Pollution control in a decentralized economy : which level of government should subsidize what in Brazil

Subsidies in Brazil essentially serve three purposes: (i) if assigned to the right level of government, they could reinforce the effectiveness of pollution taxes in reducing pollution; (ii) they offer an opportunity foradditional combinations of instruments and hence more flexibility in dealing with specific institutional characteristics of every state; and (iii) they can serve a purely"public relations"affect by showing that the federal government does not always rely on"sticks"but can also provide"carrots."The authors have four main messages of relevance to the Brazilian economy. First, carrots will not work without a stick. Subsidies of any type will not work without a coexisting pollution tax. Second, some carrots are better than others at achieving the government's objectives. In general, a state abatement subsidy is the more effective instrument to combine with a pollution tax. But when federal or state inspection capabilities are limited, monitoring subsidies may be an effective substitute. Third, increasing abatement subsidy rates can be counterproductive - tending to increase firm investment more than necessary and hence reduce the pollution tax base, while increasing subsidy costs. This can worsen the monitoring and inspection efforts and fiscal revenue. Finally, it is more effective to keep subsidy rates low if they are to be effective and sustainable and at the same time get the endorsement needed from state and federal fiscal administrations.Environmental Economics&Policies,Water and Industry,Pollution Management&Control,Public Sector Economics&Finance,Taxation&Subsidies

Managing pollution control in Brazil : the potential use of taxes and fines by federal and state governments

The authors make a case for federal monitoring of state environmental agencies'(SEPAs') performance because of the tradeoff for the states between the need to raise revenue from taxes on local output and the need to limit pollution. They also show that fines and taxes assigned respectively to the federal and state governments can improve firms'compliance and SEPA's performance, and hence environmental quality, without damaging state revenue, and perhaps even improving it. For their analysis, the authors rely on numerical policy simulations based on an analytical framework designed as a multilevel Stackelberg game. This framework reproduces the hierarchical structure of pollution control policies in Brazil, where the federal environmental protection agency relies on SEPAs to ensure that federally defined minimum ambient standards are met locally. The numerical simulations are based on a case study of the food, and the printing and publishing industries.Urban Services to the Poor,Environmental Economics&Policies,Water and Industry,Pollution Management&Control,Health Monitoring&Evaluation

Population aging and pension systems : reform options for China

Using an integrated simulation model, the authors estimate the scope and speed of population-aging in China, the cost of supporting the old, and the impact of different reform options and pension arrangements. Among their conclusions: The scope and speed of population-aging in China make the present pension system financially unsustainable, even assuming that GDP grows steadily in the long term. Moving the retirement age back would provide a temporary fix for the current pay-as-you-go pension system but would be politically viable only where there is great demand for labor. Pension funds could be made more sustainable by increasing GDP growth, raising contribution rates, or gradually reducing benefit rates. But the financial costs and social obstacles of those reform options must be carefully assessed. Fully funded, privately managed pension schemes might be feasible, but require a sound regulatory framework and institutional infrastructure,including financial markets that provide adequate savings instruments and insurance options. Pension reform is a long-term, multidimensional problem involving economic, social, political, and cultural factors. Governments should not focus only on taxes and transfers to redistribute income to and among the elderly. Real income growth is needed to cope with poverty among the elderly, especially in developing countries. To establish an adequate, efficient, and equitable social security system, China must maintain long-term socioeco nomic stability and sustainable growth. China could improve the labor market by removing management rigidities, facilitating human resource development, making labor markets more competitive, improving the household registration system, improving incentives, and rewarding hard and innovative work. To reduce unemployment, China can create more job opportunities in nontraditional sectors, especially its underdeveloped service industries. To shift jobs to the nonagricultural sector, it can develop medium-size cities. And to cushion the impact of demographic shocks, China should preserve traditional values and maintain family-community support. Drawing on experience in Europe and Latin America, China should move toward a transparent and decentralized system with 1) a fully funded, portable, defined-benefit pension plan, designed to meet basic needs, and 2) occupational pension plans or personal savings accounts to satisfy demand for maintaining or improving living standards.Public Health Promotion,Health Economics&Finance,Environmental Economics&Policies,Pensions&Retirement Systems,Labor Policies,Environmental Economics&Policies,Health Economics&Finance,Governance Indicators,Pensions&Retirement Systems,Achieving Shared Growth

Strategic interdependence in the East-West gas trade : a hierarchical Stackelberg game approach

The current and potential benefits of the East-West gas trade are enormous for all participants. Realizing those benefits requires significant upfront investments. But the new, more complex structure of the gas transit system that has emerged following changes in Eastern Europe and the former Soviet Union has created uncertainties that bear on the expected benefits from investment. The authors argue for the existence of stable contracts that would create an environment more conducive to investments and allow all participants to benefit from expansion of the gas trade. As a guide to formulating incentive-compatible, transparent, flexible contracts, they propose a framework based on a Stackelberg game, with three players (a supplier, a transiter, and an importer) under Russia's leadership. They use this framework to analyze the contract modifications that would ensue from changes affecting the gas trade. They concluded that: (a) increased competitiveness of the transiter and supplier through cost reductions would improve the payoffs to all players (the transiter's and supplier's profits and the Western importer's welfare). Strategic behavior on the part of the supplier and transiter would ultimately reduce the price to the importer, enlarging gas demand and reducing costs. If increased competitiveness is the outcome of more costly gas from sources other than Russia, both the supplier's and the transiter's payoffs would improve but the importer's welfare would deteriorate. The supplier and transiter would have leeway to strategically raise their price and transit fee, respectively, while gaining market share. But the importer would face rising costs for gas imports and would lose welfare; (b) an increase in the scope for the importer to substitute between alternative sources of gas improves welfare for all three players. The perception by the supplier and transiter of increased threat of competition leads to a preemptive move not to lose market share. The transiter and supplier reduce the transit fee and supply price, respectively, allowing the importer to face a lower gas price. Import demand expands and welfare improves. The expanded trade more than compensates for the reduction in the transit fee an supply price and allows larger payoffs for transiter and suppliers; and (c) the perception of increased reliability of Russian gas supplies expands demand for Russian gas and leads to the expansion of trade. The supplier and transiter can raise their respective charges with expanded volume, improving their payoffs. The importer's welfare deteriorates as the cost of importing gas rises. The predictability of the players'reactions to changes in the environment would build confidence in the reliability of gas trade and allow its expansion benefiting all participants.Water and Industry,Economic Theory&Research,Environmental Economics&Policies,Energy Trade,Markets and Market Access

External shocks and performance responses during systemic transition : the case of Ukraine

Ukraine encountered many economic problems in its first years of independence. Most serious among external shocks were the collapse of trade with the former Soviet Union and the sharp price increases for energy imports. External shocks resulted in an income loss in the current accounts equivalent to about 14 percent of the gross domestic product (GDP) a year in 1992 and 1993. Ukraine did not adopt an appropriate strategy for dealing with the impact of these shocks. Its main policy response has been to continue borrowing, increase arrears, postpone adjustment, and restore administrative interventions. Not only has this policy exacerbated the economic crisis, it has led to massive capital flight and rapid expansion of the underground economy. With the limited information available, the authors try to identify the major sources of external shocks and to estimate their impact on the current account. They also evaluate Ukraine's policy response. Based on examination of the experience of other countries in addressing adverse shocks, the authors recommend the following policies: (a) full commitment to systemic reform and macroeconomic stabilization; (b) privatization, price liberalization, development of competitive market system, and reform of the legal system. For the particular situation of the Ukraine, they emphasize the importance of: (a) growth-oriented structural adjustment that reflects Ukraine's comparative advantages, including the development of nontraditional industries with high valued-added and low energy intensity; (b) greater economic (especially energy) efficiency; (c) integration into world systems of trade and finance; (d) prudent borrowing and debt management strategies, as well as policies to encourage private foreign direct investment and to make more efficient use of foreign debt.Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Energy and Environment

Atomic Analogy of Poverty

An analogy between the model of an atom and poverty of an individual in a poverty field is presented to construe that poverty levels are quantized in similar notions as in the models of an atom. This analogy provides a rational explanation of the observed phenomena in society in part as well as it can be used to predict future observations. Concepts proposed in this paper may lead to a framework to quantify poverty, absolute or relative, and suggest enhanced collaboration between moral science and natural science to study poverty dynamic

Strategic Interdependence in European East-West Gas Trade: A Hierarchical Stackelberg Game Approach

The current and potential benefits of European East-West gas trade are enormous for all participants. The new and more complex structure of the natural gas transit system, as emerged with political and economic changes in Eastern Europe and the former Soviet Union, has created uncertainties about the interdependence and interactions among the participants. Using a Stackelberg game with three layers of players (suppliers, transiters and importers), this paper establishes a framework to analyze rational behaviors of the participants and reasonable ways to formulate transparent, flexible, and incentive-compatible contracts. This framework is also used to show how to modify the trade contract to accommodate changes in the gas trade environment. Improving predictability of the players' reactions to external changes can enhance the reliability of gas trade and allow its expansion to benefit all participants.

Marketing Strategy during the Global Financial Crisis－a Case study of Great Partner Company, China

This study aims to explore the implementation of marketing strategies on companies during the financial crisis, and to identify those strategies that can help a company to remain successful during a period of economic downturn