Resource abundance and economic growth in the United States

It is a common assumption that regions within the same country converge to approximately the same steady-state income levels. The so-called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions. Empirical data seem to support the absolute convergence hypothesis for US states, but the data also show that natural resource abundance is a significant negative determinant of growth. We find that natural resource abundance decreases investment, schooling, openness, and R&D expenditure and increases corruption, and we show that these effects can fully explain the negative effect of natural resource abundance on growth.     

Moral hazard and Marshallian inefficiency: Evidence from Tunisia

We formalize the link between optimal cost-sharing contracts and the production technology in the presence of moral hazard by appealing to several well-known results from duality theory. Building on intuitions from the interlinkage literature, we show that optimal contractual structure is determined by the (i) substitution possibilities that exist between different observable factor inputs, as well as (ii) between these inputs and unobservable effort. We endogenize contractual choice using landlord characteristics as instruments, exploiting the fact that, in our dataset, landlords interact with several tenants and vice versa. The approach is applied to an unbalanced plot-level panel of cost-sharing contracts in a Tunisian village, using a translog representation of the restricted profit function. Contractual terms are found to be a significant determinant of input use and therefore lead to Marshallian inefficiency, while the optimality of the underlying contractual structure is rejected.     

Contagious development: Neighbor interactions in deforestation

We estimate neighbor interactions in deforestation in Costa Rica. To address simultaneity and the presence of spatially correlated unobservables, we measure for neighbors' deforestation using the slopes of neighbors' and neighbors' neighbors' parcels. We find that neighboring deforestation significantly raises the probability of deforestation. Policies for agricultural development or forest conservation in one area will affect deforestation rates in non-targeted neighboring areas. Correct estimation of the interaction reverses the naive estimate's prediction of multiple equilibria.     

A proposal for social pricing of water supply in Côte d'Ivoire

We consider the design of a nonlinear social tariff for residential water in Côte d'Ivoire, which is a case of a monopolistic private operator supplying a population of heterogeneous consumers. The proposed optimal tariff includes an initial “social” block with a low unit price, and higher consumption blocks with a monopoly pricing rule. This optimal nonlinear tariff is calibrated using econometric estimates of a panel-data residential water demand equation. Welfare changes associated with moving from the actual tariff to approximations of the optimal pricing system are computed under different tariff scenarios. We find that gains in consumer welfare would outweigh losses in producer surplus in a majority of Ivorian local communities.     

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.     

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.     

Mark-ups, economies of scale and the role of knowledge spillovers in OECD industries

Using R&D-based models of economic growth as a foundation, this paper argues that market-driven knowledge creation is necessarily linked as an engine of productivity growth to economies of scale and market-power. A cost function and factor demand model is applied to a cross-country industry data set to study market-power, economies of scale and the role of knowledge in an integrated approach. Empirical results reveal the presence of market-power and economies of scale in all of the industries investigated. R&D and spillovers explain some of the productivity growth observed. Spillovers are identified as an external source of economies of scale.     

Hurricane strikes and local migration in US coastal counties

We examine the effects of hurricane shocks on key migration variables in US coastal counties. Results show that hurricane strikes increase the outward migration rate and that these migrants were somewhat wealthier, but that there was no impact on inward migration.     

A continuous time model of European growth,integration and technology diffusion: The role of distance

Economists have been devoting increasing attention to the diffusion process of knowledge in economic activities. However, the models till now developed concentrate mostly on the dynamics determined by the steady state, when dealing with the interaction among many countries. Instead, we present a non-linear model where explicitly formalize the disequilibrium as starting point. We evaluate theoretically and empirically, with a continuous time analysis applied to panel data, the integration process of some main European countries by considering a simultaneous interaction among output, technology and business services. In this process we take particular care of distance, as a strategic variable over time, and of the following consequences on the convergence to the steady state. On this subject we also show a closed form solution in presence of a linear constraint on technology among countries.     

Natural capital, subjective well-being, and the new welfare economics of sustainability: Some evidence from cross-country regressions

The measurement of natural capital and its management during the economic development process are important aspects of the capital approach to sustainable development. However, the assessment of social welfare in terms of genuine savings (or changes in total wealth per capita) is arguably too limited. This paper tries to make a case for the incorporation of subjective well-being measures in debates about sustainable development by exploring the macro-level relationship between subjective well-being and natural capital in a cross-country setting. It is tested whether natural capital per capita is correlated with subjective well-being in a sample of fifty-eight developed and developing countries, using natural capital data from the World Bank's Millennium Capital Assessment. Bivariate regressions indicate that it is. When multiple regression models are estimated that include (a) major country-level determinants of subjective well-being (GNI per capita, social capital, income distribution, unemployment, inflation), and (b) regional dummy variables for ex-Soviet Union and Latin American countries, the positive correlation remains. The role of data outliers is carefully explored, and the sensitivity of the results to the use of alternative subjective well-being measures (i.e. life satisfaction, happiness, and a combined life satisfaction and happiness index) is investigated. This does not change the nature of the results. The findings arguably strengthen the case for a ‘new welfare economics of sustainability’ that takes subjective well-being measures into account.     

Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia

Much has been written on the determinants of technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data from Ethiopia. Historical rainfall distributions are used to identify consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance or alternative means of keeping consumption smooth leaves some trapped in low return, lower risk agriculture, one of the mechanisms through which poverty perpetuates itself in agrarian settings.     

What really matters: Discounting, technological change and sustainable climate

This paper discusses the interplay between the choice of the discount rate, greenhouse gas mitigation and endogenous technological change. Neglecting the issue of uncertainty it is shown that the Green Golden Rule stock of atmospheric carbon is uniquely determined, but is not affected by technological change. More generally it is shown analytically within the framework of a reduced model of integrated assessment that the optimal stationary stocks of atmospheric carbon depend on the choice of the discount rate, but are independent of the stock of technological knowledge. These results are then reinforced numerically in a fully specified integrated assessment analysis.     

Producer price adjustment to commodity price shocks: An application of threshold cointegration

During the 1980s and 1990s, most developing countries in Sub-Saharan Africa and Latin America implemented structural adjustment reforms, which included the liberalization of export crop markets and the abolition of marketing boards. The emergence of new marketing systems may have altered price transmission mechanisms, especially if collusion behaviors have appeared among domestic stakeholders along the marketing chain. I use threshold cointegration tools to analyze the dynamics of world price transmission to coffee growers in three deregulated markets. The methods I use allow me to test the presence of a threshold in both the cointegrating relationship and its corresponding error correction model. Over the pre-reform period, I detect asymmetric price adjustments that appear favorable to producers - deviations from the long-run equilibrium resulting from largest increases in world prices being eliminated relatively quickly - and disappear in the post-reform period. On the contrary over the post-reform period, the results suggest that largest decreases in world prices may be transmitted relatively quickly to growers. These results can be seen as expressions of a favorable pricing policy over the pre-reform period and an unfavorable influence of new private agents over the post-reform period, meaning that in some cases reforms may have failed to create competitive market structures.     

Information technology and efficiency in trucking

Abstract .  We develop an econometric model to estimate the impact of Electronic Vehicle Management Systems ( EVMS ) on the load factor ( LF ) of heavy trucks. This technology is supposed to improve capacity utilization. The model is estimated on the Quebec subsample of the 1999  National Roadside Survey . The  LF  is explained as a function of truck, trip, and carrier characteristics. We show that the use of  EVMS  results in an increase of 16 percentage points of  LF  on backhaul trips. However, we also find that there is a rebound effect on fronthaul movements, with a reduction of  LF  by about 7.6 percentage points.     

Poverty trap and global indeterminacy in a growth model with open-access natural resources

In this paper we use global analysis techniques to analyze an economic growth model with environmental negative externalities, giving rise to a three-dimensional dynamic system (the framework is the one introduced by Wirl (1997) [53]). The dynamics of our model admits a locally attracting stationary state , which is, in fact, a poverty trap, coexisting with another stationary state possessing saddle-point stability. Global dynamical analysis shows that, under some conditions on the parameters, if the initial values of the state variables are close enough to the coordinates of , then there exists a continuum of equilibrium trajectories approaching and one trajectory approaching . Therefore, our model exhibits global indeterminacy, since either or can be selected according to agent expectations. Moreover, we prove that conditions guaranteeing the attractivity of also imply the saddle-point stability of . However, when is not attractive, numerical simulations show the possible existence of one or two limit cycles: an attractive one surrounding and one endowed with a two-dimensional stable manifold surrounding .     

Savings growth and the path of utility

Abstract.  We derive an expression relating the change in instantaneous utility to the growth of net (genuine) saving in an economy with multiple stocks and externalities that maximizes welfare in the utilitarian sense. This result is then shown to hold for decentralized competitive efficient economies as well, to yield an extension of the Hartwick rule: instantaneous utility is non-declining along a development path if genuine saving is decreasing. By way of example the rule is applied as a constant genuine saving rate rule in a simple Dasgupta-Heal-Solow-Stiglitz economy. The rule yields a path with unbounded consumption and higher wealth than on the standard Hartwick constant consumption path.     

Estimating VARs with long stationary heterogeneous panels: A comparison of the fixed effect and the mean group estimators

The most promising candidates for estimating vector autoregressive models with long, stationary, possibly heterogeneous panel data sets (panel-VARs) are the fixed effect (FE) and the mean group (MG) estimators. With a view to providing guidance to applied researchers on how to pool in a panel-VAR, this paper compares the performance of the FE and the MG estimators both asymptotically and in Monte Carlo simulations. The main results of the analysis suggest the use of both estimators in applied work. If FE and MG estimates give similar estimates, the FE estimator should be used because it is more efficient. If they differ, the MG estimator should be used only if the panel is sufficiently long — say, twice as long as usually recommended in the dynamic panel data literature. If FE and MG estimates differ and the panel is not long enough, neither is generally a desirable alternative and other estimation techniques are needed.     

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.     

A Monte Carlo study of a factor analytical method for fixed-effects dynamic panel models

In a recent article Bai (2013a) proposes a new factor analytical method (FAM) for the estimation of fixed-effects dynamic panel data models, which has the unique and very useful property that it is asymptotically bias free. In this paper we provide Monte Carlo evidence of the good small-sample performance of FAM, that complement Bai’s theoretical study.