Lawmakers as Job Buyers

In 2013, Washington State authorized the largest state tax incentive for private industry in U.S. history. It is not remarkable for a state legislature to use tax benefits to retain a major employer—in this case, the global aerospace manufacturer Boeing. Laws across all states and thousands of cities routinely incentivize companies such as Amazon to relocate or remain in particular areas. Notably, however, Washington did not recover any of the subsidies it authorized despite Boeing’s significant post-incentive workforce reductions. This story leads to several important questions: (1) How effective are state and local legislatures at influencing business-location decisions?; (2) Do such incentive programs actually achieve their goals of increasing and maintaining jobs?; (3) Is the public protected from imprudent spending? This Article looks specifically at the role of state and local governments in encouraging businesses to locate in their jurisdictions. In such cases, state and local lawmakers act as buyers of jobs. This Article argues for a two-step proposal to limit subnational government actions to incentivize business-location decisions. The first step involves a bidding process where companies are awarded incentives based on the lowest subsidy dollar amount required to create or retain a job of a certain quality or pay rate. The second step involves defining job metrics based on certain preconditions and recapturing incentives should a company fail to maintain or achieve a defined number of job and qualities inherent in each job. This two-step proposal has regulatory benefits and it mollifies the political concern for jurisdictions to appear competitive and the need for public financial protection

Biodiversity Conservation on Private Lands: Information Problems and Regulatory Choices

This survey paper examines various information insufficiencies in biodiversity conservation and their impact of regulatory choices. We surveyed the literature in the field and identified four major types of informational insufficiencies in making efficient biodiversity conservation decisions: 1) biological uncertainty 2) natural uncertainty 3) individual information, and 4) monitoring problem. The consequences of these four types of information insufficiencies on the choice of regulatory tools are explored. We discuss in this context three types of regulatory tools: land takings, environmental fees/charges, and contracts. The efficiency of each type of regulatory tools is shown dependent on the specific informational constraints that the regulatory faces.Biodiversity conservation, Information, Regulatory tools

Payments for Ecosystem Services: Mechanisms to Achieve Desired Landscape Patterns

This paper evaluates the effectiveness of five payment for ecosystem service (PES) schemes at meeting conservation objectives when the spatial configuration is important in meeting desired landscape patterns. The five PES schemes are: 1) fee-simple acquisition; 2) subsidies; 3) tradable development rights (TDR) with zoning; 4) mitigation banking; and 5) purchased development rights (PDR) easements. Findings are that tradeoffs exist between PES schemes for meeting spatial conservation objectives. The appropriate PES scheme incentive mechanism for a given region will depend upon economic demand as well as the landowner and landscape characteristics of the conservation region.Landscape, Spatial conservation, payment for ecosystem services, PES

The Efficiency of Voluntary Incentive Policies for Preventing Biodiversity Loss

In this paper we analyze the efficiency of voluntary incentive-based land-use policies for biodiversity conservation. Two factors combine to make it difficult to achieve an efficient result. First, the spatial pattern of habitat across multiple landowners is important for determining biodiversity conservation results. Second, the willingness of private landowners to accept a payment in exchange for enrolling in a conservation program is private information. Therefore, a conservation agency cannot easily control the spatial pattern of voluntary enrollment in conservation programs. We begin by showing how the distribution of a landowner's willingness-to-accept a conservation payment can be derived from a parcel-scale land-use change model. Next we combine the econometric land-use model with spatial data and ecological models to simulate the effects of various conservation program designs on biodiversity conservation outcomes. We compare these results to an estimate of the efficiency frontier that maximizes biodiversity conservation at each level of cost. The frontier mimics the regulator's solution to the biodiversity conservation problem when she has perfect information on landowner willingness-to-accept. Results indicate that there are substantial differences in biodiversity conservation scores generated by the incentive-based policies and efficient solutions. The performance of incentive-based policies is particularly poor at low levels of the conservation budget where spatial fragmentation of conserved parcels is a large concern. Performance can be improved by encouraging agglomeration of conserved habitat and by incorporating basic biological information, such as that on rare habitats, into the selection criteria.

Equilibrium in Scoring Auctions

This paper studies multi-attribute auctions in which a buyer seeks to procure a complex good and evaluate offers using a quasi-linear scoring rule. Suppliers have private information about their costs, which is summarized by a multi-dimensional type. The scoring rule reduces the multidimensional bids submitted by each supplier to a single dimension, the score, which is used for deciding on the allocation and the resulting contractual obligation. We exploit this idea and obtain two kinds of results. First, we characterize the set of equilibria in quasi-linear scoring auctions with multi-dimensional types. In particular, we show that there exists a mapping between the class of equilibria in these scoring auctions and those in standard single object IPV auctions. Second, we prove a new expected utility equivalence theorem for quasi-linear scoring auctions.Auctions, Procurement

The Question of Generation Adequacy in Liberalised Electricity Markets

This paper presents an overview of the reasons why unregulated markets for the production of electricity cannot be expected to invest sufficiently in generation capacity on a continuous basis. Although it can be shown that periodic price spikes should provide generation companies with sufficient investment incentives in theory, there are a number of probable causes of market failure. A likely result is the development of investment cycles that may affect the adequacy of capacity. The experience in California shows the great social costs associated with an episode of scarce generation capacity. Another disadvantage is that generation companies can manipulate price spikes. This would result in large transfers of income from consumers to producers and reduce the operational reliability of electricity supply during these price spikes. We end this paper by outlining several methods that have been proposed to stabilise the market, which provide better incentives to generation companies and consumers alike.Generation adequacy, Liberalised electricity market

Spatial Dynamic Modeling and Urban Land Use Transformation:

Assessing the economic impacts of urban land use transformation has become complex and acrimonious. Although community planners are beginning to comprehend the economic trade-offs inherent in transforming the urban fringe, they find it increasingly difficult to analyze and assess the trade-offs expediently and in ways that can influence local decisionmaking. New and sophisticated spatial modeling techniques are now being applied to urban systems that can quickly assess the probable spatial outcomes of given communal policies. Applying an economic impact assessment to the probable spatial patterns can provide to planners the tools needed to quickly assess scenarios for policy formation that will ultimately help inform decision makers. This paper focuses on the theoretical underpinnings and practical application of an economic impact analysis submodel developed within the Land use Evolution and Impact Assessment Modeling (LEAM) environment. The conceptual framework of LEAM is described, followed by an application of the model to the assessment of the cost of urban sprawl in Kane County, Illinois. The results show the effectiveness of spatially explicit modeling from a theoretical and a practical point of view. The agent-based approach of spatial dynamic modeling with a high spatial resolution allows for discerning the macro-level implications of micro-level behaviors. These phenomena are highlighted in the economic submodel in the discussion of the implications of land use change decisions on individual and communal costs; low-density development patterns favoring individual behaviors at the expense of the broader community.

Conservation Auctions in Manitoba: A Summary of a Series of Workshops

Currently, the effect of human impact on the environment is becoming increasingly apparent. The encroachment of human activity has inevitably resulted in the loss or impairment of ecological goods and services (EG&S) around the globe as well as in our own backyard. EG&S include features such as wildlife habitat, biodiversity, soil renewal, or nutrient cycling. The loss of such features has become a sobering reality for Manitobans in the face of the utrophication of Lake Winnipeg as a result of practices contributing to nutrient loading into the lake. Since EG&S are very important to Manitobans, efforts are being made to explore different vehicles to encourage their provision. In order to address some of the environmental issues transpiring in Manitoba, there has been discussion on the usefulness of Market Based Instruments (MBIs). In the past, a number of programs focused on the environment in agriculture have been put forward and administered, however these have not been overly successful in incenting producers or providing significant levels of EG&S. This report will provide a summary of a series of workshops developed to bring awareness to stakeholders on an MBI known as a conservation auction (which may also be referred to as reverse auction, procurement auction, or tender).Market based instruments, Conservation auction, Tender, Wetland restoration, Environmental Economics and Policy, D44, Q20, Q57,

Forest Charges and Trusts: Shared Benefits with Clear Responsibilities

This paper examines the Community-Based Forest Management Program (CBFM) and Industrial Forest Management Agreements (IFMA) within the context of efficient forest management. Investigation on ways of accomplishing the objectives of the agency, community and commercial forestry in decreased costs is conducted. Results show a need for DENR’s redirection of financial and human resources to focus on critical environmental tasks. Focus on higher-value timber opportunities can increase the potential for sustainable management and increase in the government revenue collection.forestry sector, rent and fee

(UN)Bundling public-private partnership contracts in the water sector : competition in auctions and economies of scale in operation

In public-private partnership transactions in the water sector, one of the alleged concerns is that there is little market competition at the auction stage. This paper casts light on a tradeoff between the competition effect at the auction level and potential economies of scale in service operation. If the authorities design a large-scale public-private partnership water transaction, it is expected to exploit operational scale economies. But the competition effect may have to be sacrificed. The paper shows a risk that the selection of the contract size could be a very restrictive condition that excludes many prospective bidders. Moreover, the paper quantifies the optimal size of public-private partnership contracts in the sector by estimating a cost function. The analysis shows that economies of scale exist but tend to diminish quickly as production increases. When the amount of water sold exceeds about 40 million m3, the statistical significance of economies of scale disappears. And there is no rationale for auctioning the water operation with annual water delivery of more than 400 million m3 under a single contract.Town Water Supply and Sanitation,Water Supply and Sanitation Governance and Institutions,Water and Industry,Water Conservation,Urban Water Supply and Sanitation