Policy Shocks and Contract Renegotiation: Who Gets Raked Over the Coals?

Changes in climate policy have large influence on businesses. Firms anticipate and respond to such changes, but what if they have already engaged in a longterm relationship with other firms or customers at the time of policy change? For example, coal supply to power stations is typically based on long-term contracts, while the nature of the buyer-supplier relationship may well be affected substantially by climate regulations. However, there has been little evidence on whether or how firms amend their contractual agreements in response to a change in policy.

How much does industry matter in an emerging market economy?

Theories of firm profitability make different predictions about the relative importance of firm, industry and time specific factors. We assess, empirically, the relevance of these effects over a sixteen year period in India, as a regime of control and regulation, pre 1985, gave way to partial liberalisation between 1985 and 1991 and to more decisive liberalisation after 1991. We find that firm effects are important throughout, when rent seeking opportunities proliferated, as well as when competitive forces were enhanced by institutional change. In contrast, industry effects significantly increased after liberalisation, suggesting that industry structure matters more within competitive markets. These findings help understand the relevance of different models over different stages of liberalisation, and have important implications for both theory and policy.

Optimal taxation and the skill premium

The stylized facts suggest a negative relationship between tax progressivity and the skill premium from the early 1960s until the early 1990s, and a positive one thereafter. They also generally imply rising tax progressivity, except for the 1980s. In this paper, we ask whether optimal tax policy is consistent with these observations, taking into account the demographic and technological factors that have also affected the skill premium. To this end, we construct a dynamic general equilibrium model in which the skill premium and the progressivity of the tax system are endogenously determined, with the latter being optimally chosen by a benevolent government. We find that optimal policy delivers both a progressive tax system and model predictions which are generally consistent, except for the 1980s, with the stylized facts relating to the skill premium and progressivity. To capture the patterns in the data over the 1980s requires that we adopt a government policy which is biased towards the interests of skilled agents. Thus, in addition to demographic and technological factors, changes in the preferences of policy-makers appear to be a potentially important factor in determining the evolution of the observed skill premium.

Uncertain Fiscal Consolidations

The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt.

Time is Running Out: The 2°C Target and Optimal Climate Policies

The quintessence of recent natural science studies is that the 2 degrees C target can only be achieved with massive emission reductions in the next few years. The central twist of this paper is the addition of this limited time to act into a non-perpetual real options framework analysing optimal climate policy under uncertainty. The window-of-opportunity modelling setup shows that the limited time to act may spark a trend reversal in the direction of low-carbon alternatives. However, the implementation of a climate policy is evaded by high uncertainty about possible climate pathways.

Dark Clouds or Silver Linings? Knightian Uncertainty and Climate Change

This paper examines the impact of Knightian uncertainty upon optimal climate policy through the prism of a continuous-time real option modelling framework. We analytically determine optimal intertemporal climate policies under ambiguous assessments of climate damages. Additionally, numerical simulations are provided to illustrate the properties of the model. The results indicate that increasing Knightian uncertainty accelerates climate policy, i.e. policy makers become more reluctant to postpone the timing of climate policies into the future.

The regional employment impacts of renewable energy expenditures: The case for modelling

One aspect of the case for policy support for renewable energy developments is the wider economic benefits that are expected to be generated. Within Scotland, as with other regions of the UK, there is a focus on encouraging domestically‐based renewable technologies. In this paper, we use a regional computable general equilibrium framework to model the impact on the Scottish economy of expenditures relating to marine energy installations. The results illustrate the potential for (considerable) ‘legacy’ effects after expenditures cease. In identifying the specific sectoral expenditures with the largest impact on (lifetime) regional employment, this approach offers important policy guidance.

The regional employment impacts of renewable energy expenditures: The case for modelling

One aspect of the case for policy support for renewable energy developments is the wider economic benefits that are expected to be generated. Within Scotland, as with other regions of the UK, there is a focus on encouraging domestically‐based renewable technologies. In this paper, we use a regional computable general equilibrium framework to model the impact on the Scottish economy of expenditures relating to marine energy installations. The results illustrate the potential for (considerable) ‘legacy’ effects after expenditures cease. In identifying the specific sectoral expenditures with the largest impact on (lifetime) regional employment, this approach offers important policy guidance.

An Inquiry Into The Theory, Causes And Consequences Of Monitoring Indicators Of Health And Safety At Work

This paper engages in an interdisciplinary survey of the current state of knowledge related to the theory, determinants and consequences of occupational safety and health (OSH). First, it synthesizes the available theoretical frameworks used by economists and psychologists to understand the issues related to the optimal provision of OSH in the labour market. Second, it reviews the academic literature investigating the correlates of a comprehensive set of OSH indicators, which portray the state of OSH infrastructure (social security expenditure, prevention, regulations), inputs (chemical and physical agents, ergonomics, working time, violence) and outcomes (injuries, illnesses, absenteeism, job satisfaction) within workplaces. Third, it explores the implications of the lack of OSH in terms of the economic and social costs that are entailed. Finally, the survey identifies areas of future research interests and suggests priorities for policy initiatives that can improve the health and safety of workers.

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.

Social capital formation across space: proximity and trust in European regions

An extensive economics and regional science literature has discussed the importance of social capital for economic growth and development. Yet, what social capital is and how it is formed are elusive issues, which require further investigation. Here, we refer to social capital in terms of civic capital and good culture , as rephrased by Guiso, Sapienza and Zingales (2010) and Tabellini (2010). The accumulation of this kind of capital allows the emerging of regional informal institutions, which may help explaining diff erences in regional development. In this paper, we take a regional perspective and use exploratory space and space-time methods to assess whether geography, via proximity, contributes to the formation of social capital across European regions. In particular, we ask whether generalized trust, a fundamental constituent of social capital and an ingredient of economic development, tends to be clustered across space and over time. From the policy standpoint, the spatial hysteresis of regional trust may contribute to the formation of spatial traps of social capital and act as a further barrier to regional economic development and convergence.

La responsabilité entre éthique et religion. Discussion avec Paul Ricoeur

(Résumé de l'ouvrage) Ethique de la biologie, mais aussi éthique de la science, des affaires, des assurances, de lentreprise, du corps et de la sexualité, de la communication, de lenvironnement, de la famille... Les champs dapplication de léthique sont sans limites. ... Composé de trois parties, cet ouvrage présente dabord les grandes options philosophiques (libéralisme, utilitarisme, éthique de la discussion, etc.) et les grandes figures (Aristote, Kant, Spinoza, Heidegger, Foucault, etc.) en matière déthique, puis les différents domaines concernés, et enfin les grands débats (pour ou contre la pornographie, le clonage, l'euthanasie, l'éducation, l'avortement...). Écrit de façon pédagogique, il donne une bibliographie très actuelle pour chaque entrée, un index des thèmes et des noms. L'ouvrage rassemble plus de cinquante intervenants francophones. ...

Time Horizons And Smoothing In The Bank Of England’s Reaction Function: The Contrast Between The Standard GMM And Ex Ante Forecast Approaches

The monetary policy reaction function of the Bank of England is estimated by the standard GMM approach and the ex-ante forecast method developed by Goodhart (2005), with particular attention to the horizons for inflation and output at which each approach gives the best fit. The horizons for the ex-ante approach are much closer to what is implied by the Bank’s view of the transmission mechanism, while the GMM approach produces an implausibly slow adjustment of the interest rate, and suffers from a weak instruments problem. These findings suggest a strong preference for the ex-ante approach.

Fiscal Sustainability in a New Keynesian Model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary policy-making. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady-state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government’s objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt-stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi-commitment policy which allows for different probabilities of reneging on past promises. This on-line Appendix extends the results of this paper.

Central banks and house prices in the run-up to the crisis

The financial crisis and the role played within it by fluctuations in house prices has reopened the debate about whether monetary policy should respond to asset prices. This paper investigates how the central banks of the euro area, the UK and the US considered, understood and responded to the trends in house prices in the six or seven years preceding the crisis, and how they have analysed those developments since the crisis. It suggests that these central banks, particularly the Anglo-Saxon ones, might have been able to take some useful action if they had devoted more intellectual resources to analysing the possible misalignments of house prices and been willing to act on them.