Research Seminar, Summer Term 2005

ETH Zurich
Summer Term 2005

Monday, 5:15 pm to 7:00 pm (there are 2 exceptions from this rule)
ETH Zurich, Room ZUE G1 (Zürichbergstrasse 18)

Everyone who is interested is cordially invited!

If you would like to receive our weekly invitation via e-mail, or if you have any other question, please send an e-mail to Thomas Steger.

 

Andreas Ziegler: "What Determines the Inclusion in a Sustainability Stock Index? A Panel Data Analysis for European Companies"

This paper examines the determinants of the inclusion of companies in the Dow Jones STOXX Sustainability Index. The preliminary panel probit analysis with European companies in the Dow Jones STOXXSM 600 Index shows that unobserved heterogeneity, measured by time invariant random effects and an autoregressive structure in the stochastic components, is an important factor. Furthermore, the probability to be part of the Dow Jones STOXX Sustainability Index strongly decreases if a company does not respond to the written survey. Economic performance in the past surprisingly has no significant influence or even a weakly negative influence on the inclusion in this sustainability stock index. We conclude that the internal assessment process matters for the view on corporate sustainability performance. Another conclusion is that due to the strong state dependence, biased and inconsistent estimations are likely if the determinants of corporate sustainability performance are investigated with cross-sectional data.

 

Stefan Baumgaertner: "Insurance and sustainability from conservative ecosystem management"

In the face of uncertainty, ecosystems can provide insurance to risk verse users of these systems. In the first part of the presentation, we employ a conceptual ecological-economic model to analyze the allocation of (endogenous) risk and environmental quality by risk averse decision makers, who can decide upon ecosystem management and who have access to financial insurance, and study the implications for optimal ecosystem management and policy design. It turns out that there is a direct interaction between availability of financial insurance on the one hand, and ecosystem management and quality on the other hand, as both allow a risk-averse decision maker to hedge their income risk. This has important implications for the design of economic and environmental policies. In the second part of the presentation, we put these insights into the specific context of grazing management in semi-arid rangelands and explore their implications in terms of sustainability. For that sake, we analyze a dynamic and stochastic ecological-economic model of grazing management in semi-arid rangelands. The non-equilibrium ecosystem is driven by stochastic precipitation. A risk averse farmer chooses a grazing management strategy under uncertainty such as to maximize expected utility from farming income. Grazing management strategies are rules about which share of the rangeland is given rest depending on the actual rainfall in that year. We conclude that the more risk averse a farmer is, the more conservative and sustainable is his short-term optimal grazing management strategy, even if he has no specific preference for the distant future.

 

Yu-chin Chen: "Commodity Currencies"

This paper investigates the empirical disconnect between exchange rates and economic fundamentals that is at the heart of several exchange rate puzzles. In contrast to a literature characterized by notoriously poor in-sample fits and out-of-sample forecast failures, we find that for three major OECD primary commodity producers, nominal exchange rates exhibit a robust response to movements in the world prices of their corresponding commodity exports. Moreover, incorporating commodity export prices into standard exchange rate models can generate a marked improvement in their in-sample performance. In terms of out-of-sample forecast, several commodity-price-augmented specifications offer clear evidence of exchange rate predictability, after accounting for small-sample bias and size distortion in asymptotic tests. However, no single specification is found to provide a consistent forecast improvement over a random walk at all horizons and across all currency pairs. The empirical approach and evidence shown in this paper can be applied to a much wider set of countries and have particular relevance for monetary policy and inflation control in small commodity ecomomics.

 

Phu Nguyen Van : "Economic development and CO2 emissions"

We examine the empirical relation between CO2 emissions per capita and GDP per capita during the period 1960-1996, using a panel of countries. Relying on the nonparametric poolability test of Baltagi et al. (1996), we find evidence of structural stability of the relationship. We then specify a nonparametric panel data model with fixed effects which accounts for heterogeneity and heteroskedasticity across countries. Estimation results show that this relationship is upward sloping. Nonparametric specification tests do not reject monotonicity but do reject the polynomial functional form which leads to
the environmental Kuznets curve in several studies.

 

Scott Taylor: " Trade, tragedy, and the commons "

We develop a theory of resource management where the degree to which countries escape the tragedy of the commons is endogenously determined and explicitly linked to changes in world prices and other possible effects of market integration. We show how changes in world prices can move some countries from de facto open access situations to ones where management replicates that of an unconstrained social planner. Not all countries can follow this path of institutional reform and we identify key country characteristics (mortality rates, resource growth rates, technology) to divide the world's set of resource rich countries into Hardin, Ostrom and Clark economies. Hardin economies are not able to manage their renewable resources at any world price, have zero rents and suffer from the tragedy of the commons. Ostrom economies exhibit de facto open access and zero rents for low resource prices, but can maintain a limited form of resource management at higher prices. Clark economies can implement fully efficient management and do so when resource prices are sufficiently high. The model shows heterogeneity in the success of resource management is to be xpected, and neutral technological progress works to undermine the efficacy of property rights institutions.