AGGREGATION VERSUS DISAGGREGATION IN INPUT–OUTPUT ANALYSIS OF THE ENVIRONMENT

Analysts carrying out input–output analyses of environmental issues are often plagued by environmental and input–output data existing in different classifications, with environmentally sensitive sectors sometimes being aggregated in the economic input–output database. In principle there are two alternatives for dealing with such misalignment: either environmental data have to be aggregated into the input–output classification, which entails an undesirable loss of information, or input–output data have to be disaggregated based on fragmentary information. In this article, I show that disaggregation of input–output data, even if based on few real data points, is superior to aggregating environmental data in determining input–output multipliers. This is especially true if the disaggregated sectors are heterogeneous with respect to their economic and environmental characteristics. The results of this work may help analysts in understanding that disaggregation based on even a small amount of proxy information can improve the accuracy of input–output multipliers significantly. Perhaps, these results will also provide encouragement for preferring model disaggregation to aggregation in future work.     

The election cycle in the inflation bias: evidence from the G-7 countries

This paper derives and evaluates empirical implications which separate the naive voters view [Nordhaus, W.D., 1975. The political business cycle. Review of Economic Studies 42, 169–190.] from the rational-voters view [Barro R., Gordon, D., 1983. Rules, discretion, and reputation in a model of monetary policy. Journal of Monetary Economics 12, 101–121.] under rational expectations. The observational equivalence of the two approaches obtained under a natural rate vanishes as output persistence is introduced. An analysis of inflation in the G-7 countries reveals election patterns supporting the joint hypothesis that demand shocks persist and that monetary policy courts retrospective voters. Patterns turn weaker as central banks become more independent, but do not disappear. Reducing inflationary bias not only requires more central bank independence, but as well less persistence.     

Reforming the European Monetary System

The extreme widening of the exchange rate margins last summer has transformed the EMS from a multilateral fixed rate system into a system of unilateral exchange rate pegging. Professor Neumann characterises the current state of the EMS, outlines the major defects of the system and makes some proposals for reform.     

The economic constitution of the European community: From Rome to Maastricht

The present paper analyzes the changes in the economic constitution of the European Community since its foundation in 1958. In order to identify the various changes, we start by developing a frame of reference. Our proposition is that theconstitutional charter of the European Economic Community (EEC)—the EEC Treaty—came closest to this frame of reference, being an economic constitution for a market system, whereas the subsequentprocess of European integration—including several modifications of the Treaty—was largely based on the introduction of non-market elements. Our argument is that as far as the economic constitution is concerned, the Treaty of Maastricht is dominated by traits which are characteristic of modern welfare states.     

<Emphasis Type="Italic">Notes and Comments:</Emphasis> The numeraire portfolio in financial markets modeled by a multi-dimensional jump diffusion process

In continuous time, we study a financial market which is free of arbitrage opportunities but incomplete under the physical probability measure P. Thus one has several choices of equivalent martingale measures. In the present paper, the (unique) martingale measure P ^* is studied which is defined by the concept of the numeraire portfolio. The choice of P ^* can be justified by a change of numeraire in place of a change of measure. Mathematics Subject Classification (2000): 90A09, 91B28, 91B62, 93E20, 62P05 Journal of Economic Literature Classification: G10, G12, G13     

Shared producer and consumer responsibility — Theory and practice

Over the past decade, an increasing number of authors have been examining the nexus of producer versus consumer responsibility, often dealing with the question of how to assign responsibility for internationally traded greenhouse gas emissions. Recently, a similar problem has appeared in drafting the standards for the Ecological Footprint: While the method traditionally assumes a full life-cycle perspective with full consumer responsibility, a large number of producers (businesses and industry sectors) have started to calculate their own footprints (see www.isa.org.usyd.edu.au). Adding any producer's footprint to other producers' footprints, or to population footprints, which all already cover the full upstream supply chain of their operating inputs, leads to double-counting: The sum of footprints of producers and consumers is larger than the total national footprint. The committee in charge of the Footprint standardisation process was hence faced with the decades-old non-additivity problem, posing the following dilemma for the accounting of footprints, or any other production factor: if one disallows double-counting, but wishes to be able to account for producers and consumers, then one cannot impose the requirement of full life-cycle coverage; the supply chains of actors have to be curtailed somehow in order to avoid double-counting. This work demonstrates and discusses a non-arbitrary method of consistently delineating these supply chains, into mutually exclusive and collectively exhaustive portions of responsibility to be shared by all actors in an economy.     

Power,luck and the right index

Summary We have pointed out the theoretical drawbacks of the traditional indices for measuring a priori voting power inasmuch as they are implied in considering the coalition value a private good. This criticism caused us to view the coalition outcome as a public good. From this aspect and additional considerations with respect to power, luck, and decisiveness, we obtained a story describing the characteristics of an adequate measure of a priori voting power. These characteristics were found to be fulfilled by an index presented by Holler (1978). Through the above analysis this index has received its theoretical justification. An independent view of this index was then provided by means of an axiomatic characterization. This characterization makes possible abstract comparison of the index with previously established private good indices.While we have restricted our attention to simple games, the index presented can be generalized to provide a value on games in characteristic function form. We leave this topic for future conideration.