Using Effluent Charges in Promoting Investment in Water Pollution Control Technology: A Model of Coordination Failure among Firms

Untreated wastewater being directly discharged into rivers is a very harmful environmental hazard that needs to be tackled urgently in many countries. In order to safeguard the river ecosystem and reduce water pollution, it is important to have an effluent charge policy that promotes the investment of wastewater treatment technology by domestic firms. This paper considers the strategic interaction between the government and the domestic firms regarding the investment in the wastewater treatment technology and the design of optimal e­ffluent charge policy that should be implemented. In this model, the higher is the proportion of non-investing firms, the higher would be the probability of having to incur an e­ffluent charge and the higher would be that charge. On one hand the government needs to impose a sufficiently strict policy to ensure that firms have strong incentive to invest. On the other hand, it cannot be too strict that it drives out firms which cannot afford to invest in such expensive technology. The paper analyses the factors that affect the probability of investment in this technology. It also explains the difficulty of imposing a strict environment policy in countries that have too many small firms which cannot afford to invest unless subsidised.

Negative investment in China: financing constraints and restructuring versus growth

This paper attempts to address a puzzle in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative net investment is commonly found at the microeconomic level. Using a large firm-level dataset, we test three hypotheses to explain the existence and extent of negative investment in each ownership group: what we term the efficiency (or restructuring) hypothesis, the (lack of) financing hypothesis, and the (slow) growth hypothesis. Our panel data probit estimations shows that negative investment by state-owned firms can be explained mainly by inefficiency: owing to over-investment or mis-investment in the past, these firms have had to restructure and to get rid of obsolete capital in the face of increasing competition and hardening budgets. The financing explanation holds for private firms, which have had to divest in order to raise capital. However, rapid economic growth weighs against both effects in all types of firms, with a larger impact for firms in the private and foreign sectors. A tobit model, estimated to examine the determinants of the amount of negative investment, yields similar conclusions.

Investment and financing constraints in China: does working capital management make a difference?

We use a panel of over 120,000 Chinese firms of different ownership types over the period 2000-2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that good working capital management may help firms to alleviate the effects of financing constraints on fixed investment.

Incentivising Investment in the UKCS: a Response to Supporting Investment: a Consultation on the North Sea Fiscal Regime

NORTH SEA STUDY OCCASIONAL PAPER No. 111

An Optimised Illustrative Investment Model Of The Economics Of Integrated Returns From CCS Deployment In The UK/UKCS

NORTH SEA STUDY OCCASIONAL PAPER No. 118

The past, present and future of central banking

The financial crisis, on the one hand, and the recourse to ‘unconventional’ monetary policy, on the other, have given a sharp jolt to perceptions of the role and status of central banks. In this paper we start with a brief ‘contrarian’ history of central banks since the second world war, which presents the Great Moderation and the restricted focus on inflation targeting as a temporary aberration from the norm. We then discuss how recent developments in fiscal and monetary policy have affected the role and status of central banks, notably their relationships with governments, before considering the environment central banks will face in the near and middle future and how they will have to change to address it.

Policy Labels and Investment Decision-making

Much attention in recent years has turned to the potential of behavioural insights to improve the performance of government policy. One behavioural concept of interest is the effect of a cash transfer label on how the transfer is spent. The Winter Fuel Payment (WFP) is a labelled cash transfer to offset the costs of keeping older households warm in the winter. Previous research has shown that households spend a higher proportion of the WFP on energy expenditures due to its label (Beatty et al., 2011). If households interpret the WFP as money for their energy bills, it may reduce their willingness to undertake investments which help achieving the same goal, such as the adoption of renewable energy technologies. In this paper we show that the WFP has distortionary effects on the renewable technology market. Using the sharp eligibility criteria of the WFP in a Regression Discontinuity Design, this analysis finds a reduction in the propensity to install renewable energy technologies of around 2.7 percentage points due to the WFP. This is a considerable number. It implies that 62% of households (whose oldest member turns 60) would have invested in renewable energy but refrain to do so after receiving the WFP. This analysis suggests that the labelling effect spreads to products related to the labelled good. In this case, households use too much energy from sources which generate pollution and too little from relatively cleaner technologies.

A two-sector growth model with institutional saving and investment

This paper develops a two-sector growth model in which institutional investors play a significant role. A necessary and sufficient condition is established under which these investors own the entire capital stock in the long run. The dependence of the long-run growth rate on the behaviour of such investors, and the effects of a productivity increase are analysed.

Inter-regional redistribution through infrastructure investment: tactical or programmatic?

In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more ‘Political power’ still receive more investment. These districts are those where the incumbents’ Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of ‘Political power’ and per capita income.

Assessing the quality of alternative energy sources: Energy Return On the Investment (EROI), the metabolic pattern of societies and energy statistics

This paper presents an initial challenge to tackle the every so "tricky" points encountered when dealing with energy accounting, and thereafter illustrates how such a system of accounting can be used when assessing for the metabolic changes in societies. The paper is divided in four main sections. The first three, present a general discussion on the main issues encountered when conducting energy analyses. The last section, subsequently, combines this heuristic approach to the actual formalization of it, in quantitative terms, for the analysis of possible energy scenarios. Section one covers the broader issue of how to account for the relevant categories used when accounting for Joules of energy; emphasizing on the clear distinction between Primary Energy Sources (PES) (which are the physical exploited entities that are used to derive useable energy forms (energy carriers)) and Energy Carriers (EC) (the actual useful energy that is transmitted for the appropriate end uses within a society). Section two sheds light on the concept of Energy Return on Investment (EROI). Here, it is emphasized that, there must already be a certain amount of energy carriers available to be able to extract/exploit Primary Energy Sources to thereafter generate a net supply of energy carriers. It is pointed out that this current trend of intense energy supply has only been possible to the great use and dependence on fossil energy. Section three follows up on the discussion of EROI, indicating that a single numeric indicator such as an output/input ratio is not sufficient in assessing for the performance of energetic systems. Rather an integrated approach that incorporates (i) how big the net supply of Joules of EC can be, given an amount of extracted PES (the external constraints); (ii) how much EC needs to be invested to extract an amount of PES; and (iii) the power level that it takes for both processes to succeed, is underlined. Section four, ultimately, puts the theoretical concepts at play, assessing for how the metabolic performances of societies can be accounted for within this analytical framework.

Pathology as the Cornerstone of Human Tissue Banking: European Consensus Expert Group Report

Aside from ethical considerations, the primary requirement for usage of human tissues in basic or translational research is the thorough characterization of tissues. The second, but equally essential, requirement is that tissues be collected, processed, annotated, and preserved in optimal conditions. These requirements put the pathologist at the center of tissue banking activities and of research aimed at discovering new biomarkers. Pathologists not only provide information identifying the specimen but also make decisions on what materials should be biobanked, on the preservation conditions, and on the timeline of events that precede preservation and storage. This central position calls for increased recognition of the role of the pathologist by the biomolecular community and places new demands on the pathologist's workload and scope of scientific activities. These questions were addressed by an Expert Group Meeting of the European Biological and Biomolecular Research Infrastructure (BBMRI). While detailed recommendations are published elsewhere (Bevilacqua et al., Virchows Archivs, 2010, in press), this article outlines the strategic and technological issues identified by the Expert Group and identifies ways forward for better integration of pathology in the current thrust for development of biomarker-based "personalized medicine.

Is it redistribution or centralization? On the determinants of government investment in infrastructure

The dilemma efficiency versus equity, together with political partisan interests, has received increasing attention to explain the territorial allocation of investments. However, centralization intended to introduce or reinforce hierarchization in the political system has not been object as of now of empirical analysis. Our main contribution to the literature is providing evidence that meta-political objectives related to the ordering of political power and administration influence regional investment. In this way, we find evidence that network mode’s (roads and railways) investment programs are influenced by the centralization strategy of investing near to the political capital, while investment effort in no-network modes (airports and ports) appears to be positively related to distance. Since investment in surface transportation infrastructures is much higher than that in airports and ports, and taken into account that regions surrounding the political capital are poorer than the average, we suggest that centralization rather than redistribution has been the driver for the concentration of public investment on these regions.

Accounting conservatism and firm investment efficiency

Conservatism, through the timelier recognition of losses in the income statement, is expected to increase firm investment efficiency through three main channels: (1) by decreasing the adverse effect of information asymmetries between outside equity holders and managers, facilitating the monitoring of managerial investment decisions; (2) by increasing managerial incentives to abandon poorly performing projects earlier and to undertake fewer negative net present-value investments; and (3) by facilitating the access to external financing at lower cost. Using a large US sample for the period 1990-2007 we find a negative association between conservatism and measures of over- and under- investment, and a positive association between conservatism and future profitability. This is consistent with firms reporting more conservative numbers investing more efficiently and in more profitable projects. Our results add to a growing stream of literature suggesting that eliminating conservatism from accounting regulatory frameworks may lead to undesirable economic consequences.