1. 1 4 From theory to empirics 1.Review & consolidation of the TEF approachReview & consolidation of the TEF approach 2.Empirical shortcomings of generic modelsEmpirical shortcomings of generic models 3.Development, resources and environmental pressures in AsiaDevelopment, resources and environmental pressures in Asia

2. 2 Review & consolidation of the TEF approach ‘Macro’ approach (Copeland, Ulph) helps define growth/policy issues at broadest level –Links to welfare measures –Second-best analyses Recovery of critical quantities and prices –From (p, v, t, s) recover prod’n & input dd, factor shadow prices, cons. dds, etc. –Extrapolate to environmental/NR outcomes

3. 3 Extensions & issues Production externalities Endog. factor endowments & comm. prices –E.g. double dividend argumentdouble dividend argument Heterogeneous consumers & inc. distb’n –And aggregation problems Political constraints on economic or environmental policy

4. 4 Applications of generic approach Back-of-envelope GE calculations –E.g. Implications of US reduction of barriers to Pakistan/African textile exports Economic effects –Wages and employment Environmental effects –Composition effects (TRI indices)(TRI indices) –Scale and income (technique) effects

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6. 6 Empirical shortcomings of generic models Market failures and distortions Spatial heterogeneity and transport- transactions costs Dynamic specification: transition to eq’m; non-convexity, irreversibility.

7. 7 Market failures Land markets and property rights in natural resources Capital markets –Financial repression as a development policy Labor markets –Wage rigidity and unemployment Insurance markets

8. 8 Spatial heterogeneity Watersheds and ‘airsheds’ –E.g. Doolette and MacGrath (WB report, 1990) –E.g. Rains-ASIA model Frontiers and margins (forests, coastlines)

9. 9 Spatial heterogeneity

10. 10 Development, resources and environmental pressures in Asia Growth and structural change Trade and trade intensity Capital accumulation and FDI

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16. 16 Economic & policy heterogeneity in ‘representative’ economies Manufacturing industry policies –Broadly, ISI vs. EOI Food policies –Exporter/importer; trade-based self-sufficiency policies Nature of economic activity at land/forest margin –Subsistence, plantation, comm’l food & fiber

17. 17 Economic & policy heterogeneity

18. 18 Endog. prices, tax interactions and the ‘double dividend’ In a second-best world, will an environmental tax raise or reduce welfare? –Gains from reduced pollution –Possible losses from tax interactions E.g. Bovenberg & Goulder, AER 1996: energy producers pass on carbon taxes as higher prices, which reduces real eff. wage and labor supply, narrowing base of labor tax. –What about trade taxes? Coxhead 2000, http://www.feem.it, paper # 88.2000http://www.feem.it

19. 19 Private and social marginal costs

20. 20 Labor mkt response to eff. wage

21. 21 Is there a double dividend? Pollution tax raises revenue (area A) and improves welfare by area B –Can use A to reduce income tax rate --> DD through reduction in DWL (area C) But fall in real net wage when tax costs are passed on –RNW = W(1 - t)/P, so tax/price equivalence –If |dP| > |dt| excess burden could increase (area D) <---