothole region of western Canada. In this study, we employ linear regression analysis to determine the casual effect of climate change on wetlands in this region, with temperature, precipitation and the standardized precipitation index (SPI) used to predict the effect of potential climate change on wetlands. We then use a waterfowl-wetlands bioeconomic model to solve for socially optimal levels of duck harvests and wetlands retention under current climate conditions and various climate change scenarios. The model maximizes benefits to hunters plus the amenity values of ducks to non hunters and the non-market ecosystem benefits of wetlands. Results indicate that climate change could decrease wetlands by between 7 and 47%, and that the optimal number of wetlands to retain could decrease by as much as 38% from the baseline climate.     

Priorities in the location of multiple public facilities

A collective decision problem is described by a set of agents, a profile of single-peaked preferences over the real line and a number of public facilities to be located. We consider public facilities that do not suffer from congestion and are non-excludable. We characterize the class of rules satisfying Pareto-efficiency, object-population monotonicity and sovereignty. Each rule in the class is a priority rule that selects locations according to a predetermined priority ordering among “interest groups”. We characterize the subclasses of priority rules that respectively satisfy anonymity, avoid the no-show paradox, strategy-proofness and population-monotonicity. In particular, we prove that a priority rule is strategy-proof if and only if it partitions the set of agents into a fixed hierarchy. Any such rule can also be viewed as a collection of generalized peak-selection median rules, that are linked across populations, in a way that we describe.     

Fair imposition

We introduce a new mechanism-design problem called fair imposition. In this setting a center wishes to fairly allocate tasks among a set of agents whose cost structures are known only to them, and thus will not reveal their true costs without appropriate incentives. The center, with the power to impose arbitrary tasks and payments on the agents, has the additional goal that his net payment to these agents is never positive (or, that it is tightly bounded if a loss is unavoidable). We consider two different notions of fairness that the center may wish to achieve. The central notion, which we call k-fairness, is in the spirit of max-min fairness. We present both positive results (in the form of concrete mechanisms) and negative results (in the form of impossibility theorems) concerning these criteria. We also briefly discuss an alternative, more traditional interpretation of our setting and results, in the context of auctions.     

A fair rule in minimum cost spanning tree problems

We study minimum cost spanning tree problems and define a cost sharing rule that satisfies many more properties than other rules in the literature. Furthermore, we provide an axiomatic characterization based on monotonicity properties.     

Favoritism and reverse discrimination

We analyze the inefficiency that may arise in the form of reverse discrimination in the presence of favoritism or nepotism. Favoritism is typically associated with inefficient transfers to the core support of the incumbent government. But inefficiency that is opposite in nature may also arise through the electoral process in a political environment where favoritism is pervasive. We show that if the policy maker is sufficiently office seeking, a socially efficient action may never be taken if it yields benefits to his core support due to reputational concerns. Hence, the core support of the incumbent may fare worse than other groups. We also consider the implications of policies such as anti-nepotism laws or term limits in the presence of favoritism.     

On the channel and type of aid: The case of international disaster assistance

The aim of this paper is to determine the drivers of a donor's decision on the composition of aid. We apply a dataset on international post-disaster assistance between 2000 and 2007 that includes information on the channel (bilateral vs. multilateral) and type (cash vs. in-kind) of each aid flow. Our results suggest that the choice of the channel and type of disaster assistance is mainly determined by humanitarian aspects, strategic interests and institutional quality. Moreover, we find differences in the allocation behavior between OECD and non-OECD countries.     

Price discovery and intermediation in linked emissions trading markets: A laboratory study

Many new and proposed emissions trading systems involve multiple countries and regions. The introduction of interregional trading raises questions about how flexible state- or national-level authorities should be in allowing individual firms to trade with firms or authorities in other states or countries. This paper uses laboratory methods to evaluate the efficiency and pricing performance of linking trading across regions at the firm-to-firm level. In one treatment, individual firms trade directly with firms or authorities in other regions. We compare performance in this treatment to an intergovernmental trading treatment, where emissions trading is restricted to occur only between intermediaries. A baseline treatment of autarky, where firms only trade with other firms in their country or region, provides a benchmark to assess the efficiency benefits of allowing linking. Although efficiency and price discovery are both improved by allowing intermediation in linked permit markets, we find that further gains can be realized through direct firm to firm trading. Buyers in high cost regions and sellers in low cost regions benefit the greatest from linking.     

Reliability of individual valuations of public and private goods: Choice consistency, response time, and preference refinement

We examined the reliability of a large set of paired comparison value judgments involving public goods, private goods, and sums of money. As respondents progressed through a random sequence of paired choices they were each given, their response time decreased and they became more consistent, apparently fine-tuning their responses, suggesting that respondents tend to begin a hypothetical value exercise with relatively imprecise preferences and that experience in expressing preference helps reduce that imprecision. Reliability was greater for private than for public good choices, and greater for choices between a good and a monetary amount than for choices between two goods. However, the reliability for public good choices was only slightly lower than for the private goods.     

Cooperation and framing effects in provision point mechanisms: Experimental evidence

Andreoni (1995) showed that pure framing effects may influence contribution in Voluntary Contribution Mechanisms (VCM) by comparing a standard public goods game, called the positive frame condition (giving to the public good), with a negative frame condition (taking from the public good) where the subjects' choice to purchase a private good makes the other subjects worse off. This paper aims at testing the robustness of such framing effects in the context of Provision Point Mechanisms (PPM). Our approach is original in that it combines both framing and provision point dimensions by comparing maintaining (taking from the public good) and creating (giving to the public good) contexts using Provision Point experiments. Consistent with previous findings, we find that individuals tend to be less cooperative in the maintaining frame than in the creating frame. Our results also show that the framing effects are stronger under a PPM than under a VCM and increase with the provision point level. These results may have important consequences for the management of environmental resources.     

Cooperation under the threat of expulsion in a public goods experiment

In a public goods experiment with the opportunity to vote to expel members of a group, we found that contributions rose to nearly 100% of endowments with significantly higher efficiency compared with a no-expulsion baseline. Our findings support the intuition that the threat of expulsion or ostracism is a device that helps some groups to provide public goods.     

On demand responsiveness in additive cost sharing

Under partial responsibility, the ranking of cost shares should never contradict that of demands.The Solidarity axiom says that if agent i demands more, j should not pay more if k pays less. It characterizes the quasi-proportional methods, sharing cost in proportion to `rescaled' demands.Full responsibility rules out cross-subsidization for additively separable costs. Restricting solidarity to submodular cost characterizes the fixed-flow methods, containing the Shapley-Shubik and serial methods.The quasi-proportional methods meet—but most fixed-flow methods fail—Group Monotonicity: if a group of agents increase their demands, not all of them pay less. Serial cost sharing is an exception.