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Working Paper Series

  • The Temporal Resolution of Uncertainty and the Irreversibility Effect

    Michael W. Hanemann, Urvashi Narain, Anthony Fisher

    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

    Alain de Janvry, Elisabeth Sadoulet

    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.

  • Emissions pathways, climate change, and impacts on California

    Michael W. Hanemann, Katharine Hayhoea, Daniel Cayan, Christopher B. Field, Peter C. Frumhoff, Edwin P. Maurer, Norman L. Miller, Susanne C. Moser, Stephen H. Schneider, Kimberly Nicholas Cahill, Elsa E. Cleland, Larry Dale, Ray Drapek, Laurence S. Kalkstein, James Lenihan, Claire K. Lunch, Ronald P. Neilson, Scott C. Sheridan, Julia H. Verville

    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

  • The Political Economy of Intellectual Property Treaties

    Suzanne Scotchmer

    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).

  • Procuring Knowledge

    Suzanne Scotchmer, Stephen M. Maurer

    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.

  • Measuring Transactions Costs from Observed Behavior: Market Choices in Peru

    Alain de Janvry, Elisabeth Sadoulet, Renos Vakis

    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.

  • Wither, or Whither, Agricultural Crop Subsidies?

    Lee Friedman

    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.

  • Intellectual Property—When is it the Best Incentive Mechanism for S&T Data?

    Suzanne Scotchmer

    Goldman School of Public Policy Working Paper (May 2003)