Optimal progressive taxation in a model with endogenous skill supply.

This paper examines whether efficiency considerations require that optimal labour income taxation is progressive or regressive in a model with skill heterogeneity, endogenous skill acquisition and a production sector with capital-skill complementarity. We find that wage inequality driven by the resource requirements of skill-creation implies progressive labour income taxation in the steady-state as well as along the transition path from the exogenous to optimal policy steady-state. We find that these results are explained by a lower labour supply elasticity for skilled versus unskilled labour which results from the introduction of the skill acquisition technology.

Rebound and disinvestment effects in oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector

In this paper we use an energy-economy-environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production.

The Export Base Model with a Supply-Side Stimulus to the Export Sector

Paper delivered at the Western Regional Science Association Annual Conference, Sedona, Arizona, February, 2010.

The Distributional Consequences of Supply-Side Reforms in General Equilibrium

This paper addresses the issue on whether tax reforms consisten with lower public debt-to-GDP in the long-run can lead to a more efficient and equitable economy. To this end we solve a heterogeneous agent model comprised of a government, a representative capitalist and representative skilled and unskilled workers, under both rational expectations and adaptive learning. Our main ndings are that (i) reductions in capital taxation, while bene cial at the aggregate level, lead to increased inequality mainly due to the substitutability of un- skilled labour and capital; (ii) a fall in taxation for skilled labour is Pareto improving, which is largely explained by its complementarity with the other factor inputs; (iii) all agents would prefer increasing the tax rate on capital to increasing the tax rate on skilled and un- skilled labour since it leads to relatively lower welfare losses; and (iv) heterogeneity in initial beliefs under adaptive learning quantitatively matters for welfare.

A labor market with targeted wage offers

We model a market for highly skilled workers, such as the academic job market. The outputs of firm-worker matches are heterogeneous and common knowledge. Wage setting is synchronous with search: firms simultaneously make one personalized o¤er each to the worker of their choice. With large frictions (delay costs), efficient coordination is not possible, but for small frictions efficient matching with Diamond-type monopsony wages is an equilibrium.

Price Transmission and Effects of Exchange Rates on Domestic Commodity Prices via Offshore and Currency Hedging

The framework presents how trading in the foreign commodity futures market and the forward exchange market can affect the optimal spot positions of domestic commodity producers and traders. It generalizes the models of Kawai and Zilcha (1986) and Kofman and Viaene (1991) to allow both intermediate and final commodities to be traded in the international and futures markets, and the exporters/importers to face production shock, domestic factor costs and a random price. Applying mean-variance expected utility, we find that a rise in the expected exchange rate can raise both supply and demand for commodities and reduce domestic prices if the exchange rate elasticity of supply is greater than that of demand. Whether higher volatilities of exchange rate and foreign futures price can reduce the optimal spot position of domestic traders depends on the correlation between the exchange rate and the foreign futures price. Even though the forward exchange market is unbiased, and there is no correlation between commodity prices and exchange rates, the exchange rate can still affect domestic trading and prices through offshore hedging and international trade if the traders are interested in their profit in domestic currency. It illustrates how the world prices and foreign futures prices of commodities and their volatility can be transmitted to the domestic market as well as the dynamic relationship between intermediate and final goods prices. The equilibrium prices depends on trader behaviour i.e. who trades or does not trade in the foreign commodity futures and domestic forward currency markets. The empirical result applying a two-stage-least-squares approach to Thai rice and rubber prices supports the theoretical result.

An investigation of the determinants of household demand for bushmeat in the Serengeti using an open-ended choice experiment

Illegal hunting for bushmeat is regarded as an important cause of biodiversity decline in Africa. We use a stated preferences method to obtain information on determinants of demand for bushmeat in villages around the Serengeti National Park, Tanzania. We estimate the effects of changes in the own price of bushmeat and in the prices of two substitute protein sources – fish and chicken. Promoting the availability of protein substitutes at lower prices would be effective at reducing pressures on wildlife. Supply-side measures that raise the price of bushmeat would also be effective.

The rise and fall of piecework–timework wage differentials: market volatility, labor heterogeneity, and output pricing

Based on detailed payroll data of blue collar male and female labor in Britain’s engineering and metal working industrial sectors between the mid-1920s and mid-1960s, we provide empirical evidence in respect of several central themes in the piecework-timework wage literature. The period covers part of the heyday of pieceworking as well as the start of its post-war decline. We show the importance of relative piece rate flexibility during the Great Depression as well as during the build up to WWII and during the war itself. We account for the very significant decline in the differentials after the war. Labor market topics include piecework pay in respect of compensating differentials, labor heterogeneity, and the transaction costs of pricing piecework output.