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On Public Inefficiencies in a Mixed Duopoly
Get PDFThe aim of this paper is to investigate the welfare effect of a change in the public
firms objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare- to profit-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by
Hamilton and Slutsky (1990). Differently from previous work that assumed the timing of
competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large efficiency gains result from the shift in public firm's objective, an inefficient public firm that maximizes welfare may be preferred
An interregional input-output analysis of the pollution content of trade flows and environmental trade balances between five states in the US Mid-West
Get PDFIn this paper we attempt an empirical application of the multi-region input-output (MRIO) method in order to enumerate the pollution content of interregional trade flows between five Mid-West regions/states in the US –Illinois, Indiana, Iowa, Michigan and Wisconsin – and the rest of the US. This allows us to analyse some very important issues in terms of the nature and significance of interregional environmental spillovers within the US Mid-West and the existence of pollution ‘trade balances’ between states. Our results raise questions in terms of the extent to which authorities at State level can control local emissions where they are limited in the way some emissions can be controlled, particularly with respect to changes in demand elsewhere in the Mid-West and US. This implies a need for policy co-ordination between national and state level authorities in the US to meet emissions reductions targets. The existence of an environmental trade balances between states also raises issues in terms of net losses/gains in terms of pollutants as a result of interregional trade within the US and whether, if certain activities can be carried out using less polluting technology in one region relative to others, it is better for the US as a whole if this type of relationship exists
Monetary and Fiscal Policy under Deep Habits
Get PDFRecent work on optimal policy in sticky price models suggests that demand
management through fiscal policy adds little to optimal monetary policy. We explore
this consensus assignment in an economy subject to ‘deep’ habits at the level of
individual goods where the counter-cyclicality of mark-ups this implies can result in government spending crowding-in private consumption in the short run. We
explore the robustness of this mechanism to the existence of price discrimination
in the supply of goods to the public and private sectors. We then describe optimal
monetary and fiscal policy in our New Keynesian economy subject to the additional
externality of deep habits and explore the ability of simple (but potentially nonlinear)
policy rules to mimic fully optimal policy
Development of tools to measure and explain changes in health inequalities in Scotland and benchmark performance
Get PDFThis project will develop a modelling
framework to explain changes in income-related health inequalities and benchmark
the performance of Scotland in tackling
income-related health inequalities, both
over time and relative to that of England
and Wales
Rebound and disinvestment effects in oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector
Get PDFIn this paper we use an energy-economy-environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production
Do political incentives matter for tax policies? Ideology, opportunism and the tax structure
Get PDFThis paper investigates the importance of political ideology and opportunism in the
choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and
by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes.
Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in preelectoral periods and that capital effective tax rates (defined broadly to include taxes on selfemployed
income) are reduced by more than effective labor tax rates
Negative rebound and disinvestment effects in response to an improvement in energy efficiency in the UK economy
Get PDFThis paper uses a computable general equilibrium (CGE) framework to investigate the conditions under which rebound effects may occur in response to increases in energy efficiency in the UK national economy. Previous work for the UK has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. The research reported in this paper involves carrying out a systematic sensitivity analysis, where relative price sensitivity is gradually introduced into the system, focusing specifically on elasticities of substitution in production and trade parameters, in order to determine conditions under which rebound effects become a likely outcome. The main result is that, while there is positive pressure for rebound effects even where (direct and indirect) demands for energy are very price inelastic, this may be partially or wholly offset by negative income, competitiveness and disinvestment effects, which also occur in response to falling energy prices. The occurrence of disinvestment effects is of particular interest. These occur where falling energy prices reduce profitability in domestic energy supply sectors, leading to a contraction in capital stock in these sectors, which may in turn lead to rebound effects that are smaller in the long run than in the short run, a result that runs contrary to the predictions of previous theoretical work in this area
Testing for Proportional Hazards with Unrestricted Univariate Unobserved Heterogeneity
Get PDFWe develop tests of the proportional hazards assumption, with respect to a continuous covariate, in the presence of unobserved heterogeneity with unknown distribution at the individual observation level.
The proposed tests are specially powerful against ordered alternatives useful for modeling non-proportional hazards situations. By contrast to the case when the heterogeneity distribution is known up to …nite dimensional parameters, the null hypothesis for the current problem
is similar to a test for absence of covariate dependence. However,
the two testing problems di¤er in the nature of relevant alternative hypotheses. We develop tests for both the problems against ordered alternatives. Small sample performance and an application to real data highlight the usefulness of the framework and methodology
Do Productivity Improvements Move Us Along the Environmental Kuznets Curve?
Get PDFThe Environmental Kuznets Curve (EKC) hypothesis focuses on the argument that rising prosperity will eventually be accompanied by falling pollution levels as a result of one or more of three factors: (1) structural change in the economy; (2) demand for environmental quality increasing at a more-than-proportional rate; (3) technological progress. Here, we focus
on the third of these. In particular, energy efficiency is commonly regarded as a key element of climate policy in terms of achieving reductions in economy-wide CO2 emissions over time.
However, a growing literature suggests that improvements in energy efficiency will lead to rebound (or backfire) effects that partially (or wholly) offset energy savings from efficiency improvements. Where efficiency improvements are aimed at the production side of the economy, the net impact of increased efficiency in any input to production will depend on the
combination and relative strength of substitution, output/competitiveness, composition and income effects that occur in response to changes in effective and actual factor prices, as well as on the structure of the economy in question, including which sectors are targeted with the efficiency improvement. In this paper we consider whether increasing labour productivity will
have a more beneficial, or more predictable, impact on CO2/GDP ratios than improvements in
energy efficiency. We do this by using CGE models of the Scottish regional and UK national economies to analyse the impacts of a simple 5% exogenous (and costless) increase in energy or labour augmenting technological progress
When is Monetary Policy All we Need?
Get PDFWe consider optimal monetary and scal policies in a New Keynesian model of a small open economy with sticky prices and wages. In this benchmark setting monetary policy is all we need - analytical results demonstrate that variations in government spending should play no role in the stabilization of shocks. In extensions we show, rstly, that this is even when true when allowing for in
ation inertia through backward-looking rule-of-thumb price and wage-setting, as
long as there is no discrepancy between the private and social evaluation of the marginal rate of substitution between consumption and leisure. Secondly, the optimal neutrality of government
spending is robust to the issuance of public debt. In the presence of debt government spending will deviate from the optimal steady-state but only to the extent required to cover the deficit, not to provide any additional macroeconomic stabilization. However, unlike government spending
variations in tax rates can play a complementary role to monetary policy, as they change relative prices rather than demand