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How do improvements in labour productivity in the Scottish economy affect the UK position on the Environmental Kuznets Curve?
Get PDFThe research reported here is an output of Karen Turner’s ESRC Climate Change Leadership
Fellow project (Grant reference RES-066-27-0029). However, this research builds on previous work funded by the ESRC on modelling the economic and environmental impacts of technological improvement (Grant reference: RES-061-25-0010) and by the EPSRC through the SuperGen Marine Energy Research Consortium on accounting for and modeling environmental indicators (Grant reference: EP/E040136/1)
Optimal Climate Change Policies When Governments Cannot Commit
Get PDFThis paper examines the optimal design of climate change policies in the context where
governments want to encourage the private sector to undertake significant immediate
investment in developing cleaner technologies, but the carbon taxes and other
environmental policies that could in principle stimulate such investment will be imposed over a very long future. The conventional claim by environmental economists is that environmental policies alone are sufficient to induce firms to undertake optimal investment. However this argument requires governments to be able to commit to these future taxes, and it is far from clear that governments have this degree of commitment.
We assume instead that governments cannot commit, and so both they and the private
sector have to contemplate the possibility of there being governments in power in the
future that give different (relative) weights to the environment. We show that this lack of commitment has a significant asymmetric effect. Compared to the situation where governments can commit it increases the incentive of the current government to have the investment undertaken, but reduces the incentive of the private sector to invest.
Consequently governments may need to use additional policy instruments – such as R&D
subsidies – to stimulate the required investment
The Taylor Principle and (In-) Determinacy in a New Keynesian Model with hiring Frictions and Skill Loss
Get PDFWe introduce duration dependent skill decay among the unemployed into a New-Keynesian model with hiring frictions developed by Blanchard/Gali (2008). If the central
bank responds only to (current, lagged or expected future) inflation and quarterly skill decay is above a threshold level, determinacy requires a coefficient on inflation smaller than one. The
threshold level is plausible with little steady-state hiring and firing ("Continental European Calibration") but implausibly high in the opposite case ("American calibration"). Neither interest rate smoothing nor responding to the output gap helps to restore determinacy if
skill decay exceeds the threshold level. However, a modest response to unemployment
guarantees determinacy.
Moreover, under indeterminacy, both an adverse sunspot shock and an adverse technology shock increase unemployment extremely persistently
The Greying Church: The Impact of Life Expectancy on Religiosity
Get PDFMany churches are concerned about older and dwindling congregations. We develop a theoretical framework to explain not only the downward trend in church attendance, but also the increase in the proportion of older people in the congregations. Religiosity depends positively on the expected
social and spiritual benefits attached to religious adherence, as well as the probability of entering heaven in the afterlife. While otherworldly compensation in terms of salvation and spiritual
benefits motivates religiosity, the costs of formal religion in terms of time allocated to communal activities and foregone income work in the opposite direction. We show that higher life expectancy discounts expected benefits in the afterlife and is hence likely to lead to postponement of
religiosity. For this reason, religious organizations should be prepared to attract older members to their congregations, while emphasizing contemporaneous religious benefits to increase overall church attendance
Shocks, Monetary Policy and Institutions: Explaining Unemployment Persistence in Persistence in “Europe” and the United States
No full textThis paper examines the rise in European unemployment since the 1970s by introducing endogenous growth into an otherwise standard New Keynesian model with capital accumulation and unemployment. We subject the model to an uncorrelated cost push shock, in order to mimic a scenario akin to the one faced by central banks at the end of the 1970s.
Monetary policy implements a disinfl ation by following an interest feedback rule calibrated to an estimate of a Bundesbank reaction function.
40 quarters after the shock has vanished, unemployment is still about 1.8
percentage points above its steady state. Our model also broadly reproduces cross country differences in unemployment by drawing on cross country differences in the size of cost push shock and the associated
disinfl ation, the monetary policy reaction function and the wage setting structure
Devolution & Entrenched Household Poverty: Is Scotland less mobile?
Get PDFThe Scottish National Party led Scottish Government has identified household poverty as a key focus for its anti-poverty strategy. The government’s ‘Solidarity Target’ seeks to both increase wealth and increase the share of total income gained by these three deciles.
The ability to demonstrate the advantages of policy divergence within Scotland, relative
to the other parts of the United Kingdom, is central to the Government’s aim of gaining
support for increased powers for the devolved government. This paper seeks to provide evidence on one aspect of the government’s anti- poverty strategy; the degree to which Scotland differs from the rest of the UK over levels of entrenched poverty. The paper demonstrates that not only does Scotland have greater entrenched poverty but that the changes in mobility since the 1990s have impacted on Scotland to a lesser degree than the rest of the UK
Volatility of Housing
Get PDFThe aim of the project is to develop
a theoretical framework where
homelessness arises due to various
economic and social factors that vary over
time. The ultimate goal is i) to understand
whether homelessness spells, entrances
and exits could be predicted and if so
what information is necessary; and ii)
to design and evaluate a homelessness
prevention programme in a changing
and uncertain environment. Examples
of the questions we want to answer are:
Should it be made easier for people to
borrow money so that they can get out
of homelessness, or will such borrowing
allow people to over-consume today and
so fall into homelessness tomorrow?
Should precautionary savings be
encouraged so that people have cushions
to withstand future shocks, or will savings
just delay entry into homelessness? What
interventions will affect the probability
of becoming homeless and how will they
affect behaviour? How will interventions
affect incentives to save and to consume
before homelessness prevention programmes kick in
A Futuristic Least-cost Optimisation Model of CO2 Transportation and Storage in the UK/UK Continental Shelf
Get PDFNORTH SEA STUDY OCCASIONAL PAPER
No. 11
The added value from adopting a CGE approach to analyse changes in environmental trade balances
Get PDFThe application of multi-region environmental input-output (IO) analysis to the problem of accounting for emissions generation (and/or resource use) under different accounting principles has become increasingly common in the ecological and environmental economics literature in particular, with applications at the international and interregional subnational level. However, while environmental IO analysis is invaluable in accounting for pollution flows in the single time period that the accounts relate to, it is limited when the focus is on modelling the impacts of any marginal change in activity. This is because a conventional demand-driven IO model assumes an entirely passive supply-side in the economy (i.e. all supply is infinitely elastic) and is further restricted by the assumption of universal Leontief (fixed proportions) technology implied by the use of the A and multiplier matrices. Where analysis of marginal changes in activity is required, extension from an IO accounting framework to a more flexible interregional computable general equilibrium (CGE) approach, where behavioural relationships can be modelled in a more realistic and theory-consistent manner, is appropriate. Our argument is illustrated by comparing the results of introducing a positive demand stimulus in the UK economy using IO and CGE interregional models of Scotland and the rest of the UK. In the case of the latter, we demonstrate how more theory consistent modelling of both demand and supply side behaviour at the regional and national levels effect model results, including the impact on the interregional CO2 ‘trade balance’
The Good, the Bad and the Populist: A Model of Political Agency with Emotional Voters
Get PDFThis paper attempts to extend existing models of political agency to an environment
in which voting may be divided between informed and instrumental, informed and
‘expressive’ (Brennan and Lomasky (1993)) and uninformed due to ‘rational
irrationality’ (Caplan (2007)). It constructs a model where politicians may be good, bad or populist. Populists are more willing than good politicians to pander to voters who may choose inferior policies in a large-group electoral setting because their vote is insignificant compared with those that voters would choose were their vote decisive in determining the electoral outcome. Bad politicians would ideally like to extract tax revenue for their own ends. Initially we assume the existence of only good and populist politicians. The paper investigates the incentives for good politicians to pool with or separate from populists and focuses on three key issues – (1) how far the majority of voter’s preferences are from those held by the better informed incumbent politician (2) the extent to which the population exhibits rational irrationality and expressiveness (jointly labelled as emotional) and (3) the cost involved in persuading uninformed voters to change their views in terms of composing messages and spreading them. This paper goes on to consider how the inclusion of bad politicians may affect the behaviour of good politicians and suggests that a small amount of potential corruption may be socially useful. It is also argued that where bad politicians have an incentive to mimic the behaviour of good and populist politicians, the latter types of politician may have an incentive to separate from bad politicians by investing in costly public education signals. The paper also discusses the implications of the model for whether fiscal restraints should be soft or hard