Seminar on Economics

Cap and (Frictional) Trade vs. Carbon Tax 

Speaker: Prof. Kuk Mo JUNG

Associate Professor

School of Economics

Sogang University

Abstract:

We develop an equilibrium model of an over-the-counter emissions trading scheme, characterized by intermediation, search and bargaining frictions, and firm-specific abatement cost shocks. The interdealer permit price, intermediation fees, bid-ask spreads, and the distribution of permit holdings are all endogenously determined in the model. We analyze how these equilibrium prices and quantities respond to changes in the microstructure of the emissions trading scheme, the distribution of firm-specific abatement cost shocks, and the elasticity of the damage function with respect to carbon stocks. Through this analysis, we also shed new light on the ongoing debate about the ranking of carbon tax versus cap-and-trade for climate policy. Unlike Weitzman (1974) in which carbon taxes dominate the cap-and-trade system in the case of stock pollutants, our model predicts that the opposite can be true because trading frictions in the cap-and-trade system can lessen the negative externalities caused by abatement cost uncertainty. Calibrating our model parameters to transaction data from the EU ETS, we find evidence supporting our prediction.

Date: 21 August 2024 (Wednesday)

Time : 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics

Multi-period Matching: Stability, and Non-cooperative Foundations

Speaker: Prof. Sambuddha GHOSH

Associate Professor

Department of Economics

Shanghai University of Finance & Economics

Abstract:

We study a multi-period version of the classic “marriage problem”. Specifically, two fixed and disjoint sets of agents live for T periods, and match in every period with exactly one partner from the other set or oneself. No monetary transfers are involved. Preferences over continuation matches may depend on past matches. We first introduce two notions of stability for the above multi-period marriage problem — prudent stability, and instantaneous stability. Agents in both definitions compare the equilibrium to their worst-case scenario when they contemplate blocking.  We then pursue the “Nash programme” for multi-period marriage problems by linking our notions of stability to equilibria of two non-cooperative matching games, each lasting for T periods. The first of these games has one-sided sequential proposals; any pure SPNE of this produces a prudently stable matching. This readily implies the existence of a prudently stable matching. The second game involves two-sided simultaneous proposals. A pure pairwise SPNE (i.e. no mutually profitable pairwise deviations exist) produces an instantaneously stable matching. Thus, both cooperative notions emerge in two natural non-cooperative games.

Date: 22 May 2024 (Wednesday)

Time : 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics

The “China Initiative”: Its Impacts on US-China Academic Collaboration and Beyond

Speaker: Prof. Yanrui WU

Professor of Economics

UWA Business School

University of Western Australia

Abstract:

This paper investigates the impact on US-China academic collaborations of the “China Initiative” program launched by the Trump administration in November 2018. It adopts the difference-in-difference method to analyse data of the world’s top innovative countries over the period of 2016-2022. It is shown that US-China academic collaboration suffered significantly due to this program. Furthermore, the impact goes beyond the US-China bilateral partnership as this program also affects other key scientific collaborations between China and some advanced economies. An analysis of disciplinary heterogeneity shows that the impact was particularly evident in the fields of nature science and engineering as well as in the fields which have no clear links with national security such as medical and health sciences. However, our empirical evidence also demonstrates that, after the announcement of the “China Initiative”, both domestic academic collaboration in China and international collaboration between China and non-western countries experienced rapid growth. As a result, the total number of China’s research publications involving international collaborations has maintained a steadily rising trend.

Date: 29 April 2024 (Monday)

Time : 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics

“Is Public Debt Neutral under Money Financing? New Evidence from Developing Countries”

Speaker: Prof. Ahmed M. KHALID

Professor of Economics

UBD School of Business and Economics

Universiti Brunei Darussalam

Abstract:

Contrary to the conventional macroeconomic theory the Ricardian Equivalence Proposition (henceforth, REP) negates the real economic effects of debt-financed fiscal deficits. Although, this proposition is based on some very unrealistic assumptions leading to its invalidity, the empirical evidence is non-conclusive, some rejecting the proposition while others supporting its validity. The scenario becomes even more difficult when debt is financed though inflationary financing (printing money) instead of taxes. Since inflationary financing has distortionary effects, it invalidates the basic underlying assumption of the REP which allows only lump-sum taxes. This situation is true for most developing countries which have an inefficient system of taxation and a lack of a well-established financial/bond market. Therefore, the aim of this paper is to test the validity of REP under money-finance fiscal deficits. We develop an Overlapping Generation Model (OLG) using money balances as an argument in the utility function and then test the model using the full-information maximum likelihood (FIML) techniques for a sample of developing countries. The initial results indicate a wide rejection of the REP. The absence of an infinite horizon seems to be the main source of the rejection of REP in our sample.

Date: 24 April 2024 (Wednesday)

Time : 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics

“Finding All Stable Matchings with Assignment Constraints”

Speaker: Prof. Philip Ruane NEARY

Lecturer,

Department of Economics,

Royal Holloway University of London

Abstract:

In this paper we consider stable matchings subject to assignment constraints. These are matchings that require certain assigned pairs to be included, insist that some other assigned pairs are not, and, importantly, are stable. Our main contribution is an algorithm that determines when assignment constraints are compatible with stability. Whenever there is a stable matching that satisfies the assignment constraints, our algorithm outputs all of them (each in polynomial time per solution). This provides market designers with (i) a tool to test the feasibility of stable matchings subject to assignment constraints, and (ii) a separate tool to implement them.

Date: 17 April 2024 (Wednesday)

Time : 14:00-15:15

Language: English

Venue: E21B-G016

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics

“Discrete Pricing in Multi-object Auctions”

Speaker: Prof. Yu ZHOU

Associate Professor,

Graduate School of Economics,

Nagoya University

Abstract:

We study the auction model of selling multiple heterogeneous objects in which (i) unit demand agents have utility functions accommodating wealth effects and (ii) prices can only be discretely adjusted. The minimum price equilibrium (MPE), a natural generalization of the Vickrey allocation to settings without assuming quasi-linearity, plays a central role in designing efficient and incentive-compatible auctions. Nevertheless, discrete prices do not always support the MPEs. We instead propose an efficient equilibrium notion, tight equilibrium, and calculate the upper and lower deviation bounds between any tight equilibrium price and the (unique) MPE price. We also develop a descending-price auction that finds a tight equilibrium in finitely many steps. We further introduce a new notion of incentive compatibility, compensating strategy-proofness, to measure the non-manipulability of our proposed auction in an approximate sense.

Date: 20 March 2024 (Wednesday)

Time: 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics:

“Political Fragmentation versus a Unified Empire in a Malthusian Economy”

Speaker: Prof. Angus C. CHU

Distinguished Professor of Economics,

Faculty of Social Sciences,

University of Macau

Abstract:

What are the historical origins of political fragmentation and unification? This study develops a Malthusian growth model with multiple states to explore interstate competition and the endogenous emergence of political fragmentation versus a unified empire. Our model features an agricultural society with citizens and rulers in a Malthusian environment in which the expansion of one state may come at the expense of another state, depending on the intensity of interstate competition captured by the elasticity of the land ratio with respect to the population ratio between states. If this elasticity is less than unity, then multiple states coexist. However, if this elasticity is equal to unity, then a unified empire emerges. Which state becomes the unified empire depends on its military power, agricultural productivity, and its rulers’ preference for rent-seeking Leviathan taxation. We also discuss the historical relevance of these theoretical predictions in the Warring States period of ancient China.

Date: 13 March 2024 (Wednesday)

Time: 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics:

“Quota Adjustment Process”

Speaker:

Prof. Morimitsu KURINO

Professor

Department of Economics

Keio University

Abstract: In designing priority-based matching problems, such as school choice, the quota of each school is, to some extent, a design variable for a market designer. We define an ex-post student-optimal stable matching (ESOSM) as a matching that is stable at some implementable quota distribution, and is not Pareto dominated by any stable matching among all implementable quota distributions. A simple question is whether the total resources subject to several constraints are optimally distributed in the above sense. As optimal quota distributions vary depending on students’ preferences realized, no predetermined quota distribution is optimal for all of the students’ preferences. This requires a new matching mechanism design for the variable quota distributions. We propose the novel mechanism called quota adjustment process (QAP), which endogenously finds an ESOSM and the corresponding optimal quota distribution for any preferences and any initial quota distribution. To put this into practice, we proposed the QAP in the process of admission reform at the University of Tsukuba in Japan. Our proposal was officially approved and implemented at the University of Tsukuba in 2021.

Date: 6 March 2024 (Wednesday)

Time: 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau

Seminar on Economics:

“Predictive Brain Plasticity, Choice Perception, and Decision Making”

Speakers:

Abstract: The realization that the human brain is plastic emerges from the seminal work of Hebb (1949) containing the insightful phrase about firing between neurons – “fire together, wire together”. This Hebbian ‘learning’, reflecting the brain’s ability to change and adapt based on experiences, has led to a predictive brain plasticity hypothesis underpinning the brain’s proactive tendency to seek causal understanding by anticipating sensory contingencies beyond reacting to stimuli as they arise (a tiger’s roar must not be confused with the harmless chirp of a bird). We suggest that our capacity to anticipate what we sense while minimizing (costly) surprise is key to the fitness of our species. In situations involving risk and uncertainty, how choices are perceived can have pivotal influence on the eventual decision. Building on predictive brain plasticity, we propose a neurobiological model of decision making from sensation to perception, involving attention, memory, and cognition, followed by valuation. This model delivers context sensitive choice and accounts for several choice anomalies in the literature, including loss-gain framing, Allais behavior, ambiguity attitude, and source preference. We further derive testable implications linking choice perception to revealed decision making using neurobiological correlates and pharmacological intervention. Application to the development of AI through parallels between brain plasticity and the emergence of large language models will be discussed.

Date: 21 Feb 2024 (Wed)

Time: 14:00-15:15

Language: English

Venue: E21B-G002

All are welcome!

Department of Economics
Faculty of Social Sciences
University of Macau