The impact of the UK aviation tax on carbon dioxide emissions and visitor numbers

We use a model of domestic and international tourist numbers and flows to estimate the impact of the recent and proposed changes in the Air Passenger Duty (APD) of the United Kingdom. We look at four different scenarios (abolishing the APD, keeping the 2001 APD level, the 2007 APD and the Conservative Party's “Green Miles” proposal) using base, high and very high elasticity levels as well as assumptions about the substitutability between domestic and international holidays and the effects of a carbon tax. We find that the recent doubling of the APD has the perverse effect of increasing carbon dioxide emissions, albeit only slightly, because it reduces the relative price difference between near and far holidays. Tourists arriving into the UK would fall slightly. The number of tourists travelling from the UK would fall in the countries near to the UK, and this drop would be only partly offset by displaced tourists from the UK. Tourists leaving the UK for countries further a field would increase. The proposal of the Conservative Party to exempt the first 2000 miles (for UK residents) would decrease emissions by roughly the same amount as abolishing the APD altogether—but the number of tourists arriving into the UK would not rise. These results are reversed if we assume that domestic holidays and foreign holidays are close substitutes. If the same revenue were raised with a carbon tax rather than a boarding tax, emissions would fall rather than rise.     

Competing at the frontier: The changing role of technology policy in Singapore's economic strategy

For an economy competing at the global frontier, an innovation-based growth strategy requires a well-developed technological infrastructure, a set of capabilities-focused technology policies, as well as an institutional environment that stimulates innovation and entrepreneurship. This paper examines the role played by science and technology policy in an economy's transition to an innovation-based growth strategy. We discuss the challenges governments face as they restructure economic institutions to deepen R&D capabilities and encourage technology creation. We review Singapore's experience in this regard and assess its ongoing efforts to remake itself to compete at the global frontier.     

Some methods for assessing the need for non-linear models in business cycle analysis

It is often suggested that non-linear models are needed to capture business cycle features. In this paper, we subject this view to some critical analysis. We examine two types of non-linear models designed to capture the bounce-back effect in US expansions. This means that these non-linear models produce an improved explanation of the shape of expansions over that provided by linear models. But this is at the expense of making expansions last much longer than they do in reality. Interestingly, the fitted models seem to be influenced by a single point in 1958 when a large negative growth rate in GDP was followed by good positive growth in the next quarter. This seems to have become embedded as a population characteristic and results in overly long and strong expansions. That feature is likely to be a problem for forecasting if another large negative growth rate was observed.