Public Goods Agreements with Other-Regarding Preferences

Why cooperation occurs when noncooperation appears to be individually rational has been an issue in economics for at least a half century. In the 1960’s and 1970’s the context was cooperation in the prisoner’s dilemma game; in the 1980’s concern shifted to voluntary provision of public goods; in the 1990’s, the literature on coalition formation for public goods provision emerged, in the context of coalitions to provide transboundary pollution abatement. The problem is that theory suggests fairly low (even zero) levels of contributions to the public good and high levels of free riding. Experiments and empirical evidence suggests higher levels of cooperation. This is a major reason for the emergence in the 1990’s and more recently of the literature on other-regarding preferences (also known as social preferences). Such preferences tend to involve higher levels of cooperation (though not always). This paper contributes to the literature on coalitions, public good provision and other-regarding preferences. For standard preferences, the marginal per capita return (MPCR) to investing in the public good must be greater than one for contributing to be individually rational. We find that Charness-Rabin preferences tend to reduce this threshold for individual contributions. We also find that Charness-Rabin preferences reduce the equilibrium size of a coalition of agents formed to provide the public good. In contrast to much of the literature, we treat the wealth of agents as heterogeneous. In such cases, we find that transfers among agents of the coalition may be necessary to sustain cooperation (regardless of the nature of preferences). An example drawn from experiments is provided as an illustration of the effectiveness of social preferences.

Promoting investment in small Caribbean states

This study performs an econometric analysis to determine the main policy levers for investment promotion in the Caribbean. The results provide the following policy advice to Caribbean policy makers seeking to increase investment in, and hence the growth prospectives of, their countries. 1. Investment, both foreign and domestic, is higher in countries that are open to international trade. Our results also suggest that Caribbean countries might see a greater effect of trade integration than other countries. Caribbean governments should therefore pursue regional trade arrangements, and actively support the WTO process of global trade liberalization. 2. Investment, both foreign and domestic, is higher in countries whose domestic markets are larger and more advanced. Regional integration to expand what is considered the domestic market, is thus beneficial. 3. Investment, both foreign and domestic, is higher in countries with greater political stability. To inspire confidence among investors, Caribbean countries should avoid major political disruptions, by pursuing inclusive and participatory policies. Our results suggest that investment is particularly responsive to stability issues in countries like Haiti, Guyana, Dominica, and Grenada. 4. Foreign investors are discouraged by bad macro-economic policies, poor infrastructure, and excessive regulation. Caribbean countries should avoid periods of high inflation and large debt burdens, and develop functional infrastructure and regulatory frameworks.FDI (Foreign Direct Investment Domestic investment Small states Caribbean

Determinants of foreign direct investment in services

This study uses industry level foreign direct investment (FDI) data from 57 countries 1989-2000, to examine the host country determinants of FDI flows in services as a whole, and in the major service industries. Consistent with the observation that many services are non-tradable, we find that service FDI is market-seeking, and unaffected by trade openness. Producer services are important in binding together vertically disintegrated chains of production, accordingly we find a strong correlation between FDI in manufacturing and FDI in finance and transport. While composite political risk does not affect FDI in services, disaggregate socio-political indices prove significant in certain service industries.Foreign direct investment Services

The Economics of Climate Policy

Economics has played an increasingly important role in shaping policy, in the United States and elsewhere. This paper reviews some of the dimensions of the economic approach to analyzing, understanding, and developing solutions to the problem of climate change. We then turn to the issue of designing regulatory instruments to control the problem. The paper concludes with a discussion of the political economy of greenhouse gas control in an international context.climate change, climate policy design, integrated assessment, environmental policy coordination

Computing Cournot-Nash equilibria / 1441

Includes bibliographical references (p. 22-23)

The evolution of social norms

Evolutionary game theory provides the tools to analyze which strategies, or patterns of behaviour, emerge over time through a process of adaptation. Social norms can be defined as patterns of behaviour with certain characteristics. Evolutionary game theory thus provides one perspective on how social norms are formed and maintained. Prisoner's dilemma games can be used to study the conditions under which cooperative norms emerge. Bargaining games can be used to address the formation of fairness norms. However, being more congenial to analyzing norms that somehow focus on material payoffs, it is not a given that evolutionary game theory can adequately address norms focusing on rights or virtues.Evolutionary game theory Social norms

USING ECONOMIC INCENTIVES TO CONTROL POLLUTION IN RUSSIA

This paper investigates Russia's system of environmental management, especially economic tools used to control pollution. It also describes the Russian experience with a system of pollution fees. In particular, we consider how the system of pollution fees works, how fee levels are set, the incentive properties of the fees, and the ultimate use to the Russian government of the revenue from the emission fees. Although the emission fees are quite substantial for some pollutants, the incentive properties of the fees are almost nonexistent. The primary purpose of pollution fees is to generate funds for state-owned enterprises to invest in pollution abatement equipment. This is substantially different from the operation of a pollution fee in the West.Environmental Economics and Policy,

How to make rural jobs more attractive to health workers. Findings from a discrete choice experiment in Tanzania

The geographical imbalance of the health workforce in Tanzania represents a serious problem when it comes to delivering crucial health services to a large share of the population. This study provides new quantitative information about how to make jobs in rural areas more attractive to newly educated clinical officers. A unique data set stemming from a discrete choice experiment with clinical officer finalists in Tanzania is applied. The results show that offering continuing education after a certain period of service is one of the most powerful recruitment instruments the authorities have available. Increased salaries and hardship allowances will also substantially increase recruitment in rural areas. Offers of decent housing and good infrastructure, including the provision of equipment, will increase recruitment to rural remote areas but not as much as higher wages and offers of education. Women are less responsive to pecuniary incentives and are more concerned with factors that directly allow them to do a good job, while those with parents living in a remote rural area are generally less responsive to the proposed policies. When the willingness to help other people is a strong motivating force, policies that improve the conditions for helping people appear particularly effective.Human resources for health; Discrete choice experiments; Tanzania

What constitutes a convention? Implications for the coexistence of conventions

A model of repeated play of a coordination game, where stage games have a location in social space, and players receive noisy signals of the true location of their games, is reviewed. Sugden (1995) suggests that in such a model, there can be a stationary state of convention coexistence only if interaction is non-uniform across social space. This paper shows that an alternative definition of conventions, which links conventions to actions rather than expectations, permits convention coexistence when interaction is uniform. To assess robustness, the concept of a global mutant is introduced, to which certain states of coexistence are robust.Conventions Coordination game Equilibrium selection JEL classification: C73