Growth, Congestion of Public Goods, and Second-Best Optimal Policy

This paper presents a general equilibrium endogenous growth model in which public spending is divided between public productive services and public consumption. A distinguishing feature of the model is the assumption that both components of public spending can be over used and, thus, congested by the private agents. We study the second-best dynamics of the model and prove that it is determinate. Moreover, we show that the optimal second-best policy could be not unique. Finally, the relationship between congestion and the optimal second-best policy, on the one hand, and congestion and the long run growth rate, on the other, is established.Endogenous growth, Congestion, Public spending, Second-Best

Company Start-Up Costs and Employment

I study the role of company start-up costs for employment performance. The model is search equilibrium with a new concept for firms. Agents have an innate managerial ability and make a career choice to become either managers or workers. Managers set up firms, post jobs and match with workers. Managers set up firms, post jobs and match with workers. I show that in equilibrium, career choice and job creation are jointly determined. Higher start-up costs reduce overall employment but increase the size of incumbent firms. I discuss some cross-country OECD evidence which supports the model's main proposition.Start-up costs, regulation, employment, OECD unemployment, search and matching.

Peer-to-peer and community-based markets: A comprehensive review

The advent of more proactive consumers, the so-called "prosumers", with production and storage capabilities, is empowering the consumers and bringing new opportunities and challenges to the operation of power systems in a market environment. Recently, a novel proposal for the design and operation of electricity markets has emerged: these so-called peer-to-peer (P2P) electricity markets conceptually allow the prosumers to directly share their electrical energy and investment. Such P2P markets rely on a consumer-centric and bottom-up perspective by giving the opportunity to consumers to freely choose the way they are to source their electric energy. A community can also be formed by prosumers who want to collaborate, or in terms of operational energy management. This paper contributes with an overview of these new P2P markets that starts with the motivation, challenges, market designs moving to the potential future developments in this field, providing recommendations while considering a test-case

A Holistic Approach to Forecasting Wholesale Energy Market Prices

Electricity market price predictions enable energy market participants to shape their consumption or supply while meeting their economic and environmental objectives. By utilizing the basic properties of the supply-demand matching process performed by grid operators, known as Optimal Power Flow (OPF), we develop a methodology to recover energy market's structure and predict the resulting nodal prices by using only publicly available data, specifically grid-wide generation type mix, system load, and historical prices. Our methodology uses the latest advancements in statistical learning to cope with high dimensional and sparse real power grid topologies, as well as scarce, public market data, while exploiting structural characteristics of the underlying OPF mechanism. Rigorous validations using the Southwest Power Pool (SPP) market data reveal a strong correlation between the grid level mix and corresponding market prices, resulting in accurate day-ahead predictions of real time prices. The proposed approach demonstrates remarkable proximity to the state-of-the-art industry benchmark while assuming a fully decentralized, market-participant perspective. Finally, we recognize the limitations of the proposed and other evaluated methodologies in predicting large price spike values.Comment: 14 pages, 14 figures. Accepted for publication in IEEE Transactions on Power System

On the Theory and Practise of Fiscal Decentralization

The traditional theory of public finance has made a strong case for a major role for fiscal decentralization. This case is based on an improved allocation of resources in the public sector. And it has four basic elements. First, regional or local governments are in a position to adapt outputs of public services to the preferences and particular circumstances of their constituencies, as compared to a central solution which presumes that one size fits all. Second, in a setting of mobile households, individuals can seek out jurisdictions that provide outputs well suited to their tastes, thereby increasing the potential gains from the decentralized provision of public services (Tiebout 1956). Third, in contrast to the monopolist position of the central government, decentralized levels of government face competition from their neighbors; such competition constrains budgetary growth and provides pressures for the efficient provision of public services. And fourth, decentralization may encourage experimentation and innovation as individual jurisdictions are free to adopt new approaches to public policy; in this way, decentralization can provide a valuable Alaboratory for fiscal experiments. However, this basic economic rationale for decentralization of the public sector is not quite so simple and compelling as it appears. Some of the more recent literature provides, first, a thoughtful and provocative critique of the traditional view of fiscal decentralization, and, second, some new approaches that reveal its dark side, especially in practice. There is emerging, in short, a broader perspective on fiscal decentralization that raises some serious questions about its capacity to provide an unambiguously positive contribution to an improved performance of the public sector. My purpose in this paper is twofold. First, I want to review the basic theory of fiscal decentralization. There are some loose ends to the traditional argument that open up some intriguing issues. Second, I want to turn to some of new literature on fiscal discipline in multilevel government. This literature has focused attention on some basic and destructive forces that can undermine the economic performance of a relatively decentralized public sector. I find it helpful to begin by revisiting a Decentralization Theorem that I formulated long ago. As a point of departure, I want to explain briefly why I introduced the proposition and the rationale for its particular form and proof.Fiscal Decentralization, Public Finance

Optimal Information Transmission in Organizations: Search and Congestion

We propose a stylized model of a problem-solving organization whose internal communication structure is given by a fixed network. Problems arrive randomly anywhere in this network and must find their way to their respective “specialized solvers” by relying on local information alone. The organization handles multiple problems simultaneously. For this reason, the process may be subject to congestion. We provide a characterization of the threshold of collapse of the network and of the stock of floating problems (or average delay) that prevails below that threshold. We build upon this characterization to address a design problem: the determination of what kind of network architecture optimizes performance for any given problem arrival rate. We conclude that, for low arrival rates, the optimal network is very polarized (i.e. star-like or “centralized”), whereas it is largely homogenous (or “decentralized”) for high arrival rates. We also show that, if an auxiliary assumption holds, the transition between these two opposite structures is sharp and they are the only ones to ever qualify as optimal. Keywords: Networks, information transmission, search, organization design.Networks, Information transmission, Search, Organization design

A Matching Model of the Academic Publication Market

This paper provides a dynamic analysis of the market for academic publications. Given imperfect information about journalseditorial line, authors can sometimes target a wrong journal; in turn, the editor will desk-reject their paper. An equilibrium is de…ned as a situation where both editors and authors implement their optimal publication strategies, given the matching technology and the prevailing surplus sharing rule. The model can be solved for the equilibrium submission fee, desk rejection rate and ratio between the number of editors and the number of authors.