The basque ecological debt: global socioecological impacts of a small open economy

4 p.

Optimal Taxation and Indeterminacy in the Uzawa-Lucas Model with Sector-specific Externalities

Documento de trabajo

Fiscal Policy and Economic Stability: Does PIGS stand for Procyclicality In Government Spending?

The Financial Crisis has hit particularly hard countries like Ireland or Spain. Procyclical fiscal policy has contributed to a boom-bust cycle that undermined fiscal positions and deepened current account deficits during the boom. We set up an RBC model of a small open economy, following Mendoza (1991), and introduce the effect of fiscal policy decisions that change over the cycle. We calibrate the model on data for Ireland, and simulate the effect of different spending policies in response to supply shocks. Procyclical fiscal policy distorts intertemporal allocation decisions. Temporary spending boosts in booms spur investment, and hence the need for external finance, and so generates very volatile cycles in investment and the current account. This economic instability is also harmful for the steady state level of output. Our model is able to replicate the relation between the degree of cyclicality of fiscal policy, and the volatility of consumption, investment and the current account observed in OECD countries.

Terrorism and the World Economy

Published as an article in: European Economic Review, 2008, vol. 52, issue 1, pages 1-27.

How Does the New Keynesian Monetary Model Fit in the U.S. and the Eurozone? an Indirect Inference Approach

This paper estimates a standard version of the New Keynesian monetary (NKM) model under alternative specifications of the monetary policy rule using U.S. and Eurozone data. The estimation procedure implemented is a classical method based on the indirect inference principle. An unrestricted VAR is considered as the auxiliary model. On the one hand, the estimation method proposed overcomes some of the shortcomings of using a structural VAR as the auxiliary model in order to identify the impulse response that defines the minimum distance estimator implemented in the literature. On the other hand, by following a classical approach we can further assess the estimation results found in recent papers that follow a maximum-likelihood Bayesian approach. The estimation results show that some structural parameter estimates are quite sensitive to the specification of monetary policy. Moreover, the estimation results in the U.S. show that the fit of the NKM under an optimal monetary plan is much worse than the fit of the NKM model assuming a forward-looking Taylor rule. In contrast to the U.S. case, in the Eurozone the best fit is obtained assuming a backward-looking Taylor rule, but the improvement is rather small with respect to assuming either a forward-looking Taylor rule or an optimal plan.

Optimal Minimum Wage in a Competitive Economy: an Alternative Modelling Approach

This paper analyzes whether a minimum wage can be an optimal redistribution policy when distorting taxes and lump-sum transfers are also available in a competitive economy. We build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage levels. Workers are assumed to differ only in their productivity. We find that optimal redistribution may imply the use of a minimum wage. The key factor driving our results is the reaction of the demand for low skilled labor to the minimum wage law. Hence, an optimal minimum wage appears to be most likely when low skilled households are scarce, the complementarity between the two types of workers is large or the difference in productivity is small. The main contribution of the paper is a modelling approach that allows us to adopt analysis and solution techniques widely used in recent public finance research. Moreover, this modelling strategy is flexible enough to allow for potential extensions to include dynamics into the model.

Optimal overall emissions taxation in durable goods oligopoly

We analyze optimal second-best emission taxes in a durable good industry under imperfect competition. The analysis is performed for three different types of emissions and for situations where the good is rented, sold or simultaneously sold and rented. We show, for durable goods that may cause pollution in a period (or in periods) different from the production period, that the expected overall emission tax and the expected total marginal environmental damage per unit produced in each period are the relevant variables to consider in the analysis of overinternalization and in the comparison of optimal emission taxes for renting, selling and renting-selling firms. Our results allow to extend some previous results in the literature to these durable goods and provide an adequate perspective on some other results (in particular, we point out the limitations of focusing only, for those durable goods, on the level and effects of the optimal emission tax in the production period).

Income Taxation and Growth in an OLG Economy: Does Aggregate Uncertainty Play any Role?

We analyze the effects of capital income taxation on long-run growth in a stochastic, two-period overlapping generations economy. Endogenous growth is driven by a positive externality of physical capital in the production sector that makes firms exhibit an aggregate technology in equilibrium. We distinguish between capital income and labor income, and between attitudes towards risk and intertemporal substitution of consumption. We show necessary and sufficient conditions such that i) increments in the capital income taxation lead to higher equilibrium growth rates, and ii) the effect of changes in the capital income tax rate on the equilibrium growth may be of opposite signs in stochastic and in deterministic economies. Such a sign reversal is shown to be more likely depending on i) how the intertemporal elasticity of substitution compares to one, and ii) the size of second- period labor supply. Numerical simulations show that for reasonable values of the intertemporal elasticity of substitution, a sign reversal shows up only for implausibly high values of the second- period’s labor supply. The conclusion is that deterministic OLG economies are a good approximation of the effect of taxes on the equilibrium growth rate as in Smith (1996).

A Novel Scheduling Index Rule Proposal for QoE Maximization in Wireless Networks

This paper deals with the resource allocation problem aimed at maximizing users' perception of quality in wireless channels with time-varying capacity. First of all, we model the subjective quality-aware scheduling problem in the framework of Markovian decision processes. Then, given that the obtaining of the optimal solution of this model is unachievable, we propose a simple scheduling index rule with closed-form expression by using a methodology based on Whittle approach. Finally, we analyze the performance of the achieved scheduling proposal in several relevant scenarios, concluding that it outperforms the most popular existing resource allocation strategies.

Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs

Revised 2008-08.-- Published as an article in: Journal of Public Economic Theory (2008), 10(4), 563-594.

Second-best tax policy in a growing economy with externalities

This paper investigates the exploitation of environmental resources in a growing economy within a second-best scal policy framework. Agents derive utility from two types of consumption goods one which relies on an environmental input and one which does not as well as from leisure and from environmental amenity values. Property rights for the environmental resource are potentially incomplete. We connect second best policy to essential components of utility by considering the elasticity of substitution among each of the four utility arguments. The results illustrate potentially important relationships between environmental amentity values and leisure. When amenity values are complementary with leisure, for instance when environmental amenities are used for recreation, taxes on extractive goods generally increase over time. On the other hand, optimal taxes on extractive goods generally decrease over time when leisure and environmental amenity values are substitutes. Unders some parameterizations, complex dynamics leading to nonmonotonic time paths for the state variables can emerge.

Optimal Fiscal Policy with Rationing in the Labor Market

Published as an article in: Topics in Macroeconomics, 2005, vol. 5, issue 1, article 17.

Is the Current Regulation of the VIII Division European Anchovy Optimal?

This paper sets out to assess the workability of the regulation currently in force in the European anchovy fishery of the VIII division. Particular attention is paid to the importance of the institutional regime in the allocation of natural resources. The study uses a bio-economic approach and takes into account the fact that, not only the European Union and the individual countries involved, but also some of the resource users or appropriators intervene in its management. In order to compare the effectiveness of the rules which, at the various levels, have been set up to restrict exploitation of the resource, the anchovy fishery is simulated in two extreme situations: open access and sole ownership. The results obtained by effective management will then be contrasted with those obtained from the maximum and zero profit objectives related with the two above-mentioned scenarios. Thus, if the real data come close to those derived from the sole ownership model it will have to be acknowledged that the rules at present in force are optimal. If, on the other hand, the situation more closely approach the results obtained from the open access model, we will endeavour in our conclusions to provide suggestions for economic policy measures that might improve the situation in the fishery.

Determinants of self-reported smoking and misclassification during pregnancy, and analysis of optimal cut-off points for urinary cotinine: a cross-sectional study

10 p.

Income tax progressivity, growth, income inequality and welfare

This paper analyzes the effects of personal income tax progressivity on long-run economic growth, income inequality and social welfare. The quantitative implications of income tax progressivity increments are illustrated for the US economy under three main headings: individual effects (reduced labor supply and savings, and increased dispersion of tax rates); aggregate effects (lower GDP growth and lower income inequality); and welfare effects (lower dispersion of consumption across individuals and higher leisure levels, but also lower growth of future consumption). The social discount factor proves to be crucial for this third effect: a higher valuation of future generations' well-being requires a lower level of progressivity. Additionally, if tax revenues are used to provide a public good rather than just being discarded, a higher private valuation of such public goods will also call for a lower level of progressivity.