Valuing improved hurricane forecasts

The value to households of improved hurricane forecasts is estimated from a pilot survey using discrete choice econometric methods. Each household is willing to pay approximately $13 for improvements in forecast attributes such as landfall time and position, wind speed, and storm surge.     

Recycling and Waste Diversion Effectiveness: Evidence from Canada

In this paper, we investigate the relationship between recycling policy options and recycling behavior to study the most effective methods of diverting post-consumer waste from landfills. We employ data from a unique, micro-data set collected from households in communities across Ontario, Canada. We estimate the relationships between several commonly recycled materials (newsprint, glass, plastics, aluminum cans, tin cans, cardboard, and toxic chemicals) and individual household characteristics, recycling program attributes, and garbage collection financing methods. We find that user fees on garbage collection have significant impacts on recycling levels for all materials except toxic chemicals, and mandatory recycling programs on particular items have significant effects on recycling for almost all materials. Limits on the amount of garbage that can be placed at the curb, and providing free units under user fee systems, however, generally have a negligible or detrimental impact on recycling.JEL classification: D10, H23, Q28     

Demand for Piped and Non-piped Water Supply Services: Evidence from Southwest Sri Lanka

In many countries water supply is a service that is seriously underpriced, especially for residential consumers. This has led to a call for setting cost recovery policies to ensure that the tariffs charged for water supply cover the full cost of service provision. Identification of factors driving piped and non-piped water demand is a necessary prerequisite for predicting how consumers will react to such price increases. Using cross-sectional data of 1,800 households from Southwest Sri Lanka, we estimate water demand functions for piped and non-piped households using appropriate econometric techniques. The (marginal) price elasticity is estimated at  − 0.15 for households exclusively relying on piped water, and at  − 0.37 for households using piped water but supplementing their supply with other water sources. The time cost elasticity for households relying on non-piped water only is estimated at  − 0.06 on average, but varying across sources. For both piped and non-piped households, we find evidence of substitutability between water from different sources. We discuss the implications of these results in terms of pricing policy.     

ANNUITIZED ASSET ADEQUACY IN JAPAN: THE DEMAND FOR INDIVIDUAL PENSIONS

In this paper, I analyze the impact of social security wealth, retirement payments, and living expenses during retirement on people's retirement savings in general, and on their individual pension holdings in particular, using micro data from a 1996 Japanese household survey. I confirm a replacement effect of social security on saving for all types of households and on individual pensions for self‐employed households only. This suggests that the social security assets of self‐employed households are less than their optimal level of annuitized assets and that they would increase their demand for individual pensions if social security benefits were to be reduced.     

Optimal Environmental Policy Differentials in Open Economies under Emissions Constraints

Is there a case for preferential treatment of the exposed sector in an economy when compliance to an aggregate emissions constraint induced by an international environmental agreement is mandatory? This question is being debated in many countries in the context of the implementation of the Kyoto Protocol. We address the issue in a general equilibrium framework and theoretically cover several market structures, including perfect competition, the large country case and oligopoly. We identify the conditions under which preferential treatment of the exposed sector is not warranted from the point of view of maximizing social welfare. In addition, we demonstrate that in the case of oligopoly, instituting a more stringent environmental policy on the exposed sector might be profit-enhancing for this sector. This finding lends theoretical support to a specific interpretation of the Porter hypothesis.     

Economic costs and impacts of climate-induced sea-level rise and storm surge in Canadian coastal provinces: a CGE approach

We estimated the economic costs and impacts of future sea-level rise (SLR) and storm surge due to climate change in Canada’s coastal provinces using regional, dynamic computable general equilibrium models that track provincial welfare, GDP, trade, prices and inputs over the 2009–2054 period. We also assessed the economic costs of coastal adaptation investments, to determine whether such investments can be justified on economic grounds. Results indicated that SLR and storm surge could cost Canada in the range of $4.6–$25.5 billion in present value welfare, and between $53.7 and $108.7 billion in present value GDP. We found significant variation in costs and impacts across coastal provinces, with some provinces such as Newfoundland and Labrador experiencing only marginal costs/impacts, and others such as British Columbia experiencing costs as high as $21 billion in welfare over the period. Coastal adaptation investments were supported on economics grounds. Overall, this study provides the first (and preliminary) provincial economic impact estimates of climate-induced SLR and storm surge, as well as adaptation investments, in Canada. Additional research is needed to refine the analysis in order to produce reliable estimates that can be used to guide coastal adaptation policies in Canada.     

Subjective probabilistic expectations,household air pollution,and health: Evidence from cooking fuel use patterns in West Bengal,India

An increasing number of empirical studies have investigated the determinants of cooking fuel choice in developing countries, where health risks from household air pollution are one of the most important issues. We contribute to this stream of literature by examining individuals’ subjective probabilistic expectations about health risks when using different types of fuel and their role in cooking fuel usage patterns. We also explore how these patterns, in turn, are associated with health status. Using data collected from 557 rural Indian households, we find that subjective probabilistic expectations of becoming sick from dirty fuel usage are negatively and significantly associated with the fraction of days of dirty fuel usage in households. Concurrently, dirty fuel usage and self-reported health status of the individual being sick are also significantly correlated. We then conduct a policy simulation of information provision regarding the health risks of dirty fuel usage. Our simulation demonstrates that although the provision of information results in statistically significant changes in households’ cooking fuel usage patterns and in individuals’ health status, these changes may be small in size.     

Greenhouse gas policy and California electricity prices

California has adopted a policy of mandatory reductions in greenhouse gas (GHG) emissions to 1990 levels by the year 2020. (California Legislature (2006) Assembly Bill 32, the Global Warming Solutions Act of 2006, California Air Resources Board (2008) Climate change draft scoping plan, Sect. 2) Electricity utilities will need to recover related expenses, such as for the purchase of emissions permits. Economists often assume that raising usage prices for the commodity is the best way to recoup such expenses. However, regulated usage prices to California residential customers already exceed the cost of electricity generation plus a plausible externality cost for carbon dioxide (CO₂) emissions. Instead, recovering compliance expenses through usage insensitive charges could avoid causing unnecessary economic harm to consumers.     

Does less inequality among households mean less inequality among individuals?

Consider an income distribution among households of the same size in which individuals, equally needy from the point of view of an ethical observer, are treated unfairly. Individuals are split into two types, those who receive more than one half of the family budget and those who receive less than one half. We look for conditions under which welfare and inequality quasi-orders established at the household level still hold at the individual one. A necessary and sufficient condition for the Generalized Lorenz test is that the income of dominated individuals is a concave function of the household income: individuals of poor households have to stand more together than individuals of rich households. This property also proves to be crucial for the preservation of the Relative and Absolute Lorenz criteria, when the more egalitarian distribution is the poorest. Extensions to individuals heterogeneous in needs and more than two types are also provided.     

The role of income pooling and decision-making responsibilities in material deprivation

This paper analyzes to what extent family arrangements are linked to the level of household material deprivation. This key dimension of individual well-being is defined as the enforced inability to afford financial expenses, durable goods, and adequate housing conditions. We define family arrangements in terms of the degree to which resources are pooled and the main decision maker. Using the EU-SILC dataset, we find that households where decision-making responsibilities fall chiefly on females have lower deprivation levels regardless of the degree of income pooling. In contrast, greater levels of deprivation are more likely in households where decisions are shared and resources are not fully pooled. These findings highlight the importance of integrating family arrangements in the design of actions and initiatives aimed at reducing inequalities and improving the general welfare of the economy.     

Do voluntary commitment mechanisms improve welfare? The effect of mandatory and voluntary oaths in a social dilemma

We investigate whether oaths can enforce property rights in a social dilemma and increase welfare. We examine the impact of mandatory and voluntary oaths in a laboratory experiment where individuals can produce wealth, protect accumulated wealth, and take wealth from others. Individuals are more productive when oaths are mandatory compared to a no-oath environment. Subjects’ voluntary signing oaths behave similarly to those who sign a mandatory oath. When the oath is voluntary, nonoath-taking individuals engage in nonproductive behavior, negating the positive impact from the voluntary oath. Our results show that altering commitment mechanisms can result in varying welfare levels.     

Households savings in the U.S.A.

In this paper we study the saving behaviour of U.S.A. households. We use micro data from the Consumer Expenditure Survey from 1982 to 1995. We employ synthetic cohort techniques to characterize the life cycle profile of saving rates and other variables of interest. In particular, we pay attention to the distinction between mandatory saving and discretionary saving. We then relate our evidence to the recent policy debate on saving incentives and their usefulness.     

Distributional Costs of Housing-price Bubbles: Who pays the Price when Bubbles Deflate?

Abstract

In considering whether asset-price bubbles should be offset through policy, an important issue is who pays the price when the bubble bursts. A bust that reduces the wealth of well-off households only may have small welfare costs, but costs may be sizable if broad swaths of households are affected. This paper uses micro data on millions of households from the US American Community Survey to examine how the bursting of the 1998–2006 housing bubble affected households’ employment, homeownership, home values, and housing costs. To separate dynamics of the housing bust from those of the aggregate downturn, we differentiate between metropolitan areas that did and did not experience bubbles. We find that, for most measures, deteriorations in well-being were more severe in bubble metros than elsewhere, and for several measures, differential effects on less-educated households were also more severe. This underscores the importance of leaning against broad-based housing bubbles via appropriate policies, as burdens of adjustment fall differentially on people not well prepared to bear them.     

Medicare for all or medicare for none? A macroeconomic analysis of healthcare reform

In this study, I develop a novel general equilibrium life cycle model composed of finitely-lived households that differ according to age, skill level, and access to employer-provided health insurance. After introducing a “Medicare for all” health insurance system to the model, I examine how the welfare response to this policy change will differ according to household characteristics. Then, I compare this system to a completely privatized health insurance system that achieves universal health insurance coverage through the creation of utilization-based premium subsidies. In general, both systems tend to improve the welfare of young households at the expense of old households. However, when using average value-of-life as the primary measure of welfare, Medicare for all either benefits unskilled households at the expense of skilled households, or makes both worse off. In contrast, the privatized system improves the average value-of-life of all household groups, regardless of skill level or prior access to employer-provided health insurance.     

Housing investment in urban China

What explains the rapidly increasing housing investment demand in China? To address this question, we develop an analytical framework featuring how expected capital gains impact households' housing investment decisions when subject to financial constraints. Housing demand in China takes place not only through households' owning multiple houses, but also through their owning a larger primary living residence if they are constrained from buying multiple houses. We show that households are more likely to own multiple houses when expecting higher capital gains. As expected capital gain increases, the primary housing demand of those households who are constrained from owning multiple houses increases, while those owing multiple housing units invest in extra ones instead of improving primary housing. Our empirical findings, based on 2010 and 2011 household survey data, are consistent with our theoretical predictions. We also find that the marginal effect of expected capital gains is higher for wealthier households. This links the booming housing market to widening income inequality which is a typical growth pain in a developing country like China. As an extension, we apply the analysis to derive implications of the institutional features (such as purchasing restriction policy and the existence of subsidized housing) for China’s housing markets.     

Motives for household private transfers in Burkina Faso

Resource transfers among households have received considerable interest among economists in recent years. Two of the main reasons for the surge of interest in household transfers are the information on human nature conveyed by transfer behavior and the implication on income redistribution policy that private transfer might have. Empirical studies, however, provide mixed results on transfer behavior. This is because previous inquiries were confronted with several estimation issues and have focused on data from developed countries where private transfers are already small. This paper contributes to the literature on transfer behavior by using a multifaceted econometric approach to examine the motives of household transfers in Burkina, a low-income country with a well-documented tradition of gift exchanges. The findings suggest that risk sharing is not central to transfers. Altruistic transfers are apparent for the middle income class, but not at low income level. The evidence implies that crowding out may be minimal at low income level, suggesting that public transfers targeting poor households may be effective.     

ECONOMICS OF STOCK-PRICE VIBRATIONS: RIDING SPECULATIVE WAVES WITHOUT SPECULATION

Abstract.  When speculation causes share prices to fluctuate, even the best speculators may do 'hardly better than the comprehensive common-stock averages' (Samuelson). We further demonstrate in this paper that non-speculators can indeed benefit, in terms of both utility and wealth, from speculative price fluctuations by choosing their portfolio optimally. In particular, we show both how much and how fast non-speculators' wealth can accumulate, presumably at speculators' expenses, over periods of price fluctuations. We also show a seemingly paradoxical outcome where a rational individual would rejoice more when stock prices fall than when they rise by the same (absolute) amounts.     

Finding out the Routes to Escape Poverty: The Relevance of Demographic vs. Labor Market Events in Spain

The knowledge of which events are most effective in pushing households out of deprivation should help in designing poverty-alleviating social policy. Using longitudinal data for Spain, we analyze the nature of events pushing poor households out of poverty, adding an interesting decomposition of transitions: the occurrence of an event and the income change implied by it. We find that, similarly to other developed countries, the events that most help Spanish households in leaving poverty are related to changes in labor status of household members. However, non-labor income changes are significantly more important in Spain than elsewhere.     

What makes green persuasion effective? Evidence from a community-financed sanitation program in Indonesia

Understanding when and where face-to-face communication affects pro-environmental decisions is important for policymakers. We study a data set collected in a solicitation project intended to increase participation in a community-financed waste collection program in Indonesia. Two types of messages are developed and randomly assigned to 748 households. In addition, solicitors are randomly assigned to a control group or one of two treatment groups, and these groups are shuffled further midway through the project. These two orthogonal randomizations allow us to assess the impact of a combination of messages, solicitors and households. We find that the “help the children” message increases the probability of participation for households with a young child. Solicitor personality is associated with immediate participation but becomes nonsignificant after three months. Furthermore, a household is more likely to participate if a solicitor knows the respondent personally. These results suggest that, at least in the short term, important factors in encouraging behavioral changes include not only the contents of messages but also the type of sender of such messages. This paper highlights the possible impact of targeting and content-sender-receiver matching when persuasive communication is used as an environmental policy instrument.     

Storm Damage and Risk Preferences: Panel Evidence from Germany

Individuals’ risk preferences may change after experiencing external socio-economic or natural shocks. Theoretical predictions and empirical studies suggest that risk taking may increase or decrease after experiencing shocks. So far the empirical evidence is sparse, especially when it comes to developed countries. We contribute to this literature by investigating whether experiencing financial and health-related damage caused by storms affects risk preferences of individuals in Germany. Using unique panel data, we find that household heads were more risk-seeking after they experienced storm damage. We do not find evidence of exposure to storm per se (regardless of damage experience), which suggests that household heads have to suffer damage for their risk preferences to be affected. These results are robust across a battery of alternative model specifications and alternative storm damage measures (magnitude of financial damage). We rule out other potential explanations such as health-related and economic shocks. The self-reported storm damage data is broadly confirmed by regional storm damage data provided by the insurance industry. While we cannot identify the channels through which experiencing storm damage affects risk preferences from our data, we suggest and discuss some potential channels. The results may have important policy implications as risk preferences affect, for instance, individuals’ savings and investment behaviour, adoption of self-protection and self-insurance strategies, and technology adoption.