Productivity shocks, international trade and import prices: Evidence from agriculture

The purpose of this study is to measure the sensitivity of trade volumes and unit values to agricultural productivity shocks at home and abroad. We find that the unit values of trade ows vary systematically with production shocks using both aggregate data on a large sample of countries and detailed firm-level imports to Sweden. We find that import prices increase (and import volumes fall) when importer production increases. This result is likely driven by a change in the quality composition of imports or by economies of scale in international trade. This beneficial terms-of-trade effect that we find may thus be an important coping mechanism for food net-importing countries that experience negative production shocks. Our results also suggest that trade volumes are relatively insensitive to changes in production. The results suggest that trade frictions, product differentiation and storage limit the role of international trade as way of coping with production volatility

Uninsurance through trade

Trade with differentiated goods normally provides a form of insurance against disasters, such as floods and fires, through an increasing relative price of goods from the afflicted country. With open access renewable resources this is reversed. A country hit by a negative shock recovers faster if trading with fewer countries and, if trading with many, shocks affecting also the trading partners are preferred over idiosyncratic shocks. Trade thus increases economic vulnerability to disasters and local disasters will be worse than global. Furthermore, world markets transmit shocks so a natural disaster in one country can cause man-made disasters in competitor countries. These results are particularly relevant for developing countries due to high renewable resource reliance, more problems of open access and more economic vulnerability to disasters. A calibration suggests these concerns may apply to around 60 percent of world fisheries and that around 20 percent risk collapsing following small idiosyncratic shocks

The black paradox

We model competition between an oil monopolist and competitive suppliers of coal and renewable energy in a dynamic general equilibrium framework. We show that market power- which disrupts the order of extraction-may lead to higher long-run emissions by encouraging early extraction of dirty fuels such as coal which would otherwise remain in the ground permanently; simply banning coal burning may be better than Pigovian taxation. Market power can of course be corrected by production subsidies to the monopolist, but when distribution affects welfare a better option is to offer subsidies to renewable energy, which force the oil monopolist to reduce her (limit) price but are never actually paid out

What is the effect of EU's fuel-tax cuts on Russia's oil income?

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are proposing to cut taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts will influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter would increase Russia's oil profits by around 11-17 million Euros per day in the short run and long run. This is equivalent to 4100-6300 million Euros in a year, 0.3-0.5% of Russia's GDP or 7-11% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction

Three necessary conditions for establishing effective sustainable development goals in the Anthropocene

The purpose of the United Nations-guided process to establish Sustainable Development Goals is to galvanize governments and civil society to rise to the interlinked environmental, societal, and economic challenges we face in the Anthropocene. We argue that the process of setting Sustainable Development Goals should take three key aspects into consideration. First, it should embrace an integrated social-ecological system perspective and acknowledge the key dynamics that such systems entail, including the role of ecosystems in sustaining human wellbeing, multiple cross-scale interactions, and uncertain thresholds. Second, the process needs to address trade-offs between the ambition of goals and the feasibility in reaching them, recognizing biophysical, social, and political constraints. Third, the goal-setting exercise and the management of goal implementation need to be guided by existing knowledge about the principles, dynamics, and constraints of social change processes at all scales, from the individual to the global. Combining these three aspects will increase the chances of establishing and achieving effective Sustainable Development Goals

Immunogenicity of Ad26.COV2.S vaccine against SARS-CoV-2 variants in humans

The Ad26.COV2.S vaccine1–3 has demonstrated clinical efficacy against symptomatic COVID-19, including against the B.1.351 variant that is partially resistant to neutralizing antibodies1. However, the immunogenicity of this vaccine in humans against SARS-CoV-2 variants of concern remains unclear. Here we report humoral and cellular immune responses from 20 Ad26.COV2.S vaccinated individuals from the COV1001 phase 1/2 clinical trial2 against the original SARS-CoV-2 strain WA1/2020 as well as against the B.1.1.7, CAL.20C, P.1., and B.1.351 variants of concern. Ad26.COV2.S induced median pseudovirus neutralizing antibody titers that were 5.0- and 3.3-fold lower against the B.1.351 and P.1 variants, respectively, as compared with WA1/2020 on day 71 following vaccination. Median binding antibody titers were 2.9- and 2.7-fold lower against the B.1.351 and P.1 variants, respectively, as compared with WA1/2020. Antibody-dependent cellular phagocytosis, complement deposition, and NK cell activation responses were largely preserved against the B.1.351 variant. CD8 and CD4 T cell responses, including central and effector memory responses, were comparable among the WA1/2020, B.1.1.7, B.1.351, P.1, and CAL.20C variants. These data show that neutralizing antibody responses induced by Ad26.COV2.S were reduced against the B.1.351 and P.1 variants, but functional non-neutralizing antibody responses and T cell responses were largely preserved against SARS-CoV-2 variants. These findings have implications for vaccine protection against SARS-CoV-2 variants of concern

Essays on the Macroeconomics of Climate Change

This thesis consists of three essays on macroeconomic aspects of climate change. Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made. The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made. Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to climate change. I argue, based on a stylized two country example, that trade in goods will tend to make the countries' interests more aligned while trade in financial instruments will tend to make the countries' interests less aligned

Approximately optimal forest rotation in a nonstationary environment

The problem of optimal forest rotation in a nonstationary environment can, in general, not be solved analytically. Even qualitatively characterizing how the solution changes over time is only possible in some special cases. In this paper, we consider an approximation of the true solution to the nonstationary problem. We derive an approximate harvesting rule by solving a sequence of stationary problems that assume the growth conditions at that point in time will prevail indefinitely. Each such problem can be solved using the classic Faustmann rule. We numerically compare this approximate solution to the true solution, both in terms of the harvesting rule and the resulting expected profits, for a wide range of scenarios. We find that the harvesting rules are very similar (mostly <1% difference) and the profit losses associated with following the approximate rule are very small (less than 0.3%)

Measuring the Impact of Agricultural Production Shocks on International Trade Flows

The purpose of this study is to measure the sensitivity of trade volumes and trade unit values to agricultural production shocks. We derive a gravity model of trade with two new features. First, the model assumes perfectly in- elastic supply, which captures the short-run nature of year-to-year production shocks and has important implications for levels of regression coecients and how they can be used to measure the elasticity of substitution. Second, the presence of per-unit trade costs implies that, in percentage terms, unit values based on importing country data (including trade costs) should react less to production shocks than unit values based on exporting country data (exclud- ing trade costs). Using bilateral trade ow data for a large sample of countries and agricultural commodities we nd empirical support for the predictions of the model, with relatively high substitutability between varieties of crops dif- ferentiated by country of origin and quantitatively large per-unit trade costs. Our framework provides a new method for measuring substitution elasticities and per-unit trade costs using international trade data. Furthermore, our results suggest that trade frictions or substitution with other goods diminish the role of international trade as way of coping with production volatility

Should Faustmann forecast climate change?

Climate change is predicted to substantially alter forest growth. Optimally, forest owners should take these future changes into account when making rotation decisions today. However, the fundamental uncertainty surrounding climate change makes predicting these shifts hard. Hence, this paper asks whether forecasting them is necessary for optimal rotation decisions. While climate-change uncertainty makes it theoretically impossible to calculate expected profit losses of not forecasting, we suggest a method utilizing Monte-Carlo simulations to obtain a credible upper bound on these losses. We show that an owner following a rule of thumb - ignoring future changes and only observing changes as they come - will closely approximate optimal management. If changes are observed without too much delay, profit losses and errors in harvesting are negligible. This means that the very complex analytical problem of optimal rotation with changing growth dynamics can be simplified to a sequence of stationary problems. It also implies the argument that boundedly-rational agents may behave “as if” being fully rational has traction in forestry