Optimal investment and location decisions of a firm in a flood risk area using impulse control theory

Flooding events can affect businesses close to rivers, lakes or coasts. This paper provides an economic partial equilibrium model, which helps to understand the optimal location choice for a firm in flood risk areas and its investment strategies. How often, when and how much are firms willing to invest in flood risk protection measures? We apply Impulse Control Theory and develop a continuation algorithm to solve the model numerically. We find that, the higher the flood risk and the more the firm values the future, i.e. the more sustainable the firm plans, the more the firm will invest in flood defense. Investments in productive capital follow a similar path. Hence, planning in a sustainable way leads to economic growth. Sociohydrological feedbacks are crucial for the location choice of the firm, whereas different economic settings have an impact on investment strategies. If flood defense is already present, e.g. built up by the government, firms move closer to the water and invest less in flood defense, which allows firms to generate higher expected profits. Firms with a large initial productive capital surprisingly try not to keep their market advantage, but rather reduce flood risk by reducing exposed productive capital

Public-Sector Project Abandonment Decision: A Test of the Ricardian Equivalence Theory on the Failed Lagos Metroline in Nigeria

This chapter examines the implications of projects abandonment with test of the Ricardian Equivalence on the failed Lagos metro line project in Nigeria as case study. The main variables used are Rail and Pipeline Output, Budget Deficit, Interest Rate, Corruption Index, Savings and some others. The study results on the Ricardian Equivalence hypothesis on deficit financing of projects using Vector autoregression model from 1980-2012 indicate that no causal influence holds in Nigeria. Results show that poor planning, corruption, political factors, poor support infrastructures, poor quality of local resources, etc. were attributable. The results of the Impulse Response tests reveal that Rail and Pipeline output and a few others responded positively to shocks in the short run (years 1-2), and negatively to others. The result affirms that Government should privatize the railway system, legislate against project abandonment and ensure that projects are adequately planned, funded, insured and insulated against corruptio

Topics on financial crises in emerging countries case of Jordan

This thesis investigates the effect of monetary policy on financial stability and part of the real side of the Jordanian economy over the time period 1976-2009. It uses a number of empirical methodologies including: a Vector Autoregressive (VAR) to investigate the relationship between monetary policy and financial stability in Jordan; A Logit model and Markov switching model to study the currency crisis in Jordan; and an Autoregressive Distributed Lag (ARDL) to estimate an investment function for the Jordanian economy. Findings of the VAR models confirmed the relationship between monetary policy and financial stability in Jordan. However, a number of indictors were found to have a significant effect on the currency crisis in Jordan. These indictors included the real exchange rate, money supply-reserves ratio, and growth rate of domestic credit. On the other hand, a stable long-run investment function exists. Real income and real credit were found to have a positive impact on real investment. However, the user cost of capital has had a negative impact on real investment

The total assessment profile, volume 1

A methodology is described for the evaluation of societal impacts associated with the implementation of a new technology. Theoretical foundations for the methodology, called the total assessment profile, are established from both the economic and social science perspectives. The procedure provides for accountability of nonquantifiable factors and measures through the use of a comparative value matrix by assessing the impacts of the technology on the value system of the society

Chapter 17 - Economics of adaptation

This chapter assesses the literature on the economics of climate change adaptation, building on the Fourth Assessment Report (AR4) and the increasing role that economic considerations are playing in adaptation decisionmaking and policy. AR4 provided a limited assessment of the costs and benefits of adaptation, based on narrow and fragmented sectoral and regional literature (Adger et al, 2007). Substantial advances have been made in the economics of climate change adaptation after AR4

Water Decision-Making Under Uncertainty

This dissertation is made up of three separate studies under the unifying theme of “Water Decision-Making under Uncertainty.” The first study analyzed a farmer’s decision to invest in a more efficient irrigation system given uncertainty about future water supplies and his post-investment efficiency. It found the price at which farmers would no longer produce to be a bigger consideration in irrigation investment than previously thought. It also found support for a careful identification and consideration of all significant sources of uncertainty in order to create better policy incentives for irrigation technology investments. The second study extended the first to allow the farmer to gradually update his irrigation system rather than undertake a single, complete overhaul. It found that giving the farmer this option, has significant impact and potential with regards to investments meant to effect behavioral change for improved system outcomes such as more efficient irrigation systems towards regional water conservation goals. The third and final chapter established a spatially explicit hydroeconomic model of water-use behavior in the Cache Valley of Utah to evaluate the impact of individual decisions, actions and interactions on available water supplies, and whether and how a water master’s privileged information about the behavior of users in his system may be used to improve system outcomes for users in the canal, downstream water requirements and storm-water management

The Economics of Natural Disasters - A Survey

Catastrophes caused by natural disasters are by no means new, yet our evolving understanding regarding their relevance to economic development and growth is still at its infancy. In order to facilitate further necessary research on this topic, we summarize the state of the economic literature that examines the aggregate impact of disasters. We review the main disaster data sources available, discuss the determinants of the direct effects of disasters, and distinguish between the short- and long-run indirect effects. After reviewing these literatures, we examine some of the relevant policy questions, and follow up with projections about the future likelihood of disasters, while paying particular attention to the projected climate change. We end by identifying several significant gaps in this literature.natural disasters, climate change, growth

The total assessment profile, volume 2

Appendices are presented which include discussions of interest formulas, factors in regionalization, parametric modeling of discounted benefit-sacrifice streams, engineering economic calculations, and product innovation. For Volume 1, see

Climate research Netherlands : research highlights

In the Netherlands the temperature has risen, on average, by 1.6°C since 1900. Regional climate scenarios for the 21st century developed by the Dutch Royal Meteorological Institute [1] show that temperature in the Netherlands will continue to rise and mild winters and hot summers will become more common. On average winters will become wetter and extreme precipitation amounts will increase. The intensity of extreme rain showers in summer will increase and the sea level will continue to rise. Changing climate will affect all segments and sectors of the society and the economy of the Netherlands, but it also brings new opportunities for major innovation