Environmental Taxation and Vertical Cournot Oligopolies: How Eco-industries Matter

This article specifies what an optimal pollution tax should be when dealing with a vertical Cournot oligopoly. Polluting firms sell final goods to consumers and outsource their abatement activities to an environment industry. It is assumed that both markets are imperfectly competitive. Thus, the tax is a single instrument used to regulate three sorts of distortions, one negative externality and two restrictions in production. Consequently, the optimal tax rate is the result of a trade-off that depends on the firms’ market power along the vertical structure. A detailed analysis of Cournot-Nash equilibria in both markets is also performed. In this context, the efficiency of abatement activities plays a key-role. It gives a new understanding to the necessary conditions for the emergence of an eco-industrial sector.      

Assessing Applied Protection across the World*

This paper presents MAcMap–HS‐6, a database providing a consistent, ad valorem equivalent measure of tariff duties and tariff rate quotas for 163 countries and 208 partners, at the six‐digit level of the Harmonized System (5111 products), accounting for all preferential agreements. We describe the methodology used to compute and aggregate an ad valorem equivalent of applied protection. Emphasis is placed on minimizing the endogeneity bias in the aggregation procedure, while acknowledging structural differences in export specialization. The resulting quantitative assessment is illustrated by giving an overview of applied protection across the world in 2001, in terms of average as well as distribution.     

Customs Union and Gains from Trade Under Imperfect Competition: Variation of a Kemp-Wan Theme

In a world where firms are oligopolists, is it possible to create a customs union that raises the welfare of member countries without hurting non-member countries? We give sufficient conditions for an affirmative answer.     

Using Stock Price Information to Regulate Firms

This paper examines the role of the information contained in stock prices in the regulation of privatized firms. Stock prices contain noisy but unbiased information about firm's future prospects that regulators can use to decide on some regulatory policies. The main argument developed is that the observation of stock price movements reduces the incentives of regulators to develop their own monitoring technologies and can allow them to commit to relatively light-handed regulations. This protects firm's investments in cost reduction activities and can increase ex ante welfare.     

Risk aversion and framing effects

We present a new experimental evidence of how framing affects decisions in the context of a lottery choice experiment for measuring risk aversion. We investigate framing effects by replicating the Holt and Laury’s (Am. Econ. Rev. 92:1644–1655, 2002) procedure for measuring risk aversion under various frames. We first examine treatments where participants are confronted with the 10 decisions to be made either simultaneously or sequentially. The second treatment variable is the order of appearance of the ten lottery pairs. Probabilities of winning are ranked either in increasing, decreasing, or in random order. Lastly, payoffs were increased by a factor of ten in additional treatments. The rate of inconsistencies was significantly higher in sequential than in simultaneous treatment, in increasing and random than in decreasing treatment. Both experience and salient incentives induce a dramatic decrease in inconsistent behaviors. On the other hand, risk aversion was significantly higher in sequential than in simultaneous treatment, in decreasing and random than in increasing treatment, in high than in low payoff condition. These findings suggest that subjects use available information which has no value for normative theories, like throwing a glance at the whole connected set of pairwise choices before making each decision in a connected set of lottery pairs.     

The Regulation of Predatory Firms

This article investigates the issue of predation by a regulated firm. Since it has private information, a regulated firm obtains higher rents in case of successful predation: the fewer the competitors, the higher the marginal social value of the regulated firm's effort and the higher the informational rents. Both principals (the investor of a "target" firm and the regulator) have to provide some incentives to prevent predation: the investor has to reduce the sensitivity of refinancing to predation; the regulator has to lower the gain of successful predation. It is shown that there is a trade-off between the power of the regulatory incentive scheme and the regulated firm's incentives to prey. In addition, as deterring predation is costly, the investor and the regulator compete when offering contracts: each wants to free-ride on the other. Hence, predation may occur in equilibrium although it makes both principals worse off.     

The Regulation of Predatory Firms

This article investigates the issue ofpredation by a regulated firm. Since it has private information, a regulated firm obtains higher rents in case of successful predation: the fewer the competitors, the higher the marginal social value of the regulated firm's effort and the higher the informational rents. Both principals (the investor of a "target" firm and the regulator) have to provide some incentives to prevent predation: the investor has to reduce the sensitivity of refinancing to predation; the regulator has to lower the gain of successful predation. It is shown that there is a trade-off between the power of the regulatory incentive scheme and the regulated firm's incentives to prey. In addition, as deterring predation is costly, the investor and the regulator compete when offering contracts: each wants to free-ride on the other. Hence, predation may occur in equilibrium although it makes both principals worse off.     

Job protection,housing market regulation,and the youth

Young Europeans experience high unemployment rates, job instability, and late emancipation. Meanwhile, they do not support reforms weakening protection on long‐term contracts. In this paper, we suggest a possible rationale for such reform distaste. When the rental market is strongly regulated, landlords screen applicants with regard to their ability to pay the rent. Protecting regular jobs offers a second‐best technology to sort workers, thereby increasing the rental market size. We provide a model where nonemployed workers demand protected jobs despite unemployment and the share of short‐term jobs increases, whereas the individual risk of dismissal is unaffected. Our theory can be extended to alternative risks and markets involving correlated risks and commitment under imperfect information.     

Weather Index Drought Insurance: An Ex Ante Evaluation for Millet Growers in Niger

In the Sudano-Sahelian region, which includes South Niger, the inter-annual variability of the rainy season is high and irrigation is limited. As a consequence, bad rainy seasons have a massive impact on crop yield and regularly result in food crises. Traditional insurance policies based on crop damage assessment are not available because of asymmetric information and high transaction costs compared to the value of production. We assess the risk mitigation capacity of an alternative form of insurance which has been implemented at a large scale in India since 2003: insurance based on a weather index. We compare the efficiency of various weather indices to increase the expected utility of a representative risk-averse farmer. We show the importance of using plot-level yield data rather than village averages, which bias results due to the presence of idiosyncratic shocks. We also illustrate the need for out-of-sample estimations in order to avoid overfitting. Even with the appropriate index and assuming substantial risk aversion, we find a limited gain of implementing insurance, which roughly corresponds to, or slightly exceeds, the cost observed in India for implementing such insurance policies. However, when we separately treat the plots with and without fertilisers separately, we see that the benefit of insurance is slightly higher in the former case. This suggests that insurance policies may slightly increase the use of risk-increasing inputs such as fertilisers and improved cultivars, and hence improve average yields, which remain very low in the region.     

Innovation and finance: a stock flow consistent analysis of great surges of development

The present work aims at contributing to the recent stream of literature which attempts to link the Neo-Schumpeterian/Evolutionary and the Post-Keynesian theory. The paper adopts the Post-Keynesian Stock Flow Consistent modeling approach to analyze the process of development triggered by the emergence of a new-innovative productive sector into the economic system. The model depicts a multi-sectorial economy composed of consumption and capital goods industries, a banking sector and two households sectors: capitalists and wage earners. Furthermore, it provides an explicit representation of the stock market. In line with the Schumpeterian tradition, our work highlights the cyclical nature of the development process and stresses the relevance of the finance-innovation nexus, analyzing the feed-back effects between the real and financial sides of the economic system. In this way we aim at setting the basis of a comprehensive and coherent framework to study the relationship between technological change, demand and finance along the structural change process triggered by technological innovation.