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This paper reviews the impact of the literature in depletable resources
and energy economics over the period 1973-98, particularly the period of publication of
the Journal of Environmental Economics and Management, 1974-98. A discussion of
prominent policy issues in this arena is provided, along with an indication of what
academic economics papers have contributed to that debate. This is followed by a citation
analysis of contributions in the fields of energy and exhaustible resource economics. For
each of these two fields, a list of the top papers in each five year period from 1974 to
1998 is presented, along with a list of the top journals in each decade, based on average
citations per article. The top ten cited articles in the fields in the Journal of
Environmental Economics and Management are also presented.
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The paper begins with the problem of a firm subject to random productivity
shocks drawn from a particular distribution. We are concerned with the case whereby the
distribution of the shocks changes without the knowledge of the firm. Over time the firm
learns about the nature and extent of the change in the distribution of the shock and
adjusts, incurring adjustment costs in the process. The long run loss in profits (±) due
to the shift in the distribution we term the adaptation costs. The transitory profit loss,
incurred while the firm is learning about the distribution shift, is termed the adjustment
cost. The theory is developed and then applied to the problem of measuring adaptation and
adjustment costs in the face of unanticipated and imperfectly observed climate change in
agriculture. The empirical part of the paper involves estimating a supply function for
corn that depends on actual weather realizations and expected weather, using county level
data for the US. We then simulate the effect of an unobserved climate shock, where
learning about the climate shock is by observing the weather and updating prior knowledge
using Bayes Rule.
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There is considerable empirical and experimental evidence that there is
a divergence between willingness-to-accept compensation to give up a good and
willingness-to-pay to obtain a good. This divergence persists even when the good in
question in small relative to income, a result in apparent conflict with standard economic
theory. This paper develops a theoretical bidding model with costly information
acquisition to explain this divergence. The model generates a gap between offers to sell
and bids to buy consistent with the experimental results. We argue that the model does a
better job of explaining empirical and experimental data than either of the two commonly
invoked theoretical explanations: the endowment effect and the substitution effect.
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This paper summarizes the research of three masters theses. The
theme of the theses is the economics of environmental problems in Russia. One thesis
focuses on the damage from climate change. The work estimates the climate and weather
sensitivity of Russian agriculture and estimates the output gains associated with
temperature and precipitation increases associated with climate change. The second thesis
involves the effect of environmental quality on housing rents in Moscow, the first step in
conducting a hedonic analysis of the demand for environmental quality in Moscow. The third
thesis empirically investigates the extent to which lax environmental regulations in
Russia may be responsible for the relatively good performance of Russian chemicals and
primary metals industries in international trade.
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This paper concerns computational models in environmental economics and policy,
particularly so-called integrated assessment models. For the most part, such models are
simply extensions of standard neoclassical growth models, extended by including the
environment and pollution generation. We review the structure of integrated assessment
models, distinguishing between finite horizon and infinite horizon models, both
deterministic and stochastic. We present a new solution algorithm for infinite horizon
integrated assessment models, relying on a neural net approximation of the value function
within an iterative version of the Bellman equation.
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This paper reviews the impact of the literature in depletable resources and
energy economics over the period 1973-98, particularly the period of publication of the Journal
of Environmental Economics and Management, 1974-98. A discussion of prominent policy
issues in this arena is provided, along with an indication of what academic economics
papers have contributed to that debate. This is followed by a citation analysis of
contributions in the fields of energy and exhaustible resource economics. For each of
these two fields, a list of the top papers in each five year period from 1974 to 1998 is
presented, along with a list of the top journals in each decade, based on average
citations per article. The top ten cited articles in the fields in the Journal of
Environmental Economics and Management is also presented.
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A standard assumption in integrated assessment models of climate
change is that population and technology are growing, but at a decreasing rate. We explore
the significance of the assumption of population and technology growth for greenhouse gas
abatement. After all, there has been no long run slow down in the growth of technology
over the past few centuries, and the rate of population growth has actually been
increasing for the past 19 centuries. Even if either of these growth rates were expected
to slow, by how much is subject to great uncertainty. We show computationally that such
continued growth greatly increases the severity of climate change. Indeed we find that
climate change is a problem in large part "caused" by exogenous population and
technology growth. Rapid reductions in growth make climate change a small problem; smaller
reductions in growth imply climate change is a very serious problem indeed. Analogously,
reductions in the growth rate of population can be effective in controlling climate
change.
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The debate over the magnitude of anthropogenically induced climate change has
raged for over a century (1-6). Today considerable uncertainty remains about the magnitude
of greenhouse-gas-induced climate change, particularly the climate sensitivity – the
equilibrium change in global-mean surface temperature per unit of radiative forcing. The
rapidity at which uncertainty in the climate sensitivity is resolved has significant
policy implications. If resolution is expected soon, deferring action until the picture is
clearer may be prudent. If uncertainty is likely to be resolved only slowly, then action
today on the basis of expected costs and damages may be the wisest course. Here we use a
Bayesian learning model, the instrumental temperature record, and IPCC scenarios of future
emissions of greenhouse gases and SO2 to estimate the time required to reduce
the uncertainty in the climate sensitivity. We find that more than half a century is
required to be 95% confident that the true value of the climate sensitivity lies within
±20% of the estimated value. Further, accelerated control of greenhouse-gas emissions
significantly slows this rate of learning, while control of SO2 emissions
accelerates it.
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There has been considerable controversy over the empirical significance of the
theoretically predicted pollution haven hypothesis. Generally, empirical papers have
failed to find an effect on industrial location of weaker or stricter environmental
regulations. In this paper we find strong confirmation of theoretical predictions. We
present a statistical test of the impact of environmental regulations on the capital
movement of polluting industries. The empirical study is conducted by examining foreign
direct investment (FDI) of several US industries, representing industries with high
pollution control costs (chemicals and primary metals) as well as industries with more
modest pollution control costs (electrical and non-electrical machinery, transportation
equipment, and food products). At issue is the effect of the laxity of environmental
regulation on FDI. As laxity is not directly observed, we posit two equations, one for FDI
determination and one for pollutant emissions, a variable positively correlated with the
unobserved variable. We use aggregate national sulfur emissions as the pollutant. Using
instruments for the unobserved variable, the statistical results show that the laxity of
environmental regulations in a host country is a significant determinant of FDI from the
US for heavily polluting industries and is insignificant for less polluting industries.
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The paper concerns measuring the demand for a "synthetic"
fuel--desulfurized coal--using contingent valuation techniques. This represents one of the
first times this method has been applied to factors of production. A complicating factor
is that the synthetic fuel can be of various qualities. The empirical results illustrate
the difficulty of configuring synthetic fuels to meet the requirements of existing
generating plants. The contributions of the paper are in extending contingent valuation to
quality-differentiated factor demand, using robust estimation techniques to reduce the
influence of outliers,and estimating the returns to investment in coal desulfurization.
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This paper presents a simple model of auction equilibrium. The distinctive
feature of the model is that each bidder may discover the value that the item represents
for herself, provided she spends some amount in order to be well informed. For each agent,
the decision of whether or not to acquire information depends on a private cost of
information acquisition and on her conjectures regarding the behavior of other bidders. A
rational expectations equilibrium is characterized.
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This paper presents the results of an experiment on the economics of
endogenous information acquisition. The experiment consists of a series of auctions where
subjects compete for an object with private but unknown value. The information regarding
the value of the object is costly. The experiment tests a theoretical model of bidding
equilibrium and analyzes the effects of variations in the parameters (such as information
costs and level of uncertainty) on the endogenous variables (such as the proportion of
bidders who buy information and the winning bid). Bidders’ decisions concerning the
purchase of information are closely consistent with a Risk Neutral Rational Expectations
model. The winning bids, however, are persistently above the equilibrium predictions
suggesting the presence of risk aversion.
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