Desert and Tangibility: Decomposing House Money Effects in a Charitable Giving Experiment

Several papers have documented that when subjects play with standard laboratory �endowments� they make less self-interested choices then when they use money they have either earned through a laboratory task or brought from outside the lab. In the context of a charitable giving experiment we decompose common "house money" effects into two components: the tangibility of cash in hand relative to money (or ecu's) promised on a computer screen, and the desert of earned money relative to random windfall gains. While both components are found to be significant in non-parametric tests, the former effect, which has been neglected in previous studies, has a stronger effect on total donations. These results have clear implications for experimental design, and also suggest that the availability of less tangible payment methods may increase charitable donations.

Financing Capture Ready Coal-Fired Power Plants in China by Issuing Capture Options

‘Capture Ready’ is a design concept enabling fossil fuel plants to be retrofitted more economically with carbon dioxide capture and storage (CCS) technologies, however financing the cost of capture ready can be problematic, especially in the developing world. We propose that fossil fuel plants issue tradable Capture Options to acquire financing. The Capture Option concept could move CCS forward politically in countries such as China, speed up CCS technology development, help Capture Ready investors diversify risk, and offer global warming investors an alternative investment opportunity. As a detailed case study, we assess the value of a Capture Option and Capture Ready plant for a 600 MW supercritical pulverized coal power plant in China, using a cash flow model with Monte-Carlo simulations. The gross value of Capture Ready varies from CNY3m ($0.4m) to CNY633m ($84.4m) at an 8% discount rate and the Capture Option is valued at CNY113m ($15.1m) to CNY1255m ($167.3m) for two of the four scenarios analyzed

Audit market concentration and related regulatory measures

Audit markets are highly concentrated and such a situation might have negative consequences on competition, and thus, on price setting, on audit quality and on the functioning of markets. The European regulator recognized some causes for audit market concentration, identified a systemic risk and suggested joint audits and a mandatory rotation of audit firms to reduce concentration. Prominent concentration measures are concentration ratios, the Lorenz curve, the Gini-coefficient and the Herfindahl-Hirschman-Index. An empirical study on the concentration of German Prime Standard market for the period 2010 – 2013 revealed a high concentration which is quite stable over time and a narrow oligopoly with duopolistic tendencies. Nevertheless, competition could still work, e.g. due to the threat of market entrants. Moreover, given the fact that Big4 audit firms provide a higher audit quality, concentration may have positive effects. The mandatory audit firm rotation has a positive effect on auditor independence and a negative effect on auditor competence. This explains why related research output is inconclusive, i.e. the total effect on audit quality remains unclear. Moreover, a positive impact on competition is not ensured. Archival studies reveal that joint audits do not improve audit quality but increase audit costs. On the other hand, joint audits potentially reduce concentration. A combination between audit firm rotation and joint audits might be an optimal solution.Universidad de Málaga. Campus de Excelencia Internacional Andalucía Tech

A Preliminary Political Economy of Net-negative Emissions Technologies

Although still at the drawing board, a thought experiment into the implications of negative emissions technologies (NETs) yields a different political economy than that of traditional low-carbon technologies. For some NETs, such as biomass energy with carbon capture and storage (BECCS), the rollout and deployment would likely be relatively similar though arguably more difficult than for fossil CCS. The immediate political challenge for BECCS is likely to be the extent that debates can be resolved over sustainable biomass feedstock or over food versus fuel. As with nuclear power, many environmentalists may come to view many NETs as simply unacceptable or they may view it more like fossil CCS or biofuels that are acceptable, at least under certain conditions. The key question to be resolved is whether NETs will be viewed (and regulated) as a moral hazard that would otherwise sap political and public support for mitigation without delivering the needed negative emissions. We also consider the international dimension and whether not having access to NETs will put certain countries (e.g., India) at a comparative disadvantage. The history of CCS, biofuels, and nuclear power provides helpful guide for the possible evolution of NETs. The most important difference, however, is with regard to energy savings. The interaction of NETs with previously unalloyed positive elements of a traditional mitigation portfolio such as energy efficiency is largely unexplored. Successful deployment of NETs could challenge the almost universal consensus in favour of energy savings since greater energy use in a net-negative emissions world could be considered a virtue. Thus, most of the issues raised by NETs have emerged with regard to other technologies except for the question of energy savings, which would require a redefinition not just for environmentalists or NGOs but basic cultural views about the virtues of greater savings and efficiency

Wer ist der beste Formel 1 Fahrer? Eine ökonometrische Talentbewertung

Who is the best Formula 1 driver? Until today it was impossible to answer this question because the observable performance of a driver depends both on his talent and the quality of his cars. In this article we separate for the first time driver talent from car quality by econometrically analyzing data for 57 years of Formula 1 racing. Our estimates also control for the number of drivers finishing, technical breakdowns and many other variables that influence race results. While Michael Schumacher is often believed to be the best driver, he is overtaken by Juan Manuel Fangio and Jim Clar

Desert and Tangibility: Decomposing House Money Effects in a Charitable Giving Experiment

Several papers have documented that when subjects play with standard laboratory “endowments” they make less self-interested choices then when they use money they have either earned through a laboratory task or brought from outside the lab. In the context of a charitable giving experiment we decompose common "house money" effects into two components: the tangibility of cash in hand relative to money (or ecu's) promised on a computer screen, and the desert of earned money relative to random windfall gains. While both components are found to be significant in non-parametric tests, the former effect, which has been neglected in previous studies, has a stronger effect on total donations. These results have clear implications for experimental design, and also suggest that the availability of less tangible payment methods may increase charitable donations

How Federalism Protects Future Generations from Today's Public Debts

From the politico-economic perspective, federalism is a protector of the present generation. But what about future generations? In federal states, Ricardian equivalence cannot be assumed to work properly, as migration between local jurisdictions undermines intergenerational redistribution based on parental altruism. However, we argue that there exists another equivalence mechanism which also works with purely selfish individuals: Public debts capitalize into property values. Jurisdictions with larger net debts exhibit, ceteris paribus, lower property prices. Debt capitalization in property values is the more pronounced the less elastic land supply is and the more mobile the other factors of production are. Therefore, capitalization is more relevant for local than for national debts, i.e. it is more pronounced in a federal than in a centralized state. Thus, federalism also becomes a protector of future generation

Consequences of Debt Capitalization: Property Ownership and Debt/Tax Choice

Public debts capitalize into property prices. This so far neglected fact has important consequences for the tax vs. debt choice. Property owners suffer more from the debt burden and, thus, have a stronger preference for tax financing of government spending than tenants. As a consequence of the resulting democratic struggle between property owners and tenants, the property ownership rate in a jurisdiction negatively affects public debts. We provide empirical support for this hypothesis by analyzing a cross-section of the 171 communities in the Swiss Canton of Zurich in the year 2000