ON TESTING FOR REVEALED PREFERENCE CONDITIONS

A procedure to test for the significance of violations of revealed preference conditions is described. The procedure is simple and hence may especially be appropriate for large data sets. An application to consumption data is presented.Research Methods/ Statistical Methods,

A SIMPLE PROCEDURE TO EVALUATE EX-ANTE PRODUCER WELFARE UNDER PRICE UNCERTAINTY

We propose a simple and tractable procedure for evaluating producer welfare under price uncertainty. These properties are achieved at the cost of assuming constant absolute risk aversion, where risk attitude depends on the stock of wealth but not on the flow of income. Numerical examples corroborate the procedure's properties; the validity of the constant absolute risk aversion case as an approximation is discussed.Research Methods/ Statistical Methods,

GROUNDWATER CONTAMINATION AND THE MANAGEMENT OF A CONJUNCTIVE GROUND AND SURFACE WATER IRRIGATION SYSTEM

Irrigation water (including rainfall) that infiltrates the subsurface carries salts, pesticide and fertilizer residues, and other trace elements, thus causing a contamination of aquifers and soils. A similar situation occurs when irrigating with saline groundwater (aquifers containing saline water often are found in arid and semi-arid regions, where agricultural production depends critically on groundwater irrigation). Evaporation of the irrigation water increases salt concentration, causing salinization of soils and aquifers. Although not immediately noticeable, these quality deterioration processes will have long-term effects and therefore require careful management. The paper describes a general framework for the intertemporal management of a conjunctive ground and surface water irrigation system, taking into account the quality deterioration processes. Policy implications are discussed and the results are compared with those that come from a model which neglects quality effects.Resource /Energy Economics and Policy,

TESTING THE SIGNIFICANCE OF DEVIATIONS FROM RATIONAL BEHAVIOR

We propose procedures for testing statistically the significance of violations of nonparametric tests of optimization axioms when observed behavior is measured with error. The tests are robust against parametric specification of the error distribution, thus are nonparametric in both the statistical and economic senses, and are readily implemented numerically. An illustration with demand data is presented.Research Methods/ Statistical Methods,

THE BUFFER ROLE OF GROUNDWATER WHEN SURFACE WATER SUPPLIES ARE UNCERTAIN: THE IMPLICATIONS FOR GROUNDWATER DEVELOPMENT

When used in conjunction with surface water for irrigation, groundwater serves two roles: to increase water supply; and to mitigate fluctuations in the supply of water. The later is the buffer role. This paper identifies and evaluates the economic benefit associated with the buffer role of ground water. Implications for the development of groundwater resources are investigated. An estimate is given of the buffer benefit to wheat growers of the fossil water aquifer underlying the Israeli Negev. It is found that, under the prevailing variability in the supply of surface water, this benefit may well exceed the groundwater benefit associated with the increase in water supply.Resource /Energy Economics and Policy,

Preparing for catastrophic climate change

We study optimal adaptation to climate change when the harmful consequences of global warming are associated with stochastic occurrence of abrupt changes. The adaptation policy entails the accumulation of a particular sort of capital that will eliminate or reduce the catastrophic damage of an abrupt climate change when (and if) it occurs. The occurrence date is uncertain. The policy problem involves balancing the tradeoffs between the (certain) investment cost prior to occurrence and the benefit (in reduced damage) that will be realized after the (uncertain) occurrence date. For stationary economies the optimal adaptation capital converges to a steady state. For growing economies the optimal adaptation capital stock approaches the maximal economic level above which further accumulation is ineffective.climate change, adaptation, hazard, Environmental Economics and Policy, O13, Q54,

On the Dynamics of Competing Energy Sources

We characterize the dynamics of energy markets in which energy is derived from polluting (fossil) and clean (solar) resources. The analysis is based on geometric optimal control considerations. An important feature of solar energy technologies is that their cost of supply is predominantly due to upfront investment in capital infrastructure (rather than to actual supply rate) and this feature has important implications for the market allocation outcome. In particular, it gives rise to a threshold behavior in that solar energy is adopted only when the price of fossil energy exceeds a certain threshold. Under this condition solar technologies will (eventually) dominate energy supply by driving fossil energy altogether out of the energy sector. A tax on fossil energy can have a substantial impact since it changes the threshold price. A quantity restriction (e.g., a cap on fossil energy) allows for the coexistence of clean and polluting energy technologies also in the long run, and its effect on the use of fossil energy is more moderate.fossil and solar energy, characteristic curves, price thresholds, environmental regulation, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,

ON KNOWLEDGE-BASED ECONOMIC GROWTH

International Development,

On the Dynamics of Competing Energy Sources

We characterize the dynamics of energy markets in which energy is derived from polluting (fossil) and clean (solar) resources. The analysis is based on geometric optimal control considerations. An important feature of solar energy technologies is that their cost of supply is predominantly due to upfront investment in capital infrastructure (rather than to actual supply rate) and this feature has important implications for the market allocation outcome. In particular, it gives rise to a threshold behavior in that solar energy is adopted only when the price of fossil energy exceeds a certain threshold. Under this condition solar technologies will (eventually) dominate energy supply by driving fossil energy altogether out of the energy sector. A tax on fossil energy can have a substantial impact since it changes the threshold price. A quantity restriction (e.g., a cap on fossil energy) allows for the coexistence of clean and polluting energy technologies also in the long run, and its effect on the use of fossil energy is more moderate.fossil and solar energy, optimal processes, characteristic curves, price thresholds, environmental regulation., Resource /Energy Economics and Policy,

ITERATIVE LEAST SQUARES ESTIMATION OF CENSORED REGRESSION MODELS WITH UNKNOWN ERROR DISTRIBUTIONS

Research Methods/ Statistical Methods,