Optimal incentives to reduce transboundary emissions: Theory and empirical illustration to sulphur emissions in Austria and (former) Czechoslovakia

The observation that only one out of 14 tons of sulphur compounds immissions in Austria originates from Austrian sources highlights the contribution of transboundary pollution (predominantly from Eastern Europe). Therefore, further abatement in Austria has only a marginal impact but is very costly given the already high Austrian abatement standards. Thus, scientists and politicians conclude that it is in the rich countries' (e.g., Austria, Germany and the Scandinavian countries) own interest to support environmental protection in the former centrally planned economies that are apparently less concerned about environmental harms and risks. However, the proposed policies lead to a crowding out of the recipient country's own abatement investments. In order to mitigate such strategic behaviour, which is possible due to asymmetric information, we apply the principal-agent theory to derive optimal incentives. These incentives are in stark contrast to actual policy proposals, in particular, no subsidy should be paid if the neighbouring and polluting country does not care sufficiently about environment. Indeed, the empirical application shows that only sufficient environmental concern in Czechoslovakia warrants subsidies from Austria.We acknowledge discussions with Markus Amann and Gary Brennand and in particular, the very constructive comments from three anonymous referees.     

FOCUS: Corporate Dialogue - a new perspective for Public Relations

Recent initiatives in Germany illustrate how major companies have changed their attitudes towards a critical public - and thereby have improved their economic and ethical performance. Prof. Dr. Horst Steinmann and Dipl.-Kfm. Ansgar Zerfaß belong to the University of Erlangen-Nürnberg, Germany.     

Child Health and Mortality: Does Health Knowledge Matter?

This paper studies factors that influence child health in Bissau,the capital of Guinea-Bissau. This environment is characterisedby high infant mortality, but not by malnutrition. We show thatalthough maternal education is important in determining childhealth and mortality this effect diminishes or disappears whenhealth knowledge is introduced as an explanatory variable. Itemerges that health knowledge has large and positive effectson both child mortality and health when instrumented for tocapture endogeneity.     

Imports of intermediate goods and the efficacy of fiscal policy under flexible exchange rates

Zusammenfassung Die Einfuhr von Zwischenprodukten und die Wirksamkeit der Fiskalpolitik bei flexiblen Wechselkursen. — Gew?hnlich ist der Einflu\ der Fiskalpolitik auf eine offene Volkswirtschaft unter der Annahme untersucht worden, da\ nur Endprodukte international gehandelt werden. Die Krisen im Gefolge der starken ?lpreissteigerungen haben in Erinnerung gebracht, da\ diese Annahme unrealistisch ist, und daher die Frage aufgeworfen, ob und in welchem Umfang die früher gewonnenen Schlu\folgerungen gültig bleiben, falls ein Land auch Rohstoffe und Halbfabrikate einführt. In diesem Artikel wird gezeigt, da\ bei flexiblem Wechselkurs eine starke Tendenz dafür besteht, da\ solche Importe die Wirksamkeit der Fiskalpolitik verst?rken oder abschw?chen, je nachdem, ob es zu einer Aufwertung oder Abwertung der heimischen W?hrung kommt, und da\ insbesondere bei vollkommener internationaler Kapitalmobilit?t eine solche Politik nicht v?llig unwirksam ist.

---

Résumé Les importations des biens intermédiaires et l’efficacité de la politique fiscale sous des conditions des taux de change flexibles. — Traditionellement l’effet de la politique fiscale sur une économie ouverte a été étudié sous la supposition que seulement les biens finaux sont internationalement commercés. Les crises après l’augmentation du prix pétrolier nous ont rappelés que cette supposition est peu réaliste et qu’on doit demander si et à quelle mesure les conclusions auparavant dérivées restent valables si un pays importe aussi des matières premières et des biens demi-finis. Dans cet article les auteurs démontrent que sous des taux de change flexibles il y a une forte tendance que telles importations renforcent ou atténuent l’efficacité de la politique fiscale selon qu’il en résulte une réévaluation ou une dévaluation de la monnaie du pays importatrice. Il est aussi montré que la politique fiscale ne devient pas complètement inefficace si la mobilité des capitaux internationaux est parfaite.

---

Resumen Importaciones de bienes intermedios y la eficacia de la política fiscal bajo tipos de cambio flexibles. — Tradicionalmente el impacto de la política fiscal sobre una economía abierta ha sido estudiada bajo el supuesto que solamente los bienes finales son transados internacionalmente. Las crisis del petróleo nos han recordado que este supuesto no es realista y por tanto hizo surgir la pregunta si y en qué medida las conclusiones derivadas anteriormente permanecen válidas si un país también importa materias primas y productos semi-terminados. En el presente articulo se muestra que bajo tipos de cambio flexibles hay una fuerte tendencia de esas importaciones de aumentar o atenuar la eficacia de la política fiscal todas las veces que resulta en una revaluación o devaluación, respectivamente, de la moneda local y.especialmente, que no resulta completamente inefectiva con una perfecta movilidad internacional del capital.

     

Endogenous Growth: A Knife Edge or the Razor's Edge?*

According to much of the recent growth literature, the dramatic worldwide decline in fertility currently taking place should ultimately lead to global economic stagnation. This pessimistic prediction is not shared by the original innovation‐based growth literature. In recent years, however, this strand of the literature has been criticized for resting on implausible knife‐edge assumptions and for its inconsistency with available evidence. In this paper, we argue that this conclusion is unwarranted.