An Analytical Framework for Joint vs Separate Decisions by Couples in Choice Experiments: The Case of Coastal Water Quality in Tobago

This paper offers an analytical framework for analyzing joint and separate decisions by couples in the context of choice experiments for nonmarket valuation. It reports results from an attribute-based stated preference study in which members of couples are asked to conduct a choice-experiment first individually and then jointly. The choice context was the selection of which beach to visit while on vacation in Tobago. Available alternatives differed in attributes related to coastal water and beach quality such as level of coastal development and fish abundance. Tests of preference equality are reported and structured so as to identify the intra-couple decision-making patterns under taste heterogeneity with both finite and continuous mixed logit. Results from the latter suggest that women’s preferences are found to be predominant in the joint choice-experiment. Results suggest caution in using individual choice rather than joint couple choice when valuing quality changes impacting on couple activities, such as water and beach quality in Tobago, and call for further research on the topic.     

The short and long-run interdependencies between the Eurozone and the USA

We estimate quarterly cointegrating vector autoregressive models for the Eurozone and the USA based on long-run restrictions derived from a dynamic open economy model. Three long-run relations between the Eurozone and the USA emerge: relative purchasing power parity, international interest parity and a stationary output gap between the two economies. Generalized impulse response functions show differences in the dynamic adjustment of the two economies. Due to the I(1)-characteristic of both output series and the stability conditions imposed by the long-run equilibrium relationships, shocks to the model produce level effects only, while growth rates converge to their long-run averages.

Prudent expectations equilibrium in economies with uncertain delivery

In an economy with private information, we introduce the notion of objects of choice as lists of bundles out of which the market selects one for delivery. This leads to an extension of the model of Arrow–Debreu that is used to study trade ex ante with private state verification. Under the assumption that agents are prudent, equilibrium is characterized by the fact that agents consume bundles with the same utility in states that they do not distinguish. This is a weaker condition than the restriction of equal consumption imposed by Radner (Econometrica 36(1), 31–58, 1968), therefore, some no trade situations are avoided and the efficiency of trade increases.     

Which Firms are More Sensitive to Public Disclosure Schemes for Pollution Control? Evidence from Indonesia’s PROPER Program

This paper analyzes differences in firms’ responsiveness to PROPER, Indonesia’s public disclosure program for industrial pollution control. The overall effectiveness of this program at achieving emissions reductions and its low regulatory costs have earned it a good reputation around the world. PROPER had no deterrents or incentives other than those that arose indirectly from publicly disclosing information about the environmental performances of firms. We analyzed plant-level data to relate short- and longer-term environmental responses to facility characteristics. The results revealed that foreign-owned firms were consistently more likely to respond to the environmental rating scheme, compared to private domestic firms. This is a clear and important insight with consequences for a number of issues, such as understanding the pollution haven debate. Also, firms located in densely populated regions, particularly in Java, responded more positively to the public disclosure of PROPER ratings. The main observed effect was however given by the initial level of environmental performance of firms. Those firms that had bad environmental performance records felt pressure to improve, but if the initial abatement steps had already been taken, the incentives to improve further appeared to diminish.     

Payoff dominance and risk dominance in the observable delay game: a note

We examine whether the payoff dominant sequential-move (Stackelberg) outcome is realized when timing is endogenized. We adopt the observable delay game formulated by Hamilton and Slutsky [Games Econ Behav 2(1):29–46, 1990]. We find that if one sequential-move outcome is payoff dominant, either (i) the outcome both players prefer is the unique equilibrium; or (ii) two sequential-move outcomes are equilibria and the one both players prefer is risk dominant. In other words, no conflict between payoff dominance and risk dominance in the observable delay game exists, in contrast to other games such as (non pure) coordination games. We also find that even if one of two sequential-move outcomes is the unique equilibrium outcome in the observable delay game, it does not imply that the equilibrium outcome is payoff dominant to the other sequential-move outcome.      

The political economy of state-level adoption of natural resource damage programs

U.S. states can implement programs to pursue damage recovery when firms cause natural resource damages (NRDs). We present new empirical evidence that such programs have effectively reduced oil spills in states that adopt them. However, only 34 states had implemented such programs by 2003. We analyze data on 50 states and the District of Columbia from 1980 to 2003 to ascertain the likely determinants of NRD program adoption. We find that states with many environmental accidents adopt programs more rapidly, while income and interest-group pressure have no significant impact on the process. While non-adopting states might benefit from such programs, at least NRD programs are being adopted most rapidly where they can do the most good.      

Fixed versus variable supply in the public provision of goods

Using discriminatory price auctions with variable supply, we explore a situation in which a corruptible public employee is in charge of producing and allocating a finite number of goods among consumers with uniformly distributed valuations. The negative effects of corruption are lower when the employee‘s task is to “provide at least q₀ goods” than when the employee is required to “provide exactly q₀ goods”.     

International portfolio reallocation: Diversification benefits and European monetary union

We investigate the determinants of bilateral international equity and bond portfolio reallocation across a large cross-section of countries spanning over two sample periods: 1997-2001 and 1997-2005. We find that the strongest drivers are the marginal diversification benefits arising from the pure asset component and the initial degree of underweight. This evidence suggests that global portfolio reallocations over the asset boom and bust period were determined by optimal diversification considerations. We also find that due to economic and monetary union (EMU) the weight assigned by euro area investors to investment in euro area countries increased significantly in equity and fixed income portfolios, with a trade diverting effect against the British bond market.     

The long-run impact of ICT

This paper examines the growth impact of digital capital in the US and the EU-15 countries from a long-run perspective. It estimates the elasticity of output with respect to Information and Communication Technology (ICT) within a production function framework, by means of a panel cointegration analysis. ICT capital is found to significantly spur GDP growth over time, and above its income share. This sharply contrasts with existing aggregate evidence, and with the view that the growth impact of this factor is confined to the contribution given to the productivity resurgence of the 1990s.     

The welfare effects of entry: the role of the input market

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market increases welfare. If the input market is not very concentrated, entry in the final goods market may reduce welfare if the entrant is moderately cost inefficient. Hence, entry in the final goods market is more desirable if (1) the input market is very concentrated or (2) the cost difference between the incumbents and the entrant is either very small or very large. It follows from our analysis that entry increases the profits of the incumbent final goods producers if their marginal costs are sufficiently lower than the entrant’s marginal cost.