231 research outputs found
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Rescaling-contraction with a lower cost technology when revenue declines
YesA mature oil field rescaled contraction describes a switch to a technological alternative more appropriate for the depleted state of an underlying resource. Off-shore oil rigs are an illustration, since the original technological scale designed for very large output flows becomes inappropriate as the operational efficiency declines later in life and facing a dwindling output flow, so a more appropriate extraction technology becomes economic. A real option representation is formulated on a stochastic oil price and deteriorating output volume. We consider investment/divestment decisions both separately, and jointly, which have different implications for government policies and also option values. The resulting model yields analytical (or semi-analytical) results indicating that immediate switching to the lower cost technology could sometimes be hastened as the price volatility increases, depending on the current revenue, if divestment and switching are considered jointly. However, greater volatility could also promote hysteresis
Three great american disinflations
In this paper, we examine three famous episodes of deliberate deflation (or disinflation) in U.S. history, including episodes following the Civil War, World War I, and the Volcker disinflation of the early 1980s. These episodes were associated with widely divergent effects on the real economy, which we attribute both to differences in the policy actions undertaken, and to the transparency and credibility of the monetary authorities. We attempt to account for the salient features of each episode within the context of a stylized DSGE model. Our model simulations indicate how a more predictable policy of gradual deflation could have helped avoid the sharp post-WWI depression. But our analysis also suggests that the strong argument for gradualism under a transparent monetary regime becomes less persuasive if the monetary authority lacks credibility; in this case, an aggressive policy stance (as under Volcker) can play a useful signalling role by making a policy shift more apparent to private agents. JEL Classification: E31, E32, E5
Three Great American Disinflations
In this paper, we examine three famous episodes of deliberate deflation (or disinflation) in U.S. history, including episodes following the Civil War, World War I, and the Volcker disinflation of the early 1980s. These episodes were associated with widely divergent effects on the real economy, which we attribute both to differences in the policy actions undertaken, and to the transparency and credibility of the monetary authorities. We attempt to account for the salient features of each episode within the context of a stylized DSGE model. Our model simulations indicate how a more predictable policy of gradual deflation could have helped avoid the sharp post-WWI depression. But our analysis also suggests that the strong argument for gradualism under a transparent monetary regime becomes less persuasive if the monetary authority lacks credibility; in this case, an aggressive policy stance (as under Volcker) can play a useful signalling role by making a policy shift more apparent to private agents.DSGE Model, Credibility, Deflation
Pricing information goods with piracy and heterogeneous consumers
We present an information good pricing model with persistently heterogeneous consumers and a rising marginal propensity for them to pirate. Three offsetting pricing mechanisms occur: skimming, compressing price changes, and delaying product launch. We identify a novel trade off in piracy's effect on welfare. We find that piracy quickens sales times and raises welfare in fixed capacity markets, and does the opposite in growing markets. In our model, consumers benefit from piracy except at very high rates in rapidly expanding markets, legal sellers always dislike it, and pirate providers like high but not very high rates. Purchase delay, transient heterogeneity, inelastic demand, and network externalities reduce piracy's effect, but demand uncertainty doesn't
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The shrinking State? Understanding the assault on the public sector
The public sector appears under siege across the globe. While there are variations across and within nations in how this plays out, the arms of the state that provide the social safety net and protect citizens' well-being are especially at risk. The erosion of the state as an institution can be seen in cuts to social programmes and public sector jobs, underfunded infrastructure, the sale of public assets and other forms of privatization along with the more general weakening of regulatory authority and diversion of resources to the private sector. Although such trends are often interpreted as part of the fallout from the Great Recession, they have been observed across localities and regions for a very long time. In addressing the thematic question of the “shrinking state,” we seek to investigate the extent to which the social contract between government and citizens and the private sector has fractured thereby transforming regions and localities. This paper addresses to what degree, why, and where the public sector is in retreat. We examine at what scale of the state from central to local have changes been most profound and explore what the future holds in terms of resistance to, or acquiescence in, these trends
Pricing information goods with piracy and heterogeneous consumers
We present an information good pricing model with persistently heterogeneous consumers and a rising marginal propensity for them to pirate. Three offsetting pricing mechanisms occur: skimming, compressing price changes, and delaying product launch. We identify a novel trade off in piracy's effect on welfare. We find that piracy quickens sales times and raises welfare in fixed capacity markets, and does the opposite in growing markets. In our model, consumers benefit from piracy except at very high rates in rapidly expanding markets, legal sellers always dislike it, and pirate providers like high but not very high rates. Purchase delay, transient heterogeneity, inelastic demand, and network externalities reduce piracy's effect, but demand uncertainty doesn't
Consumer Valuation of Fuel Costs and the Effectiveness of Tax Policy - Evidence from the European Car Market
To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness and welfare impact of alternative tax policies' To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a long panel of European countries, and exploit variation in fuel costs by engine type. Although we find there is modest undervaluation of fuel costs, fuel taxes are still more effective in reducing fuel usage than product taxes based on fuel economy. Importantly, fuel taxes also perform better in terms of total welfare even when usage demand is held completely fixed. The reason is that fuel taxes better target the right consumers, those with a high mileage, to purchase more fuel efficient cars
Drifting Together or Falling Apart? The Empirics of Regional Economic Growth in Post-Unification Germany
The objective of this paper is to address the question of convergence across German districts in the first decade after German unification by drawing out and emphasising some stylised facts of regional per capita income dynamics. We achieve this by employing non-parametric techniques which focus on the evolution of the entire cross-sectional income distribution. In particular, we follow a distributional approach to convergence based on kernel density estimation and implement a number of tests to establish the statistical significance of our findings. This paper finds that the relative income distribution appears to be stratifying into a trimodal/bimodal distribution.regional economic growth, Germany, convergence clubs, density estimation, modality tests
Opioid abuse and austerity: Evidence on health service use and mortality in England
Opioid abuse has become a public health concern among many developed countries, with policymakers searching for strategies to mitigate adverse effects on population health and the wider economy. The United Kingdom has seen dramatic increases in opioid-related mortality following the financial crises in 2008. We examine the impact of spending cuts resulting from government prescribed austerity measures on opioid-related hospitalisations and mortality, thereby expanding on existing evidence suggesting a countercyclical relationship with macroeconomic performance. We take advantage of the variation in spending cuts passed down from central government to local authorities since 2010, with reductions in budgets of up to fifty percent in some areas resulting in the rescaling of vital public services. Longitudinal panel data methods are used to analyse a comprehensive, linked dataset that combines information from spending records, official death registry data and large administrative health care data for 152 local authorities (i.e., unitary authorities and county councils) in England between April 2010 and March 2017. A total of 280,827 people experienced a hospital admission in the English National Health Service because of an opioid overdose and 14,700 people died from opioids across the study period. Local authorities that experienced largest spending cuts also saw largest increases in opioid abuse. Interactions between changes in unemployment and spending items for welfare programmes show evidence about the importance for governments to protect populations from social-risk effects at times of deteriorating macroeconomic performance. Our study carries important lessons for countries aiming to address high rates of opioid abuse, including the United States, Canada and Sweden
Innovative Financing at a Global Level
The European Commission services published a staff working document assessing the main sources of innovative financing under discussion. The analysis shows that for some of the instruments a "double dividend" of both raising revenues and improving market efficiency and stability could be reaped, in particular by putting a price on risk-taking in the financial sector and on carbon emissions.European Union, taxation, financial transaction tax, bank levy, bonus tax, carbon tax, financial institutions
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