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.

Monetary Policy Delegation, Contract Costs, and Contract Targets

We reconsider the optimal central banker contract derived in Walsh (1995). We show that if the government's objective function places weight (value) on the cost of the contract, then the optimal inflation contract does not completely neutralize the inflation bias. That is, a fraction of the inflation bias emerges in the resulting inflation rate after the central banker's monetary policy decision. Furthermore, the more concerned the government is about the cost of the contract or the less selfish (more benevolent) is the central banker, the smaller is the share of the inflation bias eliminated by the contract. No matter how concerned the government is about the cost of the contract or how unselfish (benevolent) the central banker is, the contract always reduces the inflationary bias by at least half. Finally, a central banker contract written in terms of output (i.e., incorporating an output target) can completely eradicate the inflationary bias, regardless of concerns about contract costs.

The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt

The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). However, when traditional corporate finance models have been applied to insured financial institutions, the results have generally predicted corner solutions (all equity or all debt) to the capital structure problem. This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bankÇs choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially the loss of future tax benefits) against the benefits of additional debt. Because we derive a closed- form solution, our model provides useful insights on several current policy debates including revisions to the regulatory framework for GSEs, tax policy in general and the tax exemption for credit unions.

Do Labor Market Imperfections Increase Trade Protection? A Theoretical Investigation

Labor market imperfections are commonly believed to be a major reason for imposing trade impediments. In this paper, I introduce labor market rigidities that are prevalent in continental European countries into the well-known protection for sale model proposed by Grossman and Helpman (1994). I show that contrary to commonly held views, imperfections in the labor market do not necessarily increase equilibrium trade protection. A testable equilibrium trade protection equation is also derived. The findings in this paper are hence particularly relevant for empirical tests of trade policy determinants in economies with more regulated labor markets.

Total Factor Productivity and Monetary Policy: Evidence from Conditional Volatility

This paper empirically assesses whether monetary policy affects real economic activity through its affect on the aggregate supply side of the macroeconomy. Analysts typically argue that monetary policy either does not affect the real economy, the classical dichotomy, or only affects the real economy in the short run through aggregate demand new Keynesian or new classical theories. Real business cycle theorists try to explain the business cycle with supply-side productivity shocks. We provide some preliminary evidence about how monetary policy affects the aggregate supply side of the macroeconomy through its affect on total factor productivity, an important measure of supply-side performance. The results show that monetary policy exerts a positive and statistically significant effect on the supply-side of the macroeconomy. Moreover, the findings buttress the importance of countercyclical monetary policy as well as support the adoption of an optimal money supply rule. Our results also prove consistent with the effective role of monetary policy in the Great Moderation as well as the more recent rise in productivity growth.

Optimal Central Banker Contracts and Common Agency

This paper considers the contacting approach to central banking in the context of a simple common agency model. The recent literature on optimal contracts suggests that the political principal of the central bank can design the appropriate incentive schemes that remedy for time-inconsistency problems in monetary policy. The effectiveness of such contracts, however, requires a central banker that attaches a positive weight to the incentive scheme. As a result, delegating monetary policy under such circumstances gives rise to the possibility that the central banker may respond to incentive schemes offered by other potential principals. We introduce common agency considerations in the design of optimal central banker contracts. We introduce two principals - society (government) and an interest group, whose objectives conflict with society's and we examine under what circumstances the government-offered or the interest-group-offered contract dominates. Our results largely depend on the type of bias that the interest group contract incorporates. In particular, when the interest group contract incorporates an inflationary bias the outcome depends on the principals' relative concern of the incentive schemes' costs. When the interest group contract incorporates an expansionary bias, however, it always dominates the government contract. A corollary of our results is that central banker contracts aiming to remove the expansionary bias of policymakers should be written explicitly in terms of the perceived bias.

A General Schema for Optimal Monetary Policymaking: Objectives and Rules

This paper examines four equivalent methods of optimal monetary policymaking, committing to the social loss function, using discretion with the central bank long-run and short-run loss functions, and following monetary policy rules. All lead to optimal economic performance. The same performance emerges from these different policymaking methods because the central bank actually follows the same (similar) policy rules. These objectives (the social loss function, the central bank long-run and short-run loss functions) and monetary policy rules imply a complete regime for optimal policy making. The central bank long-run and short-run loss functions that produce the optimal policy with discretion differ from the social loss function. Moreover, the optimal policy rule emerges from the optimization of these different central bank loss functions.

Revising the National Ambient Air Quality Standards: The integration of science and policy

Under the Clean Air Act, Congress granted discretionary decision making authority to the Administrator of the Environmental Protection Agency (EPA). This discretionary authority involves setting standards to protect the public's health with an "adequate margin of safety" based on current scientific knowledge. The Administrator of the EPA is usually not a scientist, and for the National Ambient Air Quality Standard (NAAQS) for particulate matter (PM), the Administrator faced the task of revising a standard when several scientific factors were ambiguous. These factors included: (1) no identifiable threshold below which health effects are not manifested, (2) no biological basis to explain the reported associations between particulate matter and adverse health effects, and (3) no consensus among the members of the Clean Air Scientific Advisory Committee (CASAC) as to what an appropriate PM indicator, averaging period, or value would be for the revised standard. ^ This project recommends and demonstrates a tool, integrated assessment (IA), to aid the Administrator in making a public health policy decision in the face of ambiguous scientific factors. IA is an interdisciplinary approach to decision making that has been used to deal with complex issues involving many uncertainties, particularly climate change analyses. Two IA approaches are presented; a rough set analysis by which the expertise of CASAC members can be better utilized, and a flag model for incorporating the views of stakeholders into the standard setting process. ^ The rough set analysis can describe minimal and maximal conditions about the current science pertaining to PM and health effects. Similarly, a flag model can evaluate agreement or lack of agreement by various stakeholder groups to the proposed standard in the PM review process. ^ The use of these IA tools will enable the Administrator to (1) complete the NAAQS review in a manner that is in closer compliance with the Clean Air Act, (2) expand the input from CASAC, (3) take into consideration the views of the stakeholders, and (4) retain discretionary decision making authority. ^

Current United States stem cell policy considerations and a recommendation for an alternative policy based on guidelines from existing international policies

Embryonic stem cell research is a widely debated topic in modern politics and religion. Differing views on the fetal rights conflict with the rights of an embryo. Those who believe an embryo has the same human qualities as a fetus accordingly believe embryonic stem cell research is unethical because it destroys a potential human life. However, scientists advocate the embryo does not have human qualities and should be used for valuable research in the stem cell field. Stem cell research may lead to vast developments in medical treatments, including cancer and brain conditions and injuries that are currently incurable. ^ The current stem cell policy introduced by President Bush in 2001 in an attempt to balance the moral issues with the need for scientific research has broad negative implications on the furthering of stem cell research. There is a limited diversity of available stem cell lines, there may be constitutional issues, there is an increasing disparity between the public and private research spheres, and the U.S. is struggling to maintain its scientific community. The U.S. must develop a new stem cell research policy that will balance the interest of science and public health with the moral issues that concern the public. ^ The United Kingdom allows researchers great liberty in conducting research, permitting the creation of embryos for the sole purpose of research, while Germany is equally conservative in their laws, as their policies support the philosophy that all embryos deserve the protection of full life. The United States should adopt a policy that takes the "middle ground" approach and permit research on excess embryos created for IVF purposes, rather than simply discarding those potentially valuable research tools. ^

Folic acid fortification, maternal obesity and neural tube defects: Policy implications

In 1996, the Food and Drug Administration (FDA) mandated that beginning in January 1998, flour and other enriched grain products be fortified with 140 μg of folic acid per 100 g of grain to prevent neural tube defects (NTDs) that occur in approximately 1 in 1,000 pregnancies in the United States (U.S.). Although this program has demonstrated important public health effects, it is argued that current fortification levels may not be enough to prevent all folic acid-preventable NTD cases. This study reviews published literature, on folic acid fortification in the U.S. and countries with mandatory folic acid fortification programs reported after 1992 and through January 2008. Published studies are evaluated to determine if the current level of folic acid fortification in the U.S. is adequate to prevent the most common forms of NTDs (spina bifida and anencephaly), particularly among overweight and obese women. ^ Although consistent improvement in blood folate levels of child bearing age women is reported in almost all studies, the RBC folate concentration has not reached the level associated with the most significant reduction of risk for NTDs (906 nmol/L); approximately half of the potentially preventable NTDs are prevented by fortification at the current U.S. level. Furthermore, the blood folate status of women in higher BMI categories (obese or overweight) has not improved as much as among women in lower BMI categories. Therefore, women classified as overweight or obese have not benefited from the preventive effects of folic acid fortification as much as normal or underweight women. ^ To reduce risk of folate preventable NTDs, especially in overweight and obese women, it may be necessary to increase the current level of folic acid fortification. However, further research is required to determine the optimal levels of fortification to achieve this goal without causing adverse health effects in the general population. ^

A comprehensive review of the environmental impacts and human health risks associated with the occurrence of waste pharmaceuticals in water sources of the United States, and policy implications

The occurrence of waste pharmaceuticals has been identified and well documented in water sources throughout North America and Europe. Many studies have been conducted which identify the occurrence of various pharmaceutical compounds in these waters. This project is an extensive review of the documented evidence of this occurrence published in the scientific literature. This review was performed to determine if this occurrence has a significant impact on the environment and public health. This project and review found that pharmaceuticals such as sex hormone drugs, antibiotic drugs and antineoplastic/cytostatic agents as well as their metabolites have been found to occur in water sources throughout the United States at levels high enough to have noticeable impacts on human health and the environment. It was determined that the primary sources of this occurrence of pharmaceuticals were waste water effluent and solid wastes from sewage treatment plants, pharmaceutical manufacturing plants, healthcare and biomedical research facilities, as well as runoff from veterinary medicine applications (including aquaculture). ^ In addition, current public policies of US governmental agencies such as the Environmental Protection Agency (EPA), Food and Drug Administration (FDA), and Drug Enforcement Agency (DEA) have been evaluated to see if they are doing a sufficient job at controlling this issue. Specific recommendations for developing these EPA, FDA, and DEA policies have been made to mitigate, prevent, or eliminate this issue.^ Other possible interventions such as implementing engineering controls were also evaluated in order to mitigate, prevent and eliminate this issue. These engineering controls include implementing improved current treatment technologies such as the advancement and improvement of waste water treatment processes utilized by conventional sewage treatment and pharmaceutical manufacturing plants. In addition, administrative controls such as the use of “green chemistry” in drug synthesis and design were also explored and evaluated as possible alternatives to mitigate, prevent, or eliminate this issue. Specific recommendations for incorporating these engineering and administrative controls into the applicable EPA, FDA, and DEA policies have also been made.^

Strategic trade policy and non-linear subsidy : in the case of price competition

In a strategic trade policy, it is assumed, in this paper, that a government changes disbursement or levy method so that the reaction function of home firm approaches infinitely close to that of foreign firm. In the framework of Bertrand-Nash equilibrium, Eaton and Grossman[1986] showed that export tax is preferable to export subsidy. In this paper, it is shown that export subsidy is preferable to export tax in some cases in the framework of Bertrand-Nash equilibrium, considering the uncertainty in demand. Historically, many economists mentioned non-linear subsidy or tax. However, optimum solution of it has not yet been shown. The optimum solution is shown in this paper.

The policy impact of product-related environmental regulations in Asia

This paper focuses on EU chemical regulations, RoHS and REACH, and shows these EU regulations have driven Asian countries to introduce regulations that are similar yet modified versions to the EU regulations. Asia as the world manufacturing center has extensive production networks where parts and components of a final good are traded across borders. We discuss how product-related environmental regulations could impact on firms' activities then show that if Asian countries with complex supply chains introduce different product related chemical regulations without coordinating with neighboring countries, it could work as trade barrier for manufacturing activities in the region.

Gestión óptima de embalses en avenidas incorporando al concepto de incertidumbre : aplicación a embalses con central hidroeléctrica

Esta tesis realiza una contribución metodológica al problema de la gestión óptima de embalses hidroeléctricos durante eventos de avenidas, considerando un enfoque estocástico y multiobjetivo. Para ello se propone una metodología de evaluación de estrategias de laminación en un contexto probabilístico y multiobjetivo. Además se desarrolla un entorno dinámico de laminación en tiempo real con pronósticos que combina un modelo de optimización y algoritmos de simulación. Estas herramientas asisten a los gestores de las presas en la toma de decisión respecto de cuál es la operación más adecuada del embalse. Luego de una detallada revisión de la bibliografía, se observó que los trabajos en el ámbito de la gestión óptima de embalses en avenidas utilizan, en general, un número reducido de series de caudales o hidrogramas para caracterizar los posibles escenarios. Limitando el funcionamiento satisfactorio de un modelo determinado a situaciones hidrológicas similares. Por otra parte, la mayoría de estudios disponibles en este ámbito abordan el problema de la laminación en embalses multipropósito durante la temporada de avenidas, con varios meses de duración. Estas características difieren de la realidad de la gestión de embalses en España. Con los avances computacionales en materia de gestión de información en tiempo real, se observó una tendencia a la implementación de herramientas de operación en tiempo real con pronósticos para determinar la operación a corto plazo (involucrando el control de avenidas). La metodología de evaluación de estrategias propuesta en esta tesis se basa en determinar el comportamiento de éstas frente a un espectro de avenidas características de la solicitación hidrológica. Con ese fin, se combina un sistema de evaluación mediante indicadores y un entorno de generación estocástica de avenidas, obteniéndose un sistema implícitamente estocástico. El sistema de evaluación consta de tres etapas: caracterización, síntesis y comparación, a fin de poder manejar la compleja estructura de datos resultante y realizar la evaluación. En la primera etapa se definen variables de caracterización, vinculadas a los aspectos que se quieren evaluar (seguridad de la presa, control de inundaciones, generación de energía, etc.). Estas variables caracterizan el comportamiento del modelo para un aspecto y evento determinado. En la segunda etapa, la información de estas variables se sintetiza en un conjunto de indicadores, lo más reducido posible. Finalmente, la comparación se lleva a cabo a partir de la comparación de esos indicadores, bien sea mediante la agregación de dichos objetivos en un indicador único, o bien mediante la aplicación del criterio de dominancia de Pareto obteniéndose un conjunto de soluciones aptas. Esta metodología se aplicó para calibrar los parámetros de un modelo de optimización de embalse en laminación y su comparación con otra regla de operación, mediante el enfoque por agregación. Luego se amplió la metodología para evaluar y comparar reglas de operación existentes para el control de avenidas en embalses hidroeléctricos, utilizando el criterio de dominancia. La versatilidad de la metodología permite otras aplicaciones, tales como la determinación de niveles o volúmenes de seguridad, o la selección de las dimensiones del aliviadero entre varias alternativas. Por su parte, el entorno dinámico de laminación al presentar un enfoque combinado de optimización-simulación, permite aprovechar las ventajas de ambos tipos de modelos, facilitando la interacción con los operadores de las presas. Se mejoran los resultados respecto de los obtenidos con una regla de operación reactiva, aun cuando los pronósticos se desvían considerablemente del hidrograma real. Esto contribuye a reducir la tan mencionada brecha entre el desarrollo teórico y la aplicación práctica asociada a los modelos de gestión óptima de embalses. This thesis presents a methodological contribution to address the problem about how to operate a hydropower reservoir during floods in order to achieve an optimal management considering a multiobjective and stochastic approach. A methodology is proposed to assess the flood control strategies in a multiobjective and probabilistic framework. Additionally, a dynamic flood control environ was developed for real-time operation, including forecasts. This dynamic platform combines simulation and optimization models. These tools may assist to dam managers in the decision making process, regarding the most appropriate reservoir operation to be implemented. After a detailed review of the bibliography, it was observed that most of the existing studies in the sphere of flood control reservoir operation consider a reduce number of hydrographs to characterize the reservoir inflows. Consequently, the adequate functioning of a certain strategy may be limited to similar hydrologic scenarios. In the other hand, most of the works in this context tackle the problem of multipurpose flood control operation considering the entire flood season, lasting some months. These considerations differ from the real necessity in the Spanish context. The implementation of real-time reservoir operation is gaining popularity due to computational advances and improvements in real-time data management. The methodology proposed in this thesis for assessing the strategies is based on determining their behavior for a wide range of floods, which are representative of the hydrological forcing of the dam. An evaluation algorithm is combined with a stochastic flood generation system to obtain an implicit stochastic analysis framework. The evaluation system consists in three stages: characterizing, synthesizing and comparing, in order to handle the complex structure of results and, finally, conduct the evaluation process. In the first stage some characterization variables are defined. These variables should be related to the different aspects to be evaluated (such as dam safety, flood protection, hydropower, etc.). Each of these variables characterizes the behavior of a certain operating strategy for a given aspect and event. In the second stage this information is synthesized obtaining a reduced group of indicators or objective functions. Finally, the indicators are compared by means of an aggregated approach or by a dominance criterion approach. In the first case, a single optimum solution may be achieved. However in the second case, a set of good solutions is obtained. This methodology was applied for calibrating the parameters of a flood control model and to compare it with other operating policy, using an aggregated method. After that, the methodology was extent to assess and compared some existing hydropower reservoir flood control operation, considering the Pareto approach. The versatility of the method allows many other applications, such as determining the safety levels, defining the spillways characteristics, among others. The dynamic framework for flood control combines optimization and simulation models, exploiting the advantages of both techniques. This facilitates the interaction between dam operators and the model. Improvements are obtained applying this system when compared with a reactive operating policy, even if the forecasts deviate significantly from the observed hydrograph. This approach contributes to reduce the gap between the theoretical development in the field of reservoir management and its practical applications.

Irrigation efficiency and water-policy implications for river-basin resilience

Rising demand for food, fiber, and biofuels drives expanding irrigation withdrawals from surface water and groundwater. Irrigation efficiency and water savings have become watchwords in response to climate-induced hydrological variability, increasing freshwater demand for other uses including ecosystem water needs, and low economic productivity of irrigation compared to most other uses. We identify three classes of unintended consequences, presented here as paradoxes. Ever-tighter cycling of water has been shown to increase resource use, an example of the efficiency paradox. In the absence of effective policy to constrain irrigated-area expansion using "saved water", efficiency can aggravate scarcity, deteriorate resource quality, and impair river basin resilience through loss of flexibility and redundancy. Water scarcity and salinity effects in the lower reaches of basins (symptomatic of the scale paradox) may partly be offset over the short-term through groundwater pumping or increasing surface water storage capacity. However, declining ecological flows and increasing salinity have important implications for riparian and estuarine ecosystems and for non-irrigation human uses of water including urban supply and energy generation, examples of the sectoral paradox. This paper briefly considers three regional contexts with broadly similar climatic and water-resource conditions – central Chile, southwestern US, and south-central Spain – where irrigation efficiency directly influences basin resilience. The comparison leads to more generic insights on water policy in relation to irrigation efficiency and emerging or overdue needs for environmental protection.