Flows of Air Pollution,Ill Health and Welfare

We provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures. We demonstrate the usefulness of our framework in practice by applying it to data from Swedish valuation studies designed according to the accounting principles suggested here. We estimate that the negative health effects of nitrogen dioxide emissions amount to 0.6% of GDP in Sweden. We also show that a corrective Pigouvian tax should internalize the direct disutility, reduced labor productivity, and increased healthcare expenditures caused by pollution. According to our calculations, harmful health impacts alone (excluding ecosystem effects) justify 65% of the current Swedish tax on nitrogen dioxide.      

Non-farm Income and Consumption Expenditures in Rural Bangladesh: Empirical Evidence from Multilevel Regression Modelling

This study examines the effects of non-farm income on household consumption expenditures in rural Bangladesh. A two-stage endogenous treatment effect model is built on data from a nationally representative Household Income Expenditure Survey (HIES) 2010 to control selection bias. The HIES follows a hierarchical data structure because the survey is based on two-stage stratified sampling. A multilevel mixed-effects linear regression model is used to capture the unobserved heterogeneity between clusters (PSUs) along with revealing important factors. Results reveal that non-farm income has a significant positive effect on household’s consumption expenditures and non-farm income recipient households spend about 29% more than their counterparts. In addition, higher level of per capita income, education, smaller family size and lower dependency ratio are found to be more effective in increasing consumption expenditures of rural households. Significant cluster-level variations are observed in the analyses. This study recommends that non-farm income generating activities should be encouraged among rural households as this would raise their consumption expenditures and hence, improve welfare and living standards among them.

     

“ENVIRONMENT”, “NEEDS” AND REAL INCOME COMPARISONS(1)

Conventional measures of national product make no pretence of including everything that affects welfare. As increasing attention is being paid to environmental pollution, the problem of incorporating certain non-economic variables into the analysis of well-being becomes more relevant. The object of this note is to show how a difference in “needs” for, and hence expenditures on, anti-pollutants, which will show up in conventional national accounts comparisons as differences in “tastes”, should be converted into differences in real income.     

The Inefficiency of Private Adaptation to Pollution in the Presence of Endogenous Market Structure

The paper considers an industry where production costs rise due to pollution, but where this effect can be partially off-set by investing in adaptation as a private good. The focus is not on external effects, but industries where economies of scale are introduced from adapting to pollution. The structure of the resulting oligopolistic market is endogenous, since the level of adaptation is chosen by the firms. The analysis of externalities usually disregards defensive or adaptation measures, with a few exceptions that point to considerable complications. The present debate on adaptation to climate change shows the importance of understanding defensive measures. I show that the market failure caused by economies of scale leads to production costs above the social optimum, i.e. to under-adapation. When pollution increases, adaptation only increases if demand is price inelastic. Otherwise, welfare loss from market failure decreases with pollution. The total welfare loss is only convex if demand is price inelastic and the influence of pollution on production costs is stronger than the influence of adaptation. Concave welfare loss has crucial implications for abatement policies.     

FISCAL POLICY IN AN ENDOGENOUS GROWTH MODEL WITH PUBLIC CAPITAL AND POLLUTION

This paper studies the growth and welfare effects of fiscal policy in an endogenous growth model with public capital and environmental pollution. I assume that pollution is due to aggregate production, and that it does not have a direct effect on production but only reduces household utility. I study the growth effects of fiscal policy for the model on the balanced growth path, taking transition dynamics into account. I then analyse the welfare effects of fiscal policy along the balanced growth path. Finally, I show how the fiscal parameters must be set so that the competitive economy replicates the social optimum.     

Adaptation and Mitigation in Global Pollution Problems: Economic Impacts of Productivity, Sensitivity, and Adaptive Capacity

This paper studies the influence of productivity, pollution sensitivity, and adaptive capacity on optimal mitigation and adaptation in a two-country global pollution model. We investigate the effects of changes of these parameters on the allocation of emissions, adaptation expenditures, and welfare. In our analysis we distinguish between cooperative and non-cooperative behavior. Our findings imply that unilateral improvements in productivity and adaptive capacity have strategic significance and do not necessarily lead to mutual welfare improvements. They raise the emissions not only in the country where the technological improvement takes place, but also globally. An improvement in global welfare is guaranteed only under cooperative behavior with respect to emission and adaptation choices.     

ALTERNATIVE FUELS FOR POLLUTION CONTROL: AN EMPIRICAL EVALUATION OF BENEFITS AND COSTS

In July 1989, the Bush administration proposed a new, dramatic approach to constructing clean air legislation. In particular, the Bush proposal calls for using alternative fuels as an important component to reducing urban ozone and carbon monoxide. This paper summarizes the Bush proposal, looks briefly at other options to reduce urban air pollution, and empirically evaluates the cost effectiveness of alternative fuels as an air pollution control strategy. The paper finds that the cost per ton of emissions reduced–the measure of cost effectiveness–varies dramatically as the price of gasoline vis a vis the price of the alternative fuel changes. For this reason, the authors believe that new clean air legislation should allow for great flexibility so as to allow states to incorporate alternative fuels when they are cost effective. If oil prices turn out to be lower than expected, then forcing urban centers to adopt relatively more expensive alternative fuels would impose high costs.     

Lottery expenditures in Canada: a regional analysis of determinants and incidence

This article examines two issues; first, it evaluates the statistical significance of a number of socio-economic and demographic variables on the level of household lottery expenditures in the six regions of Canada. While some household characteristics vary in the extent to which they significantly affect the level of lottery expenditures across regions (wealth, age, occupation, mother tongue and urban location, for example), others are significant in every region. Regional consistency exists in the statistical significance of after tax household income, sex and education of the head of household – lottery expenditures increase as incomes increase; lottery expenditures are significantly lower for female heads of households than for their male counterparts; lottery expenditures decline as the education level of the head of household increases. Second, lottery expenditures are found to be regressive, although the degree of regressivity is less than for lotteries in the United States.     

Exploring Alternative Measures of Welfare in the Absence of Expenditure Data

We consider an asset-based alternative to the standard use of expenditures in defining well-being and poverty. Our motivation is to see if there exist simpler and less demanding ways to collect data to measure economic welfare and rank households. This is particularly important in poor regions where there is limited capacity to collect consumption, expenditure and price data. We evaluate an index derived from a factor analysis on household assets using multipurpose surveys from several countries. We find that the asset index is a valid predictor of a crucial manifestation of poverty—child health and nutrition. Indicators of relative measurement error show that the asset index is measured as a proxy for long-term wealth with less error than expenditures. Analysts may thus prefer to use the asset index as an explanatory variable or as a means of mapping economic welfare to other living standards and capabilities such as health and nutrition.     

THE DISTRIBUTIONAL CONSEQUENCES OF GOVERNMENT SPENDING AND TAXATION IN THE U.S., 1989 AND 2000

We assess the effects of government expenditures and taxation on household economic well-being in the United States in 1989 and 2000. Net government expenditure is estimated as the difference between government expenditures incurred on behalf of the household sector—transfers and public consumption—and the taxes paid by that sector. We incorporate the estimates of net government expenditures into a wealth-adjusted measure of income. We find that overall inequality in our income measure is considerably reduced by net government expenditures. Results from decomposition analysis show that the inequality-reducing effect of net government expenditures owed more to expenditures than to taxes.     

Environmental capital flight and pollution tax

This paper analyzes the impacts of a production pollution tax on environmental capital flight and national product in a two-country static general equilibrium model with two-way foreign investment. It is assumed that the capital input in both countries is a composite good of domestic and imported capital. And pollution is assumed to originate in the production process. The productivity of capital in each country is negatively (or positively) related to the worldwide aggregate emissions.The analysis shows that when a domestic pollution tax is levied, domestic capital outflows increase and foreign capital inflows decrease for sufficiently high elasticities of substitution between labor (immobile input) and capital (mobile input) in both countries. Moreover, with negative transnational externalities, increases of a domestic pollution tax reduce domestic production and increase foreign production. The difficulty of substitution between immobile and mobile inputs hinders the optimal allocation of worldwide capital and national product. In this paper, the optimal pollution tax is based on global welfare maximization, not on global income maximization, taking into consideration the impact of income change on individual welfare. Therefore, an optimal pollution tax in the developing country should be lower for a given rate of pollution.     

The income–pollution relationship and the role of income distribution: An analysis of Swedish household data

The main purpose of this study is to analyze the relationship between pollution and income at household level. The study is motivated by the recent literature emphasizing the importance of income distribution for the aggregate relation between pollution and income. The main findings from previous studies are that if the individual pollution–income relationship is non-linear, then aggregate pollution for, say, a whole country, will depend not only on average income, but also on how income is distributed. To achieve our objective we formulate a model for determining the choice of consumption of goods in different types of household. Furthermore we link the demand model to emission functions for various goods. The theoretical analysis shows that without imposing very restrictive assumptions on preferences and the emission functions, it is not possible to determine a priori the slope or the curvature of the pollution–income relation. The empirical analysis shows that, given the model used, the pollution–income relation has a positive slope in Sweden and is strictly concave for all three pollutants under study (CO₂, SO₂, NO_x), at least in the neighbourhood of the observed income for an average household. We also show that altering the prevailing income distribution, holding average income constant, will affect aggregate emissions in the sense that an equalization of incomes will give rise to an increase in emissions. One implication is then that the development of aggregate pollution due to growth depends not only on the income level, but also on how growth is distributed.     

Trade Liberalization and Environmental Regulation on International Transportation

Incorporating pollution emissions from international transportation into a model of strategic trade and environmental policies, we investigate the effect of trade liberalization and environmental regulation on national welfare and the environment. Our model includes imperfectly competitive markets for international transportation and final products. We find that trade liberalization may reduce each country's welfare unless some level of environmental regulation on international transportation is in place. When international trade is liberalized initially, a mutual increase in the common emission tax rates may improve each country's welfare. However, when international trade is highly protected initially, imposing an emission tax may reduce welfare.     

The Triple Inefficiency of Uncoordinated Environmental Policies

When pollution is transboundary and there is international trade, a domestic inefficiency may arise in addition to the well‐known inefficiencies at the international level. More precisely, there will be a Nash equilibrium in which each country chooses a policy that gives it lower welfare than would otherwise be possible given the emission levels of all countries. However, there will also be a Nash equilibrium in which each country chooses tradable emission quotas as its policy instrument to achieve its desired level of emissions. In this Nash equilibrium, welfare in each country is maximised given the emission levels of all countries.     

辽河流域社会经济活动的环境污染压力研究——以氮污染为研究对象

水体中氮含量过高会造成水体富营养化,使水质恶化,破坏水体生态平衡。氮污染已引起人们的普遍关注,国家已将氨氮和氮氧化物列为"十二五"期间环境治理的重要污染指标。辽河流域大部分河段氨氮仍超过V类水质标准,支流水体污染依然十分严重。文章以辽河流域氮污染为研究对象,从农田化肥流失、畜禽养殖、工业生产、居民生活和城市径流五个方面估算了流域氮排放情况。结果表明:辽河流域2010年总氮排放量约13.6万吨,氨氮排放量约6.78万吨,居民生活和畜禽养殖排放合计分别占总氮和氨氮排放量的87%和90%,是流域氮污染的主要贡献方面;工业生产虽产生大量含氮废水,但工业废水和污染物的排放率较低,对环境污染的贡献有限,并不是流域氮污染的主要贡献者;短期内流域氮排放的削减幅度有限,未来一段时期内辽河流域氮污染的压力依然突出;对污染排放环节的技术改造和方式创新是削减流域氮污染高效可行的措施。     

CREDIT CRUNCH AND HOUSEHOLD WELFARE,THE CASE OF THE KOREAN FINANCIAL CRISIS*

We examine how the credit crunch in Korea in the late 1990s affected household behaviour and welfare. Using 1996–1998 household panel data, we estimate a consumption Euler equation, augmented by endogenous credit constraints. Korean households coped with the negative shocks of the 1997 credit crunch by reducing consumption of luxury items while maintaining food, education and health related expenditures. Our results show that, in 1997–1998, during the crisis, the probability of facing credit constraints and the resulting expected welfare loss from the binding constraints increased significantly, suggesting the gravity of the credit crunch at the household level.     

Correcting NDP for SO2 and NOx Emissions: Implementation of a Theoretical Model in Practice

The theoretical and the practical studies in the field of environmental accounting are often two separate lines of work. In this study, we develop an optimal control theory model for adjusting NDP for the effects of SO₂ and NO_x emissions, and subsequently insert empirically estimated values. The model includes correction entries for the effects on welfare, real capital, health and the quality and quantity of renewable natural resources. In the empirical valuation study, production losses were estimated with dose-response functions. Recreational and other welfare values were estimated by the contingent valuation (CV) method. Effects on capital depreciation are also included. For comparison, abatement costs and environmental protection expenditures for reducing sulfur and nitrogen emissions were estimated. The theoretical model was then utilized to calculate the adjustment to NDP in a consistent manner. The estimated damage value of sulfur is close to the Swedish sulfur tax.     

Measuring environmental quality: an index of pollution

This paper develops an index of pollution based on the epidemiological dose-response function associated with each pollutant, and the welfare losses due to exposure to pollution. The probability of damage is translated into welfare losses, which provides the common metric required for aggregation. Isopollution surfaces may then be used to compare environmental quality over time and space. An Air Pollution Index (API) is computed using 1997 data for the criteria pollutants under the Clean Air Act (CAA). The results are compared with the EPA's Pollutant Standards Index (PSI). Two significant differences emerge: unlike the PSI, the API facilitates a detailed ranking of regions by air quality and API values may contradict PSI results. Some regions with PSI values of 100–200 are considered less polluted under the proposed methodology than those with PSI values between 50 and 100. The key reason for the difference is that PSI values are determined entirely by the gas with the highest relative concentration whereas the API value is based on the ambient concentrations of all pollutants.     

Assessment of the theory of comprehensive national accounting with data for Portugal

We present time-series tests of the quality of genuine savings and green net national income for predicting welfare changes. These tests check the validity of the theory of comprehensive national accounting, and more broadly of the theory of economic growth. The value of technological progress is included, as well as the effects of business cycles. We use estimates for Portugal as inputs. Overall, our results indicate that both genuine savings and changes in green net national income have the same sign as changes in welfare, but reject the hypothesis that the estimated comprehensive national accounting measures coincide with the theoretical expressions. The results also suggest that comprehensive accounting indicators perform better than conventional national accounting indicators, implying that, in general, the corrections proposed by the comprehensive accounting theory add explanatory power to conventional measures. The exception is the inclusion of education expenditures and technological progress, which decrease explanatory power. Excluding business cycles from green net national income increases the agreement with the theory. Comparing both indicators, in general, genuine savings presents better results.     

Rethinking the optimal level of environmental quality: justifications for strict environmental policy

Traditional environmental theory suggests that the optimal level of a pollution emission occurs when the marginal damage created by the emissions is equal to the marginal cost of reducing the emissions. We argue that the benefits from reducing pollution should be much more broadly defined to include at least three other sources of benefits. First, we develop a game-theoretic model in which firms may under-invest in cost-saving ‘green technologies’. Second, we demonstrate that consideration of future damages and abatement costs leads to a lower current optimal pollution level than that obtained in traditional models. Finally, we show that ecological complexity creates indirect pathways by which greater pollution increases the likelihood of generating irreversible environmental damage. This broader definition of the benefits of pollution abatement yields an optimal level of pollution that may actually be less than the level at which conventionally-measured marginal damages are equal to marginal abatement costs. Thus, environmental policy should be stricter.