An interregional input-output analysis of the pollution content of trade flows and environmental trade balances between five states in the US Mid-West

In this paper we attempt an empirical application of the multi-region input-output (MRIO) method in order to enumerate the pollution content of interregional trade flows between five Mid-West regions/states in the US –Illinois, Indiana, Iowa, Michigan and Wisconsin – and the rest of the US. This allows us to analyse some very important issues in terms of the nature and significance of interregional environmental spillovers within the US Mid-West and the existence of pollution ‘trade balances’ between states. Our results raise questions in terms of the extent to which authorities at State level can control local emissions where they are limited in the way some emissions can be controlled, particularly with respect to changes in demand elsewhere in the Mid-West and US. This implies a need for policy co-ordination between national and state level authorities in the US to meet emissions reductions targets. The existence of an environmental trade balances between states also raises issues in terms of net losses/gains in terms of pollutants as a result of interregional trade within the US and whether, if certain activities can be carried out using less polluting technology in one region relative to others, it is better for the US as a whole if this type of relationship exists.

On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework

This paper studies the wasteful e ffect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public o fficials are modeled as individuals competing for a larger share of those public funds. The rent-seeking extraction technology in the government administration is modeled as in Murphy et al. (1991) and incorporated in an otherwise standard Real-Business-Cycle (RBC) framework with public sector. The model is calibrated to German data for the period 1970-2007. The main fi ndings are: (i) Due to the existence of a signi ficant public sector wage premium and the high public sector employment, a substantial amount of working time is spent rent-seeking, which in turn leads to signifi cant losses in terms of output; (ii) The measures for the rent-seeking cost obtained from the model for the major EU countries are highly-correlated to indices of bureaucratic ineffi ciency; (iii) Under the optimal scal policy regime,steady-state rent-seeking is smaller relative to the exogenous policy case, as the government chooses a higher public wage premium, but sets a much lower public employment, thus achieving a decrease in rent-seeking.