nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒02‒17
twelve papers chosen by
Stan Miles
Thompson Rivers University

  1. Layoff Taxes, Unemployment Insurance, and Business Cycle Fluctuations By Ahrens, Steffen; Nejati, Nooshin; Pfeiffer, Philipp Ludwig
  2. Evolution of the electricity market in Germany: Identifying policy implications by an agent-based model By Herrmann, Johannes; Savin, Ivan
  3. The 2016 Power Trading Agent Competition By Ketter, W.; Collins, J.; Weerdt, M.M.
  4. Contagion and fire sales in banking networks By Sara Cecchetti; Marco Rocco; Laura Sigalotti
  5. Quanto vale a água que usamos? Projeções dos impactos econômicos de restrições ao uso e elevação de preços da água na região metropolitana de Belo Horizonte By Aline Souza Magalhães; Terciane Sabadini Carvalho; Kênia Barreiro de Souza; Edson Paulo Domingues
  6. Crowdsourced Delivery - a Pickup and Delivery Problem with Ad-hoc Drivers By Arslan, A.M.; Agatz, N.A.H.; Kroon, L.G.; Zuidwijk, R.A.
  7. Global Warming and a Potential Tipping Point in the Atlantic Thermohaline Circulation: The Role of Risk Aversion By Glanemann, Nicole; Belaia, Mariia; Funke, Michael
  8. Fiscal Sustainability and Demographic Change: A Micro Approach for 27 EU Countries By Dolls, Mathias; Doorley, Karina; Paulus, Alari; Schneider, Hilmar; Siegloch, Sebastian; Sommer, Eric
  9. An Analysis of Allowance Banking in the EU ETS By Zaklan, Aleksandar; Ellerman, Denny; Valero, Vanessa
  10. A tradable employment quota By Akyol, Metin; Neugart, Michael; Pichler, Stefan
  11. Market Power Rents and Climate Change Mitigation: A Rationale for Coal Export Taxes? By Mendelevitch, Roman; Richter, Phillip; Jotzo, Frank
  12. Forging a global environmental agreement through trade sanctions on free riders? By Eichner, Thomas; Pethig, Rüdiger

  1. By: Ahrens, Steffen; Nejati, Nooshin; Pfeiffer, Philipp Ludwig
    Abstract: This paper studies the role of labor market institutions in business cycle fluctuations. We develop a DSGE model with search and matching frictions and incorporate a US unemployment insurance experience rating system. Layoff taxes based on experience rating finance the cost of unemployment benefits and create considerable employment adjustment costs. Our framework helps realign the search and matching model with the empirical properties of its most salient variables. The model reproduces the negative correlation between vacancies and unemployment, i.e., the Beveridge curve. Simulations show that the model generates more cyclical volatility in its key variable - the ratio of job vacancies to unemployment (labor market tightness). Moreover, layoff taxes reduce the excess sensitivity of job destruction found in Krause and Lubik (2007) and strengthen the negative correlation of job creation and job destruction. Thus, the model matches key labor market data while incorporating an important feature of the US labor market.
    JEL: E24 J64 J65
    Date: 2015
  2. By: Herrmann, Johannes; Savin, Ivan
    Abstract: The diffusion of renewable electricity generating technologies is widely consid- ered as crucial for establishing a sustainable energy system in the future. However, currently the required transition is unlikely to be achieved by market forces alone. For this reason, many countries implement various policy instruments to support this process, also by re-distributing costs related to the policy instruments applied among all electricity consumers. This paper presents a novel history-friendly agent-based study aiming to explore efficiency of different mixes of policy instruments by means of a differential evolution algorithm. Special emphasis of the model is devoted to possibility of small scale renewable electricity generation without any further inputs, but also to storage of this electricity using small scale facilities being actively developed over the last decade. Both combined pose an important instrument to be used by electricity consumers to achieve partial or full autarky from the electricity grid, particularly after accounting for decreasing costs and increasing efficiency of both due to continuous innovation. Another distinct feature of this study is attention to stability of the electricity grid since more consumers becoming autarkic make, on the one hand, electricity in the grid more expansive, while on the other hand, supply of the electricity more vulnerable.
    JEL: C63 Q42 Q48
    Date: 2015
  3. By: Ketter, W.; Collins, J.; Weerdt, M.M.
    Abstract: This is the specification for the Power Trading Agent Competition for 2016 (Power TAC 2016). Power TAC is a competitive simulation that models a “liberalized” retail electrical energy market, where competing business entities or “brokers” offer energy services to customers through tariff contracts, and must then serve those customers by trading in a wholesale market. Brokers are challenged to maximize their profits by buying and selling energy in the wholesale and retail markets, subject to fixed costs and constraints; the winner of an individual “game” is the broker with the highest bank balance at the end of a simulation run. Costs include fees for publication and withdrawal of tariffs, and distribution fees for transporting energy to their contracted customers. Costs are also incurred whenever there is an imbalance between a broker’s total contracted energy supply and demand within a given time slot. The simulation environment models a wholesale market, a regulated distribution utility, and a population of energy customers, situated in a real location on Earth during a specific period for which weather data is available. The wholesale market is a relatively simple call market, similar to many existing wholesale electric power markets, such as Nord Pool in Scandinavia or FERC markets in North America, but unlike the FERC markets we are modeling a single region, and therefore we approximate locational-marginal pricing through a simple manipulation of the wholesale supply curve. Customer models include households, electric vehicles, and a variety of commercial and industrial entities, many of which have production capacity such as solar panels or wind turbines. All have “real-time” metering to support allocation of their hourly supply and demand to their subscribed brokers, and all are approximate utility maximizers with respect to tariff selection, although the factors making up their utility functions may include aversion to change and complexity that can retard uptake of marginally better tariff offers. The distribution utility models the regulated natural monopoly that owns the regional distribution network, and is responsible for maintenance of its infrastructure. Real-time balancing of supply and demand is managed by a market-based mechanism that uses economic incentives to encourage brokers to achieve balance within their portfolios of tariff subscribers and wholesale market posi- tions, in the face of stochastic customer behaviors and weather-dependent renewable energy sources. Changes for 2016 are focused on a more realistic cost model for brokers, and are highlighted by change bars in the margins. See Section 7 for details.
    Keywords: autonomous agents, electronic commerce, energy, preferences, portfolio management, power, policy guidance, sustainability, trading agent competiton
    Date: 2016–01–12
  4. By: Sara Cecchetti (Bank of Italy); Marco Rocco (Bank of Italy and European Central Bank); Laura Sigalotti (Bank of Italy)
    Abstract: The paper develops a theoretical framework to analyze the connection between the structure of banking networks and their resilience to systemic shocks. We base our analysis on the model of interbank contagion proposed by Cifuentes, Ferrucci and Shin (2005), which accounts for the impact of illiquid assets' fire sales. We develop this model along three main lines: (i) analytically proving, in a general setting, the existence of an equilibrium and the convergence of the algorithm that can be used to compute it; (ii) extending the scope of the simulations (e.g., including an assessment of the resilience of different stylized network topologies and a sensitivity analysis); (iii) generalizing the model to deal with the case where more than one illiquid asset is available on the market.
    Keywords: financial networks, contagion, liquidity, fire sales, systemic risk
    JEL: D85 C62 G21 G28
    Date: 2016–01
  5. By: Aline Souza Magalhães (Cedeplar-UFMG); Terciane Sabadini Carvalho (PPGDE/UFPR); Kênia Barreiro de Souza (Cedeplar-UFMG); Edson Paulo Domingues (Cedeplar-UFMG)
    Abstract: The shortage of water for human consumption in Brazil has intensified in recent years. No different is the situation of the metropolitan region of Belo Horizonte (RMBH) who witnesses the most severe shortage of water in its history. In this context, this study estimates the economic impact of restrictions on supply or water price increases using an inter-regional computable general equilibrium model, the MINAS-Água, for 34 municipalities of the RMBH. We seek to understand the importance of water as a productive input and in household consumption, and how the limitation of its use affects the economic decisions of sectors and households. The article proceeds to propose a general equilibrium approach to the subject, thus considering the interrelationships of markets, supply chains and the spatial heterogeneity of the distribution of economic activity in the RMBH. In general, the results of the simulations indicate that for a cut of 1% in total water consumption in the RMBH, an average increase of 7.3% in water tariff would be required. The overall effect of the use of water appears to be quite inelastic since the reduction of consumption is 1/7 of the rise in prices.
    Keywords: water scarcity, Metropolitan region of Belo Horizonte, elasticities, computable general equilibrium
    JEL: R10 R13 Q25
    Date: 2015–12
  6. By: Arslan, A.M.; Agatz, N.A.H.; Kroon, L.G.; Zuidwijk, R.A.
    Abstract: The trend towards shorter delivery lead-times reduces operational efficiency and increases transportation costs for internet retailers. Mobile technology, however, creates new opportunities to organize the last-mile. In this paper, we study the concept of crowdsourced delivery that aims to use excess capacity on journeys that already take place to make deliveries. We consider a peer-to-peer platform that automatically creates matches between parcel delivery tasks and ad-hoc drivers. The matching of tasks and drivers gives rise to a new variant of the dynamic pick-up and delivery problem. We propose a rolling horizon framework and develop an exact solution approach to solve the various subproblems. In order to investigate the potential benefit of crowdsourced delivery, we conduct a wide range of computational experiments. The experiments provide insights into the viability of crowdsourced delivery under various assumptions about the environment and the behavior of the ad-hoc drivers. The results suggest that the use of ad-hoc drivers has the potential to make the last-mile more cost-efficient and environmentally friendly.
    Keywords: crowdsourced delivery, pickup and delivery problem, ad-hoc drivers
    Date: 2016–02–02
  7. By: Glanemann, Nicole; Belaia, Mariia; Funke, Michael
    Abstract: The risk of catastrophes is one of the greatest threats by climate change. Yet, the most common Integrated Assessment Models produce the counterintuitive result that a higher concern about climate change risks does not lead to stronger near-term abatement efforts. This paper probes whether this result still holds in a more refined DICE model that features Epstein-Zin utility, uncertainty about climate sensitivity and is fully coupled with a dynamic representation of the Atlantic thermohaline circulation. This modelling allows posing the question of whether aversion to this specific tipping point risk has a significant effect on the climate policy efforts. The simulations, however, show that near-term policy is insensitive to this climate change risk. For the more likely climate sensitivity values, a collapse of the circulation would occur in the more distant future, which allows acting after learning. For the more unlikely and higher climate sensitivity values, the collapse is not prevented as climate policy costs would be too high.
    JEL: Q54 C61 C63
    Date: 2015
  8. By: Dolls, Mathias (ZEW Mannheim); Doorley, Karina (LISER (CEPS/INSTEAD)); Paulus, Alari (ISER, University of Essex); Schneider, Hilmar (LISER (CEPS/INSTEAD)); Siegloch, Sebastian (University of Mannheim); Sommer, Eric (IZA)
    Abstract: The effect of demographic change on the labor force and on fiscal revenues is topical in light of potential pension shortfalls. This paper evaluates the effect of demographic changes between 2010 and 2030 on labor force participation and government budgets in the EU-27. Our analysis involves the incorporation of population projections, and an explicit modeling of the supply and demand side of the labor market. Our approach overcomes a key shortcoming of most existing studies that focus only on labor supply when assessing the effects of policy reforms. Ignoring wage reactions greatly understates the increase in fiscal revenues, suggesting that fiscal strain from demographic change might be less severe than currently perceived. Finally, as a policy response to demographic change and worsening fiscal budgets, we simulate the increase in the statutory retirement age. Our policy simulations confirm that raising the statutory retirement age can balance fiscal budgets in the long run.
    Keywords: demographic change, fiscal effects, labor supply, labor demand, pension systems
    JEL: H68 J11 J21
    Date: 2015–12
  9. By: Zaklan, Aleksandar; Ellerman, Denny; Valero, Vanessa
    Abstract: The existence of some 2 billion unused EU Allowances (EUAs) at the end of Phase II of the EU s Emissions Trading System (EU ETS) has sparked considerable debate about structural shortcomings of the EU ETS. However, there has been a surprising lack of interest in considering the accumulation of EUAs in light of the theory of intertemporal permit trading, i.e. allowance banking. In this paper we adapt basic banking theory to the case of a linearly declining cap, as is common in greenhouse gas control systems. We show that it is perfectly rational for agents to decrease emissions beyond the constraint imposed by the cap initially, accumulating an allowance bank and then drawing it down in the interest of minimizing abatement cost over time. Having laid out the theory, we carry out a set of simulations for a reasonable range of key parameters, geared to the EU ETS, to illustrate the effects of intertemporal optimization of abatement decisions on optimal time paths of emissions and allowance prices. We conclude that bank accumulation as the result of intertemporal abatement cost optimization should be considered at least a partial explanation when evaluating the current discrepancy between the cap and observed emissions.
    JEL: Q54 D92 F18
    Date: 2015
  10. By: Akyol, Metin; Neugart, Michael; Pichler, Stefan
    Abstract: Discrimination of women in the labor market requires appropriate policy interventions. Affirmative action policies typically advocate the introduction of an employment quota uniformly applied to all firms. In a heterogeneous labor market such a policy may yield avoidable welfare losses. We propose a tradable employment quota showing its effects on wages, employment, and welfare in a labor market with search frictions and taste discrimination. A tradable employment quota appears to be a viable alternative yielding superior labor market outcomes.
    JEL: J71 J78 C63
    Date: 2015
  11. By: Mendelevitch, Roman; Richter, Phillip; Jotzo, Frank
    Abstract: In this paper we investigate the introduction of an export tax on steam coal levied by an individual country (Australia), or a group of major exporting countries. The policy motivation would be twofold: generating tax revenues against the background of improved terms-of-trade, while CO2 emissions are reduced. We construct and numerically apply a two-level game consisting of an optimal policy problem at the upper level, and an equilibrium model of the international steam coal market (based on COALMOD-World) at the lower level. We find that a unilaterally introduced Australian export tax on steam coal has little impact on global emissions and may be welfare reducing. On the contrary, a tax jointly levied by a "climate coalition" of major coal exporters may well leave these better of while signifcantly reducing global CO2 emissions from steam coal by up to 200 Mt CO2e per year. Comparable production-based tax scenarios consistently yield higher tax revenues but may be hard to implement against the opposition of disproportionally afected local stakeholders depending on low domestic coal prices.
    JEL: F13 Q58 C61
    Date: 2015
  12. By: Eichner, Thomas; Pethig, Rüdiger
    Abstract: This paper studies the formation of self-enforcing global environmental agreements in a world economy with international trade and two groups of countries that differ with respect to fuel demand and environmental damage. It investigates whether the signatories threat to embargo (potential) free riders secures all countries participation in the agreement. Resorting to numerical analysis, we find that an embargo may be unnecessary, ineffective or even counterproductive - depending on the degree of asymmetry and other parameters. On some subset of parameters, the embargo stabilizes the otherwise unstable global agreement, but the threat of embargo is not credible. However, in some of these cases credibility can be restored by suitable intra-coalition transfers.
    JEL: F18 Q37 Q58
    Date: 2015

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