Informational Benefits of International Treaties

International treaties allow a minister in one country to learn about the beliefs held by a minister in another country, so allowing each to make better decisions. When the net benefits of environmental policy are uncertain, a country which participates in negotiating an environmental treaty, or which supports strong environmental action, thereby provides information to another country that such action can be worthwhile. This dimension of international environmental agreements helps explain why countries negotiate treaties, why these treaties often implement the Nash non-cooperative equilibrium, why agreement to a treaty by a country deemed not particularly favorable to it can strengthen environmental action, and why treaties may invoke a minimum participation clause. The informational mechanism we discuss holds even if physical spillovers are absent, and even if monitoring and enforcement are infeasible. Our approach can explain additional phenomena: how requirements for approval by several bodies within a country can increase support for a policy, and why simultaneous action can lead to better outcomes than sequential action.     

Optimal Tax and Public Investment Rules for Congestion Type of Externalities

Optimal government policy is considered in a second-best framework where consumers and producers cause an externality of the congestion type and income distribution issues are taken into account. The theoretical results of the optimal tax literature are adapted using the concept of the net social Pigouvian tax. An illustrative AGE model uncovers the relative importance of its components. The model demonstrates that the level of the externality tax does not depend strongly on distribution concerns, as reoptimization of the other taxes ensures that the income distribution objective is reached. The model also allows us to study the interaction between externality taxes and public abatement.     

The relative efficiency of market-based environmental policy instruments with imperfect compliance

We study how the relative cost efficiency of three market-based instruments—emission taxes, tradable permits and output taxes—is influenced by the combination of accounting for incomplete compliance and pre-existing labor taxes. First, accounting for violations makes the policy instruments less effective so that environmental damages have to be larger to justify a policy. Secondly, including fines in a second-best setting provides a new means of collecting government revenues and of lessening existing tax distortions. We show that the relative position of grandfathered tradable permits vis-à-vis emission taxes improves considerably when incomplete compliance is incorporated in a second-best setting. A simple AGE model illustrates the results.      

The Role of Business Ethics,Personality, Work Values and Gender in Vocational Interests from Adolescents

The present study investigates how business ethics are related to vocational interest. Special attention has been paid to the relationship between business ethics and the interest in ‘enterprising’ and ‘social’ oriented professions. The results show that business ethics is only significantly correlated in a negative way, to enterprising vocational preferences. Moreover, the negative contribution of business ethics to the preference for entrepreneurial and managerial professions remains after controlling for personality and work values. Some work values also predict the entrepreneurial interest: Earnings, Influence, Competition, Innovation and Creativity. The personality traits Extraversion (positive) and Agreeableness (negative) have predictive validity, but this effect disappears after controlling for work values. In the ‘Discussion’ section, we pay attention to possible consequences of the negative relationship between business ethics and Entrepreneurial interest for Corporate Social Responsibility (CSR). We argue that efforts concerning realistic job previews will only be meaningful if they are completed with efforts to make people more sensitive for ethics in two other domains, namely education and business.     

The Split Core for Sequencing Games

The split core is a refinement of the core for sequencing games. The split core arises from a generalization of the equal gain splitting (EGS) rule that is introduced byCuriel et al. (1989). It is pointed out that the split core is the convex hull of permutation-based gain splitting allocations and the EGS allocation is in the barycenter of the split core. Finally, an axiomatic characterization of the split core is provided.Journal of Economic LiteratureClassification Number: 026.     

On the distributional properties of size, profit and growth of Icelandic firms

In this paper, we analyze the distributional properties of the balance sheets of Icelandic firms by performing an empirical analysis of total assets, profit rates and growth rates using a data set of 2,818 Icelandic firms during the period 2000–2009. We find that the firms size measure, i.e. total assets, have the same heavy tail characteristics as various studies have shown, e.g. for US and Italian firms. The heavy tail nature of the total assets distribution seems to be robust w.r.t. a boom-bust cycle of the economy as well as special characteristics of Icelandic firms, e.g. their relatively small size and private ownership. Another important finding is that the profit rates, or return on assets, of Icelandic firms follow a Laplace like distribution similar to US firms. Additionally, we identified deviations from the distributional regularities, namely the power law behavior of firms’ size and Laplacian distributions of growth and profit rates, during the booming period of the economy 2005–2007.     

The political economy of fixed regional public expenditure shares with an illustration for Belgian railway investments

Many local public goods are allocated by federal governments using fixed regional shares: every region is entitled a fixed share of the total budget for a particular type of public good. This paper explores two characteristics of this type of allocation. First, it shows that this type of allocation is relatively efficient as it puts a strict budget constraint on the decisive region. Second, we show that these fixed shares can be an equilibrium of different legislative bargaining processes. The working of the fixed sharing rules is illustrated for the allocation of railway investments in Belgium.     

Carve-outs under airline antitrust immunity

This paper offers the first formal economic analysis of carve-outs under airline antitrust immunity. Carve-outs are designed to limit the potential anticompetitive effects of cooperation by alliance partners in hub-to-hub markets, where they provide overlapping nonstop service. While the paper shows that carve-outs are beneficial when the alliance does not involve full integration of the partners' operations on the hub-to-hub route, its key point is that a carve-out may be harmful when imposed on a joint-venture alliance. A JV alliance involves full exploitation of economies of traffic density on the hub-to-hub route, and a carve-out prevents the realization of these benefits. While a carve-out may limit anticompetitive incentives on the hub-to-hub route, welfare may be reduced if the resulting gains are overshadowed by the efficiency loss generated by the carve-out.