Category: Research Papers

Abstract: This document examines regions which employ labor and land in production, improve their productivity by devoting labor to R&D and promote biodiversity by conserving land from production. There is a self-interested central planner that is prone to lobbying and (i) dictates the regions to increase their area of conserved land in uniform proportion or (ii) sets a non-distorting uniform subsidy to conserved land. Comparing (i) and (ii) yields
following results. Regulation (i) promotes biodiversity and welfare. The replacement of regulation (i) by the subsidy (ii) decreases welfare. Applied to NATURA 2000 in the EU, this suggests that regulation is the appropriate authority for the Commission.

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Presented in Conference on “Structural Change, Dynamics, and Economic Growth”

Abstract. This document considers an economy with many regions and two engines of growth: horizontal R&D, which increases the number of polluting product lines; and vertical R&D, which improves productivity in these lines. Pollution in any region decreases welfare in all regions. Any group of regions can form a jurisdiction where a common policy maker controls pollution. Large jurisdictions, which can better internalize externality through pollution, perform vertical R&D.  Because jurisdictions face decreasing unit costs of administration, they expand, performing first horizontal and then vertical R&D. This generates an environmental Kuznets curve (EKC) on which pollution first aggravates and then alleviates.

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Presented in DEGIT XVII conference in Milan, September 13-14, 2012.

This document examines GHG emission policy in a world where labor and emissions are complementary in production, world-wide emissions decrease welfare, and total factor productivity can be locally improved by devoting labor to R&D. A subset of the countries can establish an “abatement coalition” where an international agency grants non-traded or traded GHG permits. This agency is self-interested, subject to lobbying, and has no budget of its own. The results are the following. The establishment of the “abatement coalition” enhances welfare, promotes economic growth and diminishes emissions both inside and outside the coalition. Without technological change, emission permit trade does not make any difference. With technological change due to R&D, the agreement with emission permit trade is Pareto worsening.

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Presented in

* the 15th Conference on Dynamics, Growth, and International Trade (DEGIT), September 3-4, 2010, Frankfurt am Main, Germany

* seminar on”Growth and Environment”, December 8, 2011, Technical University of Vienna, Austria

Since World War II, mortality has declined in the developing world. This paper examines the effects of this mortality decline on demographic and economic growth by a familyoptimization model, in which fertility is endogenous and wealth yields utility through its status. The decline in mortality stimulates investment and generates an income stream which promotes population growth, but the desire of status hampers fertility and prevents capitaldiluting demographic expansion. If status-seeking is strong, then the decline of mortality decreases population growth below its original level.

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Presented in:

1. Nordic Conference in Development Economics (NCDE), June 18-19, 2010, in the Helsinki Center of Economic Research (HECER), Finland (presenter: Tapio Palokangas)
2. The 15th Conference on Dynamics, Growth, and International Trade (DEGIT), September 3-4, 2010, Frankfurt am Main, Germany (presenter: Ulla Lehmijoki).

 

Abstract. This paper examines an economic union where oligopolistic firms produce by skilled and unskilled labor and do in-house R&D by skilled labor. The planner of the union accepts new members to the union, regulates the labor market through a minimum wage for unskilled labor and supports firms by taxation. Firms and workers lobby the planner for prospective policy. It is shown that in the political equilibrium small unions regulate the labor market but do not support firms, while large unions deregulate the labor market and support firms. Journal of Economic Literature: F15, J50, O40.

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This paper is presented in

1. the HECER_Political_Economy_Conference, March 13-14, 2009, Helsinki, Finland

2. the IFAC 2011 Conference,  August 28 – September 2, 2011, Milan, Italy

Abstract. In this study, I examine immaterial property rights in an economy where R&D firms innovate and imitate and households face non-diversifiable risk. Some property rights postpone the expected time an innovation will be imitated (e.g. increase the “length” of an innovation), while the others protect the imitator’s profits after a successful imitation (i.e. increase the “width” of an innovation). The main findings are as follows. Property rights that generate “short” and “wide” innovations also speed up economic growth. The smaller the households’ rate of risk aversion, the “longer” and “narrower” the welfare-maximizing innovations.
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Abstract. This paper examines per capita pollution in a developing economy by a family-optimization model where fertility is endogenous and wealth increases welfare through status effect. Developing countries have weaker environmental laws and specialize in capital-intensive “dirty” goods. With a significant status effect, gains from trade stimulate investments leading to higher wages so that population growth first increases but then decreases. The opposite changes in labor supply first swell but then curb the production of the capital-intensive dirty good. A typical EKC path appears: per capita pollution increase at the earlier but decrease at the later stages of development.
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Abstract. In this paper, I examine the nature of optimal capital taxation in an economy where labor unions set wages. Wage contracts are called binding, if they protect investors against immediate expropriation after new machines are installed. I show that in order to maintain aggregate production efficiency the government needs a labor tax only in the presence and taxes on both labor and capital in the absence of binding contracts. In addition,I construct optimal tax rules for the cases of both binding and non-binding wage contracts. Download

• A preliminary version of this paper was presented in the 16th Annual Conference of the European Association of Labour Economics (EALE), Lisbon, September 9-11, 2004. Homepage

Abstract. We examine a common market which expands by integrating new regions. Capitalists are strategically
interdependent through the goods market and they improve their productivity through R&D. Production and R&D employ unionized workers. The purpose of integration is to maximize a weighed
average of workers’ and capitalists’ utilities. The main findings are as follows. Integration benefits capitalists more than workers. If labour unions are strong enough, then the common market
can expand indefinitely. Otherwise, there is a upper limit for integration. This is the higher, the higher producer market power or the stronger the capitalists’ political influence.

• A paper presented in the Ninth International Conference on Dynamics, Growth, and International Trade (DEGIT), Reykjavik, Iceland, June 11-12, 2004. Homepage
• A paper presented in IZA, Germany, September 7, 2004.
• A paper presented in the international Europaeum workshop on “Factors, Goods, Externalities, Institutions, and Mobility in Europe and Beyond”, Bologna, Italy, September 30 – October 1, 2005.
• A paper presented in the Tokyotech/IIASA Workshop in Laxenburg, Austria, September 8-9, 2007

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Abstract. This paper constructs a political equilibrium in which firms and unions bargain over wages and workers and capitalists lobby the government for taxation, labor market regulation and
immigration policy. The main findings are the following. It is in the workers’ interests to ban firms’ direct recruitment from abroad. Otherwise, the ruling elite captures the surplus of the labor unions by threatening to allow such recruitment. There is an equilibrium level for both legal and illegal immigration and relative union bargaining power. Because unions lobby for illegal rather than legal immigration, the government tolerates a higher public-sector marginal cost for illegal than legal immigrants.

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