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on Economic Design |
| By: | Izquierdo-Tort, Santiago (Instituto de Investigaciones Economicas, Universidad Nacional Autonoma de Mexico); Jayachandran, Seema (Department of Economics, Princeton University); Saavedra, Santiago (Facultad de Economía, Universidad del Rosario) |
| Abstract: | Payments for Ecosystem Services (PES) are a widely used approach to incentivize conservation efforts such as avoided deforestation. Although PES effectiveness has received significant scholarly attention, whether PES design modifications can improve program outcomes is less explored. We present findings from a randomized trial in Mexico that tested whether a PES contract that requires enrollees to enroll all of their forest is more effective than the traditional PES contract that allows them to exercise choice. The modification’s aim is to prevent landowners from enrolling only parcels they planned to conserve anyway while leaving aside other parcels to deforest. We find that the full-enrollment treatment significantly reduces deforestation compared to the traditional contract. This extra conservation occurs despite the full-enrollment provision reducing the compliance rate due to its more stringent requirements. The full-enrollment treatment quadrupled cost-effectiveness, highlighting the potential to substantially improve the efficacy of conservation payments through simple contract modifications. |
| Keywords: | Deforestation; Payments for Ecosystem Services; financial incentives; contract design; Mexico |
| Date: | 2024–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:021022&r=des |
| By: | Anna Balestra (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy); Raul Caruso (Dipartimento di Politica Economica, DISCE, & Centro Studi Economia Applicata (CSEA), Università Cattolica del Sacro Cuore, Milano, Italy - Catholic University ‘Our Lady of Good Counsel’, Tirana, European Center of Peace Science, Integration and Cooperation (CESPIC)) |
| Abstract: | This paper contributes to the empirical analysis of social peace, specifically aiming to assess the suitability of an economic policy instrument for the maintenance of social peace. The contention advanced in this paper is that identifying the ratio of public education investment to military expenditure (hereafter referred to as Edumilex) serves as a pertinent instrument for fostering peaceful economic policies. To empirically evaluate this instrument, we employ a target variable serving as a measure of internal peace, structured as a concise metric of positive peace based on four pillars: (i) Health; (ii) Standard of living; (iii) Quality of institutions; (iv) Spread of violence. More precisely, we empirically estimate the impact of Edumilex on social peace, utilizing a panel comprising 85 countries spanning the years from 1990 to 2020. We utilize an Instrumental Variable approach. In particular, in the baseline estimation we employ an IV/GMM estimator. The robust and positive relationship identified in our analysis suggests the viability of Edumilex as an instrument of economic policy. This proposition constitutes a noteworthy innovation since governments commonly perceive education and military spending as distinct policy domains. However, in the light of this work, such a perspective appears flawed, as these factors both exert influence on the levels of peace within a society. |
| Keywords: | Peace, Education, Military Expenditures, Development |
| JEL: | H56 H52 O47 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie5:dipe0035&r=des |
| By: | Daniel Krähmer (Universität Bonn) |
| Abstract: | The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the well-understood case with linear costs, if investment costs are strictly convex in the buyer’s valuation distribution, the buyer’s equilibrium utility is strictly positive and to tal welfare is strictly higher than in the benchmark when valuations are public information, thus alleviating the hold-up problem. In fact, when costs are mean-based or display decreasing risk, the hold-up problem may disappear completely. Moreover, the buyer’s equilibrium utility and total welfare might be non-monotone in costs. The paper utilizes an equilibrium characterization in terms of the Gateaux derivative of the cost function. |
| Keywords: | Information Design, Hold-Up Problem, Unobservable Information |
| JEL: | C61 D42 D82 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:278&r=des |