Goldman School of Public Policy Working Paper (October 2004)
We deﬁne the irreversibility eﬀect and demonstrate its importance in problems involving investment
decisions under uncertainty. We establish several analytical and numerical results that suggest both
that the eﬀect holds more widely than generally recognized, and that an existing result (Epstein’s
Theorem) giving a suﬃcient condition for determining whether the eﬀect holds can be applied more
widely than previously indicated, in particular to problems involving intertemporally nonseparable
beneﬁt functions. We further show that a low elasticity of intertemporal substitution will however
result in failure of the eﬀect, but that the eﬀect will hold if the value of information increases in
the degree of ﬂexibility.
Toward a Territorial Approach to Rural Development: International Experiences and Implications for M
Goldman School of Public Policy Working Paper (July 2004)
The persistence of rural poverty, concentration in rural areas of the most extreme forms of
poverty, and rising inequality in the distribution of rural incomes remain vexing aspects of rural
development in Latin America, in spite of expensive programs intended at reducing poverty and inequality.
Mexico is no exception to this observation. This widespread failure calls upon exploring alternative
approaches to rural development that may have greater chances of success. Taking an approach that
distinguishes between marginal and favorable areas, and that seeks to integrate rural and urban activities in
a territorial dimension centered around regional economic projects and the economic incorporation of the
poor is one such option that deserves further consideration. It has been introduced in Mexico through the
Microregions Strategy. While it is too early to evaluate this program, we derive lessons from international
experiences that provide guidelines to assess the Mexican strategy.
We do this by first characterizing the recent evolution of rural poverty and inequality in Latin
America. We then proceed to explore a set of qualitative changes in rural poverty that need to be taken into
account in a new approach. This is complemented by analyzing a set of new opportunities for rural poverty
reduction that should also be factored into a new approach. On the basis of international experiences with
territorial development, we derive a set of principles for success of the approach. We use these principles
to discuss the methodology followed in Mexico for the Microregions Strategy.
Goldman School of Public Policy Working Paper (June 2004)
The magnitude of future climate change depends substantially on
the greenhouse gas emission pathways we choose. Here we
explore the implications of the highest and lowest Intergovernmental Panel on Climate Change emissions pathways for climate
change and associated impacts in California. Based on climate
projections from two state-of-the-art climate models with low and
medium sensitivity (Parallel Climate Model and Hadley Centre
Climate Model, version 3, respectively), we ﬁnd that annual temperature increases nearly double from the lower B1 to the higher
A1ﬁ emissions scenario before 2100. Three of four simulations also
show greater increases in summer temperatures as compared with
winter. Extreme heat and the associated impacts on a range of
temperature-sensitive sectors are substantially greater under the
higher emissions scenario, with some interscenario differences
apparent before midcentury. By the end of the century under the
B1 scenario, heatwaves and extreme heat in Los Angeles quadruple
in frequency while heat-related mortality increases two to three
times; alpinesubalpine forests are reduced by 50–75%; and Sierra
snowpack is reduced 30–70%. Under A1ﬁ, heatwaves in Los
Angeles are six to eight times more frequent, with heat-related
excess mortality increasing ﬁve to seven times; alpinesubalpine
forests are reduced by 75–90%; and snowpack declines 73–90%,
with cascading impacts on runoff and streamﬂow that, combined
with projected modest declines in winter precipitation, could
fundamentally disrupt California’s water rights system. Although
interscenario differences in climate impacts and costs of adaptation
emerge mainly in the second half of the century, they a
Goldman School of Public Policy Working Paper (June 2004)
Intellectual property treaties create two types of obligations: for national treatment of foreign inventors and for certain harmonized protections. I investigate both the incentive to join such treaties and the incentive to harmonize. As compared to an equilibrium in which the countries' policy makers make independent choices, harmonization will generally strengthen protections. this analysis recognizes that public sponsorship is sometimes an efficient alternative to intellectual property. However, there are noinstitutions to haronize public spending, and there are no international machanisms to repatriate the spillovers it generates. As a consequence, there may be too little public sponsorship and too much intellectual property. A country's inclination to strengthen harmonized protections will depend both on its innovativeness (positively) and on the size of its domestic market (negatively).
Goldman School of Public Policy Working Paper (May 2004)
There is growing public interest in alternatives to intellectual property including, but not limited to, prizes and government grants. We collect various
historical and contemporary examples of alternative incentives, and show when they are superior to intellectual property. We also give an explanation for why federally funded R&D has moved from an intramural activity to largely a grant process. Finally, we observe that much research is supported by a hybrid system of public and private sponsorship, and explain why this makes sense in some circumstances.
Goldman School of Public Policy Working Paper (October 2003)
Farmers incur proportional and fixed transactions costs in selling their crops on markets.
Using data for Peruvian potato farmers, we propose a method to measure these transactions costs.
When opportunities exist to sell a crop on alternative markets, the observed choice of market can be
used to infer a monetary measure of transactions costs in market participation. The market choice
model is first estimated at the reduced form level with a conditional logit, as a function of variables
that explain transactions costs. We then use these market choice equations to control for selection in
predicting the idiosyncratic prices that would be received on all markets and the idiosyncratic
proportional transactions costs that would be incurred to reach all markets. The net between the two
gives us a measure of effective farm-level prices. This allows us to estimate a semi-structural
conditional logit of the market choice model. In this model, the choice of market is a function of
predicted effective farm-level prices, and of market information that accounts for fixed transactions
costs. We can use the estimated coefficients to derive the price equivalence of the fixed cost due to
information. We find that the information on market price that farmers receive from their neighbors
reduces fixed transactions costs by the equivalent of doubling the price received, and is equal to four
times the average transportation cost.
Goldman School of Public Policy Working Paper (July 2003)
There is and always has been virtual consensus among economists that many agricultural
crop support programs cause inefficiency. Equally true, economists also know that whenever
there is inefficiency, there is “room for a deal” that mitigates it. However, the standard
political explanations for the persistence of these inefficient programs rely on the strength of
the farm lobby relative to the diffuse and difficult-to-organize consumers that pay for them.
This is unsatisfactory because, by the logic of economics, there is an opportunity for a deal
that would benefit the farm lobby in exchange for shedding the inefficient programs. If the
farm lobby could itself benefit, then we have no explanation for the persistence of the
inefficient programs. I examine this puzzle, and conclude that increased political
sophistication on the part of agricultural economists could have a high social payoff in terms
of reduced program inefficiencies over time.
Goldman School of Public Policy Working Paper (May 2003)