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Report
The Role of Uncertainty and Risk in Climate Change Economics
This chapter is an introductory essay to the volume Climate Change Economics: The Role of Uncertainty and Risk, edited by V. V. Chari and Robert Litterman. This volume consists of a collection of papers that were presented at "The Next Generation of Economic Models of Climate Change," a conference hosted by the Heller-Hurwicz Economics Institute at the University of Minnesota.
Working Paper
Capitalization as a Two-Part Tariff: The Role of Zoning
This paper shows that the capitalization of local amenities is effectively priced into land via a two-part pricing formula: a ticket" price paid regardless of the amount of housing service consumed and a slope" price paid per unit of services. We first show theoretically how tickets arise as an extensi ve margin price when there are binding constraints on the number of households admitted to a neighborhood. We use a large national dataset of housing transactions, property characte ristics, and neighbor- hood attributes to measure the extent to which local amenities are capitalized in ticket ...
Working Paper
Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels
We estimate location values for single family houses by local polynomial regressions (LPR), a semi-parametric procedure, using a standard housing price and characteristics dataset. As a logical extension of the LPR method, we interpolate land values for every property in every year and validate the accuracy of the interpolated estimates with an out-of-sample forecasting approach using Denver sales during 2003 through 2010. We also compare the LPR and OLS models out-of-sample and determine that the LPR model is more efficient at predicting location values. In a balanced panel application, we ...
Report
On the Efficiency of Competitive Equilibria with Pandemics
The epidemiological literature suggests that virus transmission occurs only when individuals are in relatively close contact. We show that if society can control the extent to which economic agents are exposed to the virus and agents can commit to contracts, virus externalities are local, and competitive equilibria are efficient. The Second Welfare Theorem also holds. These results still apply when infection status is imperfectly observed and when agents are privately informed about their infection status. If society cannot control virus exposure, then virus externalities are global and ...
Working Paper
Terms-of-Trade and Counterterrorism Externalities
This paper investigates the interplay of trade and terrorism externalities under free trade between a developed nation that exports a manufactured good to and imports a primary product from a developing nation. A terrorist organization targets both nations and reduces its attacks in response to a nation?s defensive counterterrorism efforts, while transferring some of its attacks abroad. Terms-of-trade considerations lead the developed nation to raise its counterterrorism level beyond the ?small-country? level, thus compounding its over provision of these measures. By contrast, the developing ...
Journal Article
The Trade-Offs of Counterterrorism Policies
This article provides a modern overview of counterterrorism tools and their trade-offs for curbing terrorist attacks and their consequences. Defensive and proactive countermeasures constitute two main classes of counterterror tools deployed by targeted governments. The primary drawback of defensive actions, which make terrorist attacks more costly and less apt to succeed, is attack transference that shifts the mode, venue, or target of attacks to those less protected. In contrast, offensive proactive measures, which confront the terrorists directly, may result in backlash as terrorist ...
Working Paper
Greed as a Source of Polarization
The political process in the United States appears to be highly polarized: evidence from voting patterns finds that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme lobby groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of the growing polarity of political views? In this paper, we show that, in standard models of lobbying and electoral competition, a free-rider problem amongst potential contributors leads naturally to a divergence in campaign ...
Working Paper
Polarized Contributions but Convergent Agendas
The political process in the United States appears to be highly polarized: Data show that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme donor groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of the growing political polarization? In this paper, we show that, in standard models of campaign contributions and electoral competition, a free-rider problem among potential contributors leads naturally to polarization of campaign contributors but without any ...
Working Paper
Efficient Public Good Provision in Networks : Revisiting the Lindahl Solution
The provision of public goods in developing countries is a central challenge. This paper studies a model where each agent?s effort provides heterogeneous benefits to the others, inducing a network of opportunities for favor-trading. We focus on a classical efficient benchmark ? the Lindahl solution ? that can be derived from a bargaining game. Does the optimistic assumption that agents use an efficient mechanism (rather than succumbing to the tragedy of the commons) imply incentives for efficient investment in the technology that is used to produce the public goods? To show that the answer is ...
Working Paper
How low can you go? Charity reporting when donations signal income and generosity
Consistent with nonprofit fundraising practices, donation visibility has been shown to increase giving. While concern for status is used to explain this response, the authors argue that this explanation relies on the assumption that giving signals only income or generosity. When giving signals both attributes overall status need not increase in donations, and donation-visibility may be harmful when individuals prefer to be perceived as poor-and-generous rather than rich-and-stingy. Using an experiment the authors find that both income-status and generosity-status concerns affect behavior. ...