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Stochastic Domination and Comb Percolation

There exists a Lipschitz embedding of a d-dimensional comb graph (consisting of infinitely many parallel copies of Z^{d-1} joined by a perpendicular copy) into the open set of site percolation on Z^d, whenever the parameter p is close enough to 1 or the Lipschitz constant is sufficiently large. This is proved using several new results and techniques involving stochastic domination, in contexts that include a process of independent overlapping intervals on Z, and first-passage percolation on general graphs.Comment: 21 page

Costs of taxation and benefits of public goods with multiple taxes and goods

The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor -- through income effects. However, the consensus is wrong because the income effects of taxes must be considered symmetrically with those from provision of public goods. This paper uses a model with multiple public goods and taxes to derive consistent measures of the marginal benefits of publicly-provided goods and their marginal social costs. With this model, the authors show that either compensated approaches excluding these income effects or uncompensated approaches including them may be used. If an uncompensated measure of the marginal cost of funds is used, however, the benefits of providing public goods should be adjusted with a simple, benefit multiplier not previously seen in the literature. Once this is done, the optimal level of public provision is independent of whether compensated or uncompensated approaches are used. Proper accounting for these income effects -- or their omission using a compensated approach -- appears to substantially raise the hurdle for government provision where there are substantial taxes bearing on labor.Economic Theory&Research,Public Sector Economics,Debt Markets,Emerging Markets,Taxation&Subsidies

Evaluating public expenditures when governments must rely on distortionary taxation

Anderson and Martin provide simple, robust rules for evaluating public spending in distorted economies. Their analysis integrates, within a clean unified framework, previous treatments of project evaluation as special cases. In this paper, the authors use a general system of fiscal accounting for marginal changes in the provision of public that allows them to account for various approaches to the funding of government projects. They obtain two key results that seem likely to be useful for project evaluation. Firstly, the shadow prices of traded (as well as non-traded) goods are not generally equal to their world prices, but differ from world prices by an amount that depends upon the impact of the project on government revenues and on the Marginal Cost of Funds (MCF). Secondly, the costs of a government project need to be adjusted by the Marginal Cost of Funds before being compared with the benefits accruing from the project. The analysis leads to operational rules for project evaluation that are only slightly more complex than the border pricing rule. To conduct the analysis, the authors utilize a framework that makes explicit the role of government in providing public goods and services subject to a budget constraint. They consider first in Section 1 a general welfare analysis of the provision of a public good which is purchased from the rest of the world and paid for out of distortionary tax revenue. In Section 2 they consider the nature of the resulting shadow prices in more detail. In Section 3 the authors consider the role of the MCF in evaluating the cost of project inputs. Section 4 deals with user charges for public goods, which are of course only feasible when such goods are excludable. Section 5 places the results in the context of the earlier literature in order to clarify the relationship between their results and those obtained by earlier authors. Section 6 provides some simple numerical examples to highlight the potential importance allowing for the costs of raising funds.Public Sector Economics&Finance,Environmental Economics&Policies,Markets and Market Access,Economic Theory&Research,Banks&Banking Reform,Public Sector Economics&Finance,Access to Markets,Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies

ANALYSIS OF A SPATIAL ROTATION PLAN FOR THE TULE LAKE NATIONAL WILDLIFE REFUGE

This paper examines the joint agro-wildfowl regulation of the Tule Lake National Wildlife Refuge in California. The area is jointly managed by the Bureau of Reclamation for both farming and wildfowl benefits. Production in both sectors has been declining recently, in farming due to nematode and soil pathogen buildup and in wildfowl production due to climax vegetation choking the lake. A novel spatial rotation plan has surfaced to solve both problems. We develop a simple model of the rotation option to identify critical variables and then we estimate some of these using data on lease bids.Resource /Energy Economics and Policy,

MARINE RESERVES WITH ENDOGENOUS PORTS: EMPIRICAL BIOECONOMICS OF THE CALIFORNIA SEA URCHIN FISHERY

Marine reserves are gaining substantial public support as tools for commercial fisheries management Harvest sector responses will influence policy performance, yet biological studies often depict harvester behavior as spread uniformly over fishing grounds and unresponsive to economic opportunities. Previous bioeconomic analyses show that these behavioral assumptions are inconsistent with empirical data and, more importantly, lead to overly optimistic predictions about harvest gains from reserves. This paper adds another layer of behavioral realism to the bioeconomics of marine reserves by endogenizing fisher home port choices with a partial adjustment share model. Estimated with Seemingly Unrelated Regression over monthly data, this approach allows simulation of both short- and long-run behavioral response to changes induced by marine reserve formation. The findings cast further doubt on the notion that marine reserves generate long-run harvest benefits.Resource /Energy Economics and Policy,

Rediscounting Under Aggregate Risk with Moral Hazard

Freeman (1999) proposes a model in which discount window lending and open market operations have different effects. This is important because in most of the literature, these policies are indistinguishable. However, Freeman's argument that the central bank should absorb losses associated with default to provide risk-sharing stands in stark contrast to the concern that central banks should limit their exposure to credit risk. We extend Freeman's model by introducing moral hazard. With moral hazard, the central bank should avoid absorbing losses and Freeman's argument breaks down. However, we show that policies resembling discount window lending and open market operations can still be distinguished in this new framework. The optimal policy is for the central bank to make a restricted number of creditors compete for funds. By restricting the number of agents, the central bank can limit the moral hazard problem. By making them compete with each other, the central bank can exploit market information that reveals the state of the economy.Payment, clearing, and settlement systems; Financial markets; Central bank research