Regulating a Polluting Firm Under Asymmetric Information

This paper reinterprets the Laffont-Tirole model of regulation under asymmetric information to cover the case of pollution control. The asymmetry of information concerns the firm's cost of lowering its pollution. The regulator has three objectives: Ensuring an efficient abatement level, generating 'green taxes' and securing the survival of the firm. We show that when optimal abatement is important relative to tax generation, the regulator cannot use the policy of offering the firm a set of linear tax schemes from which to choose. By contrast, this policy is optimal in the Laffont-Tirole model under certain not very restrictive assumptions. We proceed to establish a simple rule for when to shut-down inefficient types. In an example with specific functional forms, we derive the optimal tax function both analytically and graphically. We show the effect on the optimal tax system of a change in a technological parameter.     

LRN 2016 SPECIAL – high capacity vehicles and modal shift from rail to road: combining macro and micro analyses

ABSTRACT

This paper addresses a road transport policy of allowing high capacity vehicles (HCVs) on the roads. The purpose is to examine the effect reduced road transport costs from HCVs can have on a modal shift. Two studies of HCV implementation in Sweden were combined. A micro-based case study modelled the distribution network of a major retailer in scenarios based on actual cost and flow data. A macro analysis was conducted of the cross-elasticity between rail and road combined with detailed price changes for lorries considering the product characteristics in different industries. The results show the long-term effects of HCVs on the modal shift for heavier, and heavier and longer vehicles. The combined approach triangulates the results and highlights the effects of logistics decision-making, transport network characteristics, and time. It emphasises linkages between modal shift and road transport efficiency, price reductions, geographical characteristics, product types, train organisation, and the capacity of HCVs.     

Zwei Ungleichungen sur Ergänzung des Tchebycheffschen Lemmas

Abstract

Sei ?(x) eine für ? ∞ < x < + ∞ definierte reelle nichtnegative Funktion und      

Designing <Emphasis Type="Italic">interaction</Emphasis>: How do interaction design students address interaction?

Interaction design is usually described as being concerned with interactions with and through artifacts but independent of a specific implementation. Design work has been characterized as a conversation between the designer and the situation and this conversation poses a particular challenge for interaction design as interactions can be elusive and difficult to describe. Moreover, current trends in interaction design introduce physical materials to a higher degree resulting in even more complex design situations. There is a lack of knowledge about how interaction designers, and especially students, address the very phenomenon of interaction. This study contributes by describing how interaction design students attempt to address aspects of interaction and by presenting an in-depth analysis in the context of an interactionary-type design exercise. The quantitative and qualitative findings showed that (1) the design students brought up aspects of interactivity and dynamics through talk and gestures but (2) a comprehensive design idea about interaction did not guide the design work and they were to a little degree engaged in planning sequences of interactions or interaction on a longer time scale, (3) using physical materials disrupted interaction design, and, (4) there was a lack of continuity when addressing interaction compared to how proposals about artifacts were pursued. As interaction is the core of interaction design, the findings are discussed in terms of how the immaterial design materials may “talk back” to designers. Practical strategies for how the observed phenomena could be constructively addressed within interaction design education are suggested.     

Commodity taxes and welfare under endogenous market conduct

We consider consumption taxes in a model of endogenous Cournot versus Bertrand competition. It is argued that when the choice of unit versus ad valorem taxes affects longer-term decisions beyond the customary price or quantity decisions, the mix of the two taxes co-determines market conduct. This gives ad valorem taxes an anti-competitive effect that harms ad valorem taxes’ efficiency in comparison with unit taxes. We show that a mix of the taxes—or a unit tax alone if we compare one or the other of the taxes—is sometimes welfare superior on account of consumer-price and tax revenue effects. A practical implication of our findings is that pass-through rates are only sometimes useful guides for policy. In fact, we show when the proper response to demand for higher revenue is a higher unit tax rate and a lower ad valorem tax rate.     

Der Wert der Worte – Wie digitale Methoden helfen,Kommunikations- und Wirtschaftswissenschaft zu verknüpfen

The use of digital methods offers a chance to connect communication science with economics. In recent years, a growing body of research in economics has turned its attention to media content, assuming that journalistic coverage contains hitherto neglected information relevant for business cycles or financial market movements. Interestingly, these approaches largely ignore communication science’s established theories and empirical findings. This paper aims at building a bridge between the two disciplines. Its contribution is threefold: a) it provides an overview of the most important approaches in economics that incorporate media content; b) it operationalizes the concept of the “narrative”, as it is used in economics, and distinguishes it from the concept of the “frame”, essential in communication science; c) exemplifying our approach, we present a new Uncertainty Perception Indicator (UPI) based on the topic modeling method Latent Dirichlet Allocation (LDA), that enables us to isolate different factors of economic policy uncertainty contained in media coverage.Economic studies treat journalistic media content as a proxy for sentiment prevalent in society. Typically, they rely on frequency analyses of certain keywords, like “recession” or “inflation”. Even more sophisticated approaches, such as Shiller (2017), who calls for establishing a new branch of “narrative economics”, or Baker et al. (2016), who construct a comprehensive set of media-based indicators, make no or little reference to communication science. This neglect could be discounted as pure ignorance, but this misses the point. Being a predominantly empirical discipline today, economics relies on long time-series of data, that have not been available for media content, a gap rendering the two disciplines largely incompatible.The gap is also reflected in terminology. “Frame” is a major analytical concept in communication science, while the term “narrative” has become in vogue in economics. Although both concepts are closely connected, they are rarely properly distinguished from each other. “Frame” can be considered as a rather static concept that applies during a limited period of time. “Narrative”, in contrast, implies dynamic properties, i.?e., the sorting of events, causes and effects over time, that explain how the current state of the world has come about, as stressed by Tenenboim-Weinblatt et al. (2016).In this paper, we propose a synergetic concept. Following Entman (1993), a media frame contains four elements: a) a problem definition, b) a problem diagnosis, c) a moral judgement, and d) possible remedies. We augment this approach by adding two more elements. According to our definition, a media narrative comprises a frame, or several ones, plus e) one or several protagonists—persons, institutions, or social groupings (nations, classes, etc.)—, whose relationships are (often) antagonistic and may change over time; and f) events, that are chronologically integrated and that are (often) assumed to constitute causal relationships. To put it metaphorically: a frame is to a narrative what a still photo is to a movie. Both are valuable concepts; the still photo shows more details, while the movie provides a contextualization over time.Topic models like LDA are valuable tools for the measurement of media narratives. The probabilistic approach enables researchers to conduct what may be called “macro-content analyses”, an exercise that focuses on average reporting patterns in large text corpora and can be translated into numerical time-series, thereby facilitating compatibility with empirical economics. Based on a topic’s frequency analysis, its top words and top articles, “mean media narratives” can be formulated, that integrate certain events, protagonists and frames.In our case study, we exemplify this concept by applying it to an indicator that is currently popular in economics, the Economic Policy Uncertainty Index (Baker et al. 2016). The EPU aims at capturing political developments that are exogenous to economic models and therefore unpredictable. Essentially, the indicator is based on the counts of articles containing a set of search words, such as “uncertain”, “economic” as well as institutions like the European Central Bank. Using identical search words as the EPU for Germany, we construct a similar corpus for the years 1994 to 2017. By conducting an LDA-based analysis, we are able to extract additional relevant information from the data. In particular, the evolution of different uncertainty factors and their development over time can be detected.Our Uncertainty Perception Indicator (UPI) contains six relevant news topics that are highly relevant for market developments: central banks, the national government, international politics, the business cycle, companies, and society. While the EPU merely shows how often uncertainty concerning economic policy is mentioned in the media, the UPI also indicates the origins of uncertainty. By grouping the six topics into three analytical categories—governments, markets, and society—we find a distinct break in the time-series. Before the financial crisis of 2008, the perception of uncertainty was rather balanced between the three factors. Since then, however, economic uncertainty has mainly been driven by political actors, most prominently by central banks. The corresponding narratives are a two-chapter story: in the first part, up to 2008, stable financial markets and smoothed business cycles prevailed, making central banking a rather straight-forward task. The second part is characterized by multiple crises, leaving central banks as dominant actors, that intervened with unconventional measures. Thereby, they became stabilizing forces, but at the same time sources of uncertainty with respect to the timing and the impact of these measures.     

Konjunkturprogramme helfen!

Ohne Zusammenfassung Gustav A. Horn ist wissenschaftlicher Direktor des Instituts für Makro?konomie und Konjunkturforschung (IMK) in der Hans-B?ckler-Stiftung in Düsseldorf     

Rules,discretion, and international monetary and fiscal policy coordination

This paper considers the implications of international policy coordination when both monetary and fiscal policy choices are endogenous. We show that a movement from insular monetary commitment to international monetary policy coordination will, if fiscal policies are not coordinated, produce higher output and public expenditure levels at the expense of higher inflation rates. We also show that the concurrent coordination of monetary and fiscal policies raises output and inflation while lowering public expenditure relative to a regime of monetary coordination alone. We conclude that the arguments for concurrent monetary and fiscal policy coordination fail to have a clear-cut theoretical basis.