How large do multi-region models need to be?

Given the connectedness of most states with their neighbors, any economic analysis of changes in a state’s policy needs to account for the interdependence between states. We examine in how much detail one needs to model the factor and commodity flows between states, and how much, if anything, is lost in the aggregation of neighboring states into larger regions. We develop nine dynamic multi-region general equilibrium models of the United States, with different aggregations of states (a two-region model, a 7-region model, and a full 51-region model) and different assumptions regarding intermediate inputs. We examine the same policy change with these nine models, and find that all nine models suggest very similar economic effects of the policy change in the first year. Our overall conclusion is that the policy implications that one might draw from small and highly aggregate models are fairly robust

The Demand for Envi- ronmental Quality and the Environmental Kuznets Curve Hypothesis

Abstract Household demand for better environmental quality is the key factor in the long-term global applicability of the Environmental Kuznets Curve (EKC) hypothesis. We argue that, for given consumer preferences, the threshold income level at which the EKC turns downwards or the equilibrium income elasticity changes sign from positive to negative depends on the ability to spatially separate production and consumption. We test our hypothesis by estimating the equilibrium income elasticities of five pollutants, using 1990 data for the United States. We find that the change in sign occurs at lower income levels for pollutants for which spatial separation is relatively easy as compared to pollutants for which spatial separation is difficult. Our results suggest that even high-income households in the United States have not yet reached the income level at which their demand for better environmental quality is high enough to cause the income-pollution relationship to turn downwards for all the pollutants that we analyzed.

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Diss. Jena.OPLADEN-RUG0

Preferences, Technology, and the Environment: Understanding the Environmental Kuznets Curve Hypothesis

We derive a simple expression for the income-pollution path using the standard static model of the environmental Kuznets curve (EKC). This expression makes it straightforward to identify the general characteristics of utility and pollution functions that lead to such a curve. We show that suitable preferences can always lead to an EKC while there is no technology that yields an EKC for all types of preferences, and we derive a sufficient condition for technology that leads to an EKC for almost all types of preferences. Our results hold for a model with multiple goods with different pollution intensities and for a production economy with nonconstant relative price of consumption and environmental effort. We derive our results without assuming specific functional forms and we encompass several other models as special cases. Copyright 2006, Oxford University Press.

Does the Right to Carry Concealed Handguns Deter Countable Crimes? Only a Count Analysis Can Say

An analysis of the effects of right-to-carry laws on crime requires particular distributional and structural considerations. First, because of the count nature of crime data and the low number of expected instances per observation in the most appropriate data, least-squares methods yield unreliable estimates. Second, use of a single dummy variable as a measure of the nationwide effect of right-to-carry laws is likely to introduce geographical and intertemporal aggregation biases into the analysis. In this paper, we use a generalized Poisson process to examine the geographical and dynamic effects of right-to-carry laws on reported homicides, rapes, and robberies. We find that the effects of such laws vary across crime categories, U.S. states, and time and that such laws appear to have statistically significant deterrent effects on the numbers of reported murders, rapes, and robberies. I