Distributional implications of changes in U.S. petroleum taxation

This article develops a methodology based on input-output relations for the evaluation of excise tax incidence. Since many excise taxes are levied on products that are used not only in final consumption but also as intermediate inputs in the production of other commodities, estimation of the tax burden by the conventional methodology of using direct final consumption may yield inadequate and perhaps misleading results. The input-output methodology developed in this article is applied to the case of the U.S. taxation of petroleum products and the empirical results are compared with similar ones obtained by the U.S. Congressional Budget Office.     

Advances in input-output modeling: A review article

This paper takes the lead from the volume Advances in Input-Output Analysis, edited by K. Polenske and S. Skolka and then proceeds into a state-of-the-art assessment. The volume contains proceedings of the most recent international conference on input-output techniques. Contributions to the volume are appraised in assessing extensions of the input-output approach into the areas of short-run forecasting, regional analysis, environmental problems, income distribution, and dynamic analysis. The integration of the input-output model into more sophisticated economic models is then considered. The required improvements in the specification of the trade sector, the demand side, supply constraints, and technology are discussed.     

The experience of the EEC Eurolink Project in modeling bilateral trade linkage equations

Following the basic philosophical approach of the LINK Project, which links various national econometric models built in different countries, the Commission of the European Communities has succeeded in linking the full-size quarterly econometric models of the four major European countries. The Eurolink Project is being extended to cover the other EEC countries as well as the United States, Canada, and Japan. The results reported in this paper are part of this larger project which attempts to link the EEC member economies in a trade and capital flows econometric model and explain the transmission of interdependent economic fluctuations from country to country. In the present study, the interconnection between the various economies is represented by bilateral trade flows only. Flows of invisibles and of financial capital are not completely studied and are not yet ready to be included in this report.The theoretical structural model with its bilateral trade supply and demand functions and the technique employed for the construction of bilateral import and export price indices are presented. Estimation results are shown and discussed with emphasis on their use for the analysis of international trade and for policy decision making.     

Commodity price stabilization models: A review and appraisal

This paper is designed to bring into focus the numerous modeling attempts to analyze commodity price stabilization that have recently appeared. The studies examined begin with the Waugh-Oi-Massell framework and advance to econometric commodity modeling. Such a critique is considered necessary: None of the studies examined has overcome the myriad of problems that analysts have pointed out as essential for assessing the welfare outcomes of price stabilization schemes. As a consequence, stabilization analyses for similar commodities have produced conflicting results regarding predicted welfare outcome. The present appraisal attempts to provide a unity of direction to this work by (1) comparing recieved studies of a theoretical, empirical, and econometric modeling nature, and (2) suggesting possibilities for improving modeling analyses.     

The impact of higher energy prices on growth and inflation in an industrializing economy: the Korean experience

The first serious problem faced by the Korean economy in recent years is the stagflation caused by the increasing energy cost of imported oil. How much does the oil crisis contribute to Korean inflation and unemployment? To answer the question, a variable input-output model is introduced. It differs from conventional models in one important respect: it allows the industrial structure to change in response to changing input costs. Under the model, the technical coefficient becomes an endogenous variable, a property that conventional input-output models fail to share.     

Interest rate policies and inflation in interdependent economies: Recent policy dilemmas

This paper examines Federal Reserve Board policies that are premised on a negative short-run association of interest rate movements and the rate of inflation. In particular, econometric evidence is provided, supporting the view that tighter monetary policy appears to raise inflation rates in the short run. Conversely, it is demonstrated that easier monetary policy does not necessarily raise inflation rates in the short run. In the case of uncoordinated monetary restrictiveness, interest rate competition among major countries can produce higher inflation and lower growth than was originally intended.     

The impact of the Soviet Union upon the U.S. feed/livestock sector— An assessment

In this article, the impact of volatile Soviet Union corn imports on the U.S. feed/livestock sector is analyzed using an econometric model. The model's attention to supply response when feed price changes enables it to determine the nature of the effect of exogenous shocks across feed and livestock sectors. The model is used in historical simulation to demonstrate the effects of actual and alternative paths of variable Soviet import demand and to explore the difficulties of deriving a stabilizatior policy for these linked sectors.     

The impact of changing oil prices on interfuel substitution: Ethanol's prospects in the United States to 1995

The decline of oil prices is having an impact on the prices of other energy products. It is also forcing the reconsideration of interfuel substitution. In this article, the long-term prospects of the U.S. fuel-ethanol industry are analyzed using a system of econometric models. The modeling system comprises the INFORUM interindustry macroeconomic model and an econometric submodel detailing the ethanol production decision as well as the corn, soybean, and wheat markets. The system is used in forecasting simulations to examine the impact that changes in world oil prices would have on ethanol profitability. The results of this study suggest that, without substantial increases in real oil prices or subsidy levels, ethanol will become unprofitable in the near future.     

Applied general equilibrium modeling for long-term energy policy in Germany

The energy model is based on an extension of applied general equilibrium models of the Leontief input-output type, first implemented by Hudson and Jorgenson (1974). One objective of our project is to choose specifications of sectoral production and cost functions that permit us to estimate the unknown parameters of the price functions and input demand functions from a single input-output table in ten energy and 35 non-energy industries. Our second objective is to determine the price for capital and labor as well as the components of final demand endogenously instead of using a separate growth model as an engine for the economic development. Our third objective is to combine the concept of price-dependent substitution within the input structure with the concept of vintage coefficients for the latest plants. By this we incorporate into the input-output analysis the effect on growth as a result of investment, the effect on capacity as a result of new plants, and the effect on prices as a result of new technologies. An application of the model shows the long-term impact on growth and prices under alternative technologies in the electricity industry (nuclear or coal-fired power plants).     

Political confrontation over fiscal processes: The impact of the U.S. Congressional Budget Act

In July 1974 the U.S. Congressional Budget Act was signed into law. This legislation was the result of a heavily fought political confrontation between President Nixon and Congress over who controlled the Federal budget. In addition to the issue of control, the Act was prompted by dissatisfaction with the procedures used by Congress to determine Federal receipts and expenditures. The purpose of this paper is to assess the impact this legislation had on the U.S. economy in its early years.The first section of the paper sets up a simple modeling framework. The model is specified so as to illustrate how a change in the budget process resulting from the Congressional Budget Act could potentially produce changes in the level of total output. This section also explains the derivation of a tax and expenditure series used in the model's empirical testing. The second section addresses some of the theoretical issues, and presents the results of simulations based on the Chase, Wharton, and Data Resources econometric models. Broad conclusions are gathered in the final section.     

Prices in input-output: The INFORUM experience in modeling the U.S. deregulation of domestic oil

Prices, and particularly relative prices, have moved in recent years to the center of our attention. Soaring oil prices, large increases in agricultural prices, and rising costs of product materials and finished goods on world markets have set in motion major changes in the world economy. To model these changes, it has been necessary to use input-output analysis, for our input-output models have the necessary detail to trace these effects. This use of input-output may seem paradoxial to those who, for many years, dismissed this technique because it allegedly fails to take account of the effects of prices. The truth turns out to be almost the reverse: Only input-output can take full account of prices.This paper shows how prices work in the INFORUM model of the American economy. Specifically, it describes how the model generates prices, uses the prices in equations for personal consumption, and changes input-output coefficients on the basis of relative prices. Finally, it compares runs of the entire model to examine the effects in the U.S. of increasing domestic oil prices to world levels.     

Indexation of international commodity prices through international buffer stock operations

The developing economies have been advocating the indexation of the prices for their primary commodity exports by tying such prices to other relevant international prices, such as the prices of imports to the less-developed countries. We have used econometric models to simulate a program of indexation of the prices of the ten UNCTAD core commodities at their 1963 levels for 1963–1975. The results suggest definite difficulties in such a program. Most notably the order of magnitude of the costs of buffer stock operations and financing is likely to be prohibitive. Also the distribution of benefits and losses among the less-developed countries is quite arbitrary. Therefore we are very skeptical about indexation by buffer stock operations.     

Behavioral Probabilities

This article introduces the concept of behavioral probabilities, along with an econometric procedure for jointly estimating these probabilities as well as individual utility functions. Behavioral probabilities that guide decisions differ from posterior probabilities that are reported after receiving risk information. The underlying process that generates behavioral probabilities reflects a behavioral anomaly as the new risk information takes on an excessive role. While utility function estimates are consistent with theoretical predictions, considering behavioral probabilities alters their implications. Viscusi's research is supported by the Olin Center for Law, Business, and Economics.     

MFN tariff treatment of imports from China: Effects on U.S. employment

This article estimates the effects on U.S. output and employment of granting most-favored-nation (MFN) tariff treatment to imports from the People's Republic of China (PRC). Import demand elasticities are used to estimate changes in imports resulting from the lower tariff rates. A highly disaggregated U.S. input-output table and labor-output ratios are used to convert changes in imports into changes in domestic output and employment at a detailed sectorial level. U.S. import restraints on the textile and apparel industry are incorporated into the analysis. The article explores the implications of increased imports from the PRC for U.S., PRC, and LDC policy makers.     

Rural poverty and disability in Ethiopia: Formidable policy challenges

Our study aims to deepen our understanding of the links between rural poverty and disability in Ethiopia. We use panel data for Ethiopia to illustrate these linkages, using rigorous econometric methodology. The 2015 Sustainable Development Goals (SDGs) explicitly recognise disability as a major impediment to elimination of poverty and hunger. In the current development discourse, disability has thus acquired high priority. Since disability is neither a purely medical nor a social phenomenon but an outcome of their interplay, the policy challenges are formidable.     

An international trade model to capture linkages among supply-constrained economies

The development of a country's domestic and international markets depends on its own actions as much as on those of its trading partners. The study of market linkages is thus vital for policy making. Borrowing from the conceptual framework of Leontief's input-output analysis and from the national accounts equation, this paper presents a new model to calculate multilateral trade multipliers while minimizing data requirements. The novelty of the approach consists in the column-wise (supply-oriented) normalization of trade as opposed to the row-wise (demand-oriented) normalization that prevails in the literature. The explanatory power of the model has been successfully tested on data that refer to 1973–1974. Divergence from reality inevitably reflects the great fluidity that characterized trade during that period. Although most successful when applied to trade among supply-oriented economies (such as those of socialist or developing countries), at present empirical tests have been run only for a handful of OECD and OPEC countries.     

Multicountry dynamic multipliers under fixed and floating exchange rates: An econometric analysis

The present paper attempts to analyze the dynamic multiplier effects of fiscal monetary policies for developed countries in a consistent framework of a global econometric model under both fixed and flexible exchange rate regimes. The paper first discusses the estimation of exchange rate functions for eight developed countries with special reference to “fundamentals” in economic performance such as international gaps in inflation, productivity, expected real rate of return, and so on. The results are then incorporated into the global model to derive and compare dynamic multipliers under both fixed and flexible exchange rate regimes. “Insulation effects” are observed in most cases in terms of both output and inflation, though this differs according to the country. Policy implications are discussed at the end.     

The econometric modelling of social preferences

Experimental data on social preferences present a number of features that need to be incorporated in econometric modelling. We explore a variety of econometric modelling approaches to the analysis of such data. The approaches under consideration are: the Random Utility approach (in which it is assumed that each possible action yields a utility with a deterministic and a stochastic component, and that the individual selects the action yielding the highest utility); the Random Behavioural approach (which assumes that the individual computes the maximum of a deterministic utility function, and that computational error causes their observed behaviour to depart stochastically from this optimum); and the Random Preference approach (in which all variation in behaviour is attributed to stochastic variation in the parameters of the deterministic component of utility). These approaches are applied in various ways to an experiment on fairness conducted by Cappelen et al. (Am Econ Rev 97(3):818–827, 2007). Various models that we estimate succeed in capturing the key features of the dataset. Conclusions concerning fairness-related behaviour depend crucially on the choice of econometric model.