nep-agr New Economics Papers
on Agricultural Economics
Issue of 2007‒02‒24
24 papers chosen by
Angelo Zago
University of Verona

  1. Smallholder Farming Under Increasingly Difficult Circumstances: Policy and Public Investment Priorities for Africa. By T.S. Jayne; D. Mather; E. Mghenyi
  2. "Productivity, Technical Efficiency, and Farm Size in Paraguayan Agriculture" By Thomas Masterson
  3. Determinants of poverty vulnerability in Uganda By Charles Augustine Abuka; Michael Atingi-Ego; Jacob Opolot; Patrick Okello
  4. "Land Rental and Sales Markets in Paraguay" By Thomas Masterson
  5. Factors Associated with Farm Households' Movement Into and Out of Poverty in Kenya - The Rising Importance of Livestock By William J. Burke; T.S. Jayne; H. Ade Freeman; P. Kristjanson
  6. Evaluating the Market and Welfare Impacts of Agricultural Policies in Developed Countries: Comparison of Partial and General Equilibrium Measures By Gohin, Alexandre; Moschini, GianCarlo
  7. Tripartite Wage Stabilization in the Food Industry. By Albert Rees
  8. WTO AGRICULTURAL NEGOTIATIONS AND DEVELOPING COUNTRIES: AN OVERVIEW By Valeria Costantini
  9. ENVIRONMENT, HUMAN DEVELOPMENT AND ECONOMIC GROWTH By Valeria Costantini; Salvatore Monni
  10. Time Use in Rural Areas: A Case Study in Turkey By Erkan Erdil; Ozan Eruygur; Zehra Kasnakoglu
  11. Local and Regional Food Aid Procurement: an Assessment of Experience in Africa and Elements of Good Donor Practice. By David Tschirley; Anne Marie del Castillo
  12. Modelling Euro-Mediterranean Agricultural Trade By Garcia-Alvarez-Coque, Jose-Maria; Martinez-Gomez, Victor; Villanueva, Mique
  13. Emerging Issues and Concerns of African Countries in the WTO Negotiations on Agriculture and the Doha Round By Osakwe, Patrick N.
  14. Forestry and the Carbon Market Response to Stabilize Climate By Massimo Tavoni; Valentina Bosetti; Brent Sohngen
  15. Risks to Global Trade and Implications for South Africa’s Economy and Policy By Jeremy Wakeford
  16. Catastrophic Payment and Health Protection in Rural China - Impact of New Cooperative Medical Scheme in Shandong Province By Dr Sukhan Jackson; Xiaoyun Sun1; Gordon Carmichael; Adrian C. Sleigh1.
  17. When Father Doesn't Know Best: Parents’ Management and Control of Money and Children’s Food Insecurity By Catherine T. Kenney
  18. Commercialisation des Céréales et Sécurité Alimentaire au Mali (International Trade and the Production of Cereals in Mali) By Marthe Diallo; Kadiatou Dème; Niama Nango Dembélé; Abdramane Traoré; John Staatz
  19. Testing for Separation in Agricultural Household Models and Unobservable Household-Specific Effects By Arcand, Jean-Louis; d'Hombres, Beatrice
  20. Measurement errors in recall food consumption data By Naeem Ahmed; Matthew Brzozowski; Thomas Crossley
  21. Economic Valuation of Environmental Values of the Landscape Development and Protection Area of Volcji Potok By Verbic, Miroslav; Erker, Renata
  22. Economic and Poverty Impacts of a Voluntary Carbon Reduction for a Small Liberalized Developing Economy: The Case of the Philippines By Erwin L. Corong
  23. The Farm, the City and the Emergence of Social Security By Caucutt, Elizabeth; Cooley, Thomas F; Guner, Nezih
  24. Uncertain R&D, Backstop Technology and GHGs Stabilization By Valentina Bosetti; Massimo Tavoni

  1. By: T.S. Jayne (Department of Agricultural Economics, Michigan State University); D. Mather (Department of Agricultural Economics, Michigan State University); E. Mghenyi (Department of Agricultural Economics, Michigan State University)
    Abstract: There is no single “future” of the small farm in Africa. African farms display great heterogeneity in the challenges and constraints that they face. However, without renewed attention to sustained agricultural productivity growth, most small farms in Africa will become increasingly unviable economic and social units. Sustained agricultural productivity growth will require progress on a number of fronts, most importantly increased public goods investments to agriculture, a policy environment that supports private investment in input, output and financial marketing and provision of key support services, a more level global trade policy environment, supportive donor programs, and improved governance. Most of these challenges can be met; meaningful progress will start when there is a critical mass of political commitment and leadership among African leaders and developed country governments.
    Keywords: Africa, food security, food policy, small holder, investments
    JEL: Q18
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:msu:polbrf:081&r=agr
  2. By: Thomas Masterson
    Abstract: This essay assesses the relationship between farm size and productivity. Both parametric and nonparametric methods are used to derive efficiency measures. Smaller farms are found to have higher net farm income per hectare, and to be more technically efficient, than larger farms.
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_490&r=agr
  3. By: Charles Augustine Abuka; Michael Atingi-Ego; Jacob Opolot; Patrick Okello
    Abstract: Ugandan data shows poverty to be entrenched in rural areas and in large households. Households with heads exposed to education, an improved health status, less reliance on agriculture as the most important source of earnings, access to electricity for lighting and, the presence of markets to sell produce in the community experience improved household well-being. The data also confirms two known stylized facts regarding poverty vulnerability. First, households in the Northern region have a higher probability of being poor than those in Central, Eastern, and Western regions. Second, the ‘annual cropping and cattle northern' and ‘annual cropping and cattle Teso' zones are the agro ecological zones that are positively correlated with poverty vulnerability . The fact that residence in rural areas is associated with higher incidence of poverty suggests that promotion of off-farm employment (for example, through rural electrification) would help reduce vulnerability.
    Keywords: Poverty vulnerability, logistic regression, Uganda
    Date: 2007–02–19
    URL: http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp203&r=agr
  4. By: Thomas Masterson
    Abstract: This paper examines the claim that the land rental market can be an effective means of redistributing access to, if not ownership of, land to the rural poor, using Paraguay as our model. The land sales market is also examined. The land rental market in ParaguayÕs rural areas is found to be very thin, due at least in part to a lack of available credit for inputs. Renting-in substantial amounts of land is found to contribute significantly to household per-capita income.
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_491&r=agr
  5. By: William J. Burke; T.S. Jayne (Department of Agricultural Economics, Michigan State University); H. Ade Freeman; P. Kristjanson
    Abstract: This study explores the dynamics of poverty in Kenya. The study specifically examines how initial conditions, household decisions, and other factors that may change over time affect poverty. Dynamic relationships are identified between behavioral variables, exogenous shocks at one point in time, and indicators of household welfare in subsequent years.
    Keywords: Africa, food security, food policy, Kenya, poverty, livestock
    JEL: Q18
    Date: 2007
    URL: http://d.repec.org/n?u=RePEc:msu:idpwrk:090&r=agr
  6. By: Gohin, Alexandre; Moschini, GianCarlo
    Abstract: We revisit the question of choosing partial equilibrium or general equilibrium modeling in applied policy analysis in the context of evaluating the effects of a complete phase-out of the Common Agricultural Policy (CAP) of the European Union. We compare the results of three models—two three-sector general equilibrium models (one with an additional major distortion in the nonagricultural sector) and a two-sector partial equilibrium model. We find that the market effects of a complete phase-out of the CAP are quite comparable across these models. On the other hand, the measured welfare impacts may depend on the modeling choice.
    Date: 2007–02–22
    URL: http://d.repec.org/n?u=RePEc:isu:genres:12727&r=agr
  7. By: Albert Rees
    URL: http://d.repec.org/n?u=RePEc:pri:indrel:49&r=agr
  8. By: Valeria Costantini
    Abstract: The aim of this paper is to give a broad overview of the main issues faced by developing countries in a context of trade liberalization as part of the multilateral agricultural trade negotiations in the WTO Doha Round. The bargaining positions of developing countries in the Doha Round are described. A comparison of empirical results on possible outcomes of a Doha Round agreement follows with a focus on impacts in terms of poverty reduction. Results are then analyzed using the main theoretical findings on trade-poverty links and the specific role of preference erosion in order to shed some light on potential failures of a trade reform in the absence of complementary policy actions.
    Keywords: Agriculture, Developing Countries, Multilateral Trade Negotiations,
    JEL: F13 I32 Q17
    Date: 2007–12
    URL: http://d.repec.org/n?u=RePEc:rtr:wpaper:0071&r=agr
  9. By: Valeria Costantini; Salvatore Monni
    Abstract: Over the last few years, environmental issues have entered into policy design, particularly development and growth policies. Natural resources are considered necessary production inputs and environmental quality is considered a welfare determinant. The integration of environmental issues into economic growth and development theories and empirics is currently widely analyzed in the literature. The effects of natural resources endowment on economic growth are mainly analyzed through the so-called Resource Curse Hypothesis (RCH) whereas the effects of economic growth on environmental quality are part of the Environmental Kuznets Curve (EKC). Furthermore, recent contributions on RCH and EKC have shown the important role of institutions and human development dimensions in building a sustainable development path. In this paper, we attempt to analyze the causal relationships between economic growth, human development and sustainability combining the RCH and EKC models and adopting a human development perspective.
    Keywords: Natural resources, Sustainability, Human Development, Trade
    JEL: O15 Q01 Q56
    Date: 2006–12
    URL: http://d.repec.org/n?u=RePEc:rtr:wpaper:0062&r=agr
  10. By: Erkan Erdil (Department of Economics, METU); Ozan Eruygur; Zehra Kasnakoglu
    Abstract: This study aims to analyze rural household work and leisure time and how it is allocated among various activities and by socio-economic characteristics of individuals. The analysis is based on a survey carried out in two central Anatolian villages. Three time use questionnaires are administered between May-October 2003 during two different days of the week, an ordinary weekday and the day of the local bazaar. 138 household members from these two villages have participated in the survey. It is found that on the average, the villagers spend over half of their nonsleeping time on non-economic activities including personal development. The remaining time spent on agricultural and non-agricultural economic activities is about the same. Males on the average spend more time on all activities than females except for personal development. The results show that, time use patterns change during different days of the week and months of the year. It is also found that, there is a high correlation between time use patterns and socio-economic characteristics of the households. In general there are statistically significant differences in the average time devoted to activities by education and age groups. Finally, significant differences are observed in the time use patterns rather than magnitudes by gender. As expected, differentiation in men’s and women’s roles is observed in agricultural activities.
    Keywords: Time Use surveys, rural households, agricultural activities
    JEL: D13 J16 Q12
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:met:wpaper:0602&r=agr
  11. By: David Tschirley (Department of Agricultural Economics, Michigan State University); Anne Marie del Castillo (USAID/Food for Peace)
    Abstract: Procuring food aid supplies locally and regionally can save lives by improving the timeliness and reducing the cost of food aid delivery. Experience with local/regional procurement (LRP) in Africa has demonstrated significant cost savings compared to in-kind food aid; World Food Program (WFP) experience in Africa shows that LRP can be efficient relative to both local and international prices, and can be designed to have minimal disruptive effects on local markets while providing an important additional outlet for marketed surplus; A wide range of procurement modalities, each potentially appropriate under different circumstances, are available. For example, donors can and do rely upon WFP to carry out the local procurement. WFP can allow quick start-up to procurement activities, and may be cost effective (relative to other LRP modalities) when large quantities are needed, but is relatively inflexible as it is obliged to follow its own established procedures. Reliance on NGOs may require greater local monitoring by the donor, but can offer greater flexibility, since NGOs may be able to procure and distribute (smaller quantities) more quickly than could WFP or a commercial buying agent
    Keywords: Africa, food security, food policy, food aid, procurement
    JEL: Q18
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:msu:polbrf:079&r=agr
  12. By: Garcia-Alvarez-Coque, Jose-Maria; Martinez-Gomez, Victor; Villanueva, Mique
    Abstract: This paper examines the methodological problems to define a modelling approach to assess the impact of full or limited bilateral liberalisation of agricultural trade flows in the Euro-Mediterranean region. The bilateral trade liberalisation process in the region is framed by complexity, in policy instruments and in the characteristics of the products, in particular fruits and vegetables. Advantages and disadvantages of the general equilibrium and partial equilibrium approaches to simulate trade policy impacts are assessed. Caveats of existing models are related to the representation of specific policy instruments (tariffs, entry prices and other non-tariff measures) and on the seasonal nature of horticultural trade, which is of major importance in the Euro-Mediterranean Free Trade Are. The paper provides an illustration of how an imperfect substitute product model could be helpful to describe the trade effects of bilateral price changes, for given seasons.
    JEL: Q00 F13
    Date: 2006–02–02
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:1832&r=agr
  13. By: Osakwe, Patrick N.
    Abstract: Since the Uruguay Round, African countries have been concerned about the rules and operations of the multilateral trading system and are beginning to realize that they have to be active in the negotiation process to protect their interests. Consequently, several countries in the region have been relatively more active in the Doha Round negotiations and have formed alliances with other developing countries to increase their bargaining power. This paper provides a critical assessment of Africa’s concerns in the negotiations on agriculture and the Doha Round. It also examines the extent to which the Hong Kong Ministerial declaration meets the demands of African countries in the agriculture negotiations. Furthermore, it outlines essential elements of any new agreements on agriculture that would ensure a fair outcome for the region. Finally, the paper stresses that trade is important for development in Africa but is not the solution to the numerous economic and social problems facing the region. Consequently, African countries must adopt a strategic approach to trade which ensures that their participation in the Doha Round reforms does not jeopardize the achievement of key national development goals.
    Keywords: Doha Round; WTO Negotiations; Agriculture; Africa; Concerns
    JEL: O19 O13 F13
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:1850&r=agr
  14. By: Massimo Tavoni (Fondazione Eni Enrico Mattei); Valentina Bosetti (Fondazione Eni Enrico Mattei); Brent Sohngen (AED Economics, Ohio State University)
    Abstract: This paper investigates the potential contribution of forestry management in meeting a CO2 stabilization policy of 550 ppmv by 2100. In order to assess the optimal response of the carbon market to forest sequestration we couple two global models. An energy-economy-climate model for the study of climate policies is linked with a detailed forestry model through an iterative procedure to provide the optimal abatement strategy. Results show that forestry is a determinant abatement option and could lead to significantly lower policy costs if included. Linking forestry management to the carbon market has the potential to delay the policy burden, and is expected to reduce the price of carbon of 40% by 2050. Biological sequestration will mostly come from avoided deforestation in tropical forests rich countries. The inclusion of this mitigation option is demonstrated to crowd out some of the traditional abatement in the energy sector and to lessen induced technological change in clean technologies.
    Keywords: Forestry, Climate Policy, Technological Innovation
    JEL: Q23 Q52 Q55
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2007.15&r=agr
  15. By: Jeremy Wakeford (School of Economics, University of Cape Town)
    Abstract: Abstract: The past two decades have witnessed an unprecedented globalisation of trade in goods and services. This process has been driven, inter alia, by technology, ideology and the availability of relatively cheap energy. By extrapolating this trend, one may expect further integration of world markets and increasingly unhindered international trade. However, there is mounting evidence of significant risks to global trade, at least in goods and possibly in certain services as well. Three main risk areas are identified here: (1) fossil fuel depletion, in particular a possible peak in world oil production within the next five to ten years; (2) climate change, and especially its effects on agricultural production, transport and financial risk; and (3) instability in the world financial system caused primarily by the US’s unsustainable twin deficits. The paper explores some possible implications of these risks for the South African economy and its foreign trade in particular. It argues that South Africa’s trade policy should take due cognizance of these threats, and advocates adaptation and mitigation strategies designed to improve self-sufficiency and to protect the poor in sensitive areas, especially food and energy security.
    Keywords: Sector-Specific Policies and Regulations, SMEs
    JEL: A1
    Date: 2006–07
    URL: http://d.repec.org/n?u=RePEc:ctw:wpaper:9607&r=agr
  16. By: Dr Sukhan Jackson; Xiaoyun Sun1; Gordon Carmichael; Adrian C. Sleigh1. (School of Economics, The University of Queensland)
    Abstract: In 2005, from a stratified cluster sample of 3,101 rural households we identified 375 households that might be at risk of catastrophic payments, by searching through NCMS claims and interviewing key informants. We interviewed these 375 households and confirmed that 239 had had catastrophic payments (= 40% of the household’s capacity to pay) during 2004. A validity test of our screening method found another 8 cases among immediate neighbours of these 375 households; by extrapolation, we obtained an adjusted total of 289 catastrophic households in the sample of 3,101. We measured the impact of the NCMS on hardship alleviation by counterfactual analysis, comparing catastrophic payments before and after NCMS reimbursements.
    Date: 2007
    URL: http://d.repec.org/n?u=RePEc:qld:uq2004:344&r=agr
  17. By: Catherine T. Kenney (University of Illinois at Urbana-Champaign)
    Abstract: Although developing-country research has found that spending on children's food, healthcare, and education varies depending on which parent controls income, developed-country research on child wellbeing tends to ignore intrahousehold allocation. This study uses data from the Fragile Families and Child Wellbeing Study (N = 820 couples) to analyze how mothers' versus fathers' control of money affects U.S. children's food insecurity. Results show children are least likely to experience food insecurity when parents’ income is pooled and controlled by their mother and most likely to do so when parents’ income is pooled and controlled by their father. Surprisingly, children also fare worse when parents’ pooled income is jointly controlled—the system considered the norm for married-parent households in the United States.
    Date: 2007–04
    URL: http://d.repec.org/n?u=RePEc:pri:crcwel:wp07-04-ff&r=agr
  18. By: Marthe Diallo; Kadiatou Dème; Niama Nango Dembélé (Department of Agricultural Economics, Michigan State University); Abdramane Traoré; John Staatz
    Abstract: The liberalization of foreign trade has positively impacted the production of cereals in Mali. The increase in the production of cereals is due to both price increases and the effectiveness of the marketing system. The liberalization made Mali a cereal exporter l in contrast with its former status ten years ago, that of a cereals importer Mali supplies its neighboring countries such as Mauritania, Niger, Burkina Faso, Senegal and Cote d’Ivoire with coarse grains. However, subsidies, rapid urbanization, and changes in the food habits of the urban population threaten Mali’s capacity to remain an exporter. To remain an exporter, Mali should, in the long term, process coarse grains into products conforming to the expectations and food habits of the urban population. Food security remains a major challenge in Mali in spite of the country’s food self sufficiency.
    Keywords: food security, food policy, Mali
    JEL: Q18
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:msu:icpwrk:ml-promisam-commercialisation&r=agr
  19. By: Arcand, Jean-Louis; d'Hombres, Beatrice
    Abstract: When market structure is complete, factor demands by households will be independent of their characteristics, and households will take their production decisions as if they were profit-maximizing firms. This observation constitutes the basis for one of the most popular empirical tests for complete markets, commonly known as the “separation” hypothesis. In this paper, we show that all existing tests for separation using panel data are potentially biased towards rejecting the null-hypothesis of complete markets, because of the failure to adequately control for unobservable individual effects. Since the variable on which the test for separation is based cannot be identifed in most panel datasets following the usual covariance transformations, and is likely to be correlated with the household-specific effect, neither the within nor the variance-components procedures are able to solve the problem. We show that the Hausman-Taylor (1981) estimator, in which the impact of covariates that are invariant along one dimension of a panel can be identifed through the use of covariance transformations of other included variables that are orthogonal to the household-specific effects as instruments, provides a simple solution. Our approach is applied to a rich Tunisian dataset in which separation -and thus the null of complete markets- is strongly rejected using the standard approach, but is not rejected once correlated unobservable household-specific effects are controlled for using the Hausman-Taylor instrument set.
    Keywords: Panel data; household-specific effects; household models; testing for incomplete markets; development microeconomics; Tunisia
    JEL: D13 O12 D52 C23
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:1863&r=agr
  20. By: Naeem Ahmed; Matthew Brzozowski; Thomas Crossley (Institute for Fiscal Studies and University of Cambridge)
    Abstract: Recall food consumption data, which is the basis of a great deal of empirical work, is believed to suffer from considerable measurement error. Diary records are believed to be very accurate. We study a unique data set that collects recall and diary data from the same households. Measurement errors in recall food consumption data appear to be substantial, and they do not have the properties of classical measurement error. We also find evidence that the diary measures are themselves imperfect. We consider the implications of our findings for modelling demand, measuring inequality, and estimating inter-temporal preference parameters. Keywords: expenditure, consumption, measurement error, survey data
    JEL: C81 D12
    Date: 2006–10
    URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:06/21&r=agr
  21. By: Verbic, Miroslav; Erker, Renata
    Abstract: When the market for a certain good is competitive enough, economic activities can be studied by the market pricing mechanism. Because this is usually not feasible in case of environmental goods with embodied natural and cultural heritage, particular methods for economic valuation of such goods have to be applied. The present article represents the economic valuation of the Landscape Development and Protection Area of Vol誩 Potok, which is an important Slovenian cultural landscape area with internationally recognized characteristics. For this purpose we have chosen the method of contingent valuation and performed an econometric analysis of stated and true willingness-to-pay. We obtained the value of willingness-to-pay and determined its determinants. We also made an attempt to control for different biases that arise in such analyses. At last, we used the adjusted average individual value of willingness-to-pay to calculate the aggregate willingness-to-pay.
    Keywords: bivariate probit model; contingent valuation method; discrete choice method; embedding effects; environmental values; starting point bias; willingness-to-pay
    JEL: Q51 Q56 C51
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:1819&r=agr
  22. By: Erwin L. Corong (De La Salle University-Manila)
    Abstract: This paper analyzes the economic and poverty effects of a voluntary carbon emission reduction for a small liberalized economy—the Philippines. The simulation results indicate that tariff reductions undertaken by the Philippine government between 1994 and 2005 reduced the cost of fossil fuels thereby resulting in an increase in carbon emissions. The economic cost of reducing carbon emissions by imposing a carbon tax appears minimal as the reduction in consumer prices due to tariff reductions outweigh the increase in production cost from the imposition of a carbon tax. Overall results suggest that maintaining carbon emissions relative to 1994 levels appears to be a sensible alternative for the country
    Keywords: Climate Change, Carbon Emissions, International Trade, Computable General Equilibrium, Micro-Simulation, Macro-Micro Models, Philippines
    JEL: C68 D58 F18 I39 Q56
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2007.9&r=agr
  23. By: Caucutt, Elizabeth; Cooley, Thomas F; Guner, Nezih
    Abstract: During the period from 1880 to 1950 publicly managed retirement security programs became an important part of the social fabric in most advanced economies. In this paper we study the social, demographic and economic origins of social security. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax, and social security emerges.
    Keywords: migration; political economy; social security
    JEL: D72 H3 H55
    Date: 2007–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6131&r=agr
  24. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Massimo Tavoni (Fondazione Eni Enrico Mattei)
    Abstract: This paper analyses optimal investments in innovation when dealing with a stringent climate target and with the uncertain effectiveness of R&D. The innovation needed to achieve the deep cut in emissions is modelled by a backstop carbon-free technology whose cost depends on R&D investments. To better represent the process of technological progress, we assume that R&D effectiveness is uncertain. By means of a simple analytical model, we show how accounting for the uncertainty that characterizes technological advancement yields higher investments in innovation and lower policy costs. We then confirm the results via a numerical analysis performed with a stochastic version of WITCH, an energy-economy-climate model. The results stress the importance of a correct specification of the technological change process in economy-climate models.
    Keywords: Climate Change, Information and Uncertainty, Environmental Policy, Optimal R&D Investments
    JEL: O32 Q54 Q55
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2007.6&r=agr

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