Progress 10/01/15 to 09/30/20
Outputs
Target Audience:My target audience during the during the project period consists of undergraduate and PhD level students (30%) and (ii) professiona economists in academia and government agencies(70%). For the first group much of my effort has been devoted to writing text books and accompanying lecture slides. I have written two textbooks during the project period and am working on a third. For the second group I have written academic papers and made conference presentations. Changes/Problems:The textbooks were straightforward, although extremely time-consuming. However, the success of the research projects, particularly those culminating in the two major papers, was highly uncertain at the beginning of the research period. It would be accurate to describe the research in both cases as a long series of problems that required changes, which lead to more problems, and so on. For example, my major co-authored paper required an entirely new algorithm, based on a new theorem. Without this result, we would have been unable to solve the numerical problem. Once we had the result, we needed to implement it using new computer programs. My second major (sole-authored) paper required several new theorems. To illustrate the results, I made significant changes in the specific model. Those changes resulted in the loss of nearly a year of work. What opportunities for training and professional development has the project provided?My textbook in natural resource economics involved graduate students in helping to write some problem sets. How have the results been disseminated to communities of interest?My primary means of dissemination is through the published papers or books. I also attended many conferences, workshops, and seminars, where I presented parts of the research What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
I published two major peer reviewed papers, one in a "top-five" economics journal, and two other papers in good field journals. I also published (in press) a graduate textbook in international trade. My top journal publication (coauthored with T Iverson) studies equilibria in a climate model when agents choose investment, a planner chooses climate policy, and all agents have "time-inconsistent" preferences arising from a particular type of discounting (hyperbolic). We show that the ability of the planner to commit to future plans leads to a rather small increase in welfare. This result is important because it makes models of hyperbolic discounting (without commitment) more relevant for policy decisions. This paper landed in a top-five journal largely because of the difficulty of the problem that it solves. My second major publication during the review period compares the importance, in determining equilibrium climate policy, of increased contemporary international cooperation and increased intergenerational altruism. The paper shows that in plausible circumstances, increased international cooperation is much more important in strengthening climate policy, compared to increased intergenerational altruism. One of my coauthored field journal publications compares outcomes with strategic countries uses either taxes or quantities in controlling greenhouse gas emissions. My second coauthored field journal publication shows how the liklihood of multiple equiibria in a dynamic economy with cross-sectoral spillovers depends on the magnitude of friction that slows the cross-sectoral adjustment of labor. I also published two textbooks during the period. The most important of these is a textbook in natural resouce economics at the undergraduate/Masters level . The second book (in press) is a series of lecture notes in international trade at the Masters/Ph.D. level.
Publications
- Type:
Books
Status:
Awaiting Publication
Year Published:
2021
Citation:
Karp, Larry Lecture Notes in Classical Trade Theory, World Scientific Publishing Company, 2020.
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Progress 10/01/18 to 09/30/19
Outputs
Target Audience:My target audience during the past year has been divided between: (i) undergraduate/masters level students (30%) and (ii) academic economists, including PhD students (70%). For the first category I rewrote lecture notes, based on my 2017 textbook. These lectures were posted on the bcourses. For the second category I improved my graduate-level lecture notes (also available online), I have written academic papers and made conference presentations. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?One of my co-authors is a young assistant professor, at the start of his academic career. Via our joint work, I am able to mentor him. I am also mentoring a graduate student in our department, Wenfeng Qiu. How have the results been disseminated to communities of interest?The results of the research described above have been published in a "top-five" academic journal, and have been incorporated into working papers. These working papers have been presented at international conferences and are in preparation for submission to journals. What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period I will continue to refine several working papers, and expect to submit at least two of them. I am also beginning joint work on new projects, in the same general research area.?
Impacts
What was accomplished under these goals?
My research is primarily theoretical. This research has challenged "received wisdom" in two areas. When people discount their future utility at declining rate, their preferences are "time-inconsistent", meaning that the future decisions that they would like to commit to today will not be carried out by their "future selves". This paper provides new methods that make it possible to compute an equilibrium under this type of discounting. The results show that the ability to tie one's successors' hands, e.g. by means of current investment, is much less valuable than previously thought. Therefore, the welfare loss arising from time inconsistency does not merit the search for expensive "commitment devices" that lock in future policy. Recent research concludes that the ability to bank and borrow emissions permits (i.e., intertemporal trade in permits) does not increase welfare relative to a standard tax or to a quota that cannot be traded across time. My research shows that this conclusion is based on a special case, and that it does not hold in general. There are many circumstances where banking and borrowing increases welfare relative to a tax or a quota that cannot be banked or borrowed. I have also developed a measure of the welfare loss when firms are not permitted to trade permits within the same period.
Publications
- Type:
Journal Articles
Status:
Accepted
Year Published:
2019
Citation:
Carbon taxes and climate commitment with con-constant time preference, with Terrence Iverson, Review of Economic Studies, forthcoming.
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Progress 10/01/17 to 09/30/18
Outputs
Target Audience:My target audience during the past year has been divided between: (i) undergraduate/masters level students (30%) and (ii) academic economists, including PhD students (70%). For the first category I rewrote lecture notes, based on my 2017 textbook. These lectures were posted on the bcourses. For the second category I improved my graduate-level lecture notes (also available online), I have written academic papers and made conference presentations. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?One of my co-authors is a young assistant professor, at the start of his academic career. Via our joint work, I am able to mentor him. How have the results been disseminated to communities of interest?The results of the research described above have been incorporated into working papers. These working papers have been presented at international conferences and are in preparation for submission to journals. What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period I will submit at least two of my current working papers for publication in refereed journals, and I will continue to improve others. I am also beginning joint work on new projects, in the same general research area.
Impacts
What was accomplished under these goals?
My research is primarily theoretical. This research has challenged "received wisdom" in three areas. i)My research has shown that asset markets potentially provide a mechanism that induces self-interested agents to undertake significant efforts to reduce greenhouse gas emissions. This abatement can increase future productivity of currently existing capital by lowering climate-related damages. The higher future productivity can increase the price of currently existing capital, thus benefitting asset owners today. ii)A second strand of research re-examines the question of policy selection when polluting firms have better information about abatement costs than does the regulator. The prevailing view is that carbon taxes are a more efficient policy instrument than cap and trade. We show theoretically why this conclusion may be false, and we demonstrate empirically that the reversal can be important. We also challenge an emerging view that claims that allowing firms to bank and borrow permits from one period to another does not increase welfare, relative to a simpler cap and trade or tax policy. iii) A prevailing view asserts that International Environmental Agreements are very unlikely to succeed unless there exists an external threat, such as trade sanctions, to induce countries to join the agreement. We explain why this conclusion is likely to be false, and we demonstrate the importance of negotiators' beliefs about the likelihood of achieving a successful agreement, on the probability that such an agreement actually emerges from negotiations.
Publications
- Type:
Other
Status:
Under Review
Year Published:
2018
Citation:
My research products during the past year are in the form of working papers, which have not yet been published.
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Progress 10/01/16 to 09/30/17
Outputs
Target Audience:My target audience during the past year has been evenly divided between: (i) undergraduate/masters level students and (ii) academic economists, including PhD students. For the first category I finished a textbook and wrote solution keys for problems in the book, and lecture slides to accompany the book. For the second category I continued working on academic papers. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?Several of my co-authors are young assistant professors, at the start of their academic career. Via our joint work, I am able to mentor them. How have the results been disseminated to communities of interest?The results of the research described above have been incorporated into working papers. These working papers have been presented at international conferences and are in preparation for submission to journals. What do you plan to do during the next reporting period to accomplish the goals?During the next reporting period I will submit at least two of my current working papers for publication in refereed journals, and I will continue to improve others. I am also beginning joint work on new projects, in the same general research area.
Impacts
What was accomplished under these goals?
Most of my academic research during this period has focused on the role of asset markets in providing incentives for selfish agents to undertake costly environmental policy. In the standard setting, people undertake costly policy either because of intergenerational altruism (their concern for future generations) or because they will directly benefit from that policy later in their own life. However, the price of assets (e.g. capital) incorporates beliefs about the future productivity of those assets. Current environmental policy (e.g to reduce greenhouse gas emissions) can increase future economic productivity, thereby increasing the value (and price) of current assets. Current asset owners benefit from this policy-induced price change even if they will not be alive to enjoy the direct benefits of the policy (a cleaner environment) and even if they do not care about their successors' welfare. Our research investigates the incentives, arising from asset markets, for selfish agents to undertake costly environmental policy.
Publications
- Type:
Other
Status:
Published
Year Published:
2017
Citation:
Answer key to problem sets and Lectures to accompany the textbook:
Karp, Larry Natural Resources as Capital, MIT Press, 2017.
- Type:
Journal Articles
Status:
Published
Year Published:
2016
Citation:
Karp, Larry and Sauleh Siddiqui and Jon Strand Dynamic climate policy with both strategic and non-strategic agents: taxes versus quantities Environmental and Resource Economics vol. 65 pp 135 158 2016
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Progress 10/01/15 to 09/30/16
Outputs
Target Audience:Much of my research effort during the past three years, and especially the past year, has been devoted to writing an undergraduate/Masters level textbook on resource economics (forthcoming at MIT Press). Here, my target audience has been undergraduate and masters students and instructors of those courses. I have also worked on research directed to academic economists, including graduate students. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?My in-progress textbook has been used in undergraduate courses in the US, Canada, and Europe. I have used it to help train graduate students to develop lecture notes. How have the results been disseminated to communities of interest?I gave invited papers at two academic conferences, in Singapore and Amsterdam. I have distributed advance copies of my MIT textbook to colleagues across the world. Many of these people sent me valuable comments, and some have already began to use the book, despite it not having been published.? What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
Most research in dynamic environmental/resource problems uses the fiction of a "social planner" who chooses policy to maximize the discounted stream of future utility or welfare. This model has been productive, but it cannot distinguish between intra- and inter-generational transfers. For example, current actions to reduce carbon emissions (climate policy) typically creates current costs, and may benefit currently living people late in their life, and also benefit future generations. The infinitely lived agent model is unable to distinguish between these two types of transfers. A large part of my research uses a different paradigm, based on overlapping generations. In both sole- and jointly-authored papers, I show how equilibrium policy in this setting emerges from a dynamic game involving a sequence of "players" consisting of young and old generations. The players' identity changes as the young age and the old die off, and are replaced by new young. This type of model is closely related to a model of non-constant discounting. I have extended this setting to include the situation where the representatives of multiple nations, each of which consists of overlapping generations, choose climate policy non-cooperatively. This model enables me to show how intergenerational altruism and intergenerational equity interact in the formation of equilibrium climate policy, and to compare the relative importance of these in determining policy. Another research topic shows that, contrary to a widely cited paper catastrophes and discounting may be equally important in determining optimal climate policy.
Publications
- Type:
Book Chapters
Status:
Awaiting Publication
Year Published:
2017
Citation:
Karp, Larry Discounting and the Evaluation of Climate Policy in The Economics of the Global Environment Catastrophic Risks in Theory and Practice, Graciela Chichilinski and Armon Rezai, Ed, Springer International, 2016
- Type:
Books
Status:
Awaiting Publication
Year Published:
2017
Citation:
Karp, Larry Natural Resources as Capital, MIT Press, 2017.
- Type:
Journal Articles
Status:
Awaiting Publication
Year Published:
2017
Citation:
Karp, Larry Provision of a Public Good with Many Dynasties , forthcoming, Economic Journal, 2017.
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