Political Measures for Strategic Environmental Policy with External Effects

This paper investigates an environmental policy designed to reduce the emission of pollutants under uncertainty, with the agent problem as an optimal stopping problem. We first analyze the two cases in which there are one agent and two competing agents by following Ohyama and Tsujimura (2005). When we consider a model of strategic agents, we need to analyze the external economic effect that is peculiar to an agent’s environmental policy implementation. Then, to improve and resolve these external effects, we examine three alternative political measures, comprising an environmental subsidy, an environmental tax and an emission trading system. The results of the analysis indicate that the environmental subsidy and environmental tax promote environmental policy. However, they do not create an incentive to be the leader. On the other hand, an emissions trading system not only promotes environmental policy but also creates an incentive for leadership.This paper was previously circulated under the title “Political Measures for Strategic Environmental Policy with Induced Effects”. The authors would like to thank Masaaki Kijima for helpful comments. The authors would also like to thank Alistair Munro and two anonymous referees providing detailed comments and suggestions. This research was partially supported by Daiwa Securities Group Inc. The second-named author was partially supported by the Ministry of Education, Culture, Sports, Science and Technology, Grant-in-Aid for Scientific Research (B) (2), 16310118.     

Introduction to Repeated Games with Private Monitoring

We present a brief overview of recent developments in discounted repeated games with (imperfect) private monitoring. The literature explores the possibility of cooperation in a long-term relationship, where each agent receives imperfect private information about the opponents' actions. Although this class of games admits a wide range of applications such as collusion under secret price-cutting, exchange of goods with uncertain quality, and observation errors, it has fairly complex mathematical structure due to the lack of common information shared by players. This is in sharp contrast to the well-explored case of repeated games under public information (with the celebrated Folk Theorems), and until recently little had been known about the private monitoring case. However, rapid developments in the past few years have revealed the possibility of cooperation under private monitoring for some class of games. Journal of Economic Literature Classification Numbers: C72, C73, D43, D82, L13, L41.     

EKC-type transitions and environmental policy under pollutant uncertainty and cost irreversibility

Previous studies have suggested that some pollutant levels first increases due to the economic growth and then start decreasing, the pattern being called the “environmental Kuznets curve” (EKC). We examine EKC-type transitions of pollutant levels not with respect to economic growth but more generally in time. Assuming that each policy maker optimally executes the two switching options of regulation and unregulation for pollution, the switching dynamics of environmental policy can be described by an alternating renewal process. It is shown that the double Laplace transform of transition density of a pollutant level can be obtained by a novel application of renewal theory. The expected level of overall pollutants is then calculated numerically and found to exhibit either a Λ‐shaped or an N-shaped pattern in time. Our results present a simple explanation for the EKC-type transitions of pollutant levels within a real options framework.     

Interindustry flows, non-traded intermediate goods and the theory of effective protection : A general equilibrium analysis

This paper examines the response of net and gross outputs of tradeable goods to changes in tariff structure in the context of a comprehensive general equilibrium model with interindustry flows and non-traded, as well as imported, intermediate goods. There are two major results. First, the nominal rate of tariffs on a tradeable good is shown to correctly indicate the movements of its net output under most general conditions. Second, the (modified and) generalized Corden index of effective protection for a tradeable good is revealed to be in a close relationship with the behavior of its gross output under certain restrictions on the input substitutability of industries.     

Decentralized trade, random utility and the evolution of social welfare

We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are affected by persistent random shocks stemming from agents’ maximization of random utility. By imposing structure on the utility noise term—logit distribution—one is able to calculate exactly the stationary distribution of the perturbed Markov process for any level of noise. We show that the stationary distribution places the largest probability on the maximizers of weighted sums of the agents’ (intrinsic) utilities, and this probability tends to 1 as noise vanishes.     

URBANIZATION, URBAN CONCENTRATION AND ECONOMIC DEVELOPMENT

An international comparative study of the relations among the process of urbanization, urban concentration and economic development, and income distribution was performed by using data of developing and developed countries. Cross-section analyses at certain time periods for capturing "long-run" effects as well as time-series analyses for some countries for "short-run" effects were done taking advantage of the "rectangular" array of data. There were several interesting results: the pattern of unemployment rate in most developing countries shows an inverted-U shaped curve with respect to the degree of urbanization; the pattern of urban concentration is in the form of an inverted-U with respect to the economic development level; and the degree of inequality of income distribution seems to react in an inverted-U form to the variances in the extent of urbanization.     

Partial Free Trade Agreements and Economic Welfare: Reconsidering GATT Article 24

This paper generalizes the Kemp–Wan theorem on the customs union to cover partial and incomplete free trade agreements emerging all over the world and elucidates the conditions which ensure that they are potentially conducive to the economic welfare of member countries without harming the rest of the world. In the light of this generalization, it also reconsiders two well‐known conditions stipulated in Article 24 of the GATT required for the formation of FTAs.     

The Erosion and Sustainability of Norms and Morale

I examine why the performance of an organization is often subject to gradual erosion. I assume that players are motivated partly by psychological factors, norms and morale, and that they are willing to exert extra efforts if others do so. I show that repeated random shocks induce the erosion of the extra efforts supported by norms and morale, but they do not completely decay; in the long run a certain range of efforts are sustainable. Hence different organizations typically enjoy diverse norms and morale, which persist for a long time, in the vicinity of the equilibrium determined by material incentives.