Climate change damage and the trace gas index issue

Efficient policies to control trace gas emissions require estimation of an appropriate exchange rate among these gases; i.e. the relative value of reducing emissions of each gas. A dynamic stock pollutant model is developed that considers damages associated with both non-climatic and climatic effects of the gases, differing atmospheric lifetimes of the gases, the discount rate, and non-linear damages. The index value and shadow value of control are estimated for carbon dioxide, carbon monoxide, methane, nitrous oxide and the 4 major chlorofluorocarbons (CFCs). The value of control for short-lived relative to long-lives gases is lower for low discount rates and quadratic compared with linear damages. The relative value of control for all gases falls relative to carbon dioxide if one considers the direct beneficial effects of carbon dioxide on agriculture. The general approach developed in the paper may have application for other environmental problems where multiple substances pose individual risks but also jointly contribute to a single risk.The views expressed in this document are solely those of the authors and do not reflect the views of the U.S. Department of Agriculture or the United States government.We would like to acknowledge the helpful comments and suggestions of Bruce Larson, Dick Brazee, and Jae Edmonds while taking full responsibility for any remaining errors.     

Empirical and public choice evidence for hyperbolic social discount rates and the implications for intergenerational discounting

The derivation of the correct discount rate for intergenerational projects in Cost Benefit Analysis is particularly contentious. Public choice has resulted in lower discretionary exponential discount rates for many intergenerational projects in Britain and the USA. This is shown to be strong indirect evidence that the true social discount rate may be a hyperbolic (rather than an exponential) function. There is also empirical evidence for this hypothesis. The hyperbolic nature of discounting is also a standard finding in the behavioural sciences. For intergenerational time frames hyperbolic discount rates should be employed together with exponential discount rates in cost-benefit sensitivity analyses.Sincere thanks to Maureen Cropper and Paul Portney for supplying their survey results and to Elaine Barrow and Phillip Judge for graphics assistance. Two anonymous referees also provided valuable comments.     

Climate reversals and the transition to agriculture

The transition to agriculture is generally acknowledged to be the economic foundation for population growth over the last 10,000 years and for modern civilization itself. Dates for pristine transitions to agriculture have become a key input into empirical work on economic growth over the very long run. We propose a model of the transition in which population and technology respond endogenously to climate. The available data on the southwest Asian case, other cases of pristine transition, and cases of non-transition are consistent with our model, but often inconsistent with rival explanations. In addition, our theory of the origins of agriculture has implications for instrumental variable strategies that can be used in empirical research on long run economic growth and development.      

Liquidity risk and bank portfolio management in a financial system without deposit insurance: Empirical evidence from prewar Japan

Using data from prewar Japan, this paper investigates the impact of a liquidity shock induced by depositors' behavior on bank portfolio management during financial crises in a system lacking deposit insurance. It is found that banks reacted to the liquidity shock sensitively through an increase in their cash holdings not by liquidating bank loans but by selling securities in the financial market. Moreover, banks exposed to local financial contagion adjusted the liquidity of their portfolio mainly by actively selling and buying their securities in the financial market. Finally, there is no evidence to conclude that the existence of the lender of last resort mitigated the liquidity constraints in bank portfolio adjustments.     

Functions of innovation systems as a framework to understand sustainable technological change: Empirical evidence for earlier claims

Understanding the emergence of innovation systems is recently put central in research analysing the process of technological change. Especially the key activities that are important for the build up of an innovation system receive much attention. These are labelled ‘functions of innovation systems’. This paper builds on five empirical studies, related to renewable energy technologies, to test whether the functions of innovation systems framework is a valid framework to analyse processes of technological change. We test the claim that a specific set of functions is suitable. We also test the claim made in previous publications that the interactions between system functions accelerate innovation system emergence and growth. Both claims are confirmed.     

The newer antipsychotics: evidence for cost-effectiveness and policy implications

SUMMARY

The current reluctance in some health authorities to provide full funding for the use of the new generation of antipsychotics is not in the best interests of patients or the National Health Service. Schizophrenia is a complex and costly disease, which relies too much on hospital care because of funding shortages elsewhere.

New research attitudes are required to assist health policy decisions. Economic evaluations using evidence solely from randomised controlled trials (RCTs) are insufficient and give a partial and potentially misleading picture. The complexity of the illness and its outcomes in schizophrenia as well as the social influences on hospital admission and discharge exaggerate methodological difficulties arising from the nature of RCTs. The long-term, relapsing nature of the disease in many patients means that long-term evidence must be considered from non-randomised observational studies.

This paper discusses recent reviews and major publications in order to examine the economic arguments for newer atypicals as a class. The economic data published to date consistently suggest that these newer agents should not increase the direct costs of treating schizophrenia and may in fact reduce them. As there are undoubted patient benefits, not least a reduction in side effects, especially extrapyramidal symptoms (EPS) with the potential to improve compliance and reduce relapse, the range of atypicals might be made available and the clinician allowed to make a choice based on clinical not economic grounds.

The funding of these newer agents, although they are ultimately of benefit to patients and to the NHS, stretches already sparse resources. The likely freeing up of beds previously blocked by patients on older 'conventional' treatments will allow them to be used by those patients who currently escape the net. This will further increase funding requirements as more patients present for treatment. There are ethical, clinical and political grounds for increasing funding for the treatment of schizophrenia to take advantage of the biggest revolution in antipsychotic therapy since the launch of the first neuroleptics.     

Health insurance and the demand for medical care: evidence from a randomized experiment.

We estimate how cost sharing, the portion of the bill the patient pays, affects the demand for medical services. The data come from a randomized experiment. A catastrophic insurance plan reduces expenditures 31 percent relative to zero out-of-pocket price. The price elasticity is approximately -0.2. We reject the hypothesis that less favorable coverage of outpatient services increases total expenditure (for example, by deterring preventive care or inducing hospitalization).     

Austrian business cycle theory: Empirical evidence

The Austrian approach to business cycles has been seldom examined in econometric terms. This paper first reviews the essentials of that approach and the recent application of the Austrian business cycle theory in the economics literature. Quarterly data for Germany, USA, England and France, 1980:1 through 2006:1, are used to explore business cycle facts and relations between terms structure of interest rates, relative prices, composition of aggregate expenditure and real GDP. Results are consistent with the hypothesis of the Austrian business cycle theory that monetary policy shocks explain cycles. The changes in term structure of interest rates and composition of aggregate expenditure are large enough to explain changes in aggregate economic activity.

Empirical evidence for trends in capital markets

The random walk hypothesis of price formation in capital markets is tested against a price-trend hypothesis, using a new test statistic. Empirical results prove that commodity and currency prices are not random but exhibit price-trend behaviour.     

Weintraub's consumption coefficient: some economic implications and evidence for the UK

Weintraub's consumption coefficient, the ratio of total consumerexpenditure to income from employment, helps to elucidate trendsin the sectoral and functional distributions of income. It simplifiesand adds precision to Kaleckian macroeconomics by showing howdistributions of income affect the level of economic activity.Empirical estimates of the coefficient are presented for theUK from 1972 to 1995. From 1975 onwards, the coefficient hasindicated a marked redistribution of income in favour of capitalist(non-employment) income, accompanied by a significant rise inthe average propensity to consume from capitalist (non-employmentincome). Wealth effects induced by the housing boom of the 1980shave enabled capitalists' income and consumption to continueto increase after 1989 despite a fall in investment.     

The monetary transmission mechanism: evidence and implications for European Monetary Union

We provide some evidence consistent with a heterogeneous credit channel of monetary policy transmission in the European Union. Using the techniques of cointegration and Error Correction Models, we have shown that the external finance premium is one important leading indicator of real economic activity in Germany and Italy. No evidence is found for France and the UK. Therefore, a common monetary policy implemented by the European Central Bank might be transmitted in different ways across the member countries of the monetary union, thus exacerbating existing regional disparities among the member countries.     

The implications of job matching for retirement health insurance and leave benefits

This paper focuses on potential reasons for variations in benefit packages, in particular variations in the availability of retirement health insurance and leave. An important feature of our analysis is that we do not start with heterogeneity in workforces to explain fringe benefit differences across employers. It would be straightforward to say that differences across employers in fringe benefit packages simply represent differences in the preferences of their workforces. Rather, we focus on heterogeneity across employers as an important source of differences in fringe benefit packages. Preliminary evidence is found supportive of the predicted differences in the likelihood of such fringe benefits as retirement health insurance and leave based upon two variables–the extent of on-the-job training offered by the employer and the size of the employers. We also examine the implied links between these fringe benefits and such variables as average tenture and the proportion of the workforce that is female.     

Peak globalization: Climate change, oil depletion and global trade

The global trade in goods depends upon reliable, inexpensive transportation of freight along complex and long-distance supply chains. Global warming and peak oil undermine globalization by their effects on both transportation costs and the reliable movement of freight. Countering the current geographic pattern of comparative advantage with higher transportation costs, climate change and peak oil will thus result in peak globalization, after which the volume of exports will decline as measured by ton-miles of freight. Policies designed to mitigate climate change and peak oil are very unlikely to change this result due to their late implementation, contradictory effects and insufficient magnitude. The implication is that supply chains will become shorter for most products and that production of goods will be located closer to where they are consumed.     

Bank acquisitions of investment dealers: Canadian evidence and implications for Glass-Steagall reform

This paper analyzes the 1987 change in Canadian legislation permitting commercial banks to engage in investment banking, and makes comparisons to the US, where similar regulatory change is under way. The study focuses on the impact of such regulatory change on issue costs for corporations raising seasoned common equity. The findings indicate that although regulatory reform per se has had no effect on issue costs, costs for issues handled by a bank-owned underwriter are lower than those handled by an independent underwriter. The lower cost may be indicative of the availability of economies of scope between underwriting and commercial banking. First Version Received: Nov. 1998 / Final Version Received: March 2000     

Physician participation in health insurance plans: evidence on Blue Shield

Various health insurance programs, including Blue Shield, have developed arrangements whereby the physician agrees to accept the insurer's reimbursement as payment in full. Incentives facing the physician to accept an arrangement of this type are reviewed in this study. The empirical work uses data on individual physicians from a 1973 survey. The results indicate that physician willingness to accept insurer reimbursement as payment in full is sensitive to the amount the insurer pays for specific procedures and to other insurance program characteristics. Physicians located in high patient income areas and/or with relatively prestigious credentials are less likely to accept insurer payments as payment in full. The empirical findings are used to generate policy implications pertaining to the Medicare and Medicaid programs, to medical care quality-access tradeoffs, and to national health insurance.     

Leaders in change : Solar energy owners and the implications for future adoption rates

Information on the characteristics of the initial wave of homeowners who installed solar energy systems is presented and then used to anticipate future solar market penetration patterns. Surveys of these adopters reveal high education and income levels; professional and executive occupations; economic, energy saving, and environmental concern as the principal purchase motivations; and high satisfaction levels. As a group, these individuals conform to the “early adopter” type identified in innovation diffusion research rather than the “innovator” type that would be expected at this early stage of commercialization. This characteristic, the influence of economic motivations, owners' high satisfaction levels, and the findings of other surveys indicate that widespread solar system adoption is probable if the initial high cost barrier can be reduced.     

Structural change,specialization and regional labour market performance: evidence for the UK

While structural change and regional differences in the pattern of employment specialization are widely perceived to be significant factors in accounting for disparities in the labour market performance of regions in the United Kingdom, there have been relatively few recent attempts to gather detailed evidence on this issue. The current study aims to fill this gap by examining the effects of structural change and associated changes in the pattern of employment specialization on three key indicators of regional labour market performance: the rate of employment growth, the unemployment rate and the rate of nonemployment. The findings indicate that while industry structure has statistically significant effects on regional labour market performance, the quantitative significance of these effects is relatively small.     

The effects of education in early-stage agriculture: some evidence from China

The stochastic production frontier approach is used to study the effects of education on agricultural efficiency for a cross-section of 'early-stage' farms from Guanghan County, Sichuan Province, China. Education for farm families in rural China is multifaceted with a combination of formal education, intragenerational transfer of knowledge within the home, and agricultural extension services. Since our survey data span two different years with markedly different policy environments, we are able to examine not only which aspects of education affect agricultural efficiency, but also whether or not the policy environment matters. We find limited evidence that in a policy environment that is conducive to agriculture, formal education provides positive returns in agriculture. Furthermore, general education may provide greater returns than the more targeted extension services.     

Analyses of technical efficiency using SDF and DEA models: evidence from Nepalese agriculture

Alleviation of poverty is a central issue in Nepal. Given the limited stock of land and the infant/unorganized manufacturing sector, increased demand for food has to be satisfied by improving production efficiency. This article examines how this could be achieved. Stochastic distance function and data envelopment analysis models identify the existence of a high degree of technical inefficiency in Nepalese agriculture, suggesting that there is a substantial prospect of increasing agricultural productivity using the existing level of inputs and resources more efficiently. Among the three farm sizes in the data set, medium size farmers achieve a higher technical efficiency than large and small farm sizes, suggesting that productive efficiency can be increased with the encouragement of creating medium size holdings. The observed decreasing returns to scale also implies that productivity gains could be achieved by breaking up of large farms into small family farms. The technical inefficiency model suggests the potential for shifting the production frontier upwards by providing ownership of land, increasing farmers’ education and knowledge, and increasing land quality, including irrigation facilities.     

Deposit insurance and depositor discipline: direct evidence on bank switching behaviour in Japan

As Japan's financial system becomes more market oriented, depositor discipline is playing a larger role in the monitoring of banks. Matching household survey data with banks’ financial data, we examine households’ response to bank risk and different deposit insurance schemes. We find that bank switching in response to risk increased between 1996 and 2001 and households’ choice of bank adequately reflects banks’ financial health. We also examine the determinants of households’ knowledge of the deposit insurance scheme and how this affects switching behaviour. The results suggest that depositor discipline works and could play an important supplementary role in bank monitoring.