Sustaining the Economic Rent of Oceanic Resources: The Case of Marine Protected Areas

This paper investigates economic aspects of marine protected areas (MPAs) that are closely related to the underlying marine biota. Many marine scientists recognize that enough is now known about the marine biology for the scientific siting of MPAs to protect marine environments that create associated economic values. Marine scientists have identified several objectives of MPAs. These include protection of genetic and biodiversity, increase in population levels and structures (e.g., age, size, fecundity), enrichment of ecosystems by promoting species interactions, and the protection of continental shelf landscapes from invasive human actions. Indeed, some marine scientists and fisheries economists view MPAs as an 'insurance policy' against over-fishing and other human uses of oceanic resources that have damaged so many of the world's fisheries. The economic analysis presented here pays attention to optimal zoning, policies to maintain sustainable economic rents, and the optimal policing of MPAs.

The Economic Case for Fiscal Federalism in Scotland

In this paper we consider the case for assigning tax revenues to Scotland, by which we mean that taxes levied on Scottish tax bases should be returned to the Scottish budget. The budget, however, would continue to be supplemented by transfers from the Westminster budget. This arrangement differs from the current situation whereby public spending is largely financed by a bloc grant from Westminster. Our suggestion falls short of full fiscal federalism for Scotland . meaning that Scotland had control over choice of tax base and of tax rates, and fiscal transfers from Westminster would be minimal. We use propositions drawn from the theory of fiscal federalism to argue for a smaller vertical imbalance between taxes retained in Scotland and public spending in Scotland. A closer matching of spending with taxes would better signal to beneficiaries the true costs of public spending in terms of taxes raised. It would also create more complete incentives for politicians to provide public goods and services in quantities and at qualities that voters are actually willing to pay for. Under the current bloc grant system, the marginal tax cost of spending does not enter into political agents. calculations as spending is out of a fixed total budget. Moreover, the Scottish electorate is hindered in signaling its desire for local public goods and services since the size of the total budget is determined by a rigid formula set by Westminster. At the present time we reject proposals for full fiscal federalism because in sharply reducing vertical imbalance in the Scottish budget, it is likely to worsen horizontal balance between Scotland and the other UK regions. Horizontal balance occurs where similarly situated regions enjoy the same per capita level of public goods and services at the same per capita tax cost. The complete removal of the bloc grant under full fiscal federalism would remove the mechanism that currently promotes horizontal equity in the UK. Variability in own-source tax revenues creates other problems with full fiscal federalism. Taxes derived from North Sea oil would constitute a large proportion of Scottish taxes, but these are known to be volatile in the face of variable oil prices and the pound-dollar exchange rate. At the present time variability in oil tax revenue is absorbed by Westminster. Scotland is insulated through the bloc grant. This risk sharing mechanism would be lost with full fiscal federalism. It is true that Scotland could turn to financial markets to tide itself over oil tax revenue downturns, but as a much smaller and less diversified financial entity than the UK as a whole it would probably have to borrow on less favorable terms than can Westminster. Scotland would have to bear this extra cost itself. Also, with full fiscal federalism it is difficult to see how the Scottish budget could be used as a macroeconomic stabilizer. At present, tax revenue downturns in Scotland - together with the steady bloc grant - are absorbed through an increase in vertical imbalance. This acts as an automatic stabilizer for the Scottish economy. No such mechanism would exist under full fiscal federalism. The borrowing alternative would still exist but on the less favorable terms - as with borrowing to finance oil tax shortfalls.

Forecasting and Analyzing Economic Activity with Coincident and Leading Indexes: The Case of Connecticut

We develop coincident and leading employment indexes for the Connecticut economy. Four employment-related variables enter the coincident index while five employment-related variables enter the leading index. The peaks and troughs in the leading index lead the peaks and troughs in the coincident index by an average of 3 and 9 months. Finally, we use the leading index in vector-autoregressive (VAR) and Bayesian vector-autoregressive (BVAR) models to forecast the coincident index, nonfarm employment, and the unemployment rate.