Berkeley Electronic Press

Robust Multidimensional Welfare Comparisons: One Vector of Weights, One Vote

Stergios Athanassoglou — Wed, 22 May 2013 01:22:35 PDT

Many aspects of social welfare are intrinsically multidimensional. Composite indices at-tempting to reduce this complexity to a unique measure abound in many areas of economics and public policy. Comparisons based on such measures depend, sometimes critically, on how the different dimensions of performance are weighted. Thus, a policy maker may wish to take into account imprecision over composite index weights in a systematic manner. In this paper, such weight imprecision is parameterized via the ε-contamination framework of Bayesian statistics. Subsequently, combining results from polyhedral geometry, social choice, and theoretical computer science, an analytical procedure is presented that yields a provably robust ranking of the relevant alternatives in the presence of weight imprecision. The main idea is to consider a vector of weights as a voter and a continuum of weights as an electorate. The procedure is illustrated on recent versions of the Rule of Law and Human Development indices.

Marginal Intra-industry Trade and Adjustment Costs in Labour Market

Nuno Carlos Leitão et al. — Wed, 22 May 2013 01:18:40 PDT

The objective of this study is to provide some empirical evidences on the existence of labor market adjustments according to smooth adjustment hypothesis (SAH) under the impact of intra-industry trade (IIT) considering the Portuguese case over a time span between 1995 and 2006. The main methodological issue of this study consists in showing that it is preferable to use the GMM-System approach with orthogonal transformation of data. The key outcome consists in highlighting a negative linkage between marginal intra-industry trade and the amplitude of employment changes for this particular market. In addition, we find a negative correlation between changes of employment and changes in domestic consumption. Moreover, the relationship between growth of productivity and market structure is according to smooth adjustment hypothesis.

Energy Intensity Developments in 40 Major Economies: Structural Change or Technology Improvement?

Enrica De Cian et al. — Tue, 21 May 2013 05:42:31 PDT

This study analyzes energy intensity trends and drivers in 40 major economies using the WIOD database, a novel harmonized and consistent dataset of input-output table time series accompanied by environmental satellite data. We use logarithmic mean Divisia index decomposition to (1) study trends in global energy intensity between 1995 and 2007, (2) attribute efficiency changes to either changes in technology or changes in the structure of the economy, and (3) highlight sectoral and regional differences. We first show that heterogeneity within each sector across countries is high. These general trends within the sectors are dominated by large economies, first and foremost the United States. In most cases, heterogeneity is lower within each country across the different sectors. Regarding changes of energy intensity at the country level, improvements between 1995 and 2007 are largely attributable to technological change while structural change is less important in most countries. Notable exceptions are Japan, the United States, Australia, Taiwan, Mexico and Brazil where a change in the industry mix was the main driver behind the observed energy intensity reduction.

Evaluating the Global Role of Woody Biomass as a Mitigation Strategy

Alice Favero et al. — Tue, 21 May 2013 03:17:26 PDT

As policy makers consider stringent targets for greenhouse gas emissions, integrated assessment models are increasingly relying on biomass energy as a critical energy source. However, it is not clear how much woody biomass to expect across time and across the planet. The integrated assessment models simply do not have enough detail about global forests and arable land to make careful forecasts of biomass supply over time. Integrating the complex dynamic demand for bioenergy from the IAMs with the complex dynamic structure of forests and forest supply is a daunting intertemporal task. This study examines the market for woody biomass by combining the integrated assessment model WITCH with the global dynamic forestry model GTM. Three carbon tax schedules are used to simulate different mitigation policies that lead to radiative forcing levels of 3.7, 3.2 and 2.5 W/m2 and a baseline scenario with no mitigation policies. WITCH determines the demand for woody biomass and GTM determines the supply of woody biomass over time. Moving from a mild to stringent mitigation policy would increase the demand of woody biomass from 8.2 to 15.2 billion m3/yr while the international price of wood would increase 4 to 9 times relative to the baseline scenario by 2100. This would shrink the demand for industrial wood products from 80% to 90% with the biomass program. Forest area will expand by 70-95% leading to increased storage of 685-1,279 GtCO2 in forest by 2100. Overall, the biomass program with the CCS technology plays a key contribution to overall GHG emission reductions in all scenarios contributing 20-27% of all mitigation for 2020-2100.

Contagious Cooperation, Temptation, and Ecosystem Collapse

Andries Richter et al. — Tue, 21 May 2013 03:07:33 PDT

Real world observations suggest that social norms of cooperation can be effective in overcoming social dilemmas such as the joint management of a common pool resource – but also that they can be subject to slow erosion and sudden collapse. We show that these patterns of erosion and collapse emerge endogenously in a model of a closed community harvesting a renewable natural resource in which individual agents face the temptation to overexploit the resource, while a cooperative harvesting norm spreads through the community via interpersonal relations. We analyze under what circumstances small changes in key parameters (including the size of the community, and the rate of technological progress) trigger catastrophic transitions from relatively high levels of cooperation to widespread norm violation – causing the social-ecological system to collapse.

Climate Change and Adaptation: The Case of Nigerian Agriculture

Francesco Bosello et al. — Tue, 21 May 2013 02:58:17 PDT

The present research offers an economic assessment of climate change impacts on the four major crop families characterizing Nigerian agriculture, covering more than 80% of agricultural value added. The evaluation is performed shocking land productivity in a computable general equilibrium model tailored to replicate Nigerian economic development until the mid of this century. The detail of land uses in the model has been also increased differentiating land types per agro ecological zones. Uncertainty on future climate is captured, using, as input, yield changes computed by a crop model, covering the whole range of variability produced by an envelope of one RCM and tem GCM runs. Climate change turns to be unambiguously negative for Nigeria in the medium term with production losses, increase in crop prices, higher food dependency on foreign imports and GDP losses in all the simulations after 2025. In a second part of the paper a cost effectiveness analysis of adaptation in Nigeria agriculture is conducted. Adaptation practices considered are a mix of cheaper “soft measures” and more costly “hard” irrigation expansion. The main result is that cost effectiveness of the whole package crucially depends on the possibility to implement adaptation exploiting low cost opportunities. In this case all climate change damages can be offset with a benefit cost ration larger than one in all the climate regimes. Expensive irrigation expansion should however be applied on a much more limited acreage compared with soft measures. If adaptation costs are those of the high end estimates, full adaptation ceases to be cost/effective.This points out the need of a careful planning and implementation of adaptation, irrespectively on the type, looking for measures apt to control its unit cost.

Bepress Announces First Graduating Class of Institutional Repository Manager Certification Course

bepress — Wed, 01 May 2013 15:54:34 PDT

This spring, bepress offered its first ever IR Manager Certification Course, and we’re proud to announce our first graduating class. Hailing from educational organizations from around the world, all twenty participants rated the course “extremely helpful” and indicated that they would recommend it to others.

Jean-Gabriel Bankier, CEO of bepress, was delighted with the response to the company’s first on-site training for repository managers, noting that enrollment exceeded expectations. “We had to have a waiting list. It clearly demonstrates the demand for this kind of training, and no one else is offering anything like it.”

Topics ranged from current trends in scholarly communications to best practices for digital collection development, copyright compliance, faculty engagement, and outreach. In addition, the course included workshops and training sessions where IR administrators worked directly with their Digital Commons Consulting Services representatives. Course participants gained hands-on experience with important tools for managing a repository and implemented immediate improvements to their individual IRs.

Participants praised both the comprehensive scope and the individualized attention the course offered. As Kristine Mudrick, Serials and Electronic Resources Librarian at Saint Joseph’s University commented, “It was really valuable to have one-on-one, real-time dialogue with my consultant.” Jeremy Watson, Digital Services Librarian at Fordham University, remarked, “I am totally inspired and ready to charge ahead with my repository more efficiently and dynamically.”

Based on positive feedback from our first graduating class, bepress will repeat the IR Manager Certification Course in the spring of 2014. For more information, please contact Ann Taylor (ataylor@bepress.com), Director of Outreach and Scholarly Communications, or Eli Windchy (ewindchy@bepress.com), VP, Consulting Services.

To read more about bepress University and upcoming courses, see http://digitalcommons.bepress.com/bepressu/ .

Die Schäden von Preiskartellen: Vom Partial- zum Totalmodell

Thomas Eger et al. — Fri, 26 Apr 2013 01:51:23 PDT

In Wissenschaft und Praxis scheint Einigung darüber zu herrschen, welche Schäden von Preiskartellen ausgehen. Dabei wird ausschließlich partialanalytisch argumentiert. Es wird nur derjenige Sektor betrachtet, in dem das Kartell besteht. Auswirkungen auf andere Sektoren und auf die Beschäftigungsseite werden nicht berücksichtigt. (Siehe dazu umfassend Ashurst 2004 sowie Oxera 2009).

Es wird zum einen behauptet, dass ausschließlich die Nachfrager (Endkonsumenten und Zwischenhändler) Geschädigte sind. Zum anderen wird gezeigt, dass deren Schaden aus der Summe von Gewinn des Kartells und deadweight loss besteht. Beide Aussagen sind in dieser Ausschließlichkeit nicht richtig.

In diesem Aufsatz werden Nachfragewirkungen auf andere Sektoren und Beschäftigungswirkungen mitberücksichtigt. Es wird gezeigt, dass zum einen neben den Nachfragern auch die Faktoreigner einen Schaden durch ein Preiskartell erleiden und dass zum anderen der Schaden für die Nachfrager auch nur aus dem Kartellgewinn bestehen kann oder sogar ganz verschwindet.

Directing Technical Change from Fossil-Fuel to Renewable Energy Innovation: An Empirical Application Using Firm-Level Patent Data

Joëlle Noailly et al. — Fri, 19 Apr 2013 01:17:16 PDT

This paper investigates the determinants of directed technical change in the electricity generation sector. We use firm-level data on patents led in renewable (REN) and fossil fuel (FF) technologies by about 7,000 European firms over the period 1978-2006. We separately study specialized firms that innovate in only one type of technology during the sample period, and mixed firms that innovate in both technologies. We find that for specialized firms the main drivers of innovation are fossil-fuel prices, market size, and firms' past knowledge stocks. Also, prices and market size drive the entry of new REN firms into innovation. By contrast, we find that innovation by mixed firms is mainly driven by strong path-dependencies since for these firms past knowledge stock is the major driver of the direction of innovation. These results imply that generic environmental policies that affect prices and energy demand are mainly effective in directing innovation by small specialized firms. In order to direct innovation e orts of large mixed corporations with a long history of FF innovation, targeted R&D policies are likely to be more effective.

Business Groups as Hierarchies of Firms: Determinants of Vertical Integration and Performance

Carlo Altomonte et al. — Fri, 19 Apr 2013 01:12:17 PDT

We explore the nature of Business Groups, that is network-like forms of hierarchical organization between legally autonomous firms spanning both within and across national borders. Exploiting a unique dataset of 270,474 headquarters controlling more than 1,500,000 (domestic and foreign) affiliates in all countries worldwide, we find that business groups account for a significant part of value-added generation in both developed and developing countries, with a prevalence in the latter. In order to characterize their boundaries, we distinguish between an affiliate vs. a group-level index of vertical integration, as well as an entropy-like metric able to summarize the hierarchical complexity of a group and its trade-off between exploitation of knowledge as an input across the hierarchy and the associated communication costs. We relate these metrics to host country institutional characteristics, as well as to the performance of affiliates across business groups. Conditional on institutional quality, a negative correlation exists between vertical integration and organizational complexity in defining the boundaries of business groups. We also find a robust (albeit non-linear) positive relationship between a group's organizational complexity and productivity which dominates the already known correlation between vertical integration and productivity. Results are in line with the theoretical framework of knowledge-based hierarchies developed by the literature, in which intangible assets are a complementary input in the production processes.

Heterogeneous Beliefs, Regret, and Uncertainty: The Role of Speculation in Energy Price Dynamics

Marc Joëts — Fri, 19 Apr 2013 01:07:20 PDT

This paper proposes to investigate the impact of financialization on energy markets (oil, gas, coal and electricity European forward prices) during both normal times and extreme fluctuation periods through an original behavioral and emotional approach. To this aim, we propose a new theoretical and empirical framework based on a heterogeneous agents model in which fundamentalists and chartists co-exist and are subject to regret and uncertainty. We find significant evidence that energy markets are composed by heterogeneous traders which behave differently depending on the intensity of the price fluctuations and uncertainty context. In particular, energy prices are mainly governed by fundamental and chartist neutral agents during normal times whereas they face to irrational chartist averse investors during extreme fluctuations periods. In this context, the recent energy prices surge can be viewed as the consequence of irrational exhuberance. Our new theoretical model outperforms the random walk in out-of-sample predictive ability.

Geoengineering and Abatement: A “flat” Relationship under Uncertainty

Johannes Emmerling et al. — Fri, 19 Apr 2013 01:07:19 PDT

The potential of geoengineering as an alternative or complementary option to mitigation and adaptation has received increased interest in recent years. The scientific assessment of geoengineering is driven to a large extent by assumptions about its effectiveness, costs, and impacts, all of which are highly uncertain. This has led to a polarizing debate. This paper evaluates the role of Solar Radiation Management (SRM) on the optimal abatement path, focusing on the uncertainty about the effectiveness of SRM and the interaction with uncertain climate change response. Using standard economic models of dynamic decision theory under uncertainty, we show that abatement is decreasing in the probability of success of SRM, but that this relation is concave and thus that significant abatement reductions are optimal only if SRM is very likely to be effective. The results are confirmed even when considering positive correlation structures between the effectiveness of geoengineering and the magnitude of climate change. Using a stochastic version of an Integrated Assessment Model, the results are found to be robust for a wide range of parameters specification.

Cost-Reducing R&D in the Presence of an Appropriation Alternative: An Application to the Natural Resource Curse

Klarizze Anne Martin Puzon — Fri, 19 Apr 2013 01:02:45 PDT

This study proposes a new mechanism for the resource curse: crowding-out of innovation due to the existence of an option to engage in conflict. Using a game theoretical framework, it is argued that an increase in the amount of natural resources (in the informal sector here conflict for a common-pool rent materializes) reduces the incentives of entrepreneurial groups to engage in cost-reducing R&D (in the non-resource sector where production occurs). Compared to most models of the resource curse, the impact of resource abundance on income and welfare was interestingly observed to be non-monotonic. An increase in the amount of resources in the common pool induces intensified conflict among groups and less R&D investment. Depending on the relative strengths of the income and diversion effects, three scenarios were exhibited. First, there is a 1.) Pure Blessing. This happens when both the extent of technological spillovers and the initial level of resource are low. Starting from scarcity, the increase in natural resource generates an overall jump in the groups' income levels. Even if an increase in resources decreases innovation in the formal sector, both income and welfare still go up. Meanwhile, for intermediate initial values of the natural resource, there is a 2.) Pseudo-curse. A resource boom induces an immediate income effect. However, this income gain is dominated by the indirect diversion effect due to lower output and higher price (because of less cost-reducing R&D). Consequently, while income increases, the welfare of the economy decreases. The range of resource levels where this occurs is greater when spillovers are high. Finally, a 3.) Double Curse occurs for extremely high initial levels of natural resources. Both aggregate income of the economy and welfare suffer.

An Exploration of the Link Between Development, Economic Growth, and Natural Risk

Stéphane Hallegatte — Fri, 19 Apr 2013 00:52:20 PDT

This paper investigates the link between development, economic growth, and the economic losses from natural disasters in a normative analytical framework, with an illustration on hurricane flood risks in New Orleans. It concludes that, where capital accumulates through increased density of capital at risk in a given area, it is optimal for (i) the probability of disaster occurrence to decrease with income; (ii) the capital at risk – and thus the economic losses in case of disaster – to increase faster than economic growth; (iii) the average annual losses to grow faster than income at low levels of development and slower than income at high levels of development. In that case, increasing risk-taking reinforces economic growth, and improving protections transfer risks from frequent low-intensity events to rarer high-impact events. These findings are robust to a broad range of modeling choices and parameter values, and to the inclusion of risk aversion. Risk-taking is both a driver and a consequence of economic development, and should not be indiscriminately suppressed. The observation of a trend in disaster losses should not be confused with the presence of excessive risk taking. In a descriptive framework, suboptimal decision-making (the introduction of prospect theory's decision weights, biases in risk perception and myopic expectations) may amplify these trends and lead to excessive or insufficient risk taking. In all instances, the world is very likely to experience fewer but more costly disasters in the future.

Macroeconomic Impacts of the EU 30% GHG Mitigation Target

Francesco Bosello et al. — Fri, 19 Apr 2013 00:47:28 PDT

Nonetheless, concrete and effective measures to reduce them are hardly implemented. One of the main reasons for this deadlock is the fear that unilateral actions will reduce a country’s competitiveness, and will benefit those countries where no GHG mitigation measures are implemented. This kind of argument is also often used to explain why some governments and many business leaders are not in favour of the EU 30% GHG mitigation target that has been proposed to replace the previous 20% GHG emission reduction objective approved by the EU within the well-known 20-20-20 climate and energy package. By developing and applying a recursive, dynamic, very detailed CGE model with energy generation from both fossil fuel and renewable sources, we address this issue by estimating the cost for different EU countries and industries of the EU climate and energy package under a set of alternative international scenarios on global GHG mitigation efforts. Results show that, thanks to the EU economic recession, achieving a 20% GHG emission reduction entails a moderate cost for the European Union - about 0.5% of EU GDP – even in the case of EU unilateral action. This cost could be reduced to almost zero if not only the European Union, but also the other major world economies, comply with the “low pledge” Copenhagen Accord. A 30% GHG emission reduction target would certainly be more costly: the total loss in the European Union would be 1.26% of EU GDP in the case of EU unilateral action, whereas the total cost would be 0.55% of EU GDP if all major economies reduce their own GHG emissions according to the “low pledge” Copenhagen Accord. Both border tax adjustments and free allocation of carbon permits are shown to be successful in reducing some adverse competitiveness effects of the EU GHG mitigation policy into energy intensive sectors, but at the expenses of the other economic sectors.

A Study on Industrial Green Transformation in China

Li Ping et al. — Fri, 19 Apr 2013 00:43:46 PDT

China’s speedy industrialization has undertaken mostly a crude path with extensive energy consumption and severe environmental damage. In face of the challenge of global warming and resource restrictions, it calls for urgent green transformation for the sustainable development of China’s industry. With huge potentials and more general benefits than costs, the industrial green transformation in China will have more positive effects and accelerate the whole process of the development of China’s green economy. From this perspective, China needs to adopt a comprehensive and open mechanism for green transformation with more strict environmental regulations, effective energy conservation and emissions reduction, green technology R&D and application, as well as international cooperation in the related fields with market-oriented reform, government strategies and regulations, proactive response from the industry sector, self-initiative of enterprises and active public participation.

Jurists, Clerics and Merchants - The Rise of Learned Law in Medieval Europe and its Impact on Economic Growth

Hans-Bernd Schäfer et al. — Wed, 17 Apr 2013 02:07:24 PDT

Between the years 1200 and 1600 economic development in most parts of Europe gained momentum. By the end of this period per capita income in Western Europe (excluding Orthodox countries) was well above the income levels in all other regions of the world. We relate this unique development to the resurrection of Roman law, which went hand in hand with the rise of law as a scholarly and scientific discipline. In this paper we investigate two competing hypothesis on the impact of these processes on economic growth in Medieval Europe: a) that the rules of Roman law were conducive to the rise of commerce and economic growth and b) that growth occurred not as a result of the reception of substantive Roman law but rather because of the rational scientific and systemic features of the new law and its training of jurists in the newly established universities. Using data on city population as a proxy for economic growth we find that the decisive impact for economic development was not primarily the content of Roman law, but the emergence of a legal method by glossators and commentators in their interpretation and systematization of the sources of Roman law (Corpus Juris, Digests), which originally consisted of a huge collection of cases. The endeavor to extract general normative conclusions from theses sources led to abstraction, methodology, and the rise of law as a scholarly discipline. Wherever law faculties were founded anywhere in Europe jurists learned new legal concepts and skills which were unknown before and conducive for doing business.

East Africa: The Next Game-Changer for the Global Gas Markets?

Manfred Hafner et al. — Fri, 12 Apr 2013 01:47:27 PDT

The geographical distribution of African natural gas resources is going through a period of profound change as new gas discoveries in East Africa emerge to reshape the continent's energy landscape. This region is rapidly establishing itself as a world-class natural gas province and two countries have already emerged as key-players of this new African natural gas renaissance: Mozambique and Tanzania. This paper provides a comprehensive analysis of the gas developments in the region, which could well become the next game-changer of the global gas market.

Energy Poverty Alleviation and Climate Change Mitigation: Is There a Trade off?

Shoibal Chakravarty et al. — Fri, 12 Apr 2013 01:42:14 PDT

Energy poverty alleviation has become an important political issue in the most recent years. Several initiatives and policies have been proposed to deal with poor access to modern sources of energy in many developing countries. Given the large number of people lacking basic energy services, an important question is whether providing universal access to modern energy could significantly increase CO2 emissions. This paper provides one of the few formal assessments of this problem by means of a simple but robust model of current and future energy consumption. The model allows mapping energy consumption globally for different classes of energy use, quantifying current and future imbalances in the distribution of energy consumption. Our results indicate that an energy poverty eradication policy to be met by 2030 would increase global final energy consumption by about 7% (or 19EJ). This is the same quantity of energy which would be added between now and 2030 by individuals with energy consumption above current European standards. The additional energy infrastructure needed to eradicate energy poverty would produce 16-131 GtCO2 over the 21st century and contribute at most 0.1C of additional warming.

Looking for Free-riding: Energy Efficiency Incentives and Italian Homeowners

Anna Alberini et al. — Fri, 12 Apr 2013 01:42:13 PDT

We examine the effect of energy efficiency incentives on household energy-efficiency home improvements. Starting in February 2007, Italian homeowners have been able to avail themselves of tax credits on the purchase and installation costs of certain types of energy efficiency renovations. We examine two such renovations—door/windows replacements and heating system replacements—using multi-year cross-section data from the Italian Consumer Expenditure Survey and focusing on a narrow period around the introduction of the tax credits. Our regressions control for dwelling and household characteristics and economy-wide factors likely to influence the replacement rates. The effects of the policy are different for the two types of renovations. With window replacements, the policy is generally associated with a 30% or stronger increase in the renovation rates and number of renovations. In the simplest econometric models, the effect is not statistically significant, but the results get stronger when we allow for heterogeneous effects across the country. With heating system replacements, simpler models suggest that the tax credits policy had no effect whatsoever or that free riding was rampant, i.e., people are now accepting subsidies for replacements that they would have done anyway. Further examination suggests a strong degree of heterogeneity in the effects across warmer and colder parts of the country, and effects in the colder areas that are even more pronounced than those for windows replacements. These results should, however, be interpreted with caution due to the low rate of renovations and the imprecisely estimated effects.