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Despite increasing empirical evidence of strong links between climate and economic growth, there is no established model to describe the dynamics of how different types of climate shocks affect growth patterns. Here we present the first comprehensive, comparative analysis of the long-term dynamics of one-time, temporary climate shocks on production factors, and factor productivity, respectively, in a Ramsey-type growth model. Damages acting directly on production factors allow us to study dynamic effects on factor allocation, savings and economic growth. We find that the persistence of impacts on economic activity is smallest for climate shocks directly impacting output, and successively increases for direct damages on capital, loss of labor and productivity shocks, related to different responses in savings rates and factor-specific growth. Recurring shocks lead to large welfare effects and long-term growth effects, directly linked to the persistence of individual shocks. Endogenous savings and shock anticipation both have adaptive effects but do not eliminate differences between impact channels or significantly lower the dissipation time. Accounting for endogenous growth mechanisms increases the effects. We also find strong effects on income shares, important for distributional implications. This work fosters conceptual understanding of impact dynamics in growth models, opening options for links to empirics.
Cash vs. in-kind transfers
(2019)
Historically, India has relied on subsidizing staple food as a major instrument in improving food security. Recently, however, cash transfers have entered the debate as an alternative, as they are associated with lower market distortions, leakages and fiscal costs. This study contributes to this debate by analyzing India’s Targeted Public Distribution System (TPDS). Our main objective was to explain the under-purchase, or low take-up, from the TPDS, which is typically attributed to ‘leakage’, i.e. the diversion of food grains from eligible consumers. We provide an alternative solution based on self-targeting; while poorer households increase their consumption from the TPDS, wealthier households restrain from consuming subsidized commodities. Using a large household dataset, we estimated that such a voluntary opt-out system, based on income, would save a minimum of 6.5% of grains released through the TPDS. Besides these demand-driven aspects, our analysis indicates that poor regions perform better at lowering the diversion of grains and that large targeting errors exist among female-led households. Finally, we find substantial regional price differences that would benefit the poor and rural population under a uniform cash-transfer system that does not correct for regional price levels.
With the onset of the global food crisis, the discussion about the use and misuse of agricultural market interventions regained academic attention. As a result of economies of scale, centralized policy implementation at the regional level has the potential to reduce the budgetary costs of policies. Borrowing from the literature on international unions and international policy coordination, we develop a conceptual framework to analyze when regional policy implementation makes sense. This is the case whenever spill-overs from centralization are large and policy preferences, driven by country-specific characteristics, are homogeneous. Subsequently, we examine the advantageousness of centralized policy implementation for the West African region regarding the most common food security policies. We show that centralization of trade policies and emergency food reserves is beneficial, while buffer stocks, safety net policies, and producer support policies should be implemented at the national level.
Even though concerns about adverse distributional implications for the poor are one of the most important political challenges for carbon pricing, the existing literature reveals ambiguous results. For this reason, we assess the expected incidence of moderate carbon price increases for different income groups in 87 mostly low- and middle-income countries. Building on a consistent dataset and method, we find that for countries with per capita incomes of below USD 15,000 per year (at PPP-adjusted 2011 USD) carbon pricing has, on average, progressive distributional effects. We also develop a novel decomposition technique to show that distributional outcomes are primarily determined by differences among income groups in consumption patterns of energy, rather than of food, goods or services. We argue that an inverse U-shape relationship between energy expenditure shares and income explains why carbon pricing tends to be regressive in countries with relatively higher income. Since these countries are likely to have more financial resources and institutional capacities to deal with distributional issues, our findings suggest that mitigating climate change, raising domestic revenue and reducing economic inequality are not mutually exclusive, even in low- and middle-income countries. (C) 2018 The Authors. Published by Elsevier Ltd.