Economic and Environmental Benefits of Eliminating Log Export Bans – The Case of Costa Rica

An increasing number of tropical timber‐producing nations have enacted bans on export of logs arguing that this will reduce deforestation, expand downstream wood processing and improve the scale efficiency of domestic processing, create jobs and retain more value‐added nationally. The theoretical literature is clear that trade restrictions are generally welfare reducing (except in special cases such as when there is a potential for an optimal export tax). At best, a log export ban is a second‐best policy tool for reducing deforestation and addressing the associated environmental externalities. In overall terms, the suggestion that log export bans can achieve the objectives expected of them is dubious. However, very little quantitative evidence exists to demonstrate this claim and the paper attempts to address this gap by looking at the economic and environmental impacts of eliminating a log export ban in Costa Rica. The authors argue that eliminating the export ban is Pareto improving and could generate economic gains as high as $14 million per annum with the possibility of relatively modest environmental benefits.     

Economics,environment and equity

Although allocation of scarce resources among alternative uses to satisfy unlimited human wants in the positivist framework (a la Lionel Robbins)has been a focus of economists for a long time, awareness of resource scarcity in the ecological sense and discussion of the relevant issues in the context of distributive justice, as well as intergenerational equity, are of more recent vintage. A perspective encompassing judicious use of natural resources inevitably leads to a discussion which includes ecological, economic and ethical dimensions. This essay examines the contributions included in a recent book.     

Estimating Excess Sensitivity and Habit Persistence in Consumption Using Greenbook Forecasts

In this paper, we revisit the issue of excess sensitivity of consumption to income and address the weak instrument problem that is well documented in this literature. Using quarterly data for the US economy, we first highlight the weak instrument problem by showing that the use of conventional instruments tends to overestimate the share of rule-of-thumb consumers. To address this weak instrument problem, we propose a new instrument for endogenous disposable income growth in the consumption function, namely, the Greenbook forecast of real disposable income growth. We show that this instrument encompasses the information contained in the conventional set of instruments, and is a superior predictor of income growth. We find that using our proposed instrument ameliorates the weak instrument problem and provides a much smaller estimate for the rule-of-thumb consumers. We also extend our empirical framework to allow for habit persistence and provide an estimate for this important parameter of the consumption function. Finally, we use a time-varying specification of consumption function that allows for endogenous regressors, and document a decline in the share of rule-of-thumb consumers and a rise in the habit-persistence parameter in the US over our sample period.     

The Impact of Transfers and Taxes on Alternative Poverty Indexes

Changes in the headcount rate are the standard metric for gauging how public transfers and taxes affect US poverty. An alternative strategy, one theoretically more appealing and complete, is to rely on distribution-sensitive indexes (Sen 1976, 1981). How would policy's measured impacts change if such an approach were to be used? This study provides empirical evidence using three selected poverty indexes from the class developed by Foster et al . (1984). Pre- and post-policy values of each index are estimated for the total population and for twenty-three demographic sub-groups using data from March Current Population Surveys covering the period 1992 to 1998. The results indicate that the alternative indexes produce consistent ordinal rankings of policy's impact. (In contrast, the measured cardinal effects of policy differ substantially across indexes.) The empirical evidence has a clear implication for anti-poverty policy: government transfers and taxes are effective in lowering poverty headcount rates, in reducing the depth of poverty and in lessening the relative deprivation among the poor.     

Liberalization,growth and structural change: evidence from Nepalese manufacturing

This paper presents an empirical analysis of the consequences of liberalization on industrial structure in Nepal, a least developed country with weak institutions and severe infrastructure bottlenecks. Results suggest some structural change in manufacturing output and trade orientation which appears to be due to a change in incentive structure, but no significant improvements were recorded in total factor productivity growth which is of central importance for a least developed country like Nepal. Export intensity rose significantly in the postliberalization period despite poor productivity performance of export-oriented industries while import intensity fell due mainly to improved competitiveness in import competing industries and a fall in imports for smuggling to India.     

Horizontal and vertical intra-industry trade in Australian manufacturing: does trade liberalization have any impact?

This paper contributes to the literature on intra-industry trade (IIT) by disentangling such trade into horizontally and vertically differentiated products, and investigating their determinants in the context of trade liberalization in Australia. IIT in Australian manufacturing has increased following trade liberalization in 1980s and is increasingly dominated by vertically differentiated products. Industry level evidence confirms that the failure to segregate IIT into horizontally and vertically differentiated products produces misleading results as their determinants differ. Also, structural changes brought about by the policy liberalization appear to have an impact on total as well vertical IIT.     

The Dynamic Relationship Between Housing Prices and the Macroeconomy: Evidence from OECD Countries

This paper studies the dynamic relationship among house prices, income and interest rates in 15 OECD countries. We find that any disequilibrium in the long-run cointegrating relationship among these variables is corrected by the subsequent movement in house prices in most of these countries. This error-correction property of house prices implies that most of the variations in house prices are transitory, as compared to the movements in income and interest rates that are permanent, suggesting that the short-run movements in house prices are independent of the movements in income and interest rates. The results suggest that only the permanent movement in house prices, income and interest rates are associated with each other. We also find that the correlation in house price cycles across different OECD countries has changed over time with the highest correlation during the boom period of 1998–2005.