Knowledge and economic behaviour. A constructivist approach

The knowledge of human knowledge claims a place of its own in economics. Beyond the walls of our discipline, spectacular progress is taking place in the field of empirical research into human knowledge -the so-called “cognitive sciences”. In the light of such advances, the old and new classicals' axiom that nothing scientific can be said beyond the axioms of substantive rationality now looks very much like the protective belt of a degenerating programme. On the other hand, criticisms and alternative programmes will hardly be effective so long as their arguments are purely negative or are drawn from armchair introspection. In the present study I wish to outline a pattern of human knowledge emerging from cognitive research that may be called “constructivist”, and to point out the restrictions it sets on economic analysis. It is also my argument that such a pattern is consistent with the present non- or post-Walrasian trends in economic theory, and that it may provide them with firmer cognitive foundations.     

Exploitation,skills, and inequality

Abstract

This paper uses a computational framework to analyse the equilibrium dynamics of exploitation and inequality in accumulation economies with heterogeneous labour. A novel index is presented which measures the intensity of exploitation at the individual level and the dynamics of the distribution of exploitation intensity is analysed. Various taxation schemes are analysed which may reduce exploitation or inequalities in income and wealth. It is shown that relatively small taxation rates may have significant cumulative effects on wealth and income inequalities. Further, taxation schemes that eliminate exploitation also reduce disparities in income and wealth but in the presence of heterogeneous skills, do not necessarily eliminate them. The inegalitarian effects of different abilities need to be tackled with a progressive education policy that compensates for unfavourable circumstances.     

The quest for a fiscal rule: Italy, 1861–1998

The Italian fiscal history is characterised by a number of fiscal consolidations. In this study, we characterise fiscal policy in terms of non-linear deterministic processes. We find that government spending and taxes can be described as being non-linear trend stationary processes instead of unit roots. A long run equilibrium relationship—a non-linear co-trend—does exist between the two series, fulfilling the intertemporal government budget constraint. We interpret this result as evidence of a long run fiscal rule that different policy makers have adopted, putting public finance in balance.

Economy-wide estimates of the implications of climate change - a rejoinder

[Ackermann, F., Stanton, E., 2008-this issue. A comment on economy-wide estimates of the implications of climate change: human health. Ecological Economics. doi:10.1016/j.ecolecon.2007.10.006] criticise our recent paper [Bosello, F., Roson, R., Tol, R.S.J., 2006. Economy-wide estimates of the implications of climate change: human health. Ecological Economics 58, 579-591] on different levels, calling it “mistaken” and “misleading”. We welcome the opportunity to respond. The critique of [Ackermann, F., Stanton, E., 2008-this issue. A comment on economy-wide estimates of the implications of climate change: human health. Ecological Economics. doi:10.1016/j.ecolecon.2007.10.006] is either misdirected or incorrect.     

Economy-wide Estimates of the Implications of Climate Change: Sea Level Rise

The economy-wide implications of sea level rise in 2050 are estimated using a static computable general equilibrium model. This allows for a better estimate of the welfare effects of sea level rise than the common direct cost estimates; and for an estimate of the impact of sea level rise on greenhouse gas emissions. Overall, general equilibrium effects increase the welfare costs of sea level rise, but not necessarily in every sector or region. In the absence of coastal protection, economies that rely most on agriculture are hit hardest. Although energy is substituted for land, overall energy consumption falls with the shrinking economy, hurting energy exporters. With full coastal protection, GDP increases, particularly in regions with substantial dike building, but utility falls, least in regions that protect their coasts and export energy. Energy prices rise and energy consumption falls. The costs of full protection exceed the costs of losing land. The results also show direct costs – the usual method for estimating welfare changes due to sea level rise – are a bad approximation of the general equilibrium welfare effects; previous estimates of the economic impact of sea level rise are therefore biased.      

An Empirical Analysis of Tijuana Water Consumption

This paper examines time series characteristics of water consumption in Tijuana, a large manufacturing center and port city located in Northwestern Mexico. Home to more than 700 maquiladora assembly plants, it is one of the fastest growing metropolitan economies in Mexico. That growth places intense demands on the municipal water grid. Because it is located in a semi-arid region, Tijuana also faces supply constraints. Given the nature of the problems faced by water authorities, this research uses time series econometric techniques to analyze monthly information on grid hook-ups and per meter water consumption. Empirical estimation results are fairly satisfactory. Out-of-sample simulation results are mixed and indicate that care should be used if these equations are employed for planning purposes. Lag structures in the equations do, however, suggest several policy implications with respect to drought surcharges and rate hikes.      

Tax incentives and foreign direct investment in China

The preferential tax policies for foreign direct investment (FDI) in China were terminated by a tax reform in 2008. This article uses the provincial-level panel data for 1998?2008 before the reform in order to study whether the tax incentive had been a significant determinant of foreign investment decisions. We find that market size and geographic location had significant impacts on the FDI inflow into China but the tax incentive policies were not a sufficient determinant of FDI inflow into China over the periods studied, which provides a rationale for the termination of the tax incentives in FDI at 2008 reform in China.     

Multivariate Lévy processes with dependent jump intensity

In this work we propose a new and general approach to build dependence in multivariate Lévy processes. We fully characterize a multivariate Lévy process whose margins are able to approximate any Lévy type. Dependence is generated by one or more common sources of jump intensity separately in jumps of any sign and size and a parsimonious method to determine the intensities of these common factors is proposed. Such a new approach allows the calibration of any smooth transition between independence and a large amount of linear dependence and provides greater flexibility in calibrating nonlinear dependence than in other comparable Lévy models in the literature. The model is analytically tractable and a straightforward multivariate simulation procedure is available. An empirical analysis shows an accurate multivariate fit of stock returns in terms of linear and nonlinear dependence. A numerical illustration of multi-asset option pricing emphasizes the importance of the proposed new approach for modeling dependence.     

The contributions of interpreters to the development of radical innovations of meanings: the role of ‘Pioneering Projects’ in the sustainable buildings industry

Studies of innovation management have often focused on two domains: technologies and markets. An ever‐increasing standard of living is pushing companies to develop products and services that are not only profitable but also socially responsible. Sustainable housing offers an intriguing empirical setting that allows the investigation of new processes able to support innovations that must be both profitable and socially responsible. Energy‐efficient houses not only require technological changes (new sustainable energy technologies) but also require behavioural changes in consumers' attitudes, decisions and practices about living in sustainable houses. Companies are not only innovative in regard to their own product but apply the entire system of application with which their specific technologies interact. The development of Pioneering Projects requires many skills and competencies that often exceed the capacity and competencies of a single company. In other words, Pioneering Projects are testing grounds for experimentation, where unconventional, temporary partnerships of stakeholders from different industries unite in the development of real market applications. The paper addresses the value of key interpreters in facilitating the development of radical innovations of meanings in the sustainable buildings industry. Specifically, the paper analyses the ability to create value for the Pioneering Projects from the exploration and knowledge diversity of the interpreters and the impact that Pioneering Projects have on the companies' outcomes. Empirical data about Pioneering Projects were collected from two manufacturing companies in Denmark: DOVISTA and Saint‐Gobain Isover.     

Regional Growth and Policies in the European Union: Does the Common Agricultural Policy Have a Counter-Treatment Effect?

This article investigates the impact of both the Common Agricultural Policy and structural policies on European regions by estimating a conditional growth convergence model. The Common Agricultural Policy influences the convergence process by affecting regional aggregate productivity, eventually conflicting with the structural policies designed to promote growth in lagging regions. The conditional convergence model is specified in a dynamic panel data form and applied to 206 regions observed from 1989 to 2000. A GMM estimation is applied in order to obtain consistent estimates of both the convergence parameter β and the impact of the conditioning variables, policy measures in particular.