scholarly journals Relative Prices and Climate Policy: How the Scarcity of Nonmarket Goods Drives Policy Evaluation

2021 ◽  
Vol 13 (1) ◽  
pp. 168-201 ◽  
Author(s):  
Moritz A. Drupp ◽  
Martin C. Hänsel
Keyword(s):  
Climate Policy ◽  
Time Preference ◽  
Relative Price ◽  
Social Cost Of Carbon ◽  
Environmental Amenities ◽  
Relative Prices ◽  
Nonmarket Goods ◽  
Percentage Points ◽  
Dice Model ◽  
Relative Scarcity

Climate change not only impacts production and market consumption but also the relative scarcity of nonmarket goods, such as environmental amenities. We study fundamental drivers of the resulting relative price changes, their potential magnitude, and their implications for climate policy in Nordhaus’s Dynamic Integrated Climate-Economy (DICE) model, thereby addressing one of its key criticisms. We propose plausible ranges for these relative prices changes based on best available evidence. Our central calibration reveals that accounting for relative prices is equivalent to decreasing pure time preference by 0.6 percentage points and leads to a more than 50 percent higher social cost of carbon. (JEL D61, H43, Q51, Q54, Q58)

Competitive and Complementary Relations in International Travel: The Case of British Travel to Cyprus

2019 ◽  
Vol 10 (5) ◽  
pp. 395-420
Author(s):  
Petros Anastasopoulos ◽  
Keyword(s):  
Strong Association ◽  
International Travel ◽  
Relative Price ◽  
Annual Data ◽  
Export Demand ◽  
Relative Prices ◽  
Vector Error Correction ◽  
Vector Error ◽  
The Mediterranean ◽  
Demand Equations

This is an econometric analysis of demand for travel to Cyprus by Britons. We examined the competitive and complementary relations between travel to Cyprus and other well-established travel destinations in the Mediterranean basin. Because many package tours include several countries in their destinations within a given journey, and because individual travelers find it more advantageous to visit more than one country in a single trip, it may be meaningful to examine international travel within the contest of groups of countries rather than a single country competing for international travelers. Specifically, we provide an analysis of the competitive and complementary relations existing between the tourism sectors of Cyprus and that of Greece, Spain and Portugal for British travelers. We provide estimates of income and relative price elasticities based of export demand equations upon annual data from 1980-2016. We tested for the stationarity of the variables and derived estimates of the Vector Error Correction Model (VECM). These tests confirm a strong association between the incomes of Britons and their decision to travel to Cyprus. Furthermore, we show the relative prices between Cyprus and other competing destinations in the Mediterranean to play an important role in determining British travel to Cyprus.

scholarly journals EXPLORING CROSS-COUNTRY VARIATION IN GOVERNMENT SHARES: WHAT CAN WE LEARN FROM RELATIVE PRODUCTIVITIES?

2012 ◽  
Vol 17 (2) ◽  
pp. 356-372 ◽  
Author(s):  
Maksym Obrizan
Keyword(s):  
Relative Price ◽  
Total Output ◽  
Government Consumption ◽  
Strong Negative Correlation ◽  
Empirical Observation ◽  
Relative Prices ◽  
Neoclassical Growth Model ◽  
Poor Countries ◽  
Cross Country ◽  
Neoclassical Growth

Government shares in total output are characterized by significant variation across countries. I noticed a strong negative correlation between government consumption shares and the price of government services in terms of private consumption. Motivated by this empirical observation, I developed a neoclassical growth model with added government that is capable of matching the variation in government shares very closely using only relative prices. In addition, I provide empirical evidence showing that the relative price of government consumption increases with income, which is consistent with distortions prevailing in poor countries. These two observations combined imply that government shares tend to be higher in poorer countries.

scholarly journals Endogenous Tradability, International Relative Prices, and the International Transmission of Business Cycles

2019 ◽  
Vol 11 (3) ◽  
pp. 111
Author(s):  
Soojae Moon
Keyword(s):  
Business Cycles ◽  
Labor Supply ◽  
Product Differentiation ◽  
Physical Capital ◽  
Dynamic Stochastic General Equilibrium ◽  
Relative Price ◽  
Relative Prices ◽  
Dynamic Stochastic ◽  
Elastic Labor Supply ◽  
Endogenous Tradability

This paper propose a two-country, dynamic, stochastic, general equilibrium (DSGE) model with endogenous tradability, product differentiation, variously determined physical capital, and an elastic labor supply to explore the propagation of business cycles across countries. The model successfully addresses international relative price dynamics (its appreciation with positive home productivity shock, called the ‘Harrod-Balassa-Samuelson Effect’) through the entry of producers and their cut-off productivities of exporting. The use of endogenous physical capital in the model induces a more realistic framework since the simulated model is compared to the U.S. investment data that covers spending on capital equipment, structures and inventories for producers’ entry and exit dynamics. Building the model with endogenous capital and elastic labor supply weakens the volatility of investment compared to conventional international real business cycle (IRBC) models. The model also accounts for several features of the data, such as the volatility of aggregate variables and their correlations with GDP.

scholarly journals Relative Prices and Relative Prosperity

2007 ◽  
Vol 97 (3) ◽  
pp. 562-585 ◽  
Author(s):  
Chang-Tai Hsieh ◽  
Peter J Klenow
Keyword(s):  
Real Income ◽  
Relative Price ◽  
Relative Prices ◽  
Income Levels ◽  
Poor Countries ◽  
Investment Rates ◽  
Tariff Rates ◽  
Low Efficiency ◽  
Investment Goods ◽  
Real Investment

The positive correlation between real investment rates and real income levels across countries is driven largely by differences in the price of investment relative to output. The high relative price of investment in poor countries is due to the low price of consumption goods in those countries. Investment prices are no higher in poor countries. Thus, the low real investment rates in poor countries are not driven by high tax or tariff rates on investment. Poor countries, instead, appear to be plagued by low efficiency in producing investment goods and in producing consumer goods to trade for them. (JEL E22, E23, O16, O47)

scholarly journals EMPIRICALLY CONSTRAINED CLIMATE SENSITIVITY AND THE SOCIAL COST OF CARBON

2017 ◽  
Vol 08 (02) ◽  
pp. 1750006 ◽  
Author(s):  
KEVIN DAYARATNA ◽  
ROSS McKITRICK ◽  
DAVID KREUTZER
Keyword(s):  
Climate Sensitivity ◽  
Integrated Assessment ◽  
Social Cost ◽  
Climate Model ◽  
Temperature Response ◽  
Social Cost Of Carbon ◽  
Ocean Heat Uptake ◽  
Monte Carlo Experiments ◽  
The Social ◽  
Dice Model

Integrated Assessment Models (IAMs) require parameterization of both economic and climatic processes. The latter includes Equilibrium Climate Sensitivity (ECS), or the temperature response to doubling CO2 levels, and Ocean Heat Uptake (OHU) efficiency. ECS distributions in IAMs have been drawn from climate model runs that lack an empirical basis, and in Monte Carlo experiments may not be constrained to consistent OHU values. Empirical ECS estimates are now available, but have not yet been applied in IAMs. We incorporate a new estimate of the ECS distribution conditioned on observed OHU efficiency into two widely used IAMs. The resulting Social Cost of Carbon (SCC) estimates are much lower than those from models based on simulated ECS parameters. In the DICE model, the average SCC falls by approximately 40–50% depending on the discount rate, while in the FUND model the average SCC falls by over 80%. The span of estimates across discount rates also shrinks substantially.

scholarly journals SOME INTRANATIONAL EVIDENCE ON OUTPUT-INFLATION TRADE-OFFS

1999 ◽  
Vol 3 (2) ◽  
pp. 187-203 ◽  
Author(s):  
Gregory D. Hess ◽  
Kwanho Shin
Keyword(s):  
Aggregate Demand ◽  
Relative Price ◽  
New Keynesian ◽  
Real Output ◽  
Relative Prices ◽  
Trade Offs ◽  
Equilibrium Relationship ◽  
Supply Relationship ◽  
Individual Market ◽  
The Individual

In a seminal paper, Robert E. Lucas, Jr. provided the theoretical relationship between aggregate demand and real output based on relative price confusion at the individual market level. Subsequently, an alternative New Keynesian aggregate supply relationship was derived and it was demonstrated that the two theories can be distinguished on the basis of how both the rate of inflation and the volatility of relative prices affect its slope. By emphasizing the first implication of New Keynesian theory, strong evidence was obtained supporting this model using international data. We also concentrate on the second difference between the two theories. We derive the individual market-level equilibrium relationship for the Lucas model, i.e., the disaggregate supply curve. We estimate the crucial parameters of the relationship between aggregate nominal demand shocks and real output using U.S. intranational state and industry data. We find that the Lucas model omits important New Keynesian features of the data.

scholarly journals Rowing against the Current

2020 ◽  
pp. 74-94
Author(s):  
John Page
Keyword(s):  
Natural Resources ◽  
Value Chain ◽  
Oil And Gas ◽  
Relative Price ◽  
Resource Value ◽  
Price Changes ◽  
Relative Prices ◽  
Public Investments ◽  
Resource Sector ◽  
Local Firms

It is likely that Africa holds almost a third of the world’s reserves of minerals, oil, and gas. The exploitation of natural resources is a huge opportunity, but it also carries considerable risks. The exploitation of natural resources is a huge opportunity, but one that carries considerable risks. Relative prices in resource-exporting economies tend to push them towards economic structures dominated by the resource sector. This chapter explores ways to achieve diversification in a resource-rich economy. It describes the relative price changes that accompany a resource boom and suggests policies and public investments to mitigate their impact. It explores some of the issues that influence the participation of local firms in the resource value chain and argues for broadening the options for diversification, through the development of ‘industries without smokestacks’ and investments in knowledge.

scholarly journals Premium, pertalite or pertamax: an empirical study of a-a phenomenon on Indonesian consumer behavior

2019 ◽  
Vol 22 (2) ◽  
Author(s):  
Nur Laila Widyastuti ◽  
Djoni Hartono
Keyword(s):  
Negative Impact ◽  
Relative Price ◽  
Consumption Pattern ◽  
Regression Result ◽  
Price Difference ◽  
Middle Grade ◽  
High Quality ◽  
Relative Prices ◽  
Relative Consumption ◽  
Before And After

In Indonesia, consumers can choose to consume high or low quality gasoline based on their preferences. It might be influenced by the price difference between the two qualities. Changing preference to a higher quality that is affected by the declining relative price can lead to an A-A phenomenon. This study aims to determine whether the A-A Phenomenon occurs on the behavior of consumers before and after the existence of Pertalite. The regression model used are the panel data regressions and the regression result proves that there is an A-A phenomenon in market share in Indonesia before and after Pertalite. This indicates that the high difference of relative prices between high and low quality gasolines has a negative impact towards their relative consumption. Prior to Pertalite, consumers continued changing preference into high quality gasoline in the 2nd and 3rd month intervals when relative price difference decreased. After the existing of Pertalite, consumers did not quickly transfer their preferences from Premium to Pertalite when the relative price declined, so that the A-A phenomenon did not occur in this low and middle grade gasoline consumption pattern. However, Pertamax's consumption to Pertalite increases when the relative price between them declines; thus raising the A-A phenomenon.

scholarly journals Estimating Standard Error of Inflation Rate in Pakistan: A Stochastic Approach

2012 ◽  
Vol 51 (3) ◽  
pp. 257-272
Author(s):  
Javed Iqbal ◽  
M. Nadim Hanif
Keyword(s):  
Standard Error ◽  
Inflation Rate ◽  
Average Rate ◽  
Stochastic Approach ◽  
Mean Value ◽  
Jel Classification ◽  
Relative Price ◽  
Price Inflation ◽  
Index Numbers ◽  
Relative Prices

“The answer to the question what is the mean of a given set of magnitudes cannot in general be found, unless there is given also the object for the sake of which a mean value is required. There are as many kinds of average as many purposes; and we may almost say in the matter of prices as many purposes as many writers.” Edgeworth (1888). We estimate standard errors (S.Es.) of month on month and year on year inflation in Pakistan based on data for the period of July 2001 to June 2010 using the stochastic approach as well as extended stochastic approach to index numbers. We develop a mechanism to estimate S.E. of period average headline inflation (rate) using these approaches. This mechanism is then applied to estimate S.Es. of 12-month average rate of inflation in Pakistan for July 2003 to June 2010. The systematic changes in the relative prices of different groups in the CPI basket for Pakistan are also estimated. The highest (positive) relative price inflation occurred in ‘food, beverages and tobacco’ group and the lowest (negative) for ‘recreation and entertainment’ group, during fiscal years 2001 to 2010. JEL classification: C13, C43, E31 Keywords: Estimation, Index Numbers, Inflation Rate, Standard Error

scholarly journals The Exchange Rate and its Effects An Overvalued Quantity?

1998 ◽  
Vol 3 (2) ◽  
pp. 123-148
Author(s):  
Sikander Rahim
Keyword(s):  
Exchange Rate ◽  
A Priori ◽  
Country Of Origin ◽  
Law Of One Price ◽  
Relative Price ◽  
Relative Prices ◽  
Exchange Rate Movements ◽  
Balance Of Trade ◽  
The Exchange Rate ◽  
Exchange Rate Changes

I. Introduction The Exchange Rate and Competitive Goods The exchange rate poses an awkward problem; if the same goods are produced by and traded between different countries and if international trade is competitive, the prices of such goods in any country will be the same, regardless of the country of origin. The law of one price must hold within each country; exchange rate movements cannot alter the relative prices in the same country of competing goods according to country of origin. There is, then, no general a priori reason why purchasers in a given country should choose the product of one country rather than the competing product of another and the standard argument, that changes in exchange rates alter the volumes of imports and exports through such relative price changes, cannot hold for such goods. The conclusion is that, if most of the imports and exports of a country are goods that have international competition, there is no reason that exchange rate changes will have predictable effects on its balance of trade.

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