The Index of Sustainable Economic Welfare (ISEW) has been calculated for many countries, but rare... more The Index of Sustainable Economic Welfare (ISEW) has been calculated for many countries, but rarely at the local level. This paper shows how the index has been calculated for the Province of Siena, Central Italy. The whole procedure is illustrated step by step, including the search for the most suitable and precise methods to obtain reliable values for each item composing the index. Application of ISEW at a very local level was found to be feasible. The most general difficulty encountered was the lack of an adequate institutionalised source of statistical information to support the construction of indicators other than purely economic or demographic ones. The availability of data depends on the interest in implementing projects of sustainable management of natural resources and land on the part of local authorities and their consequent willingness to invest money and human resources on such projects. The ISEW is a good tool for local environmental policy, because it gives a more realistic representation of the well-being of the population than GDP, since it includes environmental and social items not considered in conventional national accounting. Furthermore, in Italy, the principle of administrative decentralization has been implemented in recent years to such an extent that the central government devolved part of its power to Regions, Provinces and Municipalities. Arguably, local authorities should therefore allocate more resources to pursue their policies towards sustainability, an issue which modern electoral campaigns are often based on. The results for the Province of Siena show that there is a large gap between local GDP and ISEW (about 37% of GDP).
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. Th... more This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. The empirical analysis is based on an entirely new dataset. Because the tobacco sector was mostly managed by the state, rich and detailed historical documentation is available. Price elasticities are estimated both for aggregate tobacco consumption and its four major components (cigars, cigarettes, cut tobacco, and snuff) for three separate sub-periods: 1871-1913, 1919-1939, and 1946-2010. Elasticities consistently belong to a narrow set. We discuss the public policy implications of a seemingly iso-elastic tobacco demand function.
We use a sample of 43,700 observations on Italian households’ current expenditures to investigate... more We use a sample of 43,700 observations on Italian households’ current expenditures to investigate consumption patterns from 1997 to 2004, a time period which encompasses the introduction of the Euro. Compensated and uncompensated price elasticities and expenditure elasticities for ten goods and heterogeneous households are obtained from the estimated parameters of a complete Censored non linear Almost Ideal Demand System (CAIDS) with demographic shifters. To tackle the problem of corner solutions for some goods we adopt the Two Step estimator proposed by Shonkweiler and Yen (1999). Parametric equivalence scales for the investigation period 1997-2004 are also computed for households with different demographic composition and different geographical location.
Since the end of the eighties the Becker and Murphy model of rational addiction has been the domi... more Since the end of the eighties the Becker and Murphy model of rational addiction has been the dominant approach to estimate addiction effects. A rational addictive consumer, a smoker for instance, is supposed to maximize over the life cycle a stable utility function and to be fully aware of the future consequences of her addiction and chooses to be an addicted because she evaluates the benefits of addiction to be greater than its full costs. It follows that public policy should not interfere with such fully rational behaviour. On the other hand, the additional public health care costs smokers impose on non smokers could be internalised using price mechanisms, as the long run price elasticity of demand is supposed to be significantly higher than the short run one. This work tries to assess, through a review of the literature, whether the idea of rational addiction is robust, with a focus on smoking behaviour.
This article deals with the estimation of parametric equivalence scales for Italian households wi... more This article deals with the estimation of parametric equivalence scales for Italian households with different demographic characteristics: composition, location and number of employed members in the household. Using a sample of 43,701 observations on monthly current expenditures from 1997 to 2004 we estimate a demand system for ten goods and we tackle the problem of corner solutions for some goods adopting the Two Step estimator proposed by Shonkweiler and Yen (Am J Agric Econ 81:972–982, 1999). The consumption behavior of households is also analyzed calculating compensated, uncompensated and expenditure elasticites for each commodity. By considering households that differ in composition (number of children), geographic location (four-different macro-areas of Italy), and number of employed adults, we allow for a range of useful comparisons. KeywordsEquivalence scales-Demand analysis-Censoring JEL ClassificationsD11-D12
This paper surveys existing approaches and empirical results to estimating the impact of Clean In... more This paper surveys existing approaches and empirical results to estimating the impact of Clean Indoor Air Laws on smoking behaviour, on the one hand, and on the hospitality industry, on the other. The purpose is twofold: first, identifying important gaps, if any, in the literature that could be addressed in future research; second, trying to unfold the reasons of the wide heterogeneity in the results and, as a consequence, to provide an assessment of the reliability of those results. The discussion begins with a look at the recent regulations that motivate the study of the impact of Clean Indoor Air Laws, with a special emphasis on European smoking bans. This is followed by critical reviews of studies and approaches to estimating the economic impact of Clean Indoor Air Laws. We can distinguish between a direct and an indirect effect of anti-smoking regulations: the direct effect on smoking behavior and the indirect effect on the economic performance of the hospitality industry. The first review assesses those studies and approaches that have focused on the direct impact on smoking behaviour. The second review analyzes estimation of the economic impact on the hospitality industry. At the end of each of the two broad reviews, we summarize a selection of the empirical findings. The fifth section explores methodological differences and problems that may affect the empirical analysis reviewed in the previous sections with the purpose of shedding light on the wide heterogeneity in the empirical findings. The concluding section asks whether the studies reviewed in this paper place us in a better position to assess the economic impact of Clean Indoor Air Laws. JEL Classification: I18; K32
In this work the welfare effects and the distributive impact on Italian households of the Italian... more In this work the welfare effects and the distributive impact on Italian households of the Italian Carbon tax are calculated. The Carbon tax has been introduced in Italy at the beginning of 1999 asking for smooth increases, over a number of years, in the prices of most fossil fuels. Its welfare effects have been calculated using True Cost of Living index numbers and the Compensating Variation. The parameters have been obtained through estimation of a complete Almost Ideal demand system, using households data from 1985 to 1996. The welfare loss turns out to be quite substantial and affects Italian households in a non-negligible way, but the distribution of welfare losses across different levels of total monthly expenditures does not allow sustaining the regressivity of Carbon taxation, as the effect becomes bigger as we move up the income distribution. This evidence might encourage the use of Carbon taxes, at least in the transport sector, as cost-effective instruments of environmenta...
This article deals with the estimation of parametric equivalence scales for Italian households wi... more This article deals with the estimation of parametric equivalence scales for Italian households with different demographic characteristics: composition, location and number of employed members in the household. Using a sample of 43,701 observations on monthly current expenditures from 1997 to 2004 we estimate a demand system for ten goods and we tackle the problem of corner solutions for some goods adopting the Two Step estimator proposed by Shonkweiler and Yen (Am J Agric Econ 81:972-982, 1999). The consumption behavior of households is also analyzed calculating compensated, uncompensated and expenditure elasticites for each commodity. By considering households that differ in composition (number of children), geographic location (four-different macro-areas of Italy), and number of employed adults, we allow for a range of useful comparisons.
We try to build a macroeconomic index, that includes some non-market variables, to be compared to... more We try to build a macroeconomic index, that includes some non-market variables, to be compared to the traditional GDP. Over the last twenty years answers to the welfare accounting problem have been different. Economists have used dynamic optimization to rigorously derive an index that can be used to evaluate small projects and their contribution to well being. National Accountants are trying to extend the System of National Accounts (SNA) in the form of satellite accounts by increasing the system boundary. There is also a number of other studies which cannot be included in either of the previous categories and that we may call indices of welfare. They are not rigorously founded and start from common sense ideas of what should and what should not be considered as determinants of well being. This type of indices, however, has received wide attention thanks to their immediate comparability with GDP and to their characteristic of emphasizing the long run trend of "welfare" as ...
The paper explores the role of Environmental Defensive Expenditures in the consumption behaviour ... more The paper explores the role of Environmental Defensive Expenditures in the consumption behaviour of Italian households. Environmental Defensive Expenditures are not borne to increase households' welfare, but to prevent or avoid the effects of a worsening environmental quality. The literature on environmental accounting argues that economic growth in industrialized countries is accompanied by an increasing load of defensive activities that may lead to a reorientation of consumption behaviour. In this work this hypothesis is tested using annual data on mean consumption expenditures of Italian households from 1985 to 1996. A complete system of demand is estimated and short-run price elasticities of demand for Defensive Expenditures are calculated. The complete system of demand functions is specified using the Quadratic Almost Ideal Demand System proposed by Banks, Blundell and Lewbel. Results show that there is very low substitution between the demand for the six aggregate goods in...
This paper deals with the valuation of some negative external effects arising from agricultural p... more This paper deals with the valuation of some negative external effects arising from agricultural production in Italy. External effects are treated in a transformation function as a ‘bad’ output additional to the normal output of a production activity. In this case we can distinguish a price component or shadow price of the external effect and a quantity component and estimate them separately. In order to calculate the price component of the external effects we first estimate one point on the marginal external costs curve and then try to obtain the whole curve, i.e. external costs associated to different levels of emissions in different years. As to the quantity component, net emissions of Nitrogen, Phosphorus and Potassium have been estimated. The aggregate value of external effects is then calculated for thirty years from 1961 to 1991 and deducted from the value added of the agricultural sector, as a first step towards the correction of national accounting aggregates to take environ...
In this paper we estimate the demand for alcoholic beverages in Italy following the rational addi... more In this paper we estimate the demand for alcoholic beverages in Italy following the rational addiction framework by Becker and Murphy (1988) and using a GMM estimator. To increase confidence on the reliability of such framework we use two different data sets: (i) a time series of annual aggregate alcohol consumption from 1960 to 2002 supplied by ISTAT; (ii) a time series of households' data on wine, beer and liquors consumption recorded on a four-week basis from 1999:3 to 2004:4 and supplied by ISMEA-Nielsen. Both data sets support the hypothesis that alcohol consumers are actually forward looking. Past consumption is significant in explain- ing current consumption thus detecting the addictive nature of alcohol. Short and long run price elasticities as well as the income elasticity of demand are also cal- culated. Interestingly, the long run income elasticity of demand, as derived from the rational addiction model, is higher than one both for aggregate and specific products so t...
-Price and non-price factors affecting acreage response of wheat in different agro-ecological zon... more -Price and non-price factors affecting acreage response of wheat in different agro-ecological zones in Punjab: A co-integration analysis by Mohammad, S.(University of Agriculture, Faisalabad (Pakistan). Faculty of Agricultural Economics and Rur...(2007) in (En)
The modelling of production in microeconomics has been the subject of heated debate. The controve... more The modelling of production in microeconomics has been the subject of heated debate. The controversial issues include the substitutability between production inputs, the role of time and the economic consequences of irreversibility in the production process. A case in point is the use of Cobb-Douglas type production functions. This approach completely ignores the physical process underlying the production of a good. We examine these issues in the context of the production of a basic commodity (such as copper or aluminium). We model the extraction and the refinement of a valuable substance which is mixed with waste material, in a way which is fully consistent with the physical constraints of the process. The resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used. We analyze the equilibrium pricing of a commodity extracted in an irreversible way. The thermodynamic model allows for the calculation of the "energy yield" (energy return on energy invested) of production alongside a financial (real) return in a twoperiod investment decision. The two investment criteria correspond in our economy to a different choice of numeraire and means of payment and corresponding views of the value of energy resources. Under an energy numeraire, energy resources will naturally be used in a more parsimonious way.
Abstract - Strategic market interaction is here modelled as a two-stage game in which potential e... more Abstract - Strategic market interaction is here modelled as a two-stage game in which potential entrants choose capacities and active firms compete in prices. Due to capital indivisibility, the capacity choice is made from a finite grid and there are substantial economies of scale. In ...
The Index of Sustainable Economic Welfare (ISEW) has been calculated for many countries, but rare... more The Index of Sustainable Economic Welfare (ISEW) has been calculated for many countries, but rarely at the local level. This paper shows how the index has been calculated for the Province of Siena, Central Italy. The whole procedure is illustrated step by step, including the search for the most suitable and precise methods to obtain reliable values for each item composing the index. Application of ISEW at a very local level was found to be feasible. The most general difficulty encountered was the lack of an adequate institutionalised source of statistical information to support the construction of indicators other than purely economic or demographic ones. The availability of data depends on the interest in implementing projects of sustainable management of natural resources and land on the part of local authorities and their consequent willingness to invest money and human resources on such projects. The ISEW is a good tool for local environmental policy, because it gives a more realistic representation of the well-being of the population than GDP, since it includes environmental and social items not considered in conventional national accounting. Furthermore, in Italy, the principle of administrative decentralization has been implemented in recent years to such an extent that the central government devolved part of its power to Regions, Provinces and Municipalities. Arguably, local authorities should therefore allocate more resources to pursue their policies towards sustainability, an issue which modern electoral campaigns are often based on. The results for the Province of Siena show that there is a large gap between local GDP and ISEW (about 37% of GDP).
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. Th... more This paper estimates dynamic demand models for tobacco consumption in Italy from 1871 to 2010. The empirical analysis is based on an entirely new dataset. Because the tobacco sector was mostly managed by the state, rich and detailed historical documentation is available. Price elasticities are estimated both for aggregate tobacco consumption and its four major components (cigars, cigarettes, cut tobacco, and snuff) for three separate sub-periods: 1871-1913, 1919-1939, and 1946-2010. Elasticities consistently belong to a narrow set. We discuss the public policy implications of a seemingly iso-elastic tobacco demand function.
We use a sample of 43,700 observations on Italian households’ current expenditures to investigate... more We use a sample of 43,700 observations on Italian households’ current expenditures to investigate consumption patterns from 1997 to 2004, a time period which encompasses the introduction of the Euro. Compensated and uncompensated price elasticities and expenditure elasticities for ten goods and heterogeneous households are obtained from the estimated parameters of a complete Censored non linear Almost Ideal Demand System (CAIDS) with demographic shifters. To tackle the problem of corner solutions for some goods we adopt the Two Step estimator proposed by Shonkweiler and Yen (1999). Parametric equivalence scales for the investigation period 1997-2004 are also computed for households with different demographic composition and different geographical location.
Since the end of the eighties the Becker and Murphy model of rational addiction has been the domi... more Since the end of the eighties the Becker and Murphy model of rational addiction has been the dominant approach to estimate addiction effects. A rational addictive consumer, a smoker for instance, is supposed to maximize over the life cycle a stable utility function and to be fully aware of the future consequences of her addiction and chooses to be an addicted because she evaluates the benefits of addiction to be greater than its full costs. It follows that public policy should not interfere with such fully rational behaviour. On the other hand, the additional public health care costs smokers impose on non smokers could be internalised using price mechanisms, as the long run price elasticity of demand is supposed to be significantly higher than the short run one. This work tries to assess, through a review of the literature, whether the idea of rational addiction is robust, with a focus on smoking behaviour.
This article deals with the estimation of parametric equivalence scales for Italian households wi... more This article deals with the estimation of parametric equivalence scales for Italian households with different demographic characteristics: composition, location and number of employed members in the household. Using a sample of 43,701 observations on monthly current expenditures from 1997 to 2004 we estimate a demand system for ten goods and we tackle the problem of corner solutions for some goods adopting the Two Step estimator proposed by Shonkweiler and Yen (Am J Agric Econ 81:972–982, 1999). The consumption behavior of households is also analyzed calculating compensated, uncompensated and expenditure elasticites for each commodity. By considering households that differ in composition (number of children), geographic location (four-different macro-areas of Italy), and number of employed adults, we allow for a range of useful comparisons. KeywordsEquivalence scales-Demand analysis-Censoring JEL ClassificationsD11-D12
This paper surveys existing approaches and empirical results to estimating the impact of Clean In... more This paper surveys existing approaches and empirical results to estimating the impact of Clean Indoor Air Laws on smoking behaviour, on the one hand, and on the hospitality industry, on the other. The purpose is twofold: first, identifying important gaps, if any, in the literature that could be addressed in future research; second, trying to unfold the reasons of the wide heterogeneity in the results and, as a consequence, to provide an assessment of the reliability of those results. The discussion begins with a look at the recent regulations that motivate the study of the impact of Clean Indoor Air Laws, with a special emphasis on European smoking bans. This is followed by critical reviews of studies and approaches to estimating the economic impact of Clean Indoor Air Laws. We can distinguish between a direct and an indirect effect of anti-smoking regulations: the direct effect on smoking behavior and the indirect effect on the economic performance of the hospitality industry. The first review assesses those studies and approaches that have focused on the direct impact on smoking behaviour. The second review analyzes estimation of the economic impact on the hospitality industry. At the end of each of the two broad reviews, we summarize a selection of the empirical findings. The fifth section explores methodological differences and problems that may affect the empirical analysis reviewed in the previous sections with the purpose of shedding light on the wide heterogeneity in the empirical findings. The concluding section asks whether the studies reviewed in this paper place us in a better position to assess the economic impact of Clean Indoor Air Laws. JEL Classification: I18; K32
In this work the welfare effects and the distributive impact on Italian households of the Italian... more In this work the welfare effects and the distributive impact on Italian households of the Italian Carbon tax are calculated. The Carbon tax has been introduced in Italy at the beginning of 1999 asking for smooth increases, over a number of years, in the prices of most fossil fuels. Its welfare effects have been calculated using True Cost of Living index numbers and the Compensating Variation. The parameters have been obtained through estimation of a complete Almost Ideal demand system, using households data from 1985 to 1996. The welfare loss turns out to be quite substantial and affects Italian households in a non-negligible way, but the distribution of welfare losses across different levels of total monthly expenditures does not allow sustaining the regressivity of Carbon taxation, as the effect becomes bigger as we move up the income distribution. This evidence might encourage the use of Carbon taxes, at least in the transport sector, as cost-effective instruments of environmenta...
This article deals with the estimation of parametric equivalence scales for Italian households wi... more This article deals with the estimation of parametric equivalence scales for Italian households with different demographic characteristics: composition, location and number of employed members in the household. Using a sample of 43,701 observations on monthly current expenditures from 1997 to 2004 we estimate a demand system for ten goods and we tackle the problem of corner solutions for some goods adopting the Two Step estimator proposed by Shonkweiler and Yen (Am J Agric Econ 81:972-982, 1999). The consumption behavior of households is also analyzed calculating compensated, uncompensated and expenditure elasticites for each commodity. By considering households that differ in composition (number of children), geographic location (four-different macro-areas of Italy), and number of employed adults, we allow for a range of useful comparisons.
We try to build a macroeconomic index, that includes some non-market variables, to be compared to... more We try to build a macroeconomic index, that includes some non-market variables, to be compared to the traditional GDP. Over the last twenty years answers to the welfare accounting problem have been different. Economists have used dynamic optimization to rigorously derive an index that can be used to evaluate small projects and their contribution to well being. National Accountants are trying to extend the System of National Accounts (SNA) in the form of satellite accounts by increasing the system boundary. There is also a number of other studies which cannot be included in either of the previous categories and that we may call indices of welfare. They are not rigorously founded and start from common sense ideas of what should and what should not be considered as determinants of well being. This type of indices, however, has received wide attention thanks to their immediate comparability with GDP and to their characteristic of emphasizing the long run trend of "welfare" as ...
The paper explores the role of Environmental Defensive Expenditures in the consumption behaviour ... more The paper explores the role of Environmental Defensive Expenditures in the consumption behaviour of Italian households. Environmental Defensive Expenditures are not borne to increase households' welfare, but to prevent or avoid the effects of a worsening environmental quality. The literature on environmental accounting argues that economic growth in industrialized countries is accompanied by an increasing load of defensive activities that may lead to a reorientation of consumption behaviour. In this work this hypothesis is tested using annual data on mean consumption expenditures of Italian households from 1985 to 1996. A complete system of demand is estimated and short-run price elasticities of demand for Defensive Expenditures are calculated. The complete system of demand functions is specified using the Quadratic Almost Ideal Demand System proposed by Banks, Blundell and Lewbel. Results show that there is very low substitution between the demand for the six aggregate goods in...
This paper deals with the valuation of some negative external effects arising from agricultural p... more This paper deals with the valuation of some negative external effects arising from agricultural production in Italy. External effects are treated in a transformation function as a ‘bad’ output additional to the normal output of a production activity. In this case we can distinguish a price component or shadow price of the external effect and a quantity component and estimate them separately. In order to calculate the price component of the external effects we first estimate one point on the marginal external costs curve and then try to obtain the whole curve, i.e. external costs associated to different levels of emissions in different years. As to the quantity component, net emissions of Nitrogen, Phosphorus and Potassium have been estimated. The aggregate value of external effects is then calculated for thirty years from 1961 to 1991 and deducted from the value added of the agricultural sector, as a first step towards the correction of national accounting aggregates to take environ...
In this paper we estimate the demand for alcoholic beverages in Italy following the rational addi... more In this paper we estimate the demand for alcoholic beverages in Italy following the rational addiction framework by Becker and Murphy (1988) and using a GMM estimator. To increase confidence on the reliability of such framework we use two different data sets: (i) a time series of annual aggregate alcohol consumption from 1960 to 2002 supplied by ISTAT; (ii) a time series of households' data on wine, beer and liquors consumption recorded on a four-week basis from 1999:3 to 2004:4 and supplied by ISMEA-Nielsen. Both data sets support the hypothesis that alcohol consumers are actually forward looking. Past consumption is significant in explain- ing current consumption thus detecting the addictive nature of alcohol. Short and long run price elasticities as well as the income elasticity of demand are also cal- culated. Interestingly, the long run income elasticity of demand, as derived from the rational addiction model, is higher than one both for aggregate and specific products so t...
-Price and non-price factors affecting acreage response of wheat in different agro-ecological zon... more -Price and non-price factors affecting acreage response of wheat in different agro-ecological zones in Punjab: A co-integration analysis by Mohammad, S.(University of Agriculture, Faisalabad (Pakistan). Faculty of Agricultural Economics and Rur...(2007) in (En)
The modelling of production in microeconomics has been the subject of heated debate. The controve... more The modelling of production in microeconomics has been the subject of heated debate. The controversial issues include the substitutability between production inputs, the role of time and the economic consequences of irreversibility in the production process. A case in point is the use of Cobb-Douglas type production functions. This approach completely ignores the physical process underlying the production of a good. We examine these issues in the context of the production of a basic commodity (such as copper or aluminium). We model the extraction and the refinement of a valuable substance which is mixed with waste material, in a way which is fully consistent with the physical constraints of the process. The resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used. We analyze the equilibrium pricing of a commodity extracted in an irreversible way. The thermodynamic model allows for the calculation of the "energy yield" (energy return on energy invested) of production alongside a financial (real) return in a twoperiod investment decision. The two investment criteria correspond in our economy to a different choice of numeraire and means of payment and corresponding views of the value of energy resources. Under an energy numeraire, energy resources will naturally be used in a more parsimonious way.
Abstract - Strategic market interaction is here modelled as a two-stage game in which potential e... more Abstract - Strategic market interaction is here modelled as a two-stage game in which potential entrants choose capacities and active firms compete in prices. Due to capital indivisibility, the capacity choice is made from a finite grid and there are substantial economies of scale. In ...
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