Effects of international sharing of pollution abatement burdens on income inequality among countries

Improvements in environmental quality will boost output production and hence economic growth. However, although environmental abatement equally benefits all economies in the world, it is shown that, if the private productive resources are not yet accumulated sufficiently in low income economies, income inequality among economies can be widened in the short term not only under equal burden sharing of pollution abatement but even under income-proportional burden sharing. When the marginal productivity is diminishing, the negative effect of the burden is large relative to the positive effect of the improved environment in economies in which resources are not accumulated sufficiently.     

Inference with dependent data using cluster covariance estimators

This paper presents an inference approach for dependent data in time series, spatial, and panel data applications. The method involves constructing t and Wald statistics using a cluster covariance matrix estimator (CCE). We use an approximation that takes the number of clusters/groups as fixed and the number of observations per group to be large. The resulting limiting distributions of the t and Wald statistics are standard t and F distributions where the number of groups plays the role of sample size. Using a small number of groups is analogous to ‘fixed-b’ asymptotics of [Kiefer and Vogelsang, 2002] and [Kiefer and Vogelsang, 2005] (KV) for heteroskedasticity and autocorrelation consistent inference. We provide simulation evidence that demonstrates that the procedure substantially outperforms conventional inference procedures.     

The puzzle of greenhouse gas footprints of oil abundance

The present inquiry lays a groundwork for the analysis of the net greenhouse gas (GHG) footprint of oil in the oil-abundant settings. To address the research question, the study puts forward a three-sector decision model, which provides a common ground for the assessment of the interaction of the structuralist and institutional factors influencing environmental pollution in the oil-reliant economies. The study shows that fossil-fuel abundance triggers forces, which induce diametrically opposed effects concerning atmospheric pollution. These are the rising carbon-intensive oil extraction and processing and fossil-fueled power generation versus shrinkage of the carbon-intensive manufacturing and growth of the low-carbon tertiarization. The theoretical analysis enables compartmentalization of the essential factors, which determine GHG emissions in the respective countries. To assess the significance of the proposed theoretical framework, the study employs multivariate panel co-integration techniques and two-stage fixed effects estimations for a dataset of 38 oil-producing countries for the time period between 1960 and 2018. In contrast to the existing literature, this study drives apart from the black box approaches that employ just one omnibus variable, per capita income.     

Utility maximization under a shortfall risk constraint

The article analyzes optimal portfolio choice of utility maximizing agents in a general continuous-time financial market model under a joint budget and downside risk constraint. The risk constraint is given in terms of a class of convex risk measures. We do not impose any specific assumptions on the price processes of the underlying assets. We analyze under which circumstances the risk constraint is binding. We provide a closed-form solution to the optimization problem in a general semimartingale framework. For a complete market, the wealth maximization problem is equivalent to a dynamic portfolio optimization problem.     

Forecasting the volatility of asset returns: The informational gains from option prices

A new class of forecasting models is proposed that extends the realized GARCH class of models through the inclusion of option prices to forecast the variance of asset returns. The VIX is used to approximate option prices, resulting in a set of cross-equation restrictions on the model’s parameters. The full model is characterized by a nonlinear system of three equations containing asset returns, the realized variance, and the VIX, with estimation of the parameters based on maximum likelihood methods. The forecasting properties of the new class of forecasting models, as well as a number of special cases, are investigated and applied to forecasting the daily S&P500 index realized variance using intra-day and daily data from September 2001 to November 2017. The forecasting results provide strong support for including the realized variance and the VIX to improve variance forecasts, with linear conditional variance models performing well for short-term one-day-ahead forecasts, whereas log-linear conditional variance models tend to perform better for intermediate five-day-ahead forecasts.     

Consumer cooperatives as an alternative form of governance: The case of the broadband industry

With a growing number of consumer cooperatives in non-agrarian industries such as energy and broadband, there is a need to better understand their emergence as a viable form of governance. In this context, the paper uses Mikami’s (2010) model on consumer cooperatives to explain their emergence as a result of their ability to generate additional equity financing through the membership market. It focuses on the motivations of consumers to financially contribute to a cooperative by examining the risks and benefits associated with the investment. Based on a survey of 759 consumers, it links their motivations for joining a cooperative to different forms of risks and benefits associated with the investment. It shows that the risks related to cost sharing and switching costs are important determinants for consumers. Other factors that affected the likelihood of joining a cooperative were expected benefits with respect to user network externalities and infrastructure gains.     

Firm-level determinants of tax evasion in transition economies

Business tax evasion is an important issue for governments. Yet the factors that determine business tax evasion have not been sufficiently examined in the literature in general, and in transition contexts in particular. To address this gap, this study uses the WB/EBRD Business Environment and Enterprise Performance Survey (BEEPS) database with a sample of over 12,692 firms from 26 transition economies. Applying various modelling strategies, we argue that tax evasion is a function of firm-level and institutional-level variables. We contribute to the literature by providing robust evidence showing that the perceived tax burden has a positive impact on tax evasion. We also find that the tax evasive behaviour of firms is positively influenced by low trust in government and in the judicial system as well as by higher perceptions of corruption and higher compliance costs. We find that smaller firms, individual businesses and firms in sectors that are less visible to the tax administration are more likely to get involved in evasive behaviour. Overall, institutional factors play an important role in determining firms’ tax evasion behaviour in transition economies. This finding has important policy implications.     

The determinants of corruption in transition economies

This paper examines the determinants of corruption in transition economies. We found that the progress of structural reform, comprising marketization, rule of law, and democratization had a crucial impact on the extent of corruption control in former socialist countries.     

Government solvency and financial markets: Dynamic panel estimates for the European Monetary Union

We assess government solvency in the European Monetary Union (EMU), controlling for the interaction of fiscal policy with financial markets. We find a positive interaction, reflecting market-based pressures for fiscal improvement, and significant debt stabilization efforts, weakened in the post-EMU era.     

Integration, social distress, and policy formation

I study the integration of regions in the form of a merger of populations, which I interpret as a revision of people’s social space and their comparison set; I illustrate the way in which a merger can aggravate social distress; and I consider policy responses. Specifically, I view the merger of populations as a merger of income vectors; I measure social distress by aggregate relative deprivation; I demonstrate that a merger increases aggregate relative deprivation; and I show that a social planner is able to reverse this increase by means of least-cost, post-merger increases in individual incomes, but is unable to counter it by relying exclusively on a self-contained income redistribution that retains individual levels of wellbeing at their pre-merger levels.