Template-Type: ReDIF-Paper 1.0 Number: 2009.1 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-001.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.1 Title: Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions Author-Name: Michael Hoel Author-X-Name-First: Michael Author-X-Name-Last: Hoel Author-WorkPlace-Name: University of Oslo Abstract: Fossil fuels are non-renewable carbon resources, and the extraction path of these resources depends both on present and future demand. When this “Hotelling feature” is taken into consideration, the whole price path of carbon fuel will shift downwards as a response to the reduced cost of the renewable substitute. An implication of this is that greenhouse gas emissions in the near future may increase as a response to the reduced cost of the renewable substitute. If this is the case, increased climate costs may outweigh the benefits of reduced costs of a substitute, thus reducing overall social welfare. Keywords: Climate Change, Exhaustible Resources, Renewable Energy Classification-JEL: Q30, Q42, Q5 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.2 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-002.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.2 Title: Environmental Regulation and Industry Location Author-Name: Abay Mulatu Author-X-Name-First: Abay Author-X-Name-Last: Mulatu Author-WorkPlace-Name: University of Manchester Author-Name: Reyer Gerlagh Author-X-Name-First: Reyer Author-X-Name-Last: Gerlagh Author-WorkPlace-Name: University of Manchester Author-Name: Dan Rigby Author-X-Name-First: Dan Author-X-Name-Last: Rigby Author-WorkPlace-Name: University of Manchester Author-Name: Ada Wossink Author-X-Name-First: Ada Author-X-Name-Last: Wossink Author-WorkPlace-Name: University of Manchester Abstract: This paper estimates the effect of environmental regulation on industry location and compares it with other determinants of location such as agricultural, education and R&D country characteristics. The analysis is based on a general empirical trade model that captures the interaction between country and industry characteristics in determining industry location. The Johnson-Neyman technique is used to fully explicate the nature of the conditional interactions. The model is applied to data on 16 manufacturing industries from 13 European countries. The empirical results indicate that the pollution haven effect is present and that the relative strength of such an effect is of about the same magnitude as other determinants of industry location. A significant negative effect on industry location is observed only at relatively high levels of industry pollution intensity. Keywords: Pollution Haven Hypothesis, Comparative Advantage, Industry Location Classification-JEL: O14 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.3 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-003.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.3 Title: Rates of Time Preferences for Saving Lives in the Hazardous Waste Site Context Author-Name: Anna Alberini Author-X-Name-First: Anna Author-X-Name-Last: Alberini Author-WorkPlace-Name: University of Maryland and Fondazione Eni Enrico Mattei Author-Name: Stefania Tonin Author-X-Name-First: Stefania Author-X-Name-Last: Tonin Author-WorkPlace-Name: University IUAV of Venice Author-Name: Margherita Turvani Author-X-Name-First: Margherita Author-X-Name-Last: Turvani Author-WorkPlace-Name: University IUAV of Venice Abstract: What is the rate at which people discount future lives saved? The answer to this question has important implications when comparing policies on the grounds of cost per life saved, especially in the context of hazardous waste site remediation, where risk reductions may occur at different times, depending on the permanence of the remedy. We estimate this rate by asking a sample of Italian residents to choose between saving 100 lives now and X lives in T years, where both X and T are varied to the respondents. Assuming constant exponential discounting, the responses to these questions imply a rate of time preference for saving lives of 12%. There is little evidence that this rate is systematically associated with observable individual characteristics of the respondent. There is, however, strong evidence that it declines with the time horizon when the lives would be saved, ranging from 16% for T=10 to less than 4% for T³40. We fit a hyperbolic discount model, finding that it yields a similar value of the discount function for T=10 (the shortest horizon we used in the survey), and that it discounts the future less heavily than the regular exponential discounting model for longer time horizon. We apply our estimated discount functions to two alternate remedial plans for a heavily contaminated area in Italy, and find that—due to the high estimated discount rates—the less permanent solution is found to be more cost-effective. Keywords: Value of a Statistical Life, Latent Risk Reductions, Individual Discount Rates, Rate of Time Preference for Saving Lives, Contaminated Sites, Remediation Classification-JEL: J17, I18, K32, Q51, Q53 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.4 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-004.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.4 Title: Mapping of Forest Biodiversity Values: A Plural Perspective Author-Name: Paulo A.L.D. Nunes Author-X-Name-First: Paulo A.L.D. Author-X-Name-Last: Nunes Author-WorkPlace-Name: Venice International University and Fondazione Eni Enrico Mattei Author-Name: Elena Ojea Author-X-Name-First: Elena Author-X-Name-Last: Ojea Author-WorkPlace-Name: IDEGA-Universidade de Santiago de Compostela Author-Name: Maria Loureiro Author-X-Name-First: Maria Author-X-Name-Last: Loureiro Author-WorkPlace-Name: Universidade de Santiago de Compostela Abstract: The Millennium Ecosystem Assessment is built on a conceptual framework that links biodiversity to the services ecosystems provide to society. Based on this framework, we first compile market and non-market forest valuation studies and, secondly, explore the potential of an econometric modeling exercise by conducting a world wide meta-analysis. This exercise aims to highlight the mapping of biodiversity indicators and assesses their respective role on the valuation exercise. Our results show that biodiversity loss is having an effect on forest ecosystem values. In addition, these effects reveal to be dependent on the type of services and global geo-climatic regions. Keywords: Millennium Ecosystems Approach, Biodiversity Loss, Meta-Analysis, Market Valuation, Non-Market Valuation, Forests Classification-JEL: Q57 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.5 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-005.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.5 Title: Macroeconomic Implications of Demography for the Environment: A Life-Cycle Perspective Author-Name: Xavier Pautrel Author-X-Name-First: Xavier Author-X-Name-Last: Pautrel Author-WorkPlace-Name: Nantes Atlantique Université Abstract: This article studies how demography affects the outcome of the environmental policy in a macro-economic perspective, incorporating age-earning profiles in an OLG model à la Blanchard (1985) to capture the age structure effect of the demographic shocks. It first demonstrates, conversely to previous works of the related literature that a decrease in the birth rate may lower the steady-state per capita stock of physical capital even if the aggregate labor supply is exogenous. It also demonstrates that the ageing of population influences the macro-economic impact of the environmental policy according to the cause of the ageing and the life-cycle earnings assumption. Thus, with decreasing age-earning profiles, a lower birth rate reduces the detrimental impact of the environmental policy on the steady-state per capita stock of physical capital for low values of this birth rate, while a reduction of the mortality rate reinforces the negative outcome of the environmental policy. When earnings profiles are independent of age, ageing always strengthens the negative impact of the environmental policy. Keywords: Demography, Environment Classification-JEL: Q56 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.6 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-006.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.6 Title: Inheritance Law and Investment in Family Firms Author-Name: Fausto Panunzi Author-X-Name-First: Fausto Author-X-Name-Last: Panunzi Author-WorkPlace-Name: Università Bocconi Author-Name: Andrew Ellul Author-X-Name-First: Andrew Author-X-Name-Last: Ellul Author-WorkPlace-Name: Indiana University Author-Name: Marco Pagano Author-X-Name-First: Marco Author-X-Name-Last: Pagano Author-WorkPlace-Name: University of Naples Federico II, CSEF, EIEF and CEPR Abstract: Entrepreneurs may be constrained by the law to bequeath a minimal stake to non-controlling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and data for 10,245 firms from 32 countries over the 1990-2006 interval, we find that stricter inheritance law is associated with lower investment in family firms, while it leaves investment unaffected in non-family firms. Moreover, as predicted by the model, inheritance law affects investment only in family firms that experience a succession. Keywords: Succession, Family Firms, Inheritance Law, Growth, Investment Classification-JEL: G32 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.7 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-007.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.7 Title: The Future of Securities Regulation Author-Name: Luigi Zingales Author-X-Name-First: Luigi Author-X-Name-Last: Zingales Author-WorkPlace-Name: University of Chicago, NBER & CEPR Abstract: The U.S. system of security law was designed more than 70 years ago to regain investors’ trust after a major financial crisis. Today we face a similar problem. But while in the 1930s the prevailing perception was that investors had been defrauded by offerings of dubious quality securities, in the new millennium, investors’ perception is that they have been defrauded by managers who are not accountable to anyone. For this reason, I propose a series of reforms that center around corporate governance, while shifting the focus from the protection of unsophisticated investors in the purchasing of new securities issues to the investment in mutual funds, pension funds, and other forms of asset management. Keywords: U.S. Security Law, Securities Regulation, Trust Classification-JEL: G2, G28, G01 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.8 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-008.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.8 Title: How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model Author-Name: Lea Nicita Author-X-Name-First: Lea Author-X-Name-Last: Nicita Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Carlo Carraro Author-X-Name-First: Carlo Author-X-Name-Last: Carraro Author-WorkPlace-Name: University of Venice, Fondazione Eni Enrico Mattei, CEPR, CEPS, CESifo and CMCC Author-Name: Emanuele Massetti Author-X-Name-First: Emanuele Author-X-Name-Last: Massetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: This paper analyses whether and how a climate policy designed to stabilize greenhouse gases in the atmosphere is likely to change the direction and pace of technical progress. The analysis is performed using an upgraded version of WITCH, a dynamic integrated regional model of the world economy. In this version, a non-energy R&D Sector, which enhances the productivity of the capital-labor aggregate, has been added to the energy R&D sector included in the original WITCH model. We find that, as a consequence of climate policy, R&D is re-directed towards energy knowledge. Nonetheless, total R&D investments decrease, due to a more than proportional contraction of non-energy R&D. Indeed, when non-energy and energy inputs are weakly substitutable, the overall contraction of the economic activity associated with a climate policy induces a decline in total R&D investments. However, enhanced investments in energy R&D and in the energy sector are found not to “crowd-out” investments in non-energy R&D. Keywords: echnical Change, Climate Policy, Stabilization Cost, R&D Investments Classification-JEL: C72, H23, Q25, Q28 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.9 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-009.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.9 Title: The Welfare Effects of Environmental Taxation Author-Name: William K. Jaeger Author-X-Name-First: William K. Author-X-Name-Last: Jaeger Author-WorkPlace-Name: Oregon State University Abstract: Recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second-best setting than in a first-best setting. This question has mainly been addressed indirectly, by asking whether the second-best optimal environmental tax is higher or lower than the first-best Pigouvian rate. Even this indirect question, though, has itself been approached indirectly, comparing the second-best optimal environmental tax to a proxy for its first-best value, an expression for marginal social damage (MSD). On closer examination, however, MSD becomes ambiguously defined and variable in a second-best setting, making it an unreliable proxy for the first-best Pigouvian rate. With these concerns in mind, the current analysis reevaluates the central welfare question both directly and indirectly and finds that when compared directly to its first-best Pigouvian value, the second-best optimal environmental tax generally rises with increased revenue requirements. Even in cases where the second-best optimal environmental tax is lower than its first-best value, the welfare gains may be greater than in a first-best setting. These results suggest that the marginal fiscal benefit (revenue recycling effect) exceeds the marginal fiscal cost (tax base effect) over a range of environmental tax rates that, for benchmark models, extends above the first-best Pigouvian rate. Results in the tax interaction literature are fully consistent with these interpretations once the effects of normalizations and numeraires are fully recognized. These findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods. Keywords: Optimal Environmental Tax, Second-best, Double Dividend, Tax Interaction Effect, Revenue Recycling, Tax Base Effect, Pigouvian Rate, Excess Burden Classification-JEL: H21, Q5 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.10 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-010.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.10 Title: Double Irreversibility and Environmental Policy Design Author-Name: Aude Pommeret Author-X-Name-First: Aude Author-X-Name-Last: Pommeret Author-WorkPlace-Name: University of Lausanne and IREGE-University of Savoie Author-Name: Fabien Prieur Author-X-Name-First: Fabien Author-X-Name-Last: Prieur Author-WorkPlace-Name: IREGE-University of Savoie Abstract: The design of environmental policy typically takes place within a framework in which uncertainty over the future impact of pollution and two different kinds of irreversibilities interact. The first kind of irreversibility concerns the sunk cost of environmental degradation; the second is related to the sunk cost of environmental policy. Clearly, the two irreversibilities pull in opposite directions: policy irreversibility leads to more pollution and a less/later policy while environmental irreversibility generates less pollution and a more/sooner policy. Using a real option approach and an infinite time horizon model, this paper considers both irreversibilities simultaneously. The model first is developed by paying particular attention to the option values related to pollution and policy adoption. Solving the model in closed form then provides solutions for both the optimal pollution level and the optimal environmental policy timing. Finally, the model is "calibrated" with the purpose of appraising which irreversibility has the prevailing effect and what is the overall impact of both irreversibilities on pollution and policy design. Keywords: Environmental Policy, Environmental Irreversibility, Policy Irreversibility Classification-JEL: Q58, D81 Creation-Date: 200901 Template-Type: ReDIF-Paper 1.0 Number: 2009.11 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-011.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.11 Title: Regional and Sector Environmental Efficiency Empirical Evidence from Structural Shift-share Analysis of NAMEA data Author-Name: Massimiliano Mazzanti Author-X-Name-First: Massimiliano Author-X-Name-Last: Mazzanti Author-WorkPlace-Name: University of Ferrara Author-Name: Anna Montini Author-X-Name-First: Anna Author-X-Name-Last: Montini Author-WorkPlace-Name: niversity of Bologna, CERIS CNR Abstract: This paper provides new empirical evidence on regional–national disparities in environmental efficiency, based on case studies of Italy and the Lazio region, which includes the city of Rome. Shift-share analyses provide evidence on the drivers of environmental efficiency and on sector specificity. This confirms the usefulness of this method for studying the environmental economics realm, in order to investigate structural and efficiency factors at the level of within country environmental efficiency performance, even in light of the different shares of services. Our evidence shows that although the Rome region has achieved higher environmental performance compared to Italy mainly thanks to its being less industry based, some critical points in the energy sector and in some services should be taken into account in shaping the future development of the region. Environmental, industrial and sector-oriented policy making may also derive valuable information from the evidence provided by our study. Keywords: NAMEA, Shift Share, Regional Development, RAMEA, Emission Efficiency, Economic Efficiency Classification-JEL: C67, D57, O4, O18, Q53, Q56 Creation-Date: 200902 Template-Type: ReDIF-Paper 1.0 Number: 2009.12 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-012.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.12 Title: Economic Valuation of Forest Ecosystem Services: Methodology and Monetary Estimates Author-Name: Aline Chiabai Author-X-Name-First: Aline Author-X-Name-Last: Chiabai Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: C. M. Travisi Author-X-Name-First: C. M. Author-X-Name-Last: Travisi Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: H. Ding Author-X-Name-First: H. Author-X-Name-Last: Ding Author-WorkPlace-Name: FEEM, and School for Advanced Studies in Venice Foundation, University of Venice Author-Name: A. Markandya Author-X-Name-First: A. Author-X-Name-Last: Markandya Author-WorkPlace-Name: Basque Centre for Climate Change BC3 and University of Bath Author-Name: P.A.L.D Nunes Author-X-Name-First: P.A.L.D Author-X-Name-Last: Nunes Author-WorkPlace-Name: FEEM and School for Advanced Studies in Venice Foundation, University of Venice Abstract: By using ad hoc value transfer protocols, this paper offers a methodological contribution and provides accurate per hectare estimates of the economic value of some selected ecosystem services for all forest biomes in the world, identified following the Millennium Ecosystem Assessment taxonomy MEA. The research also estimates potential total economic losses from policy inaction in year 2050. Final results show that total losses are significant. The total figure is €78 billion, the greatest losses coming from North America and Mexico, followed by Africa, Russia and some Asiatic countries. Most of this loss is attributable to provisioning services and carbon sequestration, while only a minor part is due to loss of cultural services. In terms of biomes the greatest losses are from boreal and warm mixed forests, followed by tropical forests. These results may be surprising to some who argue that it is the loss of tropical forests, particularly the Amazon, that is the most significant. A detailed analysis, shows, however, that this is not the case. The best estimates point to greater losses in areas where use and non-use values are highest, which includes North America. Keywords: Forest, Ecosystem Services, Biodiversity, Valuation, Value Transfer Classification-JEL: O13, Q23, Q26, Q51, Q54, Q57 Creation-Date: 200902 Template-Type: ReDIF-Paper 1.0 Number: 2009.13 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-013.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.13 Title: The External Cost of European Crude Oil Imports Author-Name: Andrea Bigano Author-X-Name-First: Andrea Author-X-Name-Last: Bigano Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Mariaester Cassinelli Author-X-Name-First: Mariaester Author-X-Name-Last: Cassinelli Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Fabio Sferra Author-X-Name-First: Fabio Author-X-Name-Last: Sferra Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Lisa Guarrera Author-X-Name-First: Lisa Author-X-Name-Last: Guarrera Author-WorkPlace-Name: Observatoire Méditerranéen de l'Energie Author-Name: Sohbet Karbuz Author-X-Name-First: Sohbet Author-X-Name-Last: Karbuz Author-WorkPlace-Name: Observatoire Méditerranéen de l'Energie Author-Name: Manfred Hafner Author-X-Name-First: Manfred Author-X-Name-Last: Hafner Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Observatoire Méditerranéen de l'Energie Author-Name: Anil Markandya Author-X-Name-First: Anil Author-X-Name-Last: Markandya Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, University of Bath and Basque Centre for Climate Change Research Author-Name: Ståle Navrud Author-X-Name-First: Ståle Author-X-Name-Last: Navrud Author-WorkPlace-Name: Norwegian University of Life Sciences Abstract: This paper is the first to assess operational and probabilistic externalities of oil extraction and transportation to Europe on the basis of a comprehensive evaluation of realistic future oil demand-supply scenarios, of the relative relevance of import routes, of the local specificities in terms of critical passages and different burdens and impacts along import routes. The resulting externalities appear reasonable both under the assumption of high future demand and under low demand. Estimates range from 2.32 Euro in 2030 in the low demand scenario to 2.60 Euro in 2010 in the high demand scenario per ton of imported oil. Keywords: Oil Transport, Externalities Oil Spills, Risk Analysis Classification-JEL: Q32, Q25, Q41, R40 Creation-Date: 200902 Template-Type: ReDIF-Paper 1.0 Number: 2009.14 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-014.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.14 Title: The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the Witch Model Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Bosetti Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Author-Name: Carlo Carraro Author-X-Name-First: Carlo Author-X-Name-Last: Carraro Author-WorkPlace-Name: FEEM, University of Venice, CEPR, CESIFO and CMCC Author-Name: Romain Duval Author-X-Name-First: Romain Author-X-Name-Last:Duval Author-WorkPlace-Name: OECD, Economics Department Author-Name: Alessandra Sgobbi Author-X-Name-First: Alessandra Author-X-Name-Last: Sgobbi Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and CMCC Abstract: This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful – especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters for stabilisation costs more than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required. Keywords: Climate policy; Energy R&D; Fund; Stabilisation costs Classification-JEL: H0, H2, H3, H4, O3, Q32, Q43, Q54 Creation-Date: 200902 Template-Type: ReDIF-Paper 1.0 Number: 2009.15 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-015.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.15 Title: Stock Prices in a Speculative Market: The Chinese Split-Share Reform Author-Name: Andrea Beltratti Author-X-Name-First: Andrea Author-X-Name-Last: Beltratti Author-WorkPlace-Name: Bocconi University Author-Name: Bernardo Bortolotti Author-X-Name-First: Bernardo Author-X-Name-Last: Bortolotti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Università di Torino Author-Name: Marianna Caccavaio Author-X-Name-First: Marianna Author-X-Name-Last: Caccavaio Author-WorkPlace-Name: Bocconi University Abstract: In 2005-2006 China reformed its stock market by eliminating non-tradable shares. The regulator set general guidelines and then assigned responsibility for implementation to each company. We derive relations that should have been followed by the prices of stocks and exploit a company-level data set to compare the actual and the theoretical price reactions. We find evidence for abnormal returns both before the beginning of the reform and during the reform. Cross-sectionally, abnormal returns are associated mainly with turnover and compensation. This shows that in a speculative market, investors do not properly react to unambiguous corporate actions. Keywords: Speculation, Chinese Stock Market, Market segmentation, Event study, Market Efficiency Classification-JEL: G14, N25 Creation-Date: 200902 Template-Type: ReDIF-Paper 1.0 Number: 2009.16 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-016.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.16 Title: The Fragility of Social Capital Author-Name: Fabio Sabatini Author-X-Name-First: Fabio Author-X-Name-Last: Sabatini Author-WorkPlace-Name: Università di Siena Author-Name: Angelo Antoci Author-X-Name-First: Angelo Author-X-Name-Last: Antoci Author-WorkPlace-Name: Università di Sassari Author-Name: Mauro Sodini Author-X-Name-First: Mauro Author-X-Name-Last: Sodini Author-WorkPlace-Name: Università di Pisa Abstract: This paper addresses two hot topics of the contemporary debate, social capital and economic growth. Our theoretical analysis sheds light on decisive but so far neglected issues: how does social capital accumulate over time? Which is the relationship between social capital, technical progress and economic growth in the long run? The analysis shows that the economy may be attracted by alternative steady states, depending on the initial social capital endowments and cultural exogenous parameters representing the relevance of social interaction and trust in well-being and production. When material consumption and relational goods are substitutable, the choice to devote more and more time to private activities may lead the economy to a “social poverty trap”, where the cooling of human relations causes a progressive destruction of the entire stock of social capital. In this case, the relationship of social capital with technical progress is described by an inverted U-shaped curve. However, the possibility exists for the economy to follow a virtuous trajectory where the stock of social capital endogenously and unboundedly grows. Such result may follow from a range of particular conditions, under which the economy behaves as if there was no substitutability between relational activities and material consumption. Keywords: Economic Growth, Technical Progress, Social Interactions, Social Capital Classification-JEL: A13, D03, O43, Z13 Creation-Date: 200903 Template-Type: ReDIF-Paper 1.0 Number: 2009.17 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-017.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.17 Title: Effects of Low-cost Offsets on Energy Investment -New Perspectives on REDD- Author-Name: Sabine Fuss Author-X-Name-First: Sabine Author-X-Name-Last: Fuss Author-WorkPlace-Name: International Institute of Systems Analysis Author-Name: Alexander Golub Author-X-Name-First: Alexander Author-X-Name-Last: Golub Author-WorkPlace-Name: Environmental Defense Fund Author-Name: Jana Szolgayova Author-X-Name-First: Jana Author-X-Name-Last: Szolgayova Author-WorkPlace-Name: International Institute of Systems Analysis and Comenius University Author-Name: Michael Obersteiner Author-X-Name-First: Michael Author-X-Name-Last: Obersteiner Author-WorkPlace-Name: International Institute of Systems Analysis Abstract: Tropical deforestation is one of the major sources of carbon emissions, but the Kyoto Protocol presently excludes avoiding these specific emissions to fulfill stabilization targets. Since the 13th Conference of the Parties (COP) to the UNFCCC in 2007, where the need for policy incentives for the reduction of emissions from deforestation and degradation (REDD) was first officially recognized, the focus of this debate has shifted to issues of implementation and methodology. One question is how REDD would be financed, which could be solved by integrating REDD credits into existing carbon markets. However, concern has been voiced regarding the effects that the availability of cheap REDD credits might have on energy investments and the development of clean technology. On the other hand, investors and producers are also worried that emissions trading schemes like the one installed in Europe might deter investment into new technologies and harm profits of existing plants due to fluctuations in the price of emissions permits. This paper seeks to contribute to this discussion by developing a real options model, where there is an option to invest in less carbon-intensive energy technology and an option to purchase credits on REDD, which you will exercise or not depending on the future evolution of CO2 prices. In this way, unresolved questions can still be addressed at a later stage, while producers and investors hold REDD options to maintain flexibility for later decisions. We find that investment in cleaner technology is not significantly affected if REDD options are priced as a derivative of CO2 permits. Indeed, the availability of REDD options helps to smooth out price fluctuations that might arise from permit trading and thus decreases risk for the producer - thereby being a complement to permit trading rather than an obstacle undermining cap-and-trade. Keywords: Real Options, Energy Investment, Cap-And-Trade, REDD Classification-JEL: Q23, Q28 Creation-Date: 200903 Template-Type: ReDIF-Paper 1.0 Number: 2009.18 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-018.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.18 Title: Factor-Augmenting Technical Change: An Empirical Assessment Author-Name: Enrica De Cian Author-X-Name-First: Enrica Author-X-Name-Last: De Cian Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and School of Advanced Studies in Venice Abstract: Starting from a system of factor demands, an empirical model that allows estimating factor-augmenting technical change is derived. Factor-augmenting technical change is defined as the improvement in factor productivities that can occur either exogenously or endogenously, with changes in other macroeconomic variables. This paper provides additional estimates for the substitution possibilities among inputs and it offers new empirical evidence on the direction and sources of factor-augmenting technical change, an issue that has not yet been explored by the empirical literature on growth determinants. The empirical findings suggest that technical change is directed. Technical change tends to be more energy-saving than capital- and labour-saving. Both R&D investments and international trade are important determinants of growth in energy and capital productivity whereas technical change for labour is positively related to education expenditure. Therefore, the sources of factor-augmenting technical change go beyond R&D investments, as proposed in the theory of directed technical change, and they differ across inputs. In other words, not only is technical change directed, the sources of factor-augmenting technical change appear to be input specific. Keywords: Factor-Augmenting Technical Change, Technology Spillovers, Panel Data Classification-JEL: C3, O47, Q55, Q56 Creation-Date: 200903 Template-Type: ReDIF-Paper 1.0 Number: 2009.19 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-019.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.19 Title: Non-Uniqueness of Equilibria in One-Shot Games of Strategic Communication Author-Name: Irene Valsecchi Author-X-Name-First: Irene Author-X-Name-Last: Valsecchi Author-WorkPlace-Name: University of Milano-Bicocca Abstract: The paper shows that Perfect Bayesian equilibria need not be unique in the strategic communication game of Crawford and Sobel (1982). First, different equilibrium partitions of the state space can have equal cardinality, despite fixed prior beliefs. Hence, there can be different equilibrium action profiles with the same size. Second, provided a Perfect Bayesian equilibrium exists, different message rules and beliefs can hold in other equilibria inducing the same action profile. Keywords: Sender-Receiver Games, Strategic Information Transmission Classification-JEL: D83 Creation-Date: 200903 Template-Type: ReDIF-Paper 1.0 Number: 2009.20 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-020.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.20 Title: Total Factor Productivity Growth when Factors of Production Generate Environmental Externalities Author-Name: Anastasios Xeapapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xeapapadeas Author-WorkPlace-Name: Athens University of Economics and Business Author-Name: Dimitra Vouvaki Author-X-Name-First: Dimitra Author-X-Name-Last: Vouvaki Author-WorkPlace-Name: University of Crete Abstract: Total factor productivity growth (TFPG) has been traditionally associated with technological change. We show that when a factor of production, such as energy, generates an environmental externality in the form of CO2 emissions which is not internalized because of lack of environmental policy, then TFPG estimates could be biased. This is because the contribution of environment as a factor of production is not accounted for in the growth accounting framework. Empirical estimates confirm this hypothesis and suggest that part of what is regarded as technology’s contribution to growth could be attributed to the use of environment in output production. Keywords: Total Factor Productivity, Sources of Growth, Environmental Externalities, Energy, Environmental Policy Classification-JEL: O47, Q20, Q43 Creation-Date: 200903 Template-Type: ReDIF-Paper 1.0 Number: 2009.21 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-021.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.21 Title: Assessing the Impact of Biodiversity on Tourism Flows: A model for Tourist Behaviour and its Policy Implications Author-Name: Giulia Macagno Author-X-Name-First: Giulia Author-X-Name-Last: Macagno Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Maria Loureiro Author-X-Name-First: Maria Author-X-Name-Last: Loureiro Author-WorkPlace-Name: Universidade de Santiago de Compostela Author-Name: Paulo A.L.D. Nunes Author-X-Name-First: Paulo A.L.D. Author-X-Name-Last: Nunes Author-WorkPlace-Name: University of Venice and FEEM Author-Name: Richard Tol Author-X-Name-First: Richard Author-X-Name-Last: Tol Author-WorkPlace-Name: The Economic and Social Research Institute and Free University Abstract: This analysis provides an example of how biodiversity can be measured by means of different indicators, and how the latter can be used to assess the influence of the biodiversity profile of a region on the tourism flows towards it. Previous studies have considered environmental amenities as one of the determinants of tourism destination choice. The central hypothesis of this paper is that the destination’s biodiversity profile can be considered as a key component of environmental amenities. The main objective of this study is to propose a different perspective on this topic, considering the role of biodiversity on tourists’ choice of destination and duration of stay. Domestic Irish tourist flows have been chosen as a case study. The first step of the analysis required the construction of biodiversity indicators suitable for developing a biodiversity profile of each Irish county. Subsequently, a model was developed so as to explain the total number of nights spent in any location as a function of a set of explanatory variables including information about the socio-demographic characteristics of respondents, biodiversity and the landscape profile of the county of destination and features of the trip. Results show that most of the biodiversity and landscape indicators included in the analysis turn out to be statistically significant in determining tourists’ choices regarding the duration of their trip. As a result, policies pursuing biodiversity conservation appear to have a positive impact on the revenue of regional tourism. Keywords: Species Diversity, Habitat Fragmentation, Landscape Diversity, Trip Demand, Indicators, Ecosystem Services, Human Well-Being Classification-JEL: Q57 Creation-Date: 200904 Template-Type: ReDIF-Paper 1.0 Number: 2009.22 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-022.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.22 Title: Sovereign Wealth Fund Investment Patterns and Performance Author-Name: William L. Megginson Author-X-Name-First: William L. Author-X-Name-Last: Megginson Author-WorkPlace-Name: Price College of Business Author-Name: Bernardo Bortolotti Author-X-Name-First: Bernardo Author-X-Name-Last: Bortolotti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Università di Torino Author-Name: Veljko Fotak Author-X-Name-First: Veljko Author-X-Name-Last: Fotak Author-WorkPlace-Name: University of Oklahoma and Fondazione Eni Enrico Mattei Author-Name: William Miracky Author-X-Name-First: William Author-X-Name-Last: Miracky Author-WorkPlace-Name: Monitor Group Abstract: This study describes the newly created Monitor-FEEM Sovereign Wealth Fund Database and discusses the investment patterns and performance of 1,216 individual investments, worth over $357 billion, made by 35 sovereign wealth funds (SWFs) between January 1986 and September 2008. Approximately half of the investments we document occur after June 2005, reflecting a recent surge of SWF activity. We document large SWF investments in listed and unlisted equity, real estate, and private equity funds, with the bulk of investments being targeted in cross-border acquisitions of sizeable but non-controlling stakes in operating companies and commercial properties. The average (median) SWF investment is a $441 million ($55 million) acquisition of a 42.3% (26.2%) stake in an unlisted company; the most active SWFs originate from Singapore or the United Arab Emirates. Almost one-third (30.9%) of the number, and over half of the value (54.6%) of SWF investments are directed toward financial firms. The vast majority of SWF investments involve privately-negotiated purchases of ownership stakes in underperforming firms. We perform event study analysis using a sample of 235 SWF acquisitions of equity stakes in publicly traded companies around the world, and document a significantly positive mean abnormal return of about 0.9% around the announcement date. However, one-year matched-firm abnormal returns of SWFs average -15.49%, suggesting equity acquisitions by SWFs are followed by deteriorating firm performance. In cross sectional analysis, we find weak evidence of benefits associated with a monitoring role of SWFs and evidence consistent with agency costs created by conflicts of interest between SWFs and minority shareholder. SWFs have collectively lost over $57billion on their holdings of listed stock investments alone through March 2009. Keywords: Sovereign Wealth Funds, International Financial Markets, Government Policy and Regulation Classification-JEL: G32, G15, G38 Creation-Date: 200904 Template-Type: ReDIF-Paper 1.0 Number: 2009.23 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-023.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.23 Title: Auctioning Monopoly Franchises: Award Criteria and Service Launch Requirements Author-Name: Michele Moretto Author-X-Name-First: Michele Author-X-Name-Last: Moretto Author-WorkPlace-Name: University of Padova Author-Name: Cesare Dosi Author-X-Name-First: Cesare Author-X-Name-Last: Dosi Author-WorkPlace-Name: University of Padova Abstract: We study the competition to acquire the exclusive right to operate an infrastructure service, by comparing two different specifications for the financial proposals - "lowest price to consumers" vs "highest concession fee", and two alternative contractual arrangements: a contract which imposes the obligation to immediately undertake the investment required to operate the concessioned service and a contract which simply assigns to the winning bidder the right to supply the market at a date of her choosing. By comparing the returns of these alternative award criteria and concessioning conditions, we show that concessioning without imposing rollout time limits may or may not provide a higher expected social value, depending on the bidding rule used to allocate the contract. In turn, the relative advantages of each award criterion are affected by the concessioning conditions. Keywords: Concessions, Auctions, Award criteria, Service Rollout Time limits Classification-JEL: L51, D44, D92 Creation-Date: 200904 Template-Type: ReDIF-Paper 1.0 Number: 2009.24 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-024.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.24 Title: Modelling Asymmetric Dependence Using Copula Functions: An application to Value-at-Risk in the Energy Sector Author-Name: Andrea Bastianin Author-X-Name-First: Andrea Author-X-Name-Last: Bastianin Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: In this paper I have used copula functions to forecast the Value-at-Risk (VaR) of an equally weighted portfolio comprising a small cap stock index and a large cap stock index for the oil and gas industry. The following empirical questions have been analyzed: (i) are there nonnormalities in the marginals? (ii) are there nonnormalities in the dependence structure? (iii) is it worth modelling these nonnormalities in risk- management applications? (iv) do complicated models perform better than simple models? As for questions (i) and (ii) I have shown that the data do deviate from the null of normality at the univariate, as well as at the multivariate level. When considering the dependence structure of the data I have found that asymmetries show up in their unconditional distribution, as well as in their unconditional copula. The VaR forecasting exercise has shown that models based on Normal marginals and/or with symmetric dependence structure fail to deliver accurate VaR forecasts. These findings confirm the importance of nonnormalities and asymmetries both in-sample and out-of-sample. Keywords: Copula functions, Forecasting, Value-At-Risk Classification-JEL: C32, C52, C53, G17, Q43 Creation-Date: 200904 Template-Type: ReDIF-Paper 1.0 Number: 2009.25 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-025.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.25 Title: The Investment Strategies of Sovereign Wealth Funds Author-Name: Josh Lerner Author-X-Name-First: Josh Author-X-Name-Last: Lerner Author-WorkPlace-Name: Harvard Business School Author-Name: Shai Bernstein Author-X-Name-First: Shai Author-X-Name-Last: Bernstein Author-WorkPlace-Name: Harvard University Author-Name: Antoinette Schoar Author-X-Name-First: Antoinette Author-X-Name-Last: Schoar Author-WorkPlace-Name: Harvard University Abstract: This paper examines the direct private equity investment strategies across sovereign wealth funds and their relationship to the funds’ organizational structures. SWFs seem to engage in a form of trend chasing, since they are more likely to invest at home when domestic equity prices are higher, and invest abroad when foreign prices are higher. Funds see the industry P/E ratios of their home investments drop in the year after the investment, while they have a positive change in the year after their investments abroad. SWFs where politicians are involved have a much greater likelihood of investing at home than those where external managers are involved. At the same time, SWFs with external managers tend to invest in lower P/E industries, which see an increase in the P/E ratios in the year after the investment. By way of contrast, funds with politicians involved invest in higher P/E industries, which have a negative valuation change in the year after the investment. Keywords: General Finance, Countries & Regions, Financial Services Classification-JEL: G11, G15 Creation-Date: 200904 Template-Type: ReDIF-Paper 1.0 Number: 2009.26 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-026.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.26 Title: Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model Author-Name: Marc Germain Author-X-Name-First: Marc Author-X-Name-Last: Germain Author-WorkPlace-Name: Universite catholique de Louvain Author-Name: Henry Tulkens Author-X-Name-First: Henry Author-X-Name-Last: Tulkens Author-WorkPlace-Name: Université catholique de Louvain Author-Name: Alphonse Magnus Author-X-Name-First: Alphonse Author-X-Name-Last: Magnus Author-WorkPlace-Name: Institut de mathématique, Université catholique de Louvain Abstract: This article deals with cooperation issues in international pollution problems in a two di- mensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we define at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions. Keywords: Stock Pollutant, Capital Accumulation, International Environmental Agreements, Dynamic Core Solution Classification-JEL: Q54, Q58, F42, F53, O21 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.27 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-027.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.27 Title: Overdependence on Credit Ratings Was a Primary Cause of the Crisis Author-Name: Frank Partnoy Author-X-Name-First: Frank Author-X-Name-Last: Partnoy Author-WorkPlace-Name: University of San Diego School of Law Abstract: The first part of the paper describes how over time credit rating agencies ceased to play the role of information intermediaries. Rating agencies did not provide information about the risk associated with the securitized instruments, but they simply enabled structurers to create and maintain tranches of these instruments with unjustifiably high credit ratings. The second part of the paper suggests how future policy may minimize overdependence on credit ratings, by removing regulatory licences and by implementing shock-therapy mechanisms to wean investors simple rating mnemonics. Keywords: Rating Agencies, Subprime Mortgages, Securitization Classification-JEL: G24 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.28 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-028.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.28 Title: Endogenous Network Dynamics Author-Name: Frank H. Page Author-X-Name-First: Frank H. Author-X-Name-Last: Page Author-WorkPlace-Name: Indiana University Author-Name: Myrna H. Wooders Author-X-Name-First: Myrna H. Author-X-Name-Last: Wooders Author-WorkPlace-Name: University of Warwick Abstract: In all social and economic interactions, individuals or coalitions choose not only with whom to interact but how to interact, and over time both the structure (the “with whom”) and the strategy (“the how”) of interactions change. Our objectives here are to model the structure and strategy of interactions prevailing at any point in time as a directed network and to address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, the preferences of individuals over networks, the strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emerge and persist. Our main contributions are (i) to formulate the problem of network and coalition formation as a dynamic, stochastic game, (ii) to show that this game possesses a stationary correlated equilibrium (in network and coalition formation strategies), (iii) to show that, together with the trembles of nature, this stationary correlated equilibrium determines an equilibrium Markov process of network and coalition formation, and (iv) to show that this endogenous process possesses a finite, nonempty set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. We also extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996), strong stability (Jacksonvan den Nouweland, 2005), and Nash stability (Bala-Goyal, 2000), and we show that in order for any network-coalition pair to persist and be stable (pairwise, strong, or Nash) it is necessary and sufficient that the pair reside in one of finitely many basins of attraction. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2008), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005). Keywords: Endogenous Network Dynamics, Dynamic Stochastic Games of Network Formation, Equilibrium Markov Process of Network Formation, Basins of Attraction, Harris Decomposition, Ergodic Probability Measures, Dynamic Path Dominance Core, Dynamic Pairwise Stability Classification-JEL: A14, C71, C72 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.29 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-029.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.29 Title: Constrained School Choice: An Experimental Study Author-Name: Guillaume Haeringer Author-X-Name-First: Guillaume Author-X-Name-Last: Haeringer Author-WorkPlace-Name: Universitat Autònoma de Barcelona Author-Name: Caterina Calsamiglia Author-X-Name-First: Caterina Author-X-Name-Last: Calsamiglia Author-WorkPlace-Name: Universitat Autònoma de Barcelona Author-Name: Flip Klijn Author-X-Name-First: Flip Author-X-Name-Last: Klijn Author-WorkPlace-Name: Institute for Economic Analysis (CSIC) Abstract: The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferentes. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools plays an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy. Keywords: School Choice, Matching, Experiment, Gale-Shapley, Top Trading Cycles, Boston Mechanism, Efficiency, Stability, Truncation, Truthtelling, Safety School Classification-JEL: C72, C78, D78, I20 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.30 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-030.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.30 Title: Connections Among Farsighted Agents Author-Name: Vincent Vannetelbosch Author-X-Name-First: Vincent Author-X-Name-Last: Vannetelbosch Author-WorkPlace-Name: Université catholique de Louvain Author-Name: Gilles Grandjean Author-X-Name-First: Gilles Author-X-Name-Last: Grandjean Author-WorkPlace-Name: CORE, Université catholique de Louvain Author-Name: Ana Mauleon Author-X-Name-First: Ana Author-X-Name-Last: Mauleon Author-WorkPlace-Name: NRS and CEREC, Facultés universitaires Saint-Louis and FNRS and CORE, Université catholique de Louvain Abstract: We study the stability of social and economic networks when players are farsighted. In particular, we examine whether the networks formed by farsighted players are different from those formed by myopic players. We adopt Herings, Mauleon and Vannetelbosch’s (Games and Economic Behavior, forthcoming) notion of pairwise farsightedly stable set. We first investigate in some classical models of social and economic networks whether the pairwise farsightedly stable sets of networks coincide with the set of pairwise (myopically) stable networks and the set of strongly efficient networks. We then provide some primitive conditions on value functions and allocation rules so that the set of strongly efficient networks is the unique pairwise farsightedly stable set. Under the componentwise egalitarian allocation rule, the set of strongly efficient networks and the set of pairwise (myopically) stable networks that are immune to coalitional deviations are the unique pairwise farsightedly stable set if and only if the value function is top convex. Keywords: Farsighted Players, Stability, Efficiency, Connections Model, Buyerseller Networks Classification-JEL: A14, C70, D20 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.31 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-031.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.31 Title: Feasibility Constraints and Protective Behavior in Efficient Kidney Exchange Author-Name: Antonio Nicoló Author-X-Name-First: Antonio Author-X-Name-Last: Nicoló Author-WorkPlace-Name: Università degli Studi di Padova Author-Name: Carmelo Rodríguez Álvarez Author-X-Name-First: Carmelo Author-X-Name-Last: Rodríguez Álvarez Author-WorkPlace-Name: Universidad Complutense de Madrid Abstract: We propose a model of Kidney-Exchange that incorporates the main European institutional features. We assume that patients do not consider all compatible kidneys homogeneous and patients are endowed with reservation values over the minimal quality of the kidney they may receive. Under feasibility constraints, patients' truthful revelation of reservation values is incompatible with constrained efficiency. In the light of this result, we introduce an alternative behavioral assumption on patients' incentives. Patients choose their revelation strategies as to “protect” themselves from bad outcomes and use a lexicographic refinement of maximin strategies. In this environment, if exchanges are pairwise, then priority rules or rules that maximize a fixed ordering provide incentives for the patients to report their true reservation values. The positive result vanishes if larger exchanges are admitted. Keywords: Kidney, Matching, Protective Behavior Classification-JEL: C78, D78 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.32 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-032.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.32 Title: Cournot Competition on a Network of Markets and Firms Author-Name: Rahmi Ilkiliç Author-X-Name-First: Rahmi Author-X-Name-Last: Ilkiliç Author-WorkPlace-Name: Maastricht University Abstract: Suppose markets and firms are connected in a bi-partite network, where firms can only supply to the markets they are connected to. Firms compete a la Cournot and decide how much to supply to each market they have a link with. We assume that markets have linear demand functions and firms have convex quadratic cost functions. We show there exists a unique equilibrium in any given network of firms and markets. We provide a formula which expresses the quantities at an equilibrium as a function of a network centrality measure. Keywords: Cournot Markets, Networks, Nash Equilibrium, Centrality Measures Classification-JEL: C62, C72, D85, L11 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.33 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-033.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.33 Title: Optimal Equilibria of the Best Shot Game Author-Name: Paolo Pin Author-X-Name-First: Paolo Author-X-Name-Last: Pin Author-WorkPlace-Name: Università degli Studi di Siena Author-Name: Luca Dall'Asta Author-X-Name-First: Luca Author-X-Name-Last: Dall'Asta Author-Name: Abolfazl Ramezanpour Author-X-Name-First: Abolfazl Author-X-Name-Last: Ramezanpour Author-WorkPlace-Name: Politecnico di Torino Author-WorkPlace-Name: he Abdus Salam International Centre for Theoretical Physics Abstract: We consider any network environment in which the “best shot game” is played. This is the case where the possible actions are only two for every node (0 and 1), and the best response for a node is 1 if and only if all her neighbors play 0. A natural application of the model is one in which the action 1 is the purchase of a good, which is locally a public good, in the sense that it will be available also to neighbors. This game will typically exhibit a great multiplicity of equilibria. Imagine a social planner whose scope is to find an optimal equilibrium, i.e. one in which the number of nodes playing 1 is minimal. To find such an equilibrium is a very hard task for any non-trivial network architecture. We propose an implementable mechanism that, in the limit of infinite time, reaches an optimal equilibrium, even if this equilibrium and even the network structure is unknown to the social planner. Keywords: Networks, Best Shot Game, Simulated Annealing Classification-JEL: C61, C63, D85, H41 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.34 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-034.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.34 Title: Small World Networks with Segregation Patterns and Brokers Author-Name: Edoardo Gallo Author-X-Name-First: Edoardo Author-X-Name-Last: Gallo Author-WorkPlace-Name: University of Oxford Abstract: Many social networks have the following properties: (i) a short average distance between any two individuals; (ii) a high clustering coefficient; (iii) segregation patterns; the presence of (iv) brokers and (v) hubs. (i) and (ii) define a small world network. This paper develops a strategic network formation model where agents have heterogeneous knowledge of the network: cognizant agents know the whole network, while ignorant ones are less knowledgeable. For a broad range of parameters, all pairwise Nash (PN) networks have properties (i)-(iv). There are some PN networks with one hub. Cognizant agents have higher betweenness centrality: they are the brokers who connect different parts of the network. Ignorant agents cause the emergence of segregation patterns. The results are robust to varying the number of cognizant agents and to increasing the knowledge level of ignorant ones. An application shows the relevance of the results to assessing the welfare impact of an increase in network knowledge due to, e.g., improved access to social networking tools. Keywords: Network, Cognitive Network, Small World, Broker, Segregation Classification-JEL: C72, D85 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.35 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-035.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.35 Title: How Homophily Affects Learning and Diffusion in Networks Author-Name: Benjamin Golub Author-X-Name-First: Benjamin Author-X-Name-Last: Golub Author-WorkPlace-Name: Stanford University Author-Name: Matthew O. Jackson Author-X-Name-First: Matthew O. Author-X-Name-Last: Jackson Author-WorkPlace-Name: Stanford University Abstract: We examine how three different communication processes operating through social networks are affected by homophily - the tendency of individuals to associate with others similar to themselves. Homophily has no effect if messages are broadcast or sent via shortest paths; only connection density matters. In contrast, homophily substantially slows learning based on repeated averaging of neighbors' information and Markovian diffusion processes such as the Google random surfer model. Indeed, the latter processes are strongly affected by homophily but completely independent of connection density, provided this density exceeds a low threshold. We obtain these results by establishing new results on the spectra of large random graphs and relating the spectra to homophily. We conclude by checking the theoretical predictions using observed high school friendship networks from the Adolescent Health dataset. Keywords: Networks, Learning, Diffusion, Homophily, Friendships, Social Networks, Random Graphs, Mixing Time, Convergence, Speed of Learning, Speed of Convergence Classification-JEL: D83, D85, I21, J15, Z13 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.36 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-036.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.36 Title: Team Formation in a Network Author-Name: Markus Kinateder Author-X-Name-First: Markus Author-X-Name-Last: Kinateder Author-WorkPlace-Name: Universidad de Navarra Abstract: Two project leaders (or entrepreneurs) in a network, which captures social relations, recruit players in a strategic, competitive and time-limited process. Each team has an optimal size depending on the project’s quality. This is a random variable with a commonly known distribution. Only the corresponding project leader observes its realization. Any decision is only observed by the involved agents. The set of pure strategy Sequential Equilibria is characterized by giving an algorithm that selects one equilibrium at a time. An agent’s expected payoff is related to his position in the network, though no centrality measure in the literature captures this relation. A social planner frequently would achieve a higher welfare. Keywords: Dynamic Competitive Group Formation, Imperfect Information Classification-JEL: C72, C73, D85 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.37 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-037.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.37 Title: Cooperation through Imitation and Exclusion in Networks Author-Name: Constanza Fosco Author-X-Name-First: Constanza Author-X-Name-Last: Fosco Author-WorkPlace-Name: Universidad Carlos III de Madrid Author-Name: Friederike Mengel Author-X-Name-First: Friederike Author-X-Name-Last: Mengel Author-WorkPlace-Name: Maastricht University Abstract: We develop a simple model to study the coevolution of interaction structures and action choices in Prisoners’ Dilemma games. Agents are boundedly rational and choose both actions and interaction partners via payoff-based imitation. The dynamics of imitation and exclusion yields polymorphic outcomes under a wide range of parameters. Depending on the parameters of the model two scenarios can arise. Either there is “full separation” of defectors and cooperators, i.e. they are found in two different, disconnected components. Or there is “marginalization” of defectors, i.e. connected networks emerge with a center of cooperators and a periphery of defectors. Simulations confirm our analytical results and show that the share of cooperators increases with the speed at which the network evolves, increases with the radius of interaction and decreases with the radius of information of agents. Keywords: Game Theory, Cooperation, Imitation Learning, Network Formation Classification-JEL: C70, C73, D85 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.38 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-038.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.38 Title: Under-connected and Over-connected Networks Author-Name: Tim Hellmann Author-X-Name-First: Tim Author-X-Name-Last: Hellmann Author-WorkPlace-Name: Bielefeld University Author-Name: Berno Buechel Author-X-Name-First: Berno Author-X-Name-Last: Buechel Author-WorkPlace-Name: Bielefeld University Abstract: Since the seminal contribution of Jackson & Wolinsky 1996 [A Strategic Model of Social and Economic Networks, JET 71, 44-74] it has been widely acknowledged that the formation of social networks exhibits a general conflict between individual strategic behavior and collective outcome. What has not been studied systematically are the sources of inefficiency. We approach this omission by analyzing the role of positive and negative externalities of link formation. This yields general results that relate situations of positive externalities with stable networks that cannot be “too dense” in a well-defined sense, while situations with negative externalities tend to induce “too dense” networks. Keywords: Networks, Network Formation, Connections, Game Theory, Externalities, Spillovers, Stability, Efficiency Classification-JEL: D85, C72, L14 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.39 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-039.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.39 Title: Matching Markets with Signals Author-Name: Alexey Kushnir Author-X-Name-First: Alexey Author-X-Name-Last: Kushnir Author-WorkPlace-Name: Pennsylvania State University Abstract: A costless signaling mechanism has been proposed as a device to improve welfare in decentralized two-sided matching markets. An example of such an environment is a job market for new Ph.D. economists. We study a market game of incomplete information between firms and workers and show that costless signaling is actually harmful in some matching markets. Specifically, if agents have very similar preferences, signaling lessens the total number of matches and the welfare of firms, as well as it affects ambiguously the welfare of workers. These results run contrary to previous findings that costless signaling facilitates match formation. Keywords: Matching Markets, Signaling Classification-JEL: C70 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.40 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-040.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.40 Title: Incorporating Fairness Motives into the Impulse Balance Equilibrium and Quantal Response Equilibrium Concepts: An Application to 2x2 Games Author-Name: Alessandro Tavoni Author-X-Name-First: Alessandro Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Advanced School of Economics in Venice Abstract: Substantial evidence has accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically; one such example is the impulse balance equilibrium (Selten, Chmura, 2008), which introduces a psychological reference point to which players compare the available payoff allocations. This paper is concerned with advancing two new, empirically sound, concepts: equity-driven impulse balance equilibrium (EIBE) and equity-driven quantal response equilibrium (EQRE): both introduce a distributive reference point to the corresponding established stationary concepts known as impulse balance equilibrium (IBE) and quantal response equilibrium (QRE). The explanatory power of the considered models leads to the following ranking, starting with the most successful in terms of fit to the experimental data: EQRE, IBE, EIBE, QRE and Nash equilibrium. Keywords: Fairness, Inequity aversion, Aspiration level, Impulse balance, Quantal Response, Behavioral economics, Experimental economics Classification-JEL: C72, C91, D01, D63 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.41 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-041.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.41 Title: Kingmakers and Leaders in Coalition Formation Author-Name: Marc Kilgour Author-X-Name-First: Marc Author-X-Name-Last: Kilgour Author-WorkPlace-Name: Wilfrid Laurier University Author-Name: Steven J. Brams Author-X-Name-First: Steven J. Author-X-Name-Last: Brams Author-WorkPlace-Name: New York University Abstract: Assume that players strictly rank each other as coalition partners. We propose a procedure whereby they “fall back” on their preferences, yielding internally compatible, or coherent, majority coalition(s), which we call fallback coalitions. If there is more than one fallback coalition, the players common to them, or kingmakers, determine which fallback coalition will form. The players(s) who are the first to be acceptable to all other members of a fallback coalition are the leader(s) of that coalition. The effects of different preference assumptions—particularly, different kinds of single-peakedness—and of player weights on the number of coherent coalitions, their connectedness, and which players become kingmakers and leaders are investigated. The fallback procedure may be used (i) empirically to identify kingmakers and leaders or (ii) normatively to select them. Keywords: Coalition, Fallback Process, Kingmaker Leader, Cardinally Single-peaked, Ordinally Single-peaked Classification-JEL: C71, C78, D72 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.42 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-042.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.42 Title: Power in the Heterogeneous Connections Model: The Emergence of Core-Periphery Networks Author-Name: Dotan Persitz Author-X-Name-First: Dotan Author-X-Name-Last: Persitz Author-WorkPlace-Name: Tel Aviv University Abstract: The heterogeneous connections model is a generalization of the homogeneous connections model of Jackson and Wolinsky (1996) in which the intrinsic value of each connection is set by a discrete, positive and symmetric function that depends solely on the types of the two end agents. Core periphery networks are defined as networks in which the agents' set can be partitioned into two subsets, one in which the members are completely connected among themselves and the other where there are no internal links. A two-type society is defined as "power based" if both types of agents prefer to connect to one of the types over the other, controlling for path length. An exhaustive analysis shows that core periphery networks, in which the "preferred" types are in the core and the "rejected" types are in the periphery, are crucial in the "power based" society. In particular, if the linking costs are not too low and not too high, at least one such network is pairwise stable. Moreover, in many cases these networks are the unique pairwise stable networks and in all cases they are the unique strongly efficient networks. The set of efficient networks often differs from the set of pairwise stable networks, hence a discussion on this issue is developed. These results suggest heterogeneity accompanied by "power based" linking preferences as a natural explanation for many core-periphery structures observed in real life social networks. Keywords: Network Formation, Heterogeneity, Pairwise Stability Classification-JEL: D85, L14 Creation-Date: 200905 Template-Type: ReDIF-Paper 1.0 Number: 2009.43 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-043.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.43 Title: Climate Change Feedback on Economic Growth: Explorations with a Dynamic General Equilibrium Model Author-Name: Fabio Eboli Author-X-Name-First: Fabio Author-X-Name-Last: Eboli Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Ramiro Parrado Author-X-Name-First: Ramiro Author-X-Name-Last: Parrado Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Ca’ Foscari University Author-Name: Roberto Roson Author-X-Name-First: Roberto Author-X-Name-Last: Roson Author-WorkPlace-Name: Ca’ Foscari University, Venice Abstract: Human-generated greenhouse gases depend on the level of economic activity. Therefore, most climate change studies are based on models and scenarios of economic growth. Economic growth itself, however, is likely to be affected by climate change impacts. These impacts affect the economy in multiple and complex ways: changes in productivity, resource endowments, production and consumption patterns. We use a new dynamic, multi-regional Computable General Equilibrium (CGE) model of the world economy to answer the following questions: Will climate change impacts significantly affect growth and wealth distribution in the world? Should forecasts of human-induced greenhouse gases emissions be revised, once climate change impacts are taken into account? We found that, even though economic growth and emission paths do not change significantly at the global level, relevant differences exist at the regional and sectoral level. In particular, developing countries appear to suffer the most from climate change impacts. Keywords: Computable General Equilibrium Models, Climate Change, Economic Growth Classification-JEL: C68, E27, O12, Q54, Q56 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.44 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-044.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.44 Title: Does Social Capital Create Trust? Evidence from a Community of Entrepreneurs Author-Name: Fabio Sabatini Author-X-Name-First: Fabio Author-X-Name-Last: Sabatini Author-WorkPlace-Name: University of Siena Abstract: Which kind of social capital fosters the diffusion of development-oriented trust? This paper carries out an empirical investigation into the causal relationships connecting four types of social capital (i.e. bonding, bridging, linking, and corporate), and different forms of trust (knowledge-based trust, social trust, trust towards public services and political institutions), in a community of entrepreneurs located in the Italian industrial district of the Tuscia. Our results suggest that the main factors fostering the diffusion of social trust among entrepreneurs are the perception that the local community is a safe place, and the establishment of corporate ties through professional associations. Trust in people is positively and significantly correlated also to higher levels of satisfaction and confidence in public services. Participation in voluntary organizations does not appear to increase trust in people. Rather, we find evidence of the other way round: interpersonal trust seems to encourage civic engagement. Keywords: Trust, Social capital, Safety, Professional associations, Entrepreneurship, Corporate ties, Group and Interpersonal Processes, Social Perception and Cognition Classification-JEL: J24, O15, Z13 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.45 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-045.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.45 Title: Is It Fair to Treat China as a Christmas Tree to Hang Everybody’s Complaints? Putting its Own Energy Saving into Perspective Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: East-West Center Abstract: China had been the world’s second largest carbon emitter for years. However, recent studies show that China had overtaken the U.S. as the world’s largest emitter in 2007. This has put China on the spotlight, just at a time when the world community starts negotiating a post-Kyoto climate regime under the Bali roadmap. China seems to become such a Christmas tree on which everybody can hang his/her complaints. This paper first discusses whether such a critics is fair by examining China’s own efforts towards energy saving, the widespread use of renewable energy and participation in clean development mechanism. Next, the paper puts carbon reductions of China’s unilateral actions into perspective by examining whether the estimated greenhouse gas emission reduction from meeting the country’s national energy saving goal is achieved from China’s unilateral actions or mainly with support from the clean development mechanism projects. Then the paper discusses how far developing country commitments can go in an immediate post-2012 climate regime, thus pointing out the direction and focus of future international climate negotiations. Finally, emphasizing that China needs to act as a large and responsible developing country and take due responsibilities and to set a good example to the majority of developing countries, the paper articulates what can be expected from China to illustrate that China can be a good partner in combating global climate change. Keywords: Energy Saving, Renewable Energy, Post-Kyoto Climate Negotiations, Clean Development Mechanism, China, USA Classification-JEL: Q42, Q48, Q53, Q54, Q58 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.46 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-046.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.46 Title: The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes: Empowering Consumers to Choose Optimally Author-Name: Eftichios S. Sartzetakis Author-X-Name-First: Eftichios S. Author-X-Name-Last: Sartzetakis Author-WorkPlace-Name: University of Macedonia Author-Name: Anastasios Xepapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business and Beijer Fellow Author-Name: Emmanuel Petrakis Author-X-Name-First: Emmanuel Author-X-Name-Last: Petrakis Author-WorkPlace-Name: University of Crete Abstract: The present paper examines, within a dynamic framework, the use of information provision as a policy instrument to supplement environmental taxation. We assume that at least a fraction of consumers do not posses the required information to make the optimal choices, and that their behavior at each time period depends on the accumulated stock of information. We show that, as the accumulated stock of information provision increases, both the optimal level of information provided at each period of time and the optimal tax rate decline over time. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies. Information provision can shift the demand towards environmentally friendly products over time and thus, reduce the required level of the tax rate. Keywords: Information Provision, Environmental Taxation Classification-JEL: Q53, Q58, D62, D82 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.47 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-047.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.47 Title: Contractually Stable Networks Author-Name: Vincent Vannetelbosch Author-X-Name-First: Vincent Author-X-Name-Last: Vannetelbosch Author-WorkPlace-Name: CORE, Université catholique de Louvain Author-Name: Jean-François Caulier Author-X-Name-First: Jean-François Author-X-Name-Last: Caulier Author-WorkPlace-Name: Universitaires Saint-Louis Author-Name: Ana Mauleon Author-X-Name-First: Ana Author-X-Name-Last: Mauleon Author-WorkPlace-Name: FNRS and CEREC, CORE, Université catholique de Louvain Abstract: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency. Keywords: Networks, Coalition Structures, Contractual Stability, Allocation Rules Classification-JEL: A14, C70 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.48 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-048.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.48 Title: Education, Reputation or Network? Evidence from Italy on Migrant Workers Employability Author-Name: Massimiliano Mazzanti Author-X-Name-First: Massimiliano Author-X-Name-Last: Mazzanti Author-WorkPlace-Name: University of Ferrara Author-Name: Susanna Mancinelli Author-X-Name-First: Susanna Author-X-Name-Last: Mancinelli Author-WorkPlace-Name: University of Ferrara Author-Name: Giovanni Ponti Author-X-Name-First: Giovanni Author-X-Name-Last: Ponti Author-WorkPlace-Name: University of Ferrara Author-Name: Nora Piva Author-X-Name-First: Nora Author-X-Name-Last: Piva Author-WorkPlace-Name: University of Ferrara Abstract: The strong adverse selection that immigrants face in hosting labour markets may induce them to adopt some behaviours or signals to modify employers’ beliefs. Relevant mechanisms for reaching this purpose are personal reputation; exploiting ethnic networks deeply-rooted in the hosting country; and high educational levels used as an indirect signal of productivity. On this last point, the immigrant status needs a stronger signal compared to that necessary for a local worker, and this may lead the immigrant to accept job qualifications which are lower than those achievable through the embodied educational level. This could explain the over education problem that characterizes many countries, Italy included. The aim of the paper is to investigate whether the above mentioned mechanisms are adopted by immigrants in Italy, a crucial country for EU immigration flows, and if they are useful in increasing immigrants’ likelihood of employment. The empirical analysis has been conducted using the dataset from a national Labour Force Survey which provides information on 6,860 documented immigrants. We estimate a logit model for immigrants’ likelihood of being employed, focusing on the above mentioned mechanisms: reputation, ethnic networks and educational level. Moreover we concentrate on the interaction effects of the mechanisms and investigate whether one of them wins on the others. Results show that each of the three mechanisms is statistically and economically significant and exerts positive influence: all factors contribute to increasing the immigrant’s probability of being employed. Anyway, a high level of education increases the probability of being employed more than the belonging to ethnic networks deeply-rooted in Italy. The specific embodied capital of workers matter relatively more. This is relevant for labour public policies in this specific realm since the human capital lever is a possible direct target of various public policies and private human capital investments. Keywords: Educational Qualifications, Migrant Networks, Immigrant Employability, Reputation, Segmented Labour Markets Classification-JEL: D82, J24, I2, F22 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.49 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-049.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.49 Title: General Pattern Formation in Recursive Dynamical Systems Models in Economics Author-Name: Anastasios Xepapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business and Beijer Fellow Author-Name: William Brock Author-X-Name-First: William Author-X-Name-Last: Brock Author-WorkPlace-Name: University of Wisconsin and Beijer Fellow Abstract: This paper presents a fairly general treatment of recursive infinite horizon forward looking optimizing systems on infinite dimensional spatial domains. It includes optimal control, an analysis of local stability of spatially flat optimal steady states and development of techniques to compute spatially heterogeneous optimal steady states. The paper also develops a concept of rational expectations equilibrium, a local stability analysis for spatially homogeneous rational expectations steady states, and computational techniques for spatially heterogeneous rational expectations steady states. Keywords: Pattern Formation, Spatial Spillovers, Optimal Control, Spillover Induced Instability, Growth Models Classification-JEL: C61, O41 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.50 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-050.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.50 Title: Emissions Trends and Labour Productivity Dynamics Sector Analyses of De-coupling/Recoupling on a 1990-2005 Namea Author-Name: Giovanni Marin Author-X-Name-First: Giovanni Author-X-Name-Last: Marin Author-WorkPlace-Name: University of Ferrara Author-Name: Massimiliano Mazzanti Author-X-Name-First: Massimiliano Author-X-Name-Last: Mazzanti Author-WorkPlace-Name: University of Ferrara Abstract: This paper provides new empirical evidence on Environmental Kuznets Curves (EKC) for greenhouse gases (GHGs) and air pollutants at sector level. A panel dataset based on the Italian NAMEA over 1990-2005 is analysed, focusing on both emission efficiency (EKC model) and total emissions (IPAT model). Results show that looking at sector evidence, both decoupling and also eventually re-coupling trends could emerge along the path of economic development. CH4 is moderately decreasing in recent years, but being a minor gas compared to CO2, the overall performance on GHGs is not compliant with Kyoto targets, which do not appear to have generated a structural break in the dynamics at least for GHGs. SOx and NOx show decreasing patterns, though the shape is affected by some outlier sectors with regard to joint emission-productivity dynamics, and for SOx exogenous innovation and policy related factors may be the main driving force behind observed reductions. Services tend to present stronger delinking patterns across emissions. Trade expansion validates the pollution haven in some cases, but also show negative signs when only EU15 trade is considered: this may due to technology spillovers and a positive ‘race to the top’ rather than the bottom among EU15 trade partners (Italy and Germany as the main exporters and trade partner in the EU). Finally, general R&D expenditure show weak correlation with emissions efficiency. EKC and IPAT derived models provide similar conclusions overall; the emission-labour elasticity estimated in the latter is generally different from 1, suggesting that in most cases, and for both services and industry, a scenario characterised by emissions saving technological dynamics. Further research should be directed towards deeper investigation of trade relationship at sector level, increased research into and efforts to produce specific sectoral data on ‘environmental innovations’, and to verifying the value of heterogeneous panel models capturing sector heterogeneity. Keywords: Greenhouse Gases, Air Pollutants, NAMEA, Trade Openness, Labour Productivity, EKC, STIRPAT, Delinking Classification-JEL: C23, O4, Q55, Q56 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.51 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-051.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.51 Title: Dynamics, Stability, and Foresight in the Shapley-Scarf Housing Market Author-Name: Yoshio Kamijo Author-X-Name-First: Yoshio Author-X-Name-Last: Kamijo Author-WorkPlace-Name: Waseda University Author-Name: Ryo Kawasaki Author-X-Name-First: Ryo Author-X-Name-Last: Kawasaki Author-WorkPlace-Name: Tokyo Institute of Technology Abstract: While most of the literature starting with Shapley and Scarf (1974) have considered a static exchange economy with indivisibilities, this paper studies the dynamics of such an economy. We find that both the dynamics generated by competitive equilibrium and the one generated by weakly dominance relation, converge to a set of allocations we define as strictly stable, which we can show to exist. Moreover, we show that even when only pairwise exchanges between two traders are allowed, the strictly stable allocations are attained eventually if traders are sufficiently farsighted. Keywords: Indivisible Goods Market, Dynamics, Competitive Allocation, Strict Core, Foresight, Stable Set Classification-JEL: D78, C71 Creation-Date: 200906 Template-Type: ReDIF-Paper 1.0 Number: 2009.52 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-052.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.52 Title: Does Corporate Social Responsibility Affect the Performance of Firms? Author-Name: Sergio Vergalli Author-X-Name-First: Sergio Author-X-Name-Last: Vergalli Author-WorkPlace-Name: University of Brescia Author-Name: Laura Poddi Author-X-Name-First: Laura Author-X-Name-Last: Poddi Author-WorkPlace-Name: University of Ferrara Abstract: Over the last two decades in OECD countries increasingly more firms are certifying as Socially Responsible (CSR is the acronym for Corporate Social Responsibility). This kind of certification is assigned by private companies that guarantee that a certain firm’s behaviour is environmentally and sociologically correct. Some papers (including Preston and O’Bannon, 1997; Waddock and Graves, 1997; McWilliams and Sieger, 2001; Ullman, 1985) tried to establish if there exists a link between Social Responsibility certification and the performance of firms. Their results were ambiguous and did not show any common connection. This ambiguity depends mainly on the static nature of their analyses and on the problem of whether performance is affected more by certification costs or by increasing sales due to an effect on reputation. Our work would like to discover whether certain performance indicators are affected by a firm’s social responsible behaviour and their certifications by looking at panel data. The novelty of our analysis is due to its dynamic aspect and from a CSR index that intersects two of the three main international indices (Domini 400 Social Index, Dow Jones Sustainability World Index, FTSE4Good Index), to be objective and obtain a representative sample. The main results seem to support the idea that CSR firms which are more virtuous, have better long run performance. They have some initial costs but obtain higher sales and profits due to several causes reputation effect, a reduction of long run costs and increased social responsible demand. Keywords: Corporate Social Responsibility, Growth Classification-JEL: M14, C23, O10 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.53 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-053.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.53 Title: Climate Change Mitigation Strategies in Fast-Growing Countries: The Benefits of Early Action Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Princeton University, Fondazione Eni Enrico Mattei and CMCC Author-Name: Carlo Carraro Author-X-Name-First: Carlo Author-X-Name-Last: Carraro Author-WorkPlace-Name: University of Venice, Fondazione Eni Enrico Mattei, CEPR, CESifo and CMCC Abstract: This paper builds on the assumption that OECD countries are (or will soon be) taking actions to reduce their greenhouse gas emissions. These actions, however, will not be sufficient to control global warming, unless developing countries also get involved in the cooperative effort to reduce GHG emissions. This paper investigates the best short-term strategies that emerging economies can adopt in reacting to OECD countries’ mitigation effort, given the common long-term goal to prevent excessive warming without hampering economic growth. Results indicate that developing countries would incur substantial economic losses by following a myopic strategy that disregards climate in the short-run, and that their optimal investment behaviour is to anticipate the implementation of a climate policy by roughly 10 years. Investing in innovation ahead of time is also found to be advantageous. The degree of policy anticipation is shown to be important in determining the financial transfers of an international carbon market meant to provide incentives for the participation of developing countries. This is especially relevant for China, whose recent and foreseeable trends of investments in innovation are consistent with the adoption of domestic emission reduction obligations in 2030. Keywords: Energy-economy Modeling, Climate Policy, Developing Countries Classification-JEL: Q54, Q55, Q43 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.54 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-054.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.54 Title: Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: Bocconi University, FEEM and CEPR Author-Name: Alireza Naghavi Author-X-Name-First: Alireza Author-X-Name-Last: Naghavi Author-WorkPlace-Name: Università di Bologna Abstract: We develop an endogenous growth model to study the long run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm’s production chain between a home upstream division and a foreign downstream one. On the positive side, we show that, when contracts are incomplete, the possibility of offshoring has favorable implications for economic growth. Yet, offshoring induced by a higher bargaining power of the upstream division can hamper growth: while there is always a positive correlation between upstream bargaining weight and offshoring activities, there is a non-monotonic relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. On the normative side, we show that, whereas with complete contract efficiency is restored through a subsidy to R&D only, with incomplete contracts a production subsidy to offshored upstream divisions is needed too. Keywords: Offshoring, Heterogeneous Firms, Incomplete Contracts, Growth, Industry Dynamics Classification-JEL: D23, F23, L23, O31, O43 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.55 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-055.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.55 Title: On Regulation and Competition: Pros and Cons of a Diversified Monopolist Author-Name: Carlo Scarpa Author-X-Name-First: Carlo Author-X-Name-Last: Scarpa Author-WorkPlace-Name: University of Brescia Author-Name: Giacomo Calzolari Author-X-Name-First: Giacomo Author-X-Name-Last: Calzolari Author-WorkPlace-Name: University of Bologna Abstract: We study the regulation of a firm which supplies a regulated service while also operating in a competitive, unregulated sector. If the firm conducts its activities in the two markets jointly, it enjoys economies of scope whose size is the firm’s private information, unknown either to the regulator or to the rival firms. We characterize the unregulated market outcome (with price and quantity competition) and optimal regulation that involves an informational externality to the competitors. Although joint conduct of the activities generates scope economies, it also entails private information, so that regulation is less efficient and the unregulated market too may be adversely affected. Nevertheless, we show that allowing the firm to integrate productions is (socially) desirable, unless joint production is characterized by dis-economies of scope. Keywords: Regulation, Competition, Asymmetric Information, Conglomerate Firms, Multiutility, Scope Economies, Informational Externality Classification-JEL: L51, L43, L52 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.56 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-056.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.56 Title: Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Ruben Lubowski Author-X-Name-First: Ruben Author-X-Name-Last: Lubowski Author-WorkPlace-Name: limate and Air Program, Environmental Defense Fund Author-Name: Alexander Golub Author-X-Name-First: Alexander Author-X-Name-Last: Golub Author-WorkPlace-Name: Climate and Air Program, Environmental Defense Fund Author-Name: Anil Markandya Author-X-Name-First: Anil Author-X-Name-Last: Markandya Author-WorkPlace-Name: Basque Center for Climate Change (BC3) and University of Bath Abstract: Discussions over tropical deforestation are currently at the forefront of climate change policy negotiations at national, regional, and international levels. This paper analyzes the effects of linking Reduced Emissions from Deforestation and Forest Degradation (REDD) to a global market for greenhouse gas emission reductions. We supplement a global climate-energy-economy model with alternative cost estimates for reducing deforestation emissions in order to examine a global program for stabilizing greenhouse gas concentrations at 550 ppmv of CO2 equivalent. Introducing REDD reduces global forestry emissions through 2050 by 20-22% in the Brazil-only case and by 64-88% in the global REDD scenarios. At the same time, REDD lowers the total costs of the climate policy by an estimated 10-25% depending on which tropical countries participate and whether the “banking” of excess credits for use in future periods is allowed. As a result, REDD could enable additional reductions of at least 20 ppmv of CO2-equivalent concentrations with no added costs compared to an energy-sector only policy. The cost savings from REDD are magnified if banking is allowed and there is a need to increase the stringency of global climate policy in the future in response, for example, to new scientific information. Results also indicate that REDD decreases carbon prices in 2050 by 8-23% with banking and 11-26% without banking. While developing regions, particularly Latin America, gain the value of REDD opportunities, the decrease in the carbon price keeps the value of international carbon market flows relatively stable despite an increase in volumes transacted. We also estimate that REDD generally reduces the total portfolio of investments and research and development of new energy technologies by 1-10%. However, due to impacts on the relative prices of different fossil fuels, REDD has a slight positive estimated effect on investments in coal-related technologies (IGCC and CCS) as well as, in some cases, non-electric energy R&D. This research confirms that integrating REDD into global carbon markets can provide powerful incentives for the preservation of tropical forests while lowering the costs of global climate change protection and providing valuable policy flexibility. Keywords: Carbon market, Climate change, Innovation, Mitigation, Policy costs, Offsets, Reduced Emissions from Deforestation and Degradation (REDD), Technological change, Tropical deforestation Classification-JEL: Q23, Q24, Q42, Q52, Q54, Q55 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.57 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-057.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.57 Title: Collective Moral Hazard, Maturity Mismatch and Systemic Bailouts Author-Name: Jean Tirole Author-X-Name-First: Jean Author-X-Name-Last: Tirole Author-WorkPlace-Name: Toulouse School of Economics Author-Name: Emmanuel Farhi Author-X-Name-First: Emmanuel Author-X-Name-Last: Farhi Author-WorkPlace-Name: Department of Economics Harvard and TSE Abstract: The paper elicits a mechanism by which private leverage choices exhibit strategic complementarities through the reaction of monetary policy. When everyone engages in maturity transformation, authorities have little choice but facilitating refinancing. In turn, refusing to adopt a risky balance sheet lowers the return on equity. The key ingredient is that monetary policy is non-targeted. The ex post benefits from a monetary bailout accrue in proportion to the number amount of leverage, while the distortion costs are to a large extent fixed. This insight has important consequences. First, banks choose to correlate their risk exposures. Second, private borrowers may deliberately choose to increase their interest-rate sensitivity following bad news about future needs for liquidity. Third, optimal monetary policy is time inconsistent. Fourth, macro-prudential supervision is called for. We characterize the optimal regulation, which takes the form of a minimum liquidity requirement coupled with monitoring of the quality of liquid assets. We establish the robustness of our insights when the set of bailout instruments is endogenous and characterize the structure of optimal bailouts. Keywords: Monetary Policy, Funding Liquidity Risk, Strategic Complementarities, Macro-Prudential Supervision Classification-JEL: E44, E52, G28 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.58 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-058.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.58 Title: How Harmful are Adaptation Restrictions Author-Name: Kelly C. de Bruin Author-X-Name-First: Kelly C. Author-X-Name-Last: de Bruin Author-WorkPlace-Name: Wageningen University Author-Name: Rob B. Dellink Author-X-Name-First: Rob B. Author-X-Name-Last: Dellink Author-WorkPlace-Name: Environmental Economics and Natural Resources Group, Wageningen University and Institute for Environmental Studies, VU University Amsterdam Abstract: The dominant assumption in economic models of climate policy remains that adaptation will be implemented in an optimal manner. There are, however, several reasons why optimal levels of adaptation may not be attainable. This paper investigates the effects of suboptimal levels of adaptation, i.e. adaptation restrictions, on the composition and level of climate change costs and on welfare. Several adaptation restrictions are identified and then simulated in a revised DICE model, extended with adaptation (AD-DICE). We find that especially substantial over-investment in adaptation can be very harmful due to sharply increasing marginal adaptation costs. Furthermore the potential of mitigation to offset suboptimal adaptation is investigated. When adaptation is not possible at extreme levels of climate change, it is cost-effective to use more stringent mitigation policies in order to keep climate change limited, thereby making adaptation possible. Furthermore not adjusting the optimal level of mitigation to these adaptation restrictions may double the costs of adaptation restrictions, and thus in general it is very harmful to ignore existing restrictions on adaptation when devising (efficient) climate policies. Keywords: Integrated Assessment Modelling, Adaptation, Climate Change Classification-JEL: Q25, Q28 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.59 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-059.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.59 Title: Sharing the Burden of Adaptation Financing: An Assessment of the Contributions of Countries Author-Name: Rob Dellink Author-X-Name-First: Rob Author-X-Name-Last: Dellink Author-WorkPlace-Name: Institute for Environmental Studies (IVM) Author-Name: Michel den Elzen Author-X-Name-First: Michel Author-X-Name-Last: den Elzen Author-WorkPlace-Name: Netherlands Environmental Assessment Agency Author-Name: Harry Aiking Author-X-Name-First: Harry Author-X-Name-Last: Aiking Author-WorkPlace-Name: nstitute for Environmental Studies (IVM), VU University Author-Name: Emmy Bergsma Author-X-Name-First: Emmy Author-X-Name-Last: Bergsma Author-WorkPlace-Name: Institute for Environmental Studies (IVM), VU University Author-Name: Frans Berkhout Author-X-Name-First: Frans Author-X-Name-Last: Berkhout Author-WorkPlace-Name: Institute for Environmental Studies (IVM), VU University Author-Name: Thijs Dekker Author-X-Name-First: Thijs Author-X-Name-Last: Dekker Author-WorkPlace-Name: Institute for Environmental Studies (IVM), VU University Author-Name: Joyeeta Gupta Author-X-Name-First: Joyeeta Author-X-Name-Last: Gupta Author-WorkPlace-Name: Institute for Environmental Studies (IVM), VU University Abstract: Climate change may cause most harm to countries that contribute least to greenhouse gas emissions. This paper identifies deontology, solidarity and consequentialism as the principles that can serve as a basis for a fair international burden sharing scheme of adaptation costs. We translate these principles into criteria that can be applied in assigning contributions of individual countries, namely historical responsibility, equality and capacity to pay. Specific political and scientific choices are discussed, highlighting implications for international burden-sharing. Combining historical responsibility and capacity to pay seems a promising starting point for international negotiations on the design of burden-sharing schemes. From the numerical assessment, it is clear that UNFCCC Annex I countries carry the greatest burden under most scenarios, but contributions differ substantially subject to the choice of an indicator for capacity to pay. The total financial contribution by the Annex I countries could be in the range of $55-68 billion annually. Keywords: Adaptation Financing, Burden-Sharing, Historical Responsibility Classification-JEL: F55, Q54 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.60 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-060.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.60 Title: The Value of Reducing Cancer Risks at Contaminated Sites: Are More Heavily Exposed People Willing to Pay More? Author-Name: Anna Alberini Author-X-Name-First: Anna Author-X-Name-Last: Alberini Author-WorkPlace-Name: University of Maryland Author-Name: Stefania Tonin Author-X-Name-First: Stefania Author-X-Name-Last: Tonin Author-WorkPlace-Name: University IUAV Author-Name: Margherita Turvani Author-X-Name-First: Margherita Author-X-Name-Last: Turvani Author-WorkPlace-Name: University IUAV Abstract: We use conjoint choice questions to investigate people’s tastes for cancer risk reductions and income in the context of public programs that would provide for remediation at abandoned industrial contaminated sites. Our survey was self-administered using the computer by persons living in the vicinity of an important contaminated site on the Italian National Priority List. The value of a prevented case of cancer is €2.6 million, but this figure does vary with income, perceived exposure to contaminants, and opinions about priorities that should be pursued by cleanup programs. Keywords: Value of a Statistical Case of Cancer, Conjoint Choice Experiments, Contaminated Sites, Abandoned Sites, Reuse, Remediation Classification-JEL: J17, I18, K32, Q51, Q53 Creation-Date: 200907 Template-Type: ReDIF-Paper 1.0 Number: 2009.61 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-061.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.61 Title: The Role of Forests as Carbon Sinks: Land-Use and Carbon Accounting Author-Name: Renato Rosa Author-X-Name-First: Renato Author-X-Name-Last: Rosa Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Clara Costa Duarte Author-X-Name-First: Clara Author-X-Name-Last: Costa Duarte Author-WorkPlace-Name: Universidade Nova de Lisboa Author-Name: Maria A. Cunha-e-Sá Author-X-Name-First: Maria A. Author-X-Name-Last: Cunha-e-Sá Author-WorkPlace-Name: Universidade Nova de Lisboa Abstract: The use of forests as carbon sinks is examined by introducing carbon sequestration benefits’ accounting in a multi-vintage land allocation model. Following the IPCC, three carbon accounting methods are considered. We compare the results in each case with those without carbon sequestration, as well as the performances of the ton-year and the average methods (second-best) to the carbon flow (first-best) concerning optimal land allocation between forestry and alternative uses, total carbon sequestered, timber production and social welfare. A full proof of long-run optimality of steady state forest is provided. Numerical simulations are performed and results discussed illustrating the setup’s potential. Keywords: Land Allocation Model, Forest Vintages, Carbon Sequestration, Carbon Accounting, Optimal Rotation, Transition/steady-state Classification-JEL: Q15, Q23 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.62 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-062.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.62 Title: Trade Complexity and Productivity Author-Name: Gabor Békés Author-X-Name-First: Gabor Author-X-Name-Last: Békés Author-WorkPlace-Name: Hungarian Academy of Science Author-Name: Carlo Altomonte Author-X-Name-First: Carlo Author-X-Name-Last: Altomonte Author-WorkPlace-Name: AM - Bocconi University, KITeS and FEEM Abstract: We exploit a panel dataset of Hungarian firms merged with product-level trade data for the period 1992-2003 to investigate the relation between firms' trading activities (importing, exporting or both) and productivity. We find important self-selection effects of the most productive firms induced by the existence of heterogeneous sunk costs of trade, for both importers and exporters. We relate these sunk costs of trade to the relationship-specific nature of the trade activities, entailing a certain degree of technological and organizational complexity. We also show that, to the extent that imports and exports are correlated within firms, failing to control for the importing activity leads to overstated average productivity premia of exporters. Keywords: Trade Openness, Firms' Heterogeneity, Productivity Classification-JEL: F12, F14, L25 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.63 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-063.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.63 Title: Cultural Diversity and Economic Performance: Evidence from European Regions Author-Name: Giovanni Prarolo Author-X-Name-First: Giovanni Author-X-Name-Last: Prarolo Author-WorkPlace-Name: Università di Bologna Author-Name: Elena Bellini Author-X-Name-First: Elena Author-X-Name-Last: Bellini Author-WorkPlace-Name: FEEM Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: University of Bologna, FEEM and CEPR Author-Name: Dino Pinelli Author-X-Name-First: Dino Author-X-Name-Last: Pinelli Author-WorkPlace-Name: FEEM Abstract: We investigate the relationship between diversity and productivity in Europe using an original dataset covering the NUTS 3 regions of 12 countries of the EU15 (Austria, Belgium, Denmark, France, former Western Germany, Ireland, Italy, the Netherlands, Portugal, Spain, Sweden and the United Kingdom). In so doing, we follow the empirical methodology developed by Ottaviano and Peri (2006a) in the case of US cities. The main idea is that, as cultural diversity may affect both production and consumption through positive or negative externalities, the joint estimation of price and income equations is needed to identify the dominant effect. Based on this methodology, we find that diversity is positively correlated with productivity. Moreover, we find evidence that causation runs from the former to the latter. These results for EU regions are broadly consistent with those found by Ottaviano and Peri for US cities. Keywords: Cultural Diversity, Economic Performance, Productivity, Europe Classification-JEL: O5, O11, O57, R5, R58 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.64 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-064.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.64 Title: The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Princeton University, FEEM and CMCC Author-Name: Carlo Carraro Author-X-Name-First: Carlo Author-X-Name-Last: Carraro Author-WorkPlace-Name: University of Venice, FEEM, CEPR, CESifo and CMCC Author-Name: Enrica De Cian Author-X-Name-First: Enrica Author-X-Name-Last: De Cian Author-WorkPlace-Name: FEEM Author-Name: Romain Duval Author-X-Name-First: Romain Author-X-Name-Last: Duval Author-WorkPlace-Name: OECD Author-Name: Emanuele Massetti Author-X-Name-First: Emanuele Author-X-Name-Last: Massetti Author-WorkPlace-Name: FEEM and CMCC Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Princeton University, FEEM and CMCC Abstract: This paper uses WITCH, an integrated assessment model with a game-theoretic structure, to explore the prospects for, and the stability of broad coalitions to achieve ambitious climate change mitigation action. Only coalitions including all large emitting regions are found to be technically able to meet a concentration stabilisation target below 550 ppm CO2eq by 2100. Once the free-riding incentives of non-participants are taken into account, only a “grand coalition” including virtually all regions can be successful. This grand coalition is profitable as a whole, implying that all countries can gain from participation provided appropriate transfers are made across them. However, neither the grand coalition nor smaller but still environmentally significant coalitions appear to be stable. This is because the collective welfare surplus from cooperation is not found to be large enough for transfers to offset the free-riding incentives of all countries simultaneously. Some factors omitted from the analysis, which might improve coalition stability, include the co-benefits from mitigation action, the costless removal of fossil fuel subsidies, as well as alternative assumptions regarding countries’ bargaining behaviour. Keywords: Climate Policy, Climate Coalition, Game Theory, Free Riding Classification-JEL: C68, C72, D58, Q54 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.65 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-065.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.65 Title: Article 82 EC – The Problems and The Solution Author-Name: John Temple Lang Author-X-Name-First: John Temple Author-X-Name-Last: Lang Author-WorkPlace-Name: Cleary Gottlieb Steen & Hamilton LLP, Trinity College and Senior Visiting Research Fellow Abstract: The Commission's Guidance paper on exclusionary abuse under Article 82 EC is open to three fundamental criticisms. First, it leads to less legal certainty, because the rules suggested are vague and imprecise, because dominant companies will not have the information needed to apply them, and because the Commission is trying to change the law, which it has no power to do. Second, it would lead to some anticompetitive effects, because in practice it discourages price competition, by discouraging individualised price negotiations and retroactive rebates, and by suggesting that the Commission will protect not-yet-as-efficient competitors from price competition. Third, it leads to too many "false positives", i.e., findings of exclusionary abuse that are not justified in economics or law. The solution is to return to the test in the Treaty as interpreted by the Court of Justice: an exclusionary abuse must involve limiting the production, marketing or technical development of competitors of the dominant company, if harm is caused to consumers. Keywords: Article 82EC, Competition, Abuse Classification-JEL: K21 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.66 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-066.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.66 Title: Think Again: Higher Elasticity of Substitution Increases Economic Resilience Author-Name: P. Dumas Author-X-Name-First: P. Author-X-Name-Last: Dumas Author-WorkPlace-Name: Centre International de Recherche sur l’Environnement et le Développement (CIRED) Author-Name: S. Hallegatte Author-X-Name-First: S. Author-X-Name-Last: Hallegatte Author-WorkPlace-Name: Ecole Nationale de la Météorologie, Météo-France and CIRED Abstract: This paper shows that, counter-intuitively, a higher elasticity of substitution in model production function can lead to reduced economic resilience and larger vulnerability to shocks in production factor prices. This result is due to the fact that assuming a higher elasticity of substitution requires a recalibration of the production function parameters to keep the model initial state unchanged. This result has consequences for economic analysis, e.g., on the economic vulnerability to climate change. Keywords: Substitution, Calibration, Constant Elasticity of Substitution, Shock Classification-JEL: D24, E17, E23 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.67 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-067.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.67 Title: Climate Change Assessment and Agriculture in General Equilibrium Models: Alternative Modeling Strategies Author-Name: Ruslana Rachel Palatnik Author-X-Name-First: Ruslana Rachel Author-X-Name-Last: Palatnik Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Roberto Roson Author-X-Name-First: Roberto Author-X-Name-Last: Roson Author-WorkPlace-Name: Universitá Ca’ Foscari di Venezia Abstract: Agricultural sectors play a key role in the economics of climate change. Land as an input to agricultural production is one of the most important links between economy and the biosphere, representing a direct projection of human action on the natural environment. Agricultural management practices and cropping patterns have a vast effect on biogeochemical cycles, freshwater availability and soil quality. Agriculture also plays an important role in emitting and storing greenhouse gases. Thus, to consistently investigate climate policy and future pathways for the economic and natural environment, a realistic representation of agricultural land-use is essential. Computable General Equilibrium (CGE) models have increasingly been used to this purpose. CGE models simulate the simultaneous equilibrium in a set of interdependent markets, and are especially suited to analyze agricultural markets from a global perspective. However, modelling agricultural sectors in CGE models is not a trivial task, mainly because of differences in temporal and geographical aggregation scales. The aim of this study is to overview some proposed modelling strategies, by reviewing the available literature and highlighting the different trade-offs involved in the various approaches. Keywords: Computable General Equilibrium (CGE), Partial Equilibrium (PE), Agriculture, Land Use, Climate Change Classification-JEL: C68, D58, Q24, Q51, Q54 Creation-Date: 200908 Template-Type: ReDIF-Paper 1.0 Number: 2009.68 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-068.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.68 Title: The Economic Valuation of Marine Ecosystems Author-Name: Paulo A.L.D. Nunes Author-X-Name-First: Paulo A.L.D. Author-X-Name-Last: Nunes Author-WorkPlace-Name: Center for Environmental Economics and Management, Ca’ Foscari University of Venice and Fondazione Eni Enrico Mattei Author-Name: Helen Ding Author-X-Name-First: Helen Author-X-Name-Last: Ding Author-WorkPlace-Name: Ca’ Foscari University of Venice and Fondazione Eni Enrico Mattei Author-Name: Anil Markandya Author-X-Name-First: Anil Author-X-Name-Last: Markandya Author-WorkPlace-Name: University of Bath, UK BC3 Basque Centre for Climate Change Abstract: In a democratic system, policy makers have to take the preferences of the citizens into account. Since we live in a world with scarce resources, one is asked to make choices regarding the use and management of these resources. In this context, if policy makers decide to invest in the protection of marine ecosystems, less financial resources will be available for other policy areas, for example national health. Moreover, the investment in the protection of marine ecosystems brings along with it the provision of a wide range of benefits to humans though most are not priced in the existing markets – for example climate regulation and provision of habitat for biodiversity. Given that most human activities are priced in one way or other, in some decision contexts, the temptation exists to downplay or ignore these important marine ecosystem benefits on the basis of the non-existence of prices. The simple and simplistic idea in the minds of many policymakers is that a lack of prices is equivalent to a lack of values. Clearly, this is a biased perspective. Against this background, this paper explores the motivation for an economic valuation of this complex resource. The state-of-the-art economic valuation methodologies follow the guidelines proposed by the Millennium Ecosystem Assessment, taking into account the existing scientific knowledge on the functioning of marine ecosystems, marine ecosystem goods and services and its impacts on human welfare. Finally, we critically review some economic valuation studies, arguing that the economic valuation of marine ecosystem services and biodiversity can make sense if and only if important guidelines are observed. Keywords: Economic Valuation, Marine Ecosystem, Millennium Ecosystem Assessment Approach, Europe Classification-JEL: Q50, Q57 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.69 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-069.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.69 Title: Informal Finance: A Theory of Moneylenders Author-Name: Andreas Madestam Author-X-Name-First: Andreas Author-X-Name-Last: Madestam Author-WorkPlace-Name: Bocconi University Abstract: I study the coexistence of formal and informal finance in underdeveloped credit markets. While weak institutions constrain formal banks, shallow pockets hamper informal lenders. In such economies, informal finance has two effects. By increasing the investment return it decreases borrowers’ relative payoff following default, inducing banks to lend more liberally (disciplinary effect). By channeling bank capital it reduces banks’ agency costs from lending directly to borrowers, limiting banks’ extension of borrower credit (rent-extraction effect). Among other things, the model shows that informal interest rates are higher, borrower welfare lower, and informal finance more prevalent when the rent-extraction effect prevails, consistent with stylized facts in poor societies. Keywords: Credit Markets, Financial Development, Institutions, Market Structure Classification-JEL: O12, O16, O17, D40 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.70 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-070.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.70 Title: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations Author-Name: Anastasios Xepapadeas Author-X-Name-First: Anastasios Author-X-Name-Last: Xepapadeas Author-WorkPlace-Name: Athens University of Economics and Business Author-Name: Efthymia Kyriakopoulou Author-X-Name-First: Efthymia Author-X-Name-Last: Kyriakopoulou Author-WorkPlace-Name: Athens University of Economics and Business Abstract: We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies. Keywords: Agglomeration, Spatial Economics, Environmental Policy, Knowledge Spillovers, Transportation Cost Classification-JEL: R3, Q5, H2 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.71 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-071.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.71 Title: Coastal Zone Management in the Mediterranean: Legal and Economic Perspectives Author-Name: Anil Markandya Author-X-Name-First: Anil Author-X-Name-Last: Markandya Author-WorkPlace-Name: University of Bath and Fondazione Eni Enrico Mattei Author-Name: S. Arnold Author-X-Name-First: S. Author-X-Name-Last: Arnold Author-WorkPlace-Name: University of Bath Author-Name: M. Cassinelli Author-X-Name-First: M. Author-X-Name-Last: Cassinelli Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: T. Taylor Author-X-Name-First: T. Author-X-Name-Last: Taylor Author-WorkPlace-Name: University of Bath Abstract: This paper examines existing measures taken to protect the coastal zones of the Mediterranean Sea and assesses their success. A summary of the main pressures facing these zones is given, followed by an analysis of the legislation covering coastal zone development in ten countries: Algeria, Croatia, Egypt, France, Israel, Italy, Malta, Spain, Tunisia and Turkey. We find that not all of these states have legislation specifically covering coastal zones, but there is concern in all areas that the legislation is not working, We also look at the costs and benefits of controlling coastal development. Firstly, a literature review of valuation studies identifies a range of values placed on developed and undeveloped coastline for both users and local property owners. These values were then used in a model to evaluate policy options to control development of a stretch of coastline. The model indicates that a stricter control regime of coastal development may provide significant benefits. Keywords: Coastal Zone Management, Legislation, Littoral, Mediterranean, Recreation Classification-JEL: Q5 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.72 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-072.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.72 Title: Cultural Identity and Knowledge Creation in Cosmopolitan Cities Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: Bocconi University, DEP-KITeS, FEEM and CEPR Author-Name: Giovanni Prarolo Author-X-Name-First: Giovanni Author-X-Name-Last: Prarolo Author-WorkPlace-Name: University of Bologna and FEEM Abstract: We study how the city system is affected by the possibility for the members of the same cultural diaspora to interact across different cities. In so doing, we propose a simple two- city model with two mobile cultural groups. A localized externality fosters the productivity of individuals when groups interact in a city. At the same time, such interaction dilutes cultural identities and reduces the consumption of culture-specific goods and services. We show that the two groups segregate in different cities when diaspora members find it hard to communicate at distance whereas they integrate in multicultural cities when communication is easy. The model generates situations in which segregation is an equilibrium but is Pareto dominated by integration. Keywords: Cultural Identity, Cosmopolitan City, Productiviy Classification-JEL: Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.73 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-073.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.73 Title: Self-enforcing Agreements on Water allocation Author-Name: Erik Ansink Author-X-Name-First: Erik Author-X-Name-Last: Ansink Author-WorkPlace-Name: Wageningen University Abstract: Many water allocation agreements in transboundary river basins are inherently unstable. Due to stochastic river flow, agreements may be broken in case of drought. The objective of this paper is to analyse whether water allocation agreements can be self-enforcing. An agreement is modelled as the outcome of bargaining game on river water allocation. Given this agreement, the bargaining game is followed by a repeated extensive-form game in which countries decide whether or not to comply with the agreement. I assess under what conditions such agreements are self-enforcing, given stochastic river flow. The results show that, for sufficiently low discounting, every efficient agreement can be sustained in subgame perfect equilibrium. Requiring renegotiation-proofness may shrink the set of possible agreements to a unique self-enforcing agreement. The solution induced by this particular agreement implements the “downstream incremental distribution”, an axiomatic solution to water allocation that assigns all gains from cooperation to downstream countries. Keywords: Self-Enforcing Agreement, Repeated Extensive-Form Game, Water Allocation, Renegotiation-Proofness Classification-JEL: C73, Q25 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.74 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-074.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.74 Title: Mapping the Evolution of "Clusters": A Meta-analysis Author-Name: Mario A. Maggioni Author-X-Name-First: Mario A. Author-X-Name-Last: Maggioni Author-WorkPlace-Name: Catholic University Author-Name: T. Erika Uberti Author-X-Name-First: T. Erika Author-X-Name-Last: Uberti Author-WorkPlace-Name: Catholic University Author-Name: Francesca Gambarotto Author-X-Name-First: Francesca Author-X-Name-Last: Gambarotto Author-WorkPlace-Name: University of Padova Abstract: This paper presents a meta-analysis of the “cluster literature” contained in scientific journals from 1969 to 2007. Thanks to an original database we study the evolution of a stream of literature which focuses on a research object which is both a theoretical puzzle and an empirical widespread evidence. We identify different growth stages, from take-off to development and maturity. We test the existence of a life-cycle within the authorships and we discover the existence of a substitutability relation between different collaborative behaviours. We study the relationships between a “spatial” and an “industrial” approach within the textual corpus of cluster literature and we show the existence of a “predatory” interaction. We detect the relevance of clustering behaviours in the location of authors working on clusters and in measuring the influence of geographical distance in co-authorship. We measure the extent of a convergence process of the vocabulary of scientists working on clusters. Keywords: Cluster, Life-Cycle, Cluster Literature, Textual Analysis, Agglomeration, Co-Authorship Classification-JEL: O18 , R12 , Z13, B41 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.75 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-075.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.75 Title: Environmental Kuznets Curves for Carbon Emissions: A Critical Survey Author-Name: Nektarios Aslanidis Author-X-Name-First: Nektarios Author-X-Name-Last: Aslanidis Author-WorkPlace-Name: University Rovira Virgili Abstract: The empirical finding of an inverse U-shaped relationship between per capita income and pollution, the so-called Environmental Kuznets Curve (EKC), suggests that as countries experience economic growth, environmental deterioration decelerates and thus becomes less of an issue. Focusing on the prime example of carbon emissions, the present article provides a critical review of the new econometric techniques that have questioned the baseline polynomial specification in the EKC literature. We discuss issues related to the functional form, heterogeneity, “spurious” regressions and spatial dependence to address whether and to what extent the EKC can be observed. Despite these new approaches, there is still no clear-cut evidence supporting the existence of the EKC for carbon emissions. Keywords: Environmental Kuznets Curve, Carbon Emissions, Functional Form, Heterogeneity, “Spurious” Regressions, Spatial Dependence Classification-JEL: C20, Q32, Q50, O13 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.76 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-076.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.76 Title: Environmentalists' Behaviour and Environmental Policies policies Author-Name: Joan Canton Author-X-Name-First: Joan Author-X-Name-Last: Canton Author-WorkPlace-Name: University of Ottawa Abstract: In this partial equilibrium and static model, the impact of environmentalism on two countries' environmental policies is presented. First, the only (indirect) way environmentalists influence the choice of pollution taxes is through a negative term in the welfare function in Home. It is defined as passive environmentalism (PE). Second, this article is a first attempt to consider domestic environmentalists lobbying a foreign government. It is defined as active environmentalism (AE). Our contribution is threefold. We emphasize first that the way environmentalists act is paramount to study the consequences of their actions. Passive or active environmentalisms have very different impacts on environmental policies. Second, we show that lobbying activities can be counter-productive for environmentalists. Third, we characterize cases in which the presence of environmentalists has a non-ambiguous positive impact on welfare. Keywords: Environmentalism, Lobby Groups, Positive Environmental Economics, Strategic Environmental Policy Classification-JEL: H23, D72 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.77 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-077.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.77 Title: Paying for Safety: Preferences for Mortality Risk Reductions on Alpine Roads Author-Name: Christoph M. Rheinberger Author-X-Name-First: Christoph M. Author-X-Name-Last: Rheinberger Author-WorkPlace-Name: WSL Institute for Snow and Avalanche Research and IED Institute for Environmental Decisions Abstract: This paper presents a choice experiment, which values reductions in mortality risk on Alpine roads. These roads are on one hand threatened by common road hazards, on the other hand they are also endangered by natural hazards such as avalanches and rockfalls. Drawing on choice data from frequently exposed and barely exposed respondents, we are not only able to estimate the VSL but to explore how the respondents differ in their individual willingness-to-pay depending on personal characteristics. To address heterogeneity in preferences for risk reduction, we use a non-linear conditional logit model with interaction effects. The best estimate of the VSL in the context of fatal accidents on Alpine roads is in the range of €4.9–5.4 million with distinct differences between the urban and the mountain sample groups. We find the VSL to be significantly altered by socio-economic factors but only marginally altered by the type of hazard. Keywords: Value of Statistical Life, Choice Experiment, Natural Hazard Mitigation, Traffic Safety Classification-JEL: D81, J17, R42 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.78 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-078.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.78 Title: "It Is Never too late": Optimal Penalty for Investment Delay in Public Procurement Contracts Author-Name: Sergio Vergalli Author-X-Name-First: Sergio Author-X-Name-Last: Vergalli Author-WorkPlace-Name: University of Brescia and FEEM Author-Name: Chiara D’Alpaos Author-X-Name-First: Chiara Author-X-Name-Last: D’Alpaos Author-WorkPlace-Name: DIMEG, Univ. of Padova Author-Name: Michele Moretto Author-X-Name-First: Michele Author-X-Name-Last: Moretto Author-WorkPlace-Name: Univ. of Padova and FEEM Author-Name: Paola Valbonesi Author-X-Name-First: Paola Author-X-Name-Last: Valbonesi Author-WorkPlace-Name: Univ. of Padova Abstract: We provide a general framework in which to determine the optimal penalty fee inducing the contractor to respect the contracted delivery date in public procurement contracts (PPCs). We do this by developing a real option model that enables us to investigate the contractor’s value of investment timing flexibility which the penalty rule - de facto - introduces. We then apply this setting in order to evaluate the range of penalty fees in the Italian legislation on PPCs. According to our calibration analysis, there is no evidence that the substantial delays recorded in the execution times of Italian PPCs are due to incorrectly set penalty fees. This result opens the way for other explanations of delays in Italian PPCs: specifically, we extend our model to investigate the probability of enforcing a penalty which we assume negatively affected by the "quality" of the judicial system and the discretionality of the court in voiding the rule. Our simulations show that the penalty fee is highly sensitive to the "quality" of the judicial system. Specifically referring to the Italian case, we show that the optimal penalty should be higher than those set according to the present Italian law. Keywords: Public Procurement Contracts, Penalty Fee, Investment Timing Flexibility, Contract Incompleteness, Enforceability of Rules Classification-JEL: L33, H57, D81 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.79 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-079.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.79 Title: “Mitigation, Adaptation, Suffering”: In Search of the Right Mix in the Face of Climate Change Author-Name: Henry Tulkens Author-X-Name-First: Henry Author-X-Name-Last: Tulkens Author-WorkPlace-Name: CORE, Université catholique de Louvain Author-Name: Vincent van Steenberghe Author-X-Name-First: Vincent Author-X-Name-Last: van Steenberghe Author-WorkPlace-Name: Belgian Federal Ministry for the Environment Abstract: The usually assumed two categories of costs involved in climate change policy analysis, namely abatement and damage costs, hide the presence of a third category, namely adaptation costs. This dodges the determination of an appropriate level for them. Including adaptation costs explicitly in the total environmental cost function allows one to characterize the optimal (cost minimizing) balance between the three categories, in statics as well as in dynamics. Implications are derived for cost benefit analysis of adaptation expenditures. Keywords: Climate Change, Mitigation, Adaptation, Suffering Classification-JEL: Q5, H0 Creation-Date: 200909 Template-Type: ReDIF-Paper 1.0 Number: 2009.80 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-080.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.80 Title: A Search Model for Joint Implementation Author-Name: Giovanni Bella Author-X-Name-First: Giovanni Author-X-Name-Last: Bella Author-WorkPlace-Name: University of Cagliari Abstract: The aim of this paper is to present a search model in the field of environmental economics, where so-called clean and dirty producers enter the trading market, both looking for a partner with whom to exchange the goods they are endowed with. The model derived in this paper is rather simple. Nevertheless, it is able to produce a series of interesting results and useful insights, and is conveniently used here as a framework to explain the functioning of Joint Implementation programmes for polluting emissions’ reduction. Keywords: Environmental economics, Search theory, Market failures Classification-JEL: C61, O13, Q26 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.81 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-081.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.81 Title: Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO? Author-Name: ZhongXiang Zhang Author-X-Name-First: ZhongXiang Author-X-Name-Last: Zhang Author-WorkPlace-Name: East-West Center Abstract: The climate-trade nexus gains increasing attention as governments are taking great efforts to forge a post-2012 climate change regime to succeed the Kyoto Protocol. This raises the issues of the scope of trade-related measures and of when and how they could be used. This paper discusses how far trade-related measures should be incorporated in that context. Drawing on an analogy to the Montreal Protocol and comparing developing country’s climate mitigation and adaptation needs with the funding available, the paper argues that such measures should initially be applied only among Annex I or II countries. To discipline the use of unilateral trade measures at the international level, the paper emphasizes a need to define comparable climate efforts. Moreover, the Lieberman-Warner bill in the U.S. Senate - taken as a proxy for future U.S. climate legislation - is assessed, and found to be neither effective nor likely to be WTO-consistent. The paper is concluded by arguing that, in order to encourage developing countries to do more to combat climate change, developed countries should focus on carrots. Sticks can be incorporated, but only if they are credible and realistic and serve as a useful supplement to push developing countries to take actions or adopt policies and measures earlier than would otherwise have been the case. Keywords: Post-2012 climate negotiations, Trade-related measures, Lieberman-Warner bill, WTO, Montreal Protocol, Developing countries, United States Classification-JEL: F18, Q48, Q54, Q56, Q58 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.82 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-082.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.82 Title: Invention and Transfer of Climate Change Mitigation Technologies on a Global Scale: A Study Drawing on Patent Data Author-Name: Matthieu Glachant Author-X-Name-First: Matthieu Author-X-Name-Last: Glachant Author-WorkPlace-Name: CERNA, Mines ParisTech Author-Name: Antoine Dechezleprêtre Author-X-Name-First: Antoine Author-X-Name-Last: Dechezleprêtre Author-WorkPlace-Name: CERNA, Mines ParisTech Author-Name: Ivan Hascic Author-X-Name-First: Ivan Author-X-Name-Last: Hascic Author-WorkPlace-Name: Empirical Policy Analysis Unit, OECD Environment Directorate Author-Name: Nick Johnstone Author-X-Name-First: Nick Author-X-Name-Last: Johnstone Author-WorkPlace-Name: Empirical Policy Analysis Unit, OECD Environment Directorate Author-Name: Yann Ménière Author-X-Name-First: Yann Author-X-Name-Last: Ménière Author-WorkPlace-Name: CERNA, Mines ParisTech Abstract: Accelerating the development of less GHG intensive technologies and promoting their global diffusion - in particular in fast-growing emerging economies - is imperative in achieving the transition to a low-carbon economy. Consequently, technology is at the core of current discussions about the post-Kyoto regime. The purpose of this study is to fuel this discussion by providing an in-depth analysis of the geographic distribution of climate mitigation inventions since 1978 and their international diffusion on a global scale. We use the EPO/OECD World Patent Statistical Database (PATSTAT) which includes patents from 81 national and international patent offices. Note that the Least Developed Countries patent a negligible number of inventions, meaning that the geographical scope of the study is limited to industrialized countries and emerging economies. In this study, patent counts are used to measure the output of innovation but also the transfer of inventions across borders on the ground that an innovator patents his/her invention in a foreign country because he/she plans to exploit it commercially there. They are the only indicator available today that provides a comprehensive view on innovation and technology diffusion on a global scale. Patent data also present drawbacks. First, patents are not the only tool available to inventors to protect their inventions. Second, successful technology transfers also involve the transfer of know-how. Still one can reasonably assume that patent counts are positively correlated to the quantity of non-patented innovations and transfers. We consider 13 different classes of technologies with significant global GHG emission abatement potentials, and analyze inventive activities and international technology transfer between 1978 and 2003. The technologies considered are seven renewable energy technologies (wind, solar, geothermal, ocean energy, biomass, waste-to-energy, and hydropower), methane destruction, climate-friendly cement, energy conservation in buildings, motor vehicle fuel injection, energy-efficient lighting and Carbon Capture & Storage (CCS). Keywords: Climate Change, Mitigation Technologies, Patent Data Classification-JEL: Q5, Q55 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.83 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-083.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.83 Title: Stationary Consistent Equilibrium Coalition Structures Constitute the Recursive Core Author-Name: László Á. Kóczy Author-X-Name-First: László Á. Author-X-Name-Last: Kóczy Author-WorkPlace-Name: Budapest Tech Abstract: We study coalitional games where the proceeds from cooperation depend on the entire coalition structure. The coalition structure core (Kóczy, 2007) is a generalisation of the coalition structure core for such games. We introduce a noncooperative, sequential coalition formation model and show that the set of equilibrium outcomes coincides with the recursive core. In order to extend past results to games that are not totally balanced (understood in this special setting) we introduce subgame-consistency that requires perfectness in relevant subgames only, while subgames that are never reached are ignored. Keywords: Partition Function, Externalities, Implementation, Recursive Core, Stationary Perfect Equilibrium, Time Consistent Equilibrium Classification-JEL: C71, C72 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.84 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-084.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.84 Title: Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix Author-Name: Michele Moretto Author-X-Name-First: Michele Author-X-Name-Last: Moretto Author-WorkPlace-Name: University of Padua Author-Name: Luca Di Corato Author-X-Name-First: Luca Author-X-Name-Last: Di Corato Author-WorkPlace-Name: Swedish University of Agricultural Sciences Abstract: In a continuous-time framework we study the technology and investment choice problem of a continuous co-digestion biogas plant dealing with randomly fluctuating relative convenience of input factor costs. Input factors enter into the productive process together mixed according to a given initial rule. Being inputs relative convenience stochastically evolving, a successive revision of the initial rule may be desirable. Hence, when the venture starts the manager may or may not install a flexible technology allowing for such option. Investment is irreversible and flexibility is costly. The problem is solved determining in the light of future prospects the optimal revision and then playing backward fixing the investment timing rule. Keywords: Factor Proportions, Technological Choice, Flexibility, Real Options, Alternative Energy Source Classification-JEL: C61, D24, Q42 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.85 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-085.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.85 Title: The 2008 WITCH Model: New Model Features and Baseline Author-Name: Enrica De Cian Author-X-Name-First: Enrica Author-X-Name-Last: De Cian Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, PEI Princeton University and CMCC Author-Name: Alessandra Sgobbi Author-X-Name-First: Alessandra Author-X-Name-Last: Sgobbi Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and European Commission Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei, PEI Princeton University and CMCC Abstract: WITCH is an energy-economy-climate model developed by the climate change group at FEEM. The model has been extensively used in the past 3 years for the economic analysis of climate change policies. WITCH is a hybrid top-down economic model with a representation of the energy sector of medium complexity. Two distinguishing features of the WITCH model are the representation of endogenous technological change and the game–theoretic set-up. Technological change is driven by innovation and diffusion processes, both of which feature international spillovers. World countries are grouped in 12 regions which interact with each other in a setting of strategic interdependence. This paper describes the updating of the base year data to 2005 and some new features: the inclusion of non-CO2 greenhouse gases and abatement options, the new specification of low carbon technologies and the inclusion of reducing emissions from deforestation and degradation. Keywords: Climate Policy, Hybrid Modelling, Integrated Assessment, Technological Change Classification-JEL: O33, O41, Q43 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.86 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-086.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.86 Title: Vertical Integration and Investor Protection in Developing Countries Author-Name: Rocco Macchiavello Author-X-Name-First: Rocco Author-X-Name-Last: Macchiavello Author-WorkPlace-Name: Oxford (Nuffield College) Abstract: The industrial organization of developing countries is characterized by the pervasive use of subcontracting arrangements among small, financially constrained firms. This paper asks whether vertical integration relaxes those financial constraints. It shows that vertical integration trades off the benefits of joint liability against the costs of rendering the supply chain more opaque to external investors. In contrast to the commonly held view that pervasive input and capital market imperfections are conducive to vertical integration, the model predicts that the motives for vertical integration are not necessarily higher in developing countries. In particular, vertical integration is more likely to arise at intermediate levels of investor protection and better contract enforcement with suppliers reduces vertical integration only if financial markets are sufficiently developed. Evidence supporting both predictions is discussed. Keywords: Vertical Integration, Industrial Development, Financial Constraints, Joint Liability, Trade Credit, Community-based Industries Classification-JEL: O12, O16, D23, G30, L22 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.87 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-087.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.87 Title: Carbon Kuznets Curves: Long-run Structural Dynamics and Policy Events Author-Name: Massimiliano Mazzanti Author-X-Name-First: Massimiliano Author-X-Name-Last: Mazzanti Author-WorkPlace-Name: University of Ferrara & CERIS CNR and CESAER INRA, UMR Author-Name: Antonio Musolesi Author-X-Name-First: Antonio Author-X-Name-Last: Musolesi Author-WorkPlace-Name: University of Ferrara & CERIS CNR and CESAER INRA, UMR Abstract: We study the structural differences among climate change leading ‘factors’ - Northern EU members -, and lagging actors - southern EU countries and the ‘Umbrella group’ - with regard to long run carbon-income relationships. Homogeneous and heterogeneous panel models show that the groups of countries less in favour of stringent climate policy have yet to experience a Kuznets curve, though they show relative delinking. Northern EU instead robustly shows bell shapes. Exogenous policy events such as the 1992 climate change convention appear to be relevant in shaping the EKC of Northern EU. In addition, other events such as the second oil price shock appear to have also impacted in shaping the long run emission/GDP dynamics. Keywords: Carbon Kuznets Curve, Panel Cointegration, Heterogeneous Panels, Cross-Section Correlation, Kyoto Framework, Bayesian Models, Policy Events, Long Run Dynamics Classification-JEL: C23, Q53 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.88 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-088.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.88 Title: SMEs in Argentina: Who are the Exporters Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: Bocconi University DEP-KITeS, FEEM and CEPR Author-Name: Christian Volpe Martincus Author-X-Name-First: Christian Author-X-Name-Last: Volpe Martincus Author-WorkPlace-Name: Inter-American Development Bank Abstract: There exists a growing body of literature which looks at export decisions made by firms. Most studies focus on developed countries and do not explore whether different behavioral patterns prevail over the firm size distribution. This paper aims at filling this gap in the literature by analyzing the export behavior of a statistically representative sample of 192 Small and Medium-Size Enterprises (SMEs) in a developing country, Argentina, over the period 1996-1998. We find that the level of employment, sourcing from abroad, investment in product improvement and average productivity are associated with a higher probability of exporting. Training activities for employees are important to export outside of MERCOSUR. Keywords: SME, Exports, Argentina Classification-JEL: F10, F14, D21, L60 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.89 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-089.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.89 Title: Input Production Joint Venture Author-Name: Gianpaolo Rossini Author-X-Name-First: Gianpaolo Author-X-Name-Last: Rossini Author-WorkPlace-Name: University of Bologna Author-Name: Cecilia Vergari Author-X-Name-First: Cecilia Author-X-Name-Last: Vergari Author-WorkPlace-Name: University of Bologna Abstract: In many industries it is quite common to observe firms delegating the production of essential inputs to independent ventures jointly established with competing rivals. The diffusion of this arrangement and the favourable stance of competition authorities call for the assessment of the social and private desirability of Input Production Joint Ventures (IPJV), which represent a form of input production cooperation, not investigated so far. IPJV can be seen as an intermediate organizational setting lying between the two extremes of vertical integration and vertical separation. Our investigation is based on an oligopoly model with horizontally differentiated goods. We characterize the conditions under which IPJV is privately optimal finding that firms’ incentives may be welfare detrimental. We also provide a rationale for the empirical relevance of IPJV both in terms of its ability to survive and in terms of disengagement incentives. Keywords: Input Production Joint Venture, Horizontal Differentiation, Oligopoly Classification-JEL: L24, L42 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.90 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-090.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.90 Title: Environmental Options and Technological Innovation: An Evolutionary Game Model Author-Name: Simone Borghesi Author-X-Name-First: Simone Author-X-Name-Last: Borghesi Author-WorkPlace-Name: University of Siena Author-Name: Angelo Antoci Author-X-Name-First: Angelo Author-X-Name-Last: Antoci Author-WorkPlace-Name: University of Sassari Author-Name: Marcello Galeotti Author-X-Name-First: Marcello Author-X-Name-Last: Galeotti Author-WorkPlace-Name: University of Florence Abstract: This paper analyses the effects on economic agents' behaviour of an innovative environmental protection mechanism that the Public Administration of a tourist region may adopt to attract visitors while protecting the environment. On the one hand, the Public Administration sells to the tourists an environmental call option that gives them the possibility of being (partially or totally) reimbursed if the environmental quality in the region turns out to be below a given threshold level. On the other hand, it offers the firms that adopt an innovative, non-polluting technology an environmental put option that allows them to get a reimbursement for the additional costs imposed by the new technology if the environmental quality is above the threshold level. The aim of the paper is to study the dynamics that arise with this financial mechanism from the interaction between the economic agents and the Public Administration in an evolutionary game context. Keywords: Environmental Bonds, Call and Put Options, Technological Innovation, Evolutionary Dynamics Classification-JEL: C73, D62, G10, O30, Q28 Creation-Date: 200910 Template-Type: ReDIF-Paper 1.0 Number: 2009.91 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-091.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.91 Title: The Decision to Migrate and Social Capital: Evidence from Albania Author-Name: Cristina Cattaneo Author-X-Name-First: Cristina Author-X-Name-Last: Cattaneo Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Abstract: The objective of this paper is to determine whether the participation in social organizations, which are commonly defined as a form of social capital, represents a complement or a substitute with respect to emigration. The nature of the relationship depends on the motivations behind the two choices, which induce the households to join a group and to invest in migration. To address this research question a bivariate probit model is employed, in that the decision to migrate and to join a social organization are estimated simultaneously. Both temporary and permanent emigration of the household are addressed. The results of the empirical estimation reveal that families participating in social organizations are more likely to send siblings abroad permanently, as they may receive from the social network important information that is crucial for permanent emigration. Hence, social capital performs a role as complement to permanent emigration. On the other hand, social capital is associated with a lower probability of moving temporarily. This may indicate that families resort to social capital rather than to temporary circular migration to overcome contingent liquidity constraint and therefore social capital is a substitute for temporary emigration. Keywords: International Migration, Social Capital, Information Network Classification-JEL: O15 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.92 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-092.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.92 Title: Global Climate Policy Architecture and Political Feasibility: Specific Formulas and Emission Targets to Attain 460 ppm CO2 Concentrations Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Jeffrey Frankel Author-X-Name-First: Jeffrey Author-X-Name-Last: Frankel Author-WorkPlace-Name: Harvard University Abstract: Three gaps in the Kyoto Protocol most badly need to be filled: the absence of emission targets extending far into the future, the absence of participation by the United States, China, and other developing countries, and the absence of reason to think that members will abide by commitments. To be politically acceptable, any new treaty that fills these gaps must, we believe, obey certain constraints regarding country-by-country economic costs. We offer a framework of formulas that assign quantitative allocations of emissions, across countries, one budget period at a time. The two-part plan: (i) China and other developing countries accept targets at BAU in the coming budget period, the same period in which the US first agrees to cuts below BAU; and (ii) all countries are asked in the future to make further cuts in accordance with a formula which sums up a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. An earlier proposal for specific parameter values in the formulas – Frankel (2009), as analyzed by Bosetti, et al (2009) – achieved the environmental goal that concentrations of CO2 plateau at 500 ppm by 2100. It succeeded in obeying our political constraints, such as keeping the economic cost for every country below the thresholds of Y=1% of income in Present Discounted Value, and X=5% of income in the worst period. In pursuit of more aggressive environmental goals, we now advance the dates at which some countries are asked to begin cutting below BAU, within our framework. We also tinker with the values for the parameters in the formulas. The resulting target paths for emissions are run through the WITCH model to find their economic and environmental effects. We find that it is not possible to attain a 380 ppm CO2 goal (roughly in line with the 2°C target) without violating our political constraints. We were however, able to attain a concentration goal of 460 ppm CO2 with looser political constraints. The most important result is that we had to raise the threshold of costs above which a country drops out, to as high as Y =3.4% of income in PDV terms, or X =12 % in the worst budget period. Some may conclude from these results that the more aggressive environmental goals are not attainable in practice, and that our earlier proposal for how to attain 500 ppm CO2 is the better plan. We take no position on which environmental goal is best overall. Rather, we submit that, whatever the goal, our approach will give targets that are more practical economically and politically than approaches that have been proposed by others. Keywords: International Climate Agreements Classification-JEL: Q, Q40, Q54 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.93 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-093.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.93 Title: Do International Roaming Alliances Harm Consumers? Author-Name: Benno Bühler Author-X-Name-First: Benno Author-X-Name-Last: Bühler Author-WorkPlace-Name: Toulouse School of Economics (IDEI) Abstract: We develop a model of international roaming in which mobile network operators (MNOs) compete both on the wholesale market to sell roaming services to foreign operators and on the retail market for subscribers. The operators own a network infrastructure only in their home country. To allow their subscribers to place or receive calls abroad, they have to buy roaming services provided by foreign MNOs. We show that in absence of international alliances and capacity restrictions, competition between foreign operators would drive wholesale unit prices down to marginal costs. However, operators prefer to form international alliances in which members mutually provide roaming services at inefficiently high wholesale prices. Alliances serve as a commitment device to soften competition on the retail market and harm consumers through excessively high per call prices. Although operators compete in two-part tariffs for subscribers, wholesale roaming prices do not exhibit profit-neutrality as do access prices in related models of net- work interconnection. We also show that international alliances are endogenously formed if not prevented by regulation. Keywords: International Roaming, Vertical Relations, Regulation Classification-JEL: D43, L13, L42, L96 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.94 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-094.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.94 Title: Like Oil and Water or Chocolate and Peanut Butter? Ethnic Diversity and Social Participation of Young People in England Author-Name: Elena Fumagalli Author-X-Name-First: Elena Author-X-Name-Last: Fumagalli Author-WorkPlace-Name: University Ca' Foscari of Venice Author-Name: Laura Fumagalli Author-X-Name-First: Laura Author-X-Name-Last: Fumagalli Author-WorkPlace-Name: Institute for Social and Economic Research, University of Essex Abstract: The paper studies the impact of ethnic diversity on social participation of young people. We first propose a theoretical model in which the agents choose between structured and unstructured social activities by taking into account the ethnic composition of the groups they join. We test our predictions using English census data together with the `Longitudinal Survey of Young People in England' (LSYPE) and we find that ethnic segregation increases the probability of hanging around near home, while ethnic fractionalization decreases it. Furthermore, more structured activities are not affected by ethnic fractionalization. Finally, we use an IV strategy based on both historical and geographical data to correct for endogenous sorting into neighborhoods. The results we get are even stronger than those obtained where the ethnic composition of the neighborhood is taken as exogenous. Keywords: Social Participation, Fractionalization, Segregation Classification-JEL: C25, D71, J15 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.95 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-095.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.95 Title: Gender Differences in Output Quality and Quantity under Competition and Time Constraints: Evidence from a Pilot Study Author-Name: Olga Shurchkov Author-X-Name-First: Olga Author-X-Name-Last: Shurchkov Author-WorkPlace-Name: Wellesley College Abstract: Gender gaps in income and level of position in the workplace are widespread. One explanation for this inequality is that the genders perform differently under competitive conditions, as previous experimental studies have found a significant gender gap in competitive tasks that are perceived to favor men. In this paper, we use a verbal task that is perceived to favor women and find no gender difference under competition per se. We also reject the hypothesis that a .stereotype threat. explains the inability of women to improve performance under competition. We propose an alternative explanation for gender inequality: namely, that women and men respond differently to time pressure. With reduced time pressure, competition in verbal tasks greatly increases the performance of women, such that women significantly outperform men. This effect appears largely due to the fact that extra time in a competition improves the quality of women’s work, leading them to make fewer mistakes. On the other hand, men use this extra time to increase the quantity of work, which results in a greater number of mistakes. Keywords: Gender Differences, Competition, Effects of Time Pressure Classification-JEL: C9, J16, J71 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.96 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-096.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.96 Title: Winning Big but Feeling no Better? The Effect of Lottery Prizes on Physical and Mental Health Author-Name: Benedicte Apouey Author-X-Name-First: Benedicte Author-X-Name-Last: Apouey Author-WorkPlace-Name: Paris School of Economics Author-Name: Andrew E. Clark Author-X-Name-First: Andrew E. Author-X-Name-Last: Clark Author-WorkPlace-Name: Paris School of Economics and IZA Bonn Abstract: We use British panel data to explore the exogenous impact of income on a number of individual health outcomes: general health status, mental health, physical health problems, and health behaviours (drinking and smoking). Lottery winnings allow us to make causal statements regarding the effect of income on health, as the amount won is largely exogenous. These positive income shocks have no significant effect on general health, but a large positive effect on mental health. This result seems paradoxical on two levels. First, there is a well-known status gradient in health in cross-section data, and, second, general health should partly reflect mental health, so that we may expect both variables to move in the same direction. We propose a solution to the first apparent paradox by underlining the endogeneity of income. For the second, we show that exogenous income is associated with greater risky health behaviours: lottery winners smoke more and engage in more social drinking. General health will pick up both mental health and the effect of these behaviours, and so may not improve following a positive income shock. This paper presents the first microeconomic analogue of previous work which has highlighted the negative health consequences of good macroeconomic conditions. Keywords: Income, Self-assessed health, Mental health, Smoking, Drinking Classification-JEL: D1, I1, I3 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.97 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-097.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.97 Title: Household Responses to Individual Shocks: Disability and Labor Supply Author-Name: Giovanni Gallipoli Author-X-Name-First: Giovanni Author-X-Name-Last: Gallipoli Author-WorkPlace-Name: UBC Author-Name: Laura Turner Author-X-Name-First: Laura Author-X-Name-Last: Turner Author-WorkPlace-Name: UBC Abstract: What are idiosyncratic shocks and how do people respond to them? This paper starts from the observation that idiosyncratic shocks are experienced at the individual level, but responses to shocks can encompass the whole household. Understanding and accurately modeling these responses is essential to the analysis of intra-household allocations, especially labor supply. Using longitudinal data from the Canadian Survey of Labour and Income Dynamics (SLID) we exploit information about disability and health status to develop a life-cycle framework which rationalizes observed responses of household members to idiosyncratic shocks. Two puzzling findings associated to disability onset motivate our work: (1) the almost complete absence of `added worker' effects within households and, (2) the fact that single agents' labor supply responses to disability shocks are larger and more persistent than those of married agents. We show that a first-pass, basic model of the household has predictions about dynamic labor supply responses which are at odds with these facts; despite such failure, we argue that these facts are consistent with optimal household behavior when we account for two simple mechanisms: the first mechanism relates to selection into and out of marriage, while the second hinges on insurance transfers taking place within households. We show that these mechanisms arise naturally when we allow for three features: a linkage between human capital accumulation and life-cycle labor supply, endogenous marriage contracts and the possibility of time transfers between partners. We also report evidence that the extended model with endogenous marriage contracts can fit divorce patterns observed in Canadian data, as well as correlations between disability prevalence and marital status, providing an ideal framework to study intra-household risk-sharing with limited commitment. Keywords: Idiosyncratic Risk, Disability, Life Cycle Labor Supply, Intrahousehold Insurance Classification-JEL: D13, I10, J12, J22 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.98 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-098.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.98 Title: On the Legitimacy of Coercion for the Financing of Public Goods Author-Name: Felix Bierbrauer Author-X-Name-First: Felix Author-X-Name-Last: Bierbrauer Author-WorkPlace-Name: Max Planck Institute Abstract: The literature on public goods has shown that efficient outcomes are impossible if participation constraints have to be respected. This paper addresses the question whether they should be imposed. It asks under what conditions efficiency considerations justify that individuals are forced to pay for public goods that they do not value. It is shown that participation constraints are desirable if public goods are provided by a malevolent Leviathan. By contrast, with a Pigouvian planner, efficiency can be achieved. Finally, the paper studies the delegation of public goods provision to a profit-maximizing firm. This also makes participation constraints desirable. Keywords: Public goods, Mechanism Design, Incomplete Contracts, Regulation Classification-JEL: D02, D82, H41, L51 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.99 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-099.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.99 Title: Foreclosing Competition through Access Charges and Price Discrimination Author-Name: Ángel L. López Author-X-Name-First: Ángel L. Author-X-Name-Last: López Author-WorkPlace-Name: IESE Business School Author-Name: Patrick Rey Author-X-Name-First: Patrick Author-X-Name-Last: Rey Author-WorkPlace-Name: Toulouse School of Economics (IDEI and GREMAQ) Abstract: This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non-linear tariffs and may charge different prices for on-net and off-net calls. Departing from cost-based access pricing allows the incumbent to foreclose the market in a profitable way. If the incumbent benefits from customer inertia, then it has an incentive to insist in the highest possible access markup even if access charges are reciprocal and even in the absence of actual switching costs. If instead the entrant benefits from customer activism, then foreclosure is profitable only when switching costs are large enough. Keywords: Access Pricing, Entry Deterrence, Interconnection, Network Competition, Two-way Access Classification-JEL: L41, L51, L96 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.100 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-100.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.100 Title: Nuclear versus Coal plus CCS: A Comparison of Two Competitive Base-load Climate Control Options Author-Name: Massimo Tavoni Author-X-Name-First: Massimo Author-X-Name-Last: Tavoni Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Bob van der Zwaan Author-X-Name-First: Bob Author-X-Name-Last: van der Zwaan Author-WorkPlace-Name: Energy research Centre of the Netherlands and Lenfest Center for Sustainable Energy at Columbia University Abstract: In this paper we analyze the relative importance and mutual behavior of two competing base-load electricity generation options that each are capable of contributing significantly to the abatement of global CO2 emissions: nuclear energy and coal-based power production complemented with CO2 capture and storage (CCS). We also investigate how, in scenarios from an integrated assessment model that simulates the economics of a climate-constrained world, the prospects for nuclear energy would change if exogenous limitations on the spread of nuclear technology were relaxed. Using the climate change economics model WITCH we find that until 2050 the resulting growth rates of nuclear electricity generation capacity become comparable to historical rates observed during the 1980s. Given that nuclear energy continues to face serious challenges and contention, we inspect how extensive the improvements of coal-based power equipped with CCS technology would need to be if our model is to significantly scale down the construction of new nuclear power plants. Keywords: Economic Competition, Electricity Sector, Nuclear Power, Coal Power, CCS, Renewables, Climate Policy Classification-JEL: D8, D9, H0, O3, O4, Q4, Q5 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.101 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-101.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.101 Title: Non-bossy Social Classification Author-Name: Dinko Dimitrov Author-X-Name-First: Dinko Author-X-Name-Last: Dimitrov Author-WorkPlace-Name: University of Munich Author-Name: Clemens Puppe Author-X-Name-First: Clemens Author-X-Name-Last: Puppe Author-WorkPlace-Name: Karlsruhe Institute of Technology Abstract: We consider the problem of how societies should be partitioned into classes if individuals express their views about who should be put with whom in the same class. A non-bossiness condition makes the social aggregator dependent only on those cells of the individual partitions the society members classify themselves in. This information is used to construct for each profile of views an opinion graph. By means of natural sovereignty and liberalism requirements, we characterize the non-bossy aggregators generating partitions in which the social classes are refinements of the connected components in the opinion graph. Keywords: Social Aggregation, Group Identity, Liberalism, Non-bossiness Classification-JEL: D71 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.102 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-102.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.102 Title: The Pace of Technology Transfer in Anticipation of Joint Venture Breakup Author-Name: Rapahel Soubeyran Author-X-Name-First: Rapahel Author-X-Name-Last: Soubeyran Author-WorkPlace-Name: INRA-MOISA & IDEP Author-Name: Ngo Van Long Author-X-Name-First: Ngo Author-X-Name-Last: Van Long Author-WorkPlace-Name: McGill University Author-Name: Antoine Soubeyran Author-X-Name-First: Antoine Author-X-Name-Last: Soubeyran Author-WorkPlace-Name: GREQAM, Université de la Méditerranée Abstract: This paper studies the properties of joint-venture relationship between a technologically advanced multinational firm and a local firm operating in a developing economy where the ability to enforce contracts is weak. We formulate a dynamic model of principal-agent relationship in which at any point of time the local firm can quit without legal penalties. An early breakup may be prevented if the multinational designs a suitable scheme in which both the pace and aggregate amount of technology transfer deviate from the first-best, and a suitable flow of side payments to encourage the local firm to stay longer. Keywords: Technology Transfer, Joint Venture, Developing Economies Classification-JEL: O3 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.103 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-103.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.103 Title: On the Real Effects of Bank Bailouts: Micro-Evidence from Japan Author-Name: Mariassunta Giannetti Author-X-Name-First: Mariassunta Author-X-Name-Last: Giannetti Author-WorkPlace-Name: Stockholm School of Economics Author-Name: Andrei Simonov Author-X-Name-First: Andrei Author-X-Name-Last: Simonov Author-WorkPlace-Name: Eli Broad Graduate School of Management, Michigan State University and CEPR Abstract: Exploiting the Japanese banking crisis as a laboratory, we provide firm-level evidence on the real effects of bank bailouts. Government recapitalizations result in positive abnormal returns for the clients of recapitalized banks. After recapitalizations, banks extend larger loans to their clients and some firms increase investment, but do not create more jobs than comparable firms. Most importantly, recapitalizations allow banks to extend larger loans to low and high quality firms alike, and low quality firms experience higher abnormal returns than other firms. Interestingly, recapitalizations by private investors have similar effects. Moreover, bank mergers engineered to enhance bank stability appear to hurt the borrowers of the sounder banks involved in the mergers. Keywords: Recapitalization, Merger, Banking Crisis Classification-JEL: G21, G34 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.104 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-104.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.104 Title: Time-separable Utility, Leisure and Human Capital Accumulation: What New Implications for the Environment-Growth Nexus? Author-Name: Xavier Pautrel Author-X-Name-First: Xavier Author-X-Name-Last: Pautrel Author-WorkPlace-Name: Nantes Atlantique Université Laboratoire d’Économie et de Management de Nantes (LEMNA), Institut d’Économie et de Management de Nantes - IEA Abstract: Using a time-separable utility function where leisure is introduced through the disutility of working time and is adjusted for quality, as measured by human capital to capture home production, we demonstrate that the environmental policy is harmful for growth. A tighter environmental tax reduces the incentives to educate by increasing leisure time and lowers the steady-state growth rate and lifetime welfare, whatever the source of pollution. We also demonstrate that the intertemporal elasticity of substitution in labor supply plays a crucial role in the marginal impact of the environmental tax on growth and welfare. When the positive influence of human capital is added into preferences (by explicitly modelling the home production sector), we find that the environmental policy promotes steady-state growth. This result challenges the finding by Hettich (1998) according to which, in the presence of leisure, the environmental tax does not affect human capital accumulation if the source of pollution is output. Keywords: Leisure, Human Capital, Environmental Tax Classification-JEL: C, Q56 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.105 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-105.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.105 Title: An Integrated Assessment of Climate Change, Air Pollution, and Energy Security Policy Author-Name: Bob van der Zwaan Author-X-Name-First: Bob Author-X-Name-Last: van der Zwaan Author-WorkPlace-Name: ECN, Energy research Centre of the Netherlands Author-Name: Johannes Bollen Author-X-Name-First: Johannes Author-X-Name-Last: Bollen Author-WorkPlace-Name: PBL, Netherlands Environmental Assessment Agency Author-Name: Sebastiaan Hers Author-X-Name-First: Sebastiaan Author-X-Name-Last: Hers Author-WorkPlace-Name: ECN, Energy research Centre of the Netherland Abstract: This article presents an integrated assessment of climate change, air pollution, and energy security policy. Basis of our analysis is the MERGE model, designed to study the interaction between the global economy, energy use, and the impacts of climate change. For our purposes we expanded MERGE with expressions that quantify damages incurred to regional economies as a result of air pollution and lack of energy security. One of the main findings of our cost-benefit analysis is that energy security policy alone does not decrease the use of oil: global oil consumption is only delayed by several decades and oil reserves are still practically depleted before the end of the 21st century. If, on the other hand, energy security policy is integrated with optimal climate change and air pollution policy, the world’s oil reserves will not be depleted, at least not before our modeling horizon well into the 22nd century: total cumulative demand for oil then decreases by about 20%. More generally, we demonstrate that there are multiple other benefits of combining climate change, air pollution, and energy security policies and exploiting the possible synergies between them. These benefits can be large: for Europe the achievable CO2 emission abatement and oil consumption reduction levels are significantly deeper for integrated policy than when a strategy is adopted in which one of the three policies is omitted. Integrated optimal energy policy can reduce the number of premature deaths from air pollution by about 14,000 annually in Europe and over 3 million per year globally, by lowering the chronic exposure to ambient particulate matter. Only the optimal strategy combining the three types of energy policy can constrain the global average atmospheric temperature increase to a limit of 3ºC with respect to the pre-industrial level. Keywords: Climate Change, Air Pollution, Energy Security, Cost-Benefit Analysis Classification-JEL: H21, D58, C61, O33, Q40 Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.106 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-106.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.106 Title: Imperfections in the Economics of Public Policy, Imperfections in Markets, and Climate Change Author-Name: Nicholas Stern Author-X-Name-First: Nicholas Author-X-Name-Last: Stern Author-WorkPlace-Name: IG Patel Professor of Economics and Government at the LSE and Chairman of the Grantham Research Institute on Climate Change and the Environment Abstract: In the last twenty years economics has created much of lasting value and real potential: it has been a very fertile period. But economics has also suffered from what I shall term „collective amnesia? covering whole areas of public policy. And on policy and the role of government it has, embarrassingly in my view, swayed with the political winds to the detriment of both our profession and to outcomes. Both the amnesia and the political bending have contributed to the economic crisis of the last year or two and to hostility towards the profession. My purpose here is first to lament the amnesia on theories of public policy in imperfect economies, in short the subject of public economics, to describe the bending of public policy analysis to political vogue, and to indicate some of the consequences. I then describe some of the mechanics of the processes described, in terms of choice of models and patterns of teaching. Finally, I use the example of climate change to illustrate some of the consequences of the amnesia, as well as of the political influence. Keywords: Public Policy, Climate Change Classification-JEL: H Creation-Date: 200911 Template-Type: ReDIF-Paper 1.0 Number: 2009.107 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-107.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.107 Title: Political Persistence, Connections and Economic Growth Author-Name: Giorgio Bellettini Author-X-Name-First: Giorgio Author-X-Name-Last: Bellettini Author-WorkPlace-Name: University of Bologna Author-Name: Carlotta Berti Ceroni Author-X-Name-First: Carlotta Author-X-Name-Last: Berti Ceroni Author-WorkPlace-Name: University of Bologna Author-Name: Giovanni Prarolo Author-X-Name-First: Giovanni Author-X-Name-Last: Prarolo Author-WorkPlace-Name: University of Bologna Abstract: Using data on a panel of 56 democratic countries in the period 1975-2004, we find evidence of a negative association between political stability and economic growth which is stronger and empirically more robust in countries with high bureaucratic costs. Motivated by these results, which contrast with previous contributions, we develop a model of growth with quality improvements where political connections with long-term politicians can be exploited by low-quality producers to defend their monopoly position and prevent innovation and entry of high-quality competitors. This requires that the incumbent politician remains in office and that the red-tape cost advantage granted by political connections is large relative to the quality upgrade related to innovation. Consistently with our empirical findings, the model delivers a negative association between the probability that the incumbent politician remains in office and average economic growth in the presence of high bureaucratic costs. Keywords: Political Persistence, Growth, Innovation Classification-JEL: O43 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.108 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-108.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.108 Title: The Deep-Pocket Effect of Internal Capital Markets Author-Name: Xavier Boutin Author-X-Name-First: Xavier Author-X-Name-Last: Boutin Author-WorkPlace-Name: CREST(LEI) and European Commission Author-Name: Giacinta Cestone Author-X-Name-First: Giacinta Author-X-Name-Last: Cestone Author-WorkPlace-Name: Queen Mary University of London, CSEF, and ECGI Author-Name: Chiara Fumagalli Author-X-Name-First: Chiara Author-X-Name-Last: Fumagalli Author-WorkPlace-Name: Università Bocconi, CSEF, and CEPR Author-Name: Giovanni Pica Author-X-Name-First: Giovanni Author-X-Name-Last: Pica Author-WorkPlace-Name: Università di Salerno and CSEF Author-Name: Nicolas Serrano-Velarde Author-X-Name-First: Nicolas Author-X-Name-Last: Serrano-Velarde Author-WorkPlace-Name: European University Institute Abstract: We provide evidence suggesting that incumbents' access to group deep pockets has a negative impact on entry in product markets. Relying on a unique French data set on business groups, our paper presents three major findings. First, the amount of cash holdings owned by incumbent-affiliated groups is negatively related to entry in a market. Second, the impact on entry of group deep pockets is more important in markets where access to external funding is likely to be more difficult. Third, the “entry deterring effect" of group deep pockets is more pronounced when groups have more active internal capital markets. Our findings suggest that internal capital markets operate within corporate groups and that they have a potential anti-competitive effect. Keywords: Business Groups, Cash Holdings, Internal Capital Markets, Deep-Pockets, Market Entry Classification-JEL: G32, G38, L41 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.109 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-109.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.109 Title: Simulating a Sequential Coalition Formation Process for the Climate Change Problem: First Come, but Second Served? Author-Name: Michael Finus Author-X-Name-First: Michael Author-X-Name-Last: Finus Author-WorkPlace-Name: University of Stirling Author-Name: Bianca Rundshagen Author-X-Name-First: Bianca Author-X-Name-Last: Rundshagen Author-WorkPlace-Name: University of Hagen Author-Name: Johan Eyckmans Author-X-Name-First: Johan Author-X-Name-Last: Eyckmans Author-WorkPlace-Name: atholieke Universiteit Leuven, Centrum voor Economische Studiën and Hogeschool-Universiteit Brussels Abstract: We analyze stability of self-enforcing climate agreements based on a data set generated by the CLIMNEG world simulation model (CWSM), version 1.2. We consider two new aspects which appear important in actual treaty-making. First, we consider a sequential coalition formation process where players can make proposals which are either accepted or countered by other proposals. Second, we analyze whether a moderator, like an international organization, even without enforcement power, can improve upon globally suboptimal outcomes through coordinating actions by making recommendations that must be Pareto-improving to all parties. We discuss the conceptual difficulties of implementing our algorithm. Keywords: International Climate Agreements, Sequential Coalition Formation, Coordination through Moderator, Integrated Assessment Model, Algorithm for Computations Classification-JEL: C79, H87, Q54 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.110 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-110.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.110 Title: Abatement and Allocation in the Pilot Phase of the EU ETS Author-Name: Corrado Di Maria Author-X-Name-First: Corrado Author-X-Name-Last: Di Maria Author-WorkPlace-Name: University College Dublin Author-Name: Barry Anderson Author-X-Name-First: Barry Author-X-Name-Last: Anderson Author-WorkPlace-Name: University College Dublin Author-Name: Frank Convery Author-X-Name-First: Frank Author-X-Name-Last: Convery Author-WorkPlace-Name: University College Dublin Abstract: We use historical industrial emissions data to assess the level of abatement and overallocation that took place across European countries during the pilot phase (2005-2007)of the European Union Emission Trading Scheme. Using a dynamic panel data model, we estimate the counterfactual (business-as-usual) emissions scenario for EU member states. Comparing this baseline to allocated and verified emissions, we conclude that both overallocation and abatement occurred, along with under-allocation and emissions inflation. Over the three trading years of the pilot phase we find over-allocation of approximately 376 million EUAs (6%) and total abatement at the member state level of 107 Mt CO2 (1.8%). However, due to over-allocation and possible uncertainty about future allocation methodologies, we calculate that emissions inflation of approximately 119 Mt CO2 (2%) occurred, resulting in emissions over the pilot phase being approximately 12 Mt CO2 (0.2%) higher than they would have been in the absence of the EU ETS. Keywords: Emissions Trading Scheme, Climate Policy, Dynamic Panel Data Analysis Classification-JEL: C23, O13, Q54, Q58 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.111 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-111.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.111 Title: Health-enhancing Activities and the Environment: How Competition for Resources Makes the Environmental Policy Beneficial Author-Name: Xavier Pautrel Author-X-Name-First: Xavier Author-X-Name-Last: Pautrel Author-WorkPlace-Name: Institut d’Economie et de Management de Nantes-IAE, Université de Nantes Abstract: In a two-period overlapping generations model, this paper demonstrates that the relationship between the environmental taxation and the economic activity (level- and growth-output) becomes inverted-U shaped, when the detrimental impact of pollution on health and the private decision of each working-age agent to improve her health are taken into account. Especially, a tighter environmental tax is more likely to promote (rather than to harm) output-level and –growth when health is very sensitive to pollution, the weight of health in preferences is high, the polluting capacity of the production technology is high and the rate of natural purification of pollutants is low. The inverted-U shaped relationship between the environmental tax and the economic activity is due to a positive effect arising from the competition for resources between the final output sector and the health-enhancing activities that offsets the conventional detrimental “drag-down effect” for low values of the environmental tax. We also demonstrate that the link between the environmental tax and the lifetime welfare is inverted-U shaped as well. Finally, we investigate the social optimum and the determinants of the optimal environmental tax. Keywords: Growth, Environment, Health, Overlapping Generations Classification-JEL: Q5 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.112 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-112.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.112 Title: Long Term Changes in Voting Power and Control Structure following the Unification of Dual Class Shares Author-Name: Yishay Yafeh Author-X-Name-First: Yishay Author-X-Name-Last: Yafeh Author-WorkPlace-Name: The Hebrew University Author-Name: Beni Lauterbach Author-X-Name-First: Beni Author-X-Name-Last: Lauterbach Author-WorkPlace-Name: School of Business Administration, Bar-Ilan University Abstract: We follow the evolution of ownership structure in a sample of 80 Israeli companies that unified their dual-class shares in the 1990s, and compare it with a control sample of firms that maintained their dual share structure at least until 2000. Our main findings are as follows. First, controlling shareholders offset the dilution of voting rights they incurred upon unification by: 1) increasing their holdings prior to the unification (ex-ante preparation), and 2) by buying shares afterwards; by the end of the sample period their voting power was only marginally lower than in the control sample. This suggests that marginal voting rights are important to controlling shareholders even beyond the 50% threshold. Second, share unifications were not associated with much change in the identity of controlling shareholders. Third, the proportion of firms affiliated with pyramidal business groups in the sample of unifying firms was lower than in the population of listed firms as a whole and not different from that in the control sample, suggesting that pyramidal ownership structures did not replace dual class shares. Finally, unifying firms did not exhibit a substantial improvement in their performance and valuation in comparison with the control sample. We conclude that the regulatory attempt to enforce one share-one vote yielded, at best, a minor improvement in corporate governance. Keywords: Dual class shares, corporate governance Classification-JEL: G30, G32 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.113 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-113.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.113 Title: On the Realized Volatility of the ECX CO2 Emissions 2008 Futures Contract: Distribution, Dynamics and Forecasting Author-Name: Julien Chevallier Author-X-Name-First: Julien Author-X-Name-Last: Chevallier Author-WorkPlace-Name: Imperial College London Author-Name: Benoît Sévi Author-X-Name-First: Benoît Author-X-Name-Last: Sévi Author-WorkPlace-Name: University of Angers (GRANEM) and LEMNA Abstract: The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a controversial issue. This article improves our understanding of this issue by characterizing the conditional and unconditional distributions of the realized volatility for the 2008 futures contract in the European Climate Exchange (ECX), which is valid during Phase II (2008-2012) of the EU ETS. The realized volatility measures from naive, kernel-based and subsampling estimators are used to obtain inferences about the distributional and dynamic properties of the ECX emissions futures volatility. The distribution of the daily realized volatility in logarithmic form is shown to be close to normal. The mixture-of-distributions hypothesis is strongly rejected, as the returns standardized using daily measures of volatility clearly departs from normality. A simplified HAR-RV model (Corsi, 2009) with only a weekly component, which reproduces long memory properties of the series, is then used to model the volatility dynamics. Finally, the predictive accuracy of the HAR-RV model is tested against GARCH specifications using one-step-ahead forecasts, which confirms the HAR-RV superior ability. Our conclusions indicate that (i) the standard Brownian motion is not an adequate tool for option pricing in the EU ETS, and (ii) a jump component should be included in the stochastic process to price options, thus providing more efficient tools for risk-management activities. Keywords: CO2 Price, Realized Volatility, HAR-RV, GARCH, Futures Trading, Emissions Markets, EU ETS, Intraday data, Forecasting Classification-JEL: C5, G1, Q4 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.114 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-114.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.114 Title: Sequential Sharing Rules for River Sharing Problems Author-Name: Erik Ansink Author-X-Name-First: Erik Author-X-Name-Last: Ansink Author-WorkPlace-Name: Wageningen University Author-Name: Hans-Peter Weikard Author-X-Name-First: Hans-Peter Author-X-Name-Last: Weikard Author-WorkPlace-Name: Wageningen University Abstract: We analyse the redistribution of a resource among agents who have claims to the resource and who are ordered linearly. A well known example of this particular situation is the river sharing problem. We exploit the linear order of agents to transform the river sharing problem to a sequence of two-agent river sharing problems. These reduced problems are mathematically equivalent to bankruptcy problems and can therefore be solved using any bankruptcy rule. Our proposed class of solutions, that we call sequential sharing rules, solves the river sharing problem. Our approach extends the bankruptcy literature to settings with a sequential structure of both the agents and the resource to be shared. In the paper, we first characterise a class of sequential sharing rules. Subsequently, we apply sequential sharing rules based on four classical bankruptcy rules, assess their properties, and compare them to four alternative solutions to the river sharing problem. Keywords: River Sharing Problem, Sequential Sharing Rule, Bankruptcy Problem, Water Allocation Classification-JEL: D63, D71, Q25 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.115 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-115.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.115 Title: Productivity and Firm Selection: Quantifying the “New” Gains from Trade Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: Bocconi University, KITeS, FEEM and CEPR Author-Name: Gregory Corcos Author-X-Name-First: Gregory Author-X-Name-Last: Corcos Author-WorkPlace-Name: Norwegian School of Economics and Business Administration Author-Name: Massimo Del Gatto Author-X-Name-First: Massimo Author-X-Name-Last: Del Gatto Author-WorkPlace-Name: "G. d'Annunzio" University and CRENoS Author-Name: Giordano Mion Author-X-Name-First: Giordano Author-X-Name-Last: Mion Author-WorkPlace-Name: LSE, Department of Geography, NBB, CEP and CEPR Abstract: We discuss how standard computable equilibrium models of trade policy can be enriched with selection effects without missing other important channels of adjustment. This is achieved by estimating and simulating a partial equilibrium model that accounts for a number of real world effects of trade liberalisation: richer availability of product varieties; tougher competition and weaker market power of firms; better exploitation of economies of scale; and, of course, efficiency gains via the selection of the most efficient firms. The model is estimated on E.U. data and simulated in counterfactual scenarios that capture several dimensions of European integration. Simulations suggest that the gains from trade are much larger in the presence of selection effects. Even in a relatively integrated economy as the E.U., dismantling residual trade barriers would deliver relevant welfare gains stemming from lower production costs, smaller markups, lower prices, larger firm scale and richer product variety. We believe our analysis provides enough ground to support the inclusion of firm heterogeneity and selection effects in the standard toolkit of trade policy evaluation. Keywords: European Integration, Firm-level Data, Firm Selection, Gains from Trade, Total Factor Productivity Classification-JEL: F12, R13 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.116 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-116.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.116 Title: Fatter Attraction: Marital Status and the Relationship between BMI and Labor Supply Author-Name: Sonia Oreffice Author-X-Name-First: Sonia Author-X-Name-Last: Oreffice Author-WorkPlace-Name: University of Alicante Author-Name: Climent Quintana-Domeque Author-X-Name-First: Climent Author-X-Name-Last: uintana-Domeque Author-WorkPlace-Name: Universitat d’Alacant & FEDEA Abstract: We empirically analyze the labor supply choices of married men and women according to their body size (BMI), using data from the Panel Study of Income Dynamics on anthropometric characteristics of both spouses, and unmarried men and women as comparison group. Heavier husbands are found to work significantly more hours and earn more labor income, controlling for both spouses’ demographic and socioeconomic characteristics. Conversely, no such effect is found for either unmarried individuals or for married women. We suggest a marriage market mechanism through which male BMI and earnings are positively related. Heavier married men compensate for their negative physical trait by providing their wives with more disposable income, working more hours and earning more. Heavier women may not able to compensate their spouse through labor supply, as female physical traits are more relevant in the marriage market than the corresponding male traits. Keywords: Body Size, Labor Supply, Earnings, Marriage Classification-JEL: D1, I1, J1, J22 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.117 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-117.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.117 Title: Towards a Better Understanding of Disparities in Scenarios of Decarbonization: Sectorally Explicit Results from the RECIPE Project Author-Name: Gunnar Luderer Author-X-Name-First: Gunnar Author-X-Name-Last: Luderer Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research Author-Name: Valentina Bosetti Author-X-Name-First: Valentina Author-X-Name-Last: Bosetti Author-WorkPlace-Name: CMCC, FEEM and Princeton Environmental Institute Author-Name: Michael Jakob Author-X-Name-First: Michael Author-X-Name-Last: Jakob Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research Author-Name: Henri Waisman Author-X-Name-First: Henri Author-X-Name-Last: Waisman Author-WorkPlace-Name: Centre International de Recherche sur l’ l'Environnement et le Développement Author-Name: Jan Steckel Author-X-Name-First: Jan Author-X-Name-Last: Steckel Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research Author-Name: Ottmar Edenhofer Author-X-Name-First: Ottmar Author-X-Name-Last: Edenhofer Author-WorkPlace-Name: Potsdam Institute for Climate Impact Research Abstract: This paper presents results from a model intercomparison exercise among regionalized global energy-economy models conducted in the context of the RECIPE project. The economic adjustment effects of long-term climate policy aiming at stabilization of atmospheric CO2 concentrations at 450 ppm are investigated based on the cross-comparison of the intertemporal optimization models REMIND-R and WITCH as well as the recursive dynamic computable general equilibrium model IMACLIM-R. The models applied in the project differ in several respects and the comparison exercise tracks differences in the business as usual forecasts as well as in the mitigation scenarios to conceptual differences in the model structures and assumptions. In particular, the models have different representation of the sectoral structure of the energy system. A detailed sectoral analysis conducted as part of this study reveals that the sectoral representation is a crucial determinant of the mitigation strategy and costs. While all models project that the electricity sector can be decarbonized readily, emissions abatement in the non-electric sectors, particularly transport, is much more challenging. Mitigation costs and carbon prices were found to depend strongly on the availability of low-carbon options in the non-electric sectors. Keywords: Decarbonization, Energy and Climate Policy Classification-JEL: Q48, Q58 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.118 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-118.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.118 Title: Price Floors for Emissions Trading Author-Name: Peter John Wood Author-X-Name-First: Peter John Author-X-Name-Last: Wood Author-WorkPlace-Name: The Australian National University Author-Name: Frank Jotzo Author-X-Name-First: Frank Author-X-Name-Last: Jotzo Author-WorkPlace-Name: The Australian National University Abstract: Price floors in greenhouse gas emissions trading schemes can have advantages for technological innovation, price volatility, and management of cost uncertainty, but implementation has potential pitfalls. We argue that the best mechanism for implementing a price floor is to have firms pay an extra fee or tax. This has budgetary advantages and is more compatible with international permit trading than alternative approaches that dominate the academic and policy debate. The fee approach can also be used to implement more general hybrid approaches to emissions pricing. Keywords: Price Floor, Price Ceiling, Carbon Tax, Emissions Trading, Carbon Pricing, Price and Quantity Controls, Waxman-Markey Bill Classification-JEL: Q58 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.119 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-119.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.119 Title: Beyond the Home Market Effect: Market Size and Specialization in a Multi-Country World Author-Name: Gianmarco I.P. Ottaviano Author-X-Name-First: Gianmarco I.P. Author-X-Name-Last: Ottaviano Author-WorkPlace-Name: Bocconi University, FEEM and CEPR Author-Name: Kristian Behrens Author-X-Name-First: Kristian Author-X-Name-Last: Behrens Author-WorkPlace-Name: Université du Québec à Montréa, CORE, Université catholique de Louvain, CIRPÉE and CEPR Author-Name: Andrea R. Lamorgese Author-X-Name-First: Andrea R. Author-X-Name-Last: Lamorgese Author-WorkPlace-Name: Bank of Italy Author-Name: Takatoshi Tabuchi Author-X-Name-First: Takatoshi Author-X-Name-Last: Tabuchi Author-WorkPlace-Name: University of Tokyo Abstract: The standard two-country model of international trade with monopolistic competition predicts a more-than-proportional relationship between a country’s share of world production of a good and its share of world demand for that same good, a result known as the “home market effect”. We first show that this prediction does not generally carry through to the multi-country case, as production patterns are crucially affected by third country effects. We then derive an alternative prediction that holds whatever the number of countries considered. This new prediction takes into account important features of the real world such as comparative advantage due to cross-country technological differences and lack of factor price equalization. Keywords: Comparative Advantage, Home Market Effect, Hub Effect, International Trade, Monopolistic Competition, Multi-country Models Classification-JEL: F12, R12 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.120 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-120.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.120 Title: Exclusive Dealing: The Interaction between Foreclosure and Investment Promotion Author-Name: Chiara Fumagalli Author-X-Name-First: Chiara Author-X-Name-Last: Fumagalli Author-WorkPlace-Name: Bocconi University Author-Name: Massimo Motta Author-X-Name-First: Massimo Author-X-Name-Last: Motta Author-WorkPlace-Name: Bologna University and CEPR Author-Name: Thomas Rønde Author-X-Name-First: Thomas Author-X-Name-Last: Rønde Author-WorkPlace-Name: Copenhagen Business School and CEPR Abstract: This paper studies a model where exclusive dealing (ED) can both promote investment and foreclose a more efficient supplier. While investment promotion is usually regarded as a pro-competitive effect of ED, our paper shows that it may be the very reason why a contract that forecloses a more efficient supplier is signed. Absent the effect on investment, the contract would not be signed and foreclosure would not be a concern. For this reason, considering potential foreclosure and investment promotion in isolation and then summing them up may not be a suitable approach to assess the net effect of ED. The paper therefore invites a more cautious attitude towards accepting possible investment promotion arguments as a defence for ED. Keywords: Monopolization Practices, Vertical Agreements Classification-JEL: L12, L40, L42 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.121 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-121.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.121 Title: Recreational, Cultural and Aesthetic Services from Estuarine and Coastal Ecosystems Author-Name: Paulo A.L.D. Nunes Author-X-Name-First: Paulo A.L.D. Author-X-Name-Last: Nunes Author-WorkPlace-Name: Fondazione Eni Enrico Mattei Author-Name: Rosimeiry Portela Author-X-Name-First: Rosimeiry Author-X-Name-Last: Portela Author-WorkPlace-Name: Conservation International, Center for Applied Biodiversity Science Author-Name: Nalini Rao Author-X-Name-First: Nalini Author-X-Name-Last: Rao Author-WorkPlace-Name: Conservation International, Center for Applied Biodiversity Science Author-Name: Sonja S. Teelucksingh Author-X-Name-First: Sonja S. Author-X-Name-Last: Teelucksingh Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and the University of the West Indies Abstract: The role of economic analysis in guiding the sustainable development of estuarine and coastal ecosystems is investigated based on a comprehensive review of the literature on the valuation of the recreation, cultural and aesthetic services. The implications of the findings for the sustainable management of coral reefs, Marine Protected Areas, and Small Island Developing States are discussed. Finally, the potential of meta-analytical benefit transfer and scaling up of values at various aggregation levels is demonstrated in the context of coastal tourism and recreation in Europe. The results of the study support the conclusion that the non-material values provided by coastal and estuarine ecosystems in terms of recreational, cultural and aesthetic services represent a substantial component of human well-being. Keywords: Aesthetic Values, Coastal Recreation, Coral Reefs, Cultural Values, Ecosystem Services Valuation, Ecosystem Services, Estuarine Ecosystems, Marine Protected Areas, Non-market Valuation, Non-use Values, Passive Values, Recreational Fishing, Small Island Developing States, Spiritual and Religious Values. Classification-JEL: Q20, Q26, Q57 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.122 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-122.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.122 Title: Youth Unemployment Challenges in Mining Areas of Ghana Author-Name: P. Sarfo-Mensah Author-X-Name-First: P. Author-X-Name-Last: Sarfo-Mensah Author-WorkPlace-Name: Kwame Nkrumah University of Science and Technology Author-Name: M.K. Adjaloo Author-X-Name-First: M.K. Author-X-Name-Last: Adjaloo Author-WorkPlace-Name: Kwame Nkrumah University of Science and Technology Author-Name: P. Donkor Author-X-Name-First: P. Author-X-Name-Last: Donkor Author-WorkPlace-Name: Kwame Nkrumah University of Science and Technology Abstract: Ghana, like the rest of West Africa is experiencing tremendous human migration both internally and across international boundaries. Rural-urban migration has assumed uncontrollable dimensions in the sub-region and the social consequences have become major development challenge. In Ghana the mining communities have been at the receiving end for some time now. This study on the Obuasi Municipal Assembly (OMA) in the Ashanti region of Ghana explores the tremendous socioeconomic changes, especially demographic patterns as a result of the inflows of migrants into the Obuasi Township and its catchment area in search of non existing jobs especially in mining. A major outcome is the serious unemployment problem in the township with all the attendant social vices. A three-month socio-economic study of the municipality was carried out to determine the scope of unemployment. The study showed that there is acute unemployment situation in the municipality which is due to the fact that AngloGold Ashanti, a mining giant in Ghana, the major employer, has limited job openings especially for menial workers who flock to the company. Other income generating opportunities are few. Agriculture which has the capacity to employ majority of the unemployed youth does not appeal to them because it is considered not lucrative. The acute unemployment situation has contributed significantly to the high crime rate, prostitution and widespread illegal mining activities with their attendant problems. The study explores options that are feasible for a typical mining setting especially for the youth who are very vulnerable and susceptible to crime and other social vices. Job creation, through the development and implementation of sustainable programmes aimed at training the youth to acquire the necessary employable skills is one of the options considered by the municipal managers and their partners. The study also looks at broader policy implications for the Economic Community of West African States (ECOWAS). Keywords: Illegal Mining, Unemployment, AngloGold Ashanti, Social Vices, Agriculture, Mining Communities, Migration Classification-JEL: J60, J61 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.123 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-123.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.123 Title: At Home and Abroad: An Empirical Analysis of Innovation and Diffusion in Energy-Efficient Technologies Author-Name: Elena Verdolini Author-X-Name-First: Elena Author-X-Name-Last: Verdolini Author-WorkPlace-Name: Fondazione Eni Enrico Mattei and Catholic University of Milan Author-Name: Marzio Galeotti Author-X-Name-First: Marzio Author-X-Name-Last: Galeotti Author-WorkPlace-Name: University of Milan and IEFE-Bocconi Abstract: This paper contributes to the induced innovation literature by extending the analysis of supply and demand determinants of innovation in energy-efficient technologies to account for international knowledge flows and spillovers. In the first part of the paper we select a sample of 38 innovating countries and we study how knowledge related to energy-efficient technologies flows across geographical and technological space. We demonstrate that higher geographical and technological distances are associated with a lower probability of knowledge flow. In the second part of the paper, we use our previous estimates to construct stocks of internal and external knowledge for a panel of 17 countries and present an econometric analysis of the supply and demand determinants of innovation accounting for international knowledge spillovers. Our results confirm the role of demand-pull effects, as proxied by energy prices, as well as that of technological opportunity, as proxied by the knowledge stocks. In particular, this paper provides evidence that spillovers between countries have a significant positive impact on further innovation in energy-efficient technologies. Keywords: Innovation, Technology Diffusion, Knowledge Spillovers, Energy-Efficient Technologies Classification-JEL: O33, Q55, C13 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.124 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-124.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.124 Title: A New Capital Regulation For Large Financial Institutions Author-Name: Luigi Zingales Author-X-Name-First: Luigi Author-X-Name-Last: Zingales Author-WorkPlace-Name: University of Chicago Booth School of Business Author-Name: Oliver Hart Author-X-Name-First: Oliver Author-X-Name-Last: Hart Author-WorkPlace-Name: Harvard University & NBER Abstract: We design a new, implementable capital requirement for large financial institutions (LFIs) that are too big to fail. Our mechanism mimics the operation of margin accounts. To ensure that LFIs do not default on either their deposits or their derivative contracts, we require that they maintain an equity cushion sufficiently great that their own credit default swap price stays below a threshold level, and a cushion of long term bonds sufficiently large that, even if the equity is wiped out, the systemically relevant obligations are safe. If the CDS price goes above the threshold, the LFI regulator forces the LFI to issue equity until the CDS price moves back down. If this does not happen within a predetermined period of time, the regulator intervenes. We show that this mechanism ensures that LFIs are always solvent, while preserving some of the disciplinary effects of debt. Keywords: Banks, Capital Requirement, Too Big to Fail Classification-JEL: G21, G28 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.125 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/ndl2009-125.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.125 Title: Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve Author-Name: S.J. Rubio Author-X-Name-First: S.J. Author-X-Name-Last: Rubio Author-WorkPlace-Name: University of Valencia Author-Name: J.R. García Author-X-Name-First: J.R. Author-X-Name-Last: García Author-WorkPlace-Name: University of Valencia Author-Name: J.L. Hueso Author-X-Name-First: J.L. Author-X-Name-Last: Hueso Author-WorkPlace-Name: University of Valencia Abstract: The paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, the environmental quality affects positively not only to utility but also to production. However, cleaner technologies can be used in the economy whether a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low then the shadow price of a cleaner technology is low relative to the cost of developing it given by the marginal utility of consumption and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with a decreasing environmental quality until the moment that pollution is great enough to make profitable the investment in R&D. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with an increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve. Keywords: Neoclassical Growth Model, Endogenous Technological Progress, External Effects, Environmental Kuznets Curve Classification-JEL: O33, O41, Q55, Q56 Creation-Date: 200912 Template-Type: ReDIF-Paper 1.0 Number: 2009.126 File-URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2009-126.pdf File-Format: application/pdf Handle: RePEc:fem:femwpa:2009.126 Title: Reallocating Water: An Application of Sequent Author-Name: Erik Ansink Author-X-Name-First: Erik Author-X-Name-Last: Ansink Author-WorkPlace-Name: Wageningen University Author-Name: Carmen Marchiori Author-X-Name-First: Carmen Author-X-Name-Last: Marchiori Author-WorkPlace-Name: London School of Economics Abstract: We present an axiomatic approach to the reallocation of water rights among economic sectors. Reallocation may be appropriate when the current schedule of water allocation is considered unfair. Our proposed approach is based on the combination of initial water rights, sectors' claims to water, and an exogenous ordering of these sectors. We apply sharing rules, based on bankruptcy rules, to reallocate water, which complements other approaches to the reallocation of water rights, including those based on water markets. Our approach is illustrated using an application to water reallocation in Cyprus, where reallocation of water rights has been recognised as an essential step towards good water governance and one of the main challenges for current water policies. Keywords: Water Reallocation, Sequential Sharing Rule, Water Scarcity, Axiomatic Approach, Cyprus Classification-JEL: D63, D71, Q25 Creation-Date: 200912