Fair division with general equilibrium effects and international climate politics

This paper introduces a solution for the fair division of common property resources in production economies with multiple inputs and outputs. It is derived from complementing the Walrasian solution by welfare bounds, whose ethical justification rests on commonality of ownership. We then apply this solution to the question of burden sharing in the climate change regime, using an intertemporal computable general equilibrium model. For a wide range of initial allocations of CO2 emission rights, we find that developing countries should participate in emission reduction efforts in order to increase their global efficiency, but should also be fully compensated for their incremental abatement costs. --Fair division,climate change,common property resources,welfare bounds,CGE models

Estimation of value of travel-time savings using mixed logit models

In this paper, we discuss some of the issues that arise with the computation of the implied value of travel-time savings in the case of discrete choice models allowing for random taste heterogeneity. We specifically look at the case of models producing a non-zero probability of positive travel-time coefficients, and discuss the consistency of such estimates with theories of rational economic behaviour. We then describe how the presence of unobserved travel-experience attributes or conjoint activities can bias the estimation of the travel-time coefficient, and can lead to false conclusions with regards to the existence of negative valuations of travel-time savings. We note that while it is important not to interpret such estimates as travel-time coefficients per se, it is nevertheless similarly important to allow such effects to manifest themselves; as such, the use of distributions with fixed bounds is inappropriate. On the other hand, the use of unbounded distributions can lead to further problems, as their shape (especially in the case of symmetrical distributions) can falsely imply the presence of positive estimates. We note that a preferable solution is to use bounded distributions where the bounds are estimated from the data during model calibration. This allows for the effects of data impurities or model misspecifications to manifest themselves, while reducing the risk of bias as a result of the shape of the distribution. To conclude, a brief application is conducted to support the theoretical claims made in the paper

Financial development and economic growth in an oil-rich economy: The case of Saudi Arabia

© 2014 Elsevier B.V.We investigate the effect of financial development on economic growth in the context of Saudi Arabia, an oil-rich economy. In doing so, we distinguish between the effects of financial development on the oil and non-oil sectors of the economy. Using the Autoregressive Distributed Lag (ARDL) Bounds test technique, we find that financial development has a positive impact on the growth of the non-oil sector. In contrast, its impact on the oil-sector growth and total GDP growth is either negative or insignificant. This suggests that the relationship between financial development and growth may be fundamentally different in resource-dominated economies

Structuring Exotic Options Contracts on Water to Improve the Efficiency of Resource Allocation in the Water Spot Market

With the current drought in South-Eastern Australia highlighting the scarcity and value of inland Australia’s water resources, focus turns to how these resources can be allocated more efficiently. The first major step was taken almost a decade ago with the separation of land and water property rights allowing openly traded water markets. This study assesses the potential economic benefits that options contracts bring to the water market in the Murray Valley water market. Exotic call options are estimated using both Black-Scholes and skewness-and-kurtosis-amended Black-Scholes financial option pricing methods that are based on three years of data on water prices. While the presence of options would result in significant economic benefits in the more efficient trade of water on the open market for lower-value crops, there were mixed results from the attempt to price such options.options, skewness-and-kurtosis-amended Black-Scholes model, water, Environmental Economics and Policy, Financial Economics, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,

Public Choice with Unequally Rational Individuals

As governments lack the rationality-promoting selective pressures of market competition, the standard (unbounded) rationality assumption is less legitimate in Public Choice than in analysis of markets. This paper argues that many Public Choice problems require recognizing that human rationality has bounds, that these differ across individuals, and that rationality must therefore be treated as a special scarce resource, tied to individuals and used for deciding on its own uses. This complicates resource-allocation in society, which has to rely on institutionally shaped selection processes. But this also appears to be the only way to produce the long-missing analytical support to the first head of J.S. Mill's criticism of government, of which Public Choice has so far supported only the second. --unequally bounded rationality,institutions,voting,politics-as-selection,government policies

Receive Combining vs. Multi-Stream Multiplexing in Downlink Systems with Multi-Antenna Users

In downlink multi-antenna systems with many users, the multiplexing gain is strictly limited by the number of transmit antennas $N$ and the use of these antennas. Assuming that the total number of receive antennas at the multi-antenna users is much larger than $N$, the maximal multiplexing gain can be achieved with many different transmission/reception strategies. For example, the excess number of receive antennas can be utilized to schedule users with effective channels that are near-orthogonal, for multi-stream multiplexing to users with well-conditioned channels, and/or to enable interference-aware receive combining. In this paper, we try to answer the question if the $N$ data streams should be divided among few users (many streams per user) or many users (few streams per user, enabling receive combining). Analytic results are derived to show how user selection, spatial correlation, heterogeneous user conditions, and imperfect channel acquisition (quantization or estimation errors) affect the performance when sending the maximal number of streams or one stream per scheduled user---the two extremes in data stream allocation. While contradicting observations on this topic have been reported in prior works, we show that selecting many users and allocating one stream per user (i.e., exploiting receive combining) is the best candidate under realistic conditions. This is explained by the provably stronger resilience towards spatial correlation and the larger benefit from multi-user diversity. This fundamental result has positive implications for the design of downlink systems as it reduces the hardware requirements at the user devices and simplifies the throughput optimization.Comment: Published in IEEE Transactions on Signal Processing, 16 pages, 11 figures. The results can be reproduced using the following Matlab code: https://github.com/emilbjornson/one-or-multiple-stream

Pennies from Heaven? Using Exogeneous Tax Variation to Identify Effects of School Resources on Pupil Achievements

Despite important policy implications associated with the allocation of education resources, evidence on the effectiveness of school inputs remains inconclusive. In part, this is due to endogenous allocation; families sort themselves non-randomly into school districts and school districts allocate money based in order to compensate (or reinforce) differences in child abilities, which leaves estimates of school input effects likely to be biased. Using variation in education expenditures induced by the location of natural resources in Norway we examine the effect of school resources on pupil outcomes. We find that higher school expenditures, triggered by higher revenues from local taxes on hydropower plants, have a significantly positive effect on pupil performance at age 16. The positive IV estimates contrast with the standard cross-sectional estimates that reveal no effects of extra resources.pupil achievement, school resources