A Kuznets Curve for Recycling

The paper aims at extending the debate on Environmental Kuznets Curves to the case of non-renewable resources and to discuss the driving forces that might give rise to EKC's in this case. The paper at hand deviates from the standard EKC analysis in two ways: First, mostly EKC's are analyzed for flow variables. In this paper we argue that EKC's may very well arise for certain stock variables like minerals or waste. Second, most papers that provide a theoretical foundation for EKC's focus on assumptions like technological anomalies (e.g. increasing returns) or technological switches. We offer an alternative explanation by showing that EKC's might arise simply due to the combination of recycling and the rising scarcity of materials. It is shown that an EKC for non-renewables might emerge during the transition to the long-run balanced growth path. Whether or not an EKC arises depends e.g. on initial conditions, but also on preferences and technology. The assumptions made about the ability of recycling firms to internalize the in- terrelation between recycling decisions today and the future availability of recyclable waste matter with respect to the prerequisites for an EKC and the speed of conver- gence. Internalization furthermore implies that an economy can be caught in a poverty trap, i.e. it might not be able to converge to the long-run growth equilibrium if the initial endowment with resources and capital is too low.non-renewable resources, recycling, transitional growth, Environmental Kuznets Curve

Sectoral Heterogeneity, Resource Depletion, and Directed Technical Change: Theory and Policy

We analyze an economy in which sectors are heterogeneous with respect to the intensity of natural resource use. Long-term dynamics are driven by resource prices, sectoral composition, and directed technical change. We study the balanced growth path and determine stability conditions. Technical change is found to be biased towards the resource-intensive sector. Resource taxes have no impact on dynamics except when the tax rate varies over time. Constant research subsidies raise the growth rate while increasing subsidies have the opposite effect. We also find that supporting sectors by providing them with productivity enhancing public goods can raise the growth rate of the economy and additionally provide an effective tool for structural policy.sustainable development, sectoral heterogeneity, directed technical change

Local and Global Externalities, Environmental Policies and Growth

The paper analyzes the implications of local and global pollution when two types of abatement activities can be undertaken. One type reduces solely local pollution (e.g., use of particulate matter filters) while the other mitigates global pollution as well (e.g., application of fuel saving technologies). In the framework of a 2-country endogenous growth model, the implications of different assumptions about the degree to which global externalities are internalized are analyzed. Subsequently, we derive policy rules adapted to the different scenarios. Special attention is paid to pollution, growth and optimal policy in the case of asymmetric internalization.economic growth, global and local externalities, government policies

Innovative investments, natural resources, and intergenerational fairness : are pension funds good for sustainable development?

We analyse long-term consumption paths in a dynamic two-sector economy with overlapping generations. Each young generation saves for the retirement age, both with private savings and pension funds. The productivity of each sector can be raised by sector-specific research while the essential use of a non-renewable natural resource poses a threat to consumption possibilities in the long run. Bonds, the two types innovations, and resource stocks are the different investment opportunities. We show that pension funds have a positive impact on long-term development, provided that individuals have a preference for own investments. In this case, sustainability is more likely to be achieved due to pension fund savings.Pension funds, sustainable development, financial investments, overlapping generations

Characteristics of Terrorism

Individual terrorist are frequently behaving seemingly absurd, e.g. by carrying out suicide operations, while activities of the terrorist organisations as a whole often seem to be conducted in a very effective way. These facts caused many researchers to regard the leaders representing the organisations like rational entities, while the followers are supposed to be just obeying and, hence, to be irrational. In this paper we offer a different approach which postulates rationality of all involved agents. We demonstrate how these agents’ behaviour could be modelled, while taking into account options of the terrorist leaders to influence their followers. From our model approaches to counter terrorism on both the leadership as well as the follower level can be derived.cognitive dissonance, joint production, Lancastrian characteristics approach, public goods, rationality, suicide attacks, terrorism

Decision Processes of a Suicide Bomber – Integrating Economics and Psychology

This paper provides a theoretical analysis regarding the rationality of suicide attacks from an economist’s point of view. It is argued that although a terrorist gives up future utility from consumption by committing a suicide attack, this loss can be overcompensated by the utility he derives from the attack. Some individual cases of suicide bombers are presented in order to elucidate the diversity of motivations behind the attacks. We derive conditions under which a rational agent might decide to become a suicide bomber – or to announce the attack and defect later. The paper shows why the decision to commit a suicide attack can be time-inconsistent and what mechanisms might prevent time-inconsistency. Integrating the psychological concepts of cognitive dissonance and terror management theory into our economic analysis, we demonstrate why – although predicted by standard economic theory – defection is a phenomenon rarely observed. We finally present some policy implications. In the light of our analysis, policies that focus on material well-being seem less promising than policies that address non-monetary benefits of suicide attacks. The paper concentrates on two policy strategies: offering alternatives – with respect to the aims of terrorism as well as the means to attain them – and reducing the information bias – with respect to the availability as well as the access to information.terrorism, discounting, rationality, time-consistency

Private Provision of Public Goods : Incentives for Donations

In many countries the government supports individuals' and companies' donations dedicated to charity organizations or { more general { to public goods. Yet the effects of governmental support with respect to the provision of public goods has been and still is subject to an extensive debate in the economic literature. Starting from Warr's (1982, 1983) famous neutrality result an array of conditions has been identified under which this result holds or not. In this paper we examine the commonly used policy approach to subsi- dize the private provision of public goods by granting agents deductions with respect to their income or corporate tax burden. We especially take into ac- count that most income tax schemes are progressive and that deductibility is limited. The problems that arise from these specific properties of the con- sidered tax-refund schemes are pointed out first. We then turn towards the effects which such a tax-refund scheme has with respect to the provision of the public good on the one hand and individual as well as aggregate wel- fare on the other hand. We show that the effects of this commonly practised method of supporting private public good provision depend crucially on the specific properties of the progressive tax scheme and the preference structure of agents. While Pareto-improvements and even Pareto-efficiency can result from the implementation of such a scheme, it is also conceivable that at least some agents perceive a utility reduction. Due to the dependency of welfare effects on the tariff structure, income tax reforms as they are planned in many countries might not only induce a reduction in private public good provision, but might also alter the induced welfare effects.public goods, sponsoring, neutrality

Local and Global Externalities, Environmental Policies and Growth

33 p.The paper analyzes the implications of local and global pollution when two types of abatement activities can be undertaken. One type reduces solely local pollution (e.g., use of particulate matter filters) while the other mitigates global pollution as well (e.g., application of fuel saving technologies). In the framework of a 2-country endogenous growth model, the implications of different assumptions about the degree to which global externalities are internalized are analyzed. Subsequently, we derive policy rules adapted to the different scenarios. Special attention is paid to pollution, growth and optimal policy in the case of asymmetric internalization