Social and Behavioral Sciences Commons^™

The Long Run Impact Of Biofuels On Food Prices, Ujjayant N. Chakravorty, Marie Helene Hubert, Michel Moreaux, Linda Nostbakken

Ujjayant Chakravorty

The Effect Of The U.S. Biofuels Mandate On Poverty In India, Ujjayant N. Chakravorty, Marie-Helene Hubert, Beyza Ural Marchand

Ujjayant Chakravorty

More than 40% of US grain is now used for energy and this share is expected to rise under the current Renewable Fuels Mandate (RFS). There are no studies of the global distributional consequences of this purely domestic policy. Using micro-level survey data, we trace the effect of the RFS on world food prices and their impact on household level consumption and wage impacts in India. We first develop a partial equilibrium model to estimate the effect of the RFS on the price of selected food commodities - rice, wheat, corn, sugar and meat and dairy, which together provide almost …

Roads And Resources: Groundwater Depletion In Lankao Country In The North China Plains, Ujjayant N. Chakravorty, Xiangzheng Deng, Yazhen Gong, Martino Pelli, Zhang Qian

Ujjayant Chakravorty

China produces most of its food grains in the North China Plains. However, there is evidence that groundwater aquifers in this region are being overexploited. We use a unique GIS-referenced dataset of the depth of the water table for all the 12,000 odd tube wells in Lankao county. We find that the construction of new highways has led to a depletion of the water table in wells close to the highways. This relationship is robust to a variety of controls, including distance to river and primary canals, village and township fixed effects, the date of drilling of the well and …

Drilling In The Drought: The Industrial Organization Of Groundwater, Ujjayant N. Chakravorty, E. Somanathan

Ujjayant Chakravorty

China and India together produce about half the world's rice and a third of the world's wheat, but production in both countries is heavily dependent on depleting groundwater resources. A large proportion of farmers buy and sell groundwater - the trading facilitated by small farm sizes and fragments land holdings. The economics of groundwater, when farm sizes are small, is little understood. This paper develops a simple, spatial model of the industrial organization of groundwater markets appropriate for smallholder agriculture. We show that if water is abundant, then equilibrium with free entry results in Bertrand competition, with water sellers charging …

Does The Quality Of Electricity Matter? Evidence From Rural India, Ujjayant Chakravorty, Martino Pelli, Beyza Ural Marchand

Ujjayant Chakravorty

This paper estimates the returns to household income due to improved access to electricity in rural India. We examine the effect of connecting a household to the grid and of the quality of electricity, defined as hours of daily supply. The analysis is based on two rounds of a representative panel of more than 10,000 households. We use the district-level density of transmission cables as instrument for the electrification status of the household. We find that a grid connection increases non-agricultural incomes of rural households by about 9 percent during the study period (1994-2005). However, a grid connection and a …

The Effect Of Stock And Flow Regulation On Pollution From A Nonrenewable Resource, Ujjayant N. Chakravorty

Ujjayant Chakravorty

Many nonrenewable resources produce multiple pollutants which create different types of damage. For example, refineries use crude oil and produce sulphur and carbon. Sulphur is a flow pollutant which is mostly controlled by regulating emissions. However, carbon is a stock pollutant that builds in the atmosphere. The goal of the regulatory authority is to stabilize the stock of carbon at some pre-determined level. In this paper we examine the effect of flow and stock mandates on pollution from a non-renewable resource. We show that a stricter emissions mandate may lead to the stock mandate binding at an early date. On …

Global Impacts Of The Biofuel Mandate Under A Carbon Tax, Ujjayant N. Chakravorty, Marie-Helene Hubert

Ujjayant Chakravorty

This paper examines the effect of a carbon tax on fuel use and carbon emissions, under the US and EU biofuel mandates.

Resource Use Under Climate Stabilization: Can Nuclear Power Provide Clean Energy?, Ujjayant N. Chakravorty, Bertrand Magne, Michel Moreaux

Ujjayant Chakravorty

The long-term goal of the Intergovernmental Panel on Climate Change (IPCC) is the stabilization of carbon concentration in the atmosphere. In this paper, we impose a carbon target concentration on a partial equilibrium model of the global energy sector. Specifically, we ask whether nuclear power can provide carbon-free energy as fossil fuel resources become costly due to scarcity and externality costs. We find that nuclear power can reduce the cost of generating clean energy significantly and relatively quickly. However, beyond a few decades the role of nuclear power may be considerably reduced as uranium becomes scarce and renewables become economical. …

Cycles In Nonrenewable Resource Prices With Pollution And Learning-By-Doing, Ujjayant N. Chakravorty, Andrew Leach, Michel Moreaux

Ujjayant Chakravorty

We study how environmental regulation in the form of a cap on aggregate emissions from a fossil fuel (e.g., coal) interacts with the arrival of a clean substitute (e.g., solar energy). The cost of the substitute is assumed to decrease with cumulative use because of learning-by-doing. We show that optimal energy prices may initially increase because of pollution regulation, but fall due to learning, and rise again because of scarcity of the resource, finally falling after transition to the clean substitute. Thus nonrenewable resource prices may exhibit cyclical behavior even in a purely deterministic setting.

Would Hotelling Kill The Electric Car?, Ujjayant N. Chakravorty, Andrew Leach, Michel Moreaux

Ujjayant Chakravorty

In this paper, we show that the potential for endogenous technological change in alternative energy sources may alter the behavior of resource-owning firms. When technological progress in an alternative energy source can occur through learning-by-doing, resource owners face competing incentives to extract rents from the resource and to prevent expansion of the new technology. We show that in such a context, it is not necessarily the case that scarcity-driven higher traditional energy prices over time will induce alternative energy supply as resources are exhausted. Rather, we show that as we increase the learning potential in the substitute technology, lower equilibrium …

Water Allocation Under Distribution Losses: Comparing Alternative Institutions, Ujjayant N. Chakravorty, Eithan Hochman, Chieko Umetsu, David Zilberman

Ujjayant Chakravorty

The distribution of water resources is characterized by increasing returns to scale. Distribution links water generation to its end-use. Standard economic analysis overlooks the interaction among these micro-markets - generation, distribution and end-use. We compare water allocation when there is market power in each micro-market. These outcomes are compared with benchmark cases - social planning and a competitive business-as-usual regime. Simulations suggest that institutions with market power in generation and end-use generate significantly higher welfare than the distribution monopoly and the competitive regime. However, if the policy goal is to maximize the size of the grid, a distribution monopoly is …

Fuel Versus Food, Ujjayant N. Chakravorty, Marie-Helene Hubert, Linda Nostbakken

Ujjayant Chakravorty

Many countries have actively encouraged the production of biofuels as a low-carbon alternative to the use of fossil fuels in transportation. To what extent do these trends imply a reallocation of scarce land away from food to fuel production? This paper critically reviews the small but growing literature in this area. We find that an increase in biofuel production may have a significant effect on food prices and, in certain parts of the world, in speeding up deforestation through land conversion. However, more research needs to be done to examine the effect of newer generation biofuel technologies that are less …

Clean Air Regulation And Heterogeneity In Us Gasoline Prices, Ujjayant N. Chakravorty, Celine Nauges, Alban Thomas

Ujjayant Chakravorty

In order to improve public health in areas with air quality problems, the US Clean Air Act imposes a variety of federal regulations on gasoline, which have led to a proliferation of fuel blends known as ‘‘boutique fuels.’’ More than 45 fuel blends are sold nationwide. We examine the effects of this program on wholesale gasoline prices. The methodological innovation in this study is the use of a regulatory distance measure as a proxy for measuring market power that arises from product differentiation. We find that Clean Air regulation increases gasoline prices by increasing the cost of refining, but more …

Ordering The Extraction Of Polluting Nonrenewable Resources, Ujjayant N. Chakravorty, Michel Moreaux, Mabel Tidball

Ujjayant Chakravorty

A well-known theorem by Herfindahl states that the low cost nonrenewable resource must be exploited first. Consider resources that are differentiated only by their pollution content. For instance, both coal and natural gas are used to generate electricity, yet coal is more polluting. We show that the ordering of extraction need not be driven by whether a resource is clean or dirty. Coal may be used first, followed by natural gas and again by coal. Such “vacillation” does not occur under cost heterogeneity. A perverse policy implication is that regulating pollution may accelerate use of the polluting resource.

A Dynamic Model Of Food And Clean Energy, Ujjayant N. Chakravorty, Bertrand Magne, Michel Moreaux

Ujjayant Chakravorty

In the midwestern United States, ethanol produced from corn is mixed with gasoline to meet clean air standards. Allocating land to produce clean fuel means taking away land from farming. We examine the use of a scarce fossil fuel that causes pollution but may be substituted by a clean fuel produced from land. When land is scarce, it is gradually shifted away from farming to energy production. However, when land is abundant, there may be a jump in the supply of clean energy. When the stock of pollution is regulated, the supply of clean energy may exhibit multiple discontinuities.

Environmental Effects Of Intensification Of Agriculture: Livestock Production And Regulation, Ujjayant N. Chakravorty, Donna K. Fisher, Chieko Umetsu

Ujjayant Chakravorty

This article deals with the relationship between industrialization of agriculture and the environment in developing countries. We specifically focus on livestock production and regulation. We develop a simple economic framework to demonstrate the effect of location on intensification of industrial activity in farming, and discuss this issue in the context of urbanization and economic growth in developing countries. Policy implications of the model are discussed in light of the experience of developed countries in regulating livestock pollution and other externalities. We argue that environmental problems from agricultural industrialization in developing countries may pose major challenges. In the case of livestock …

Discontinuous Extraction Of A Nonrenewable Resource, Ujjayant N. Chakravorty, Erik Im, James Roumasset

Ujjayant Chakravorty

This paper examines the sequence of optimal extraction of nonrenewable resources in the presence of multiple demands. We provide conditions under which extraction of a nonrenewable resource may be discontinuous over the course of its depletion.

A Hotelling Model With A Ceiling On The Stock Of Pollution, Ujjayant N. Chakravorty, Bertrand Magne, Michel Moreaux

Ujjayant Chakravorty

Environmental agreements such as the Kyoto Protocol aim to stabilize the amount of carbon in the atmosphere, which is mainly caused by the burning of nonrenewable resources such as coal. We characterize the solution to the textbook Hotelling model when there is a ceiling on the stock of emissions. We consider both increasing and decreasing demand for energy. We show that when the ceiling is binding, both the low-cost nonrenewable resource and the high-cost renewable resource may be used jointly. A key implication is that if energy demand were to decline in the long run, we may supplement energy supply …

Specialization And Non-Renewable Resources: Ricardo Meets Ricardo, Ujjayant N. Chakravorty, Darrell Krulce, James Roumasset

Ujjayant Chakravorty

The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

Protecting Forests Through Farming: A Dynamic Model Of Nontimber Forest Extraction, Ujjayant N. Chakravorty, Herath Gunatileke

Ujjayant Chakravorty

Forest resource extraction by local communities has been cited as a major impediment to the efficient management of protected forests. This paper develops a two sector dynamic model for farming and forest resource extraction by communities living in the forest periphery. The model assumes that land under forestry is constant and households allocate their time to farming and forestry. Comparative dynamic results suggest that higher prices for agriculture output, lower input prices, better knowledge of farming techniques and a lower discount rate may result in a higher equilibrium stock of forest resources. Tobit analysis with primary data collected from the …

Efficiency And Technical Change In The Philippine Rice Sector: A Malmquist Total Factor Productivity Analysis, Ujjayant N. Chakravorty, Chieko Umetsu, Thamana Lekprichakul

Ujjayant Chakravorty

Regional differences in total factor productivity, efficiency, and technological change in the Philippine rice sector are examined for the post-Green Revolution era. Malmquist productivity indices were constructed for 1971-90 and were decomposed into efficiency and technological change. The average annual Malmquist productivity growth was only slightly positive. Productivity growth was negative during the early 1970s, and was followed by a period of positive growth. Growth was negative again in the late 1980s. The period of positive growth coincided with the introduction of new rice varieties while the declines are likely to have been caused by intensification of rice production in …

Basinwide Water Management: A Spatial Model, Ujjayant N. Chakravorty, Chieko Umetsu

Ujjayant Chakravorty

This paper develops a spatial model for a water basin that allows for surface water allocation and reuse of the water that is lost. The analytical solution suggests specialization of production over space—upstream farmers use canal water and downstream farmers pump groundwater that is lost upstream. Groundwater emerges as an endogenous ‘‘backstop’’. The empirical results suggest that when traditional conservation technologies are used, optimization over the entire basin leads to a significant increase in aggregate output, project area and water use. Somewhat counter-intuitively, rents from water decrease if farmers switch from traditional to modern irrigation technology.

Modeling The Effects Of Area Closure And Tax Policies: A Spatial-Temporal Model Of The Hawaii Longline Fishery, Ujjayant N. Chakravorty, Keiichi Nemoto

Ujjayant Chakravorty

We develop an economic model for a multi-species fishery that incorporates the spatial and temporal distribution of effort and fish stocks. Catchability coefficients and initial stocks are estimated from catch and effort data for each specific location. Vessels are allocated over space and time to locations of maximum profit, which decline with harvest because of stock externalities. A supply function for labor allocation in the fishery is estimated. The simulated model is applied to the Hawaii longline fishery. The economic impacts of regulatory policies, such as reduction of inshore gear conflict and conservation of offshore turtle populations, are examined.

Domestic Demand For Petroleum In Opec Countries, Ujjayant N. Chakravorty, Fereidun Fesharaki, Shuoying Zhou

Ujjayant Chakravorty

The literature on OPEC energy policy has focused primarily on its production and export potential. The rapidly increasing domestic demand for petroleum products in OPEC countries has often been ignored. This study estimates domestic demand for petroleum products by the major OPEC economies and forecasts consumption trends under alternative assumptions regarding economic growth and price deregulation. It concludes that product demand is generally price and income inelastic and thus domestic consumption in OPEC will continue to grow rapidly, even if domestic prices are raised closer to world levels in the near future.

Demand For Ground Transportation Fuel And Pricing Policy In Asian Tigers, Ujjayant N. Chakravorty, Sara Banaszak, Pingsun Leung

Ujjayant Chakravorty

This paper examines the demand for gasoline and diesel in the ground transportation sectors of Korea and Taiwan, comparing the effects of their different pricing policies and stages of economic growth.

Lessons Of A Drought, Ujjayant N. Chakravorty

Ujjayant Chakravorty

Water will become the most prized and precious commodity in the coming years. Internecine conflicts over the resource are already the order of the day and a global water crisis seems not too far away. But the water-guzzling US state of California is showing a way out of the problem - by allowing farmers to sell their share of water, it is pushing them to become efficient water users.

Endogenous Substitution Among Energy Resources And Global Warming, Ujjayant N. Chakravorty, James Roumasset, Kin-Ping Tse

Ujjayant Chakravorty

The theory of resource extraction has focused primarily on extraction when there is a single, homogeneous demand for the resource. In reality, however, we observe the simultaneous extraction of different resources such as oil, coal, and natural gas and multiple demands such as transportation, residential and commercial heating, and electricity generation. This paper develops a model with multiple resources and grades and multiple demands. The model is simulated with extraction cost, estimated reserves, and energy demand data for the world economy. It is shown that if historical rates of cost reduction in the production of solar energy are maintained, more …

Technology Adoption In The Presence Of An Exhaustible Resource: The Case Of Groundwater Extraction, Ujjayant N. Chakravorty, Farhed Shah, David Zilberman

Ujjayant Chakravorty

In this paper we integrate technology diffusion within Hotelling's exhaustible resource model. The modern technology is a conservation technology such as drip irrigation used with groundwater. Resource quality heterogeneity and rising water prices are responsible for the gradual adoption of the modern technology, and under reasonable conditions the diffusion curve is an S-shaped function of time. Without intervention, the diffusion process will be slower than is socially optimal, and optimal resource use tax will accelerate the diffusion of the conservation technology and slow down excessive resource depletion caused by market failure due to open access conditions.

A Spatial Model Of Optimal Water Conveyance, Ujjayant N. Chakravorty, Eithan Hochman, David Zilberman

Ujjayant Chakravorty

Most water projects suffer from losses in conveyance. Because conveyance has public good characteristics, investment in reducing conveyance losses must be provided by a central authority. This paper develops a spatial model to determine optimal conveyance investment, water allocation, and investment in firm-specific conservation technology. The efficiency and distributional characteristics of the optimal solution are compared to projects with (i) well-developed water markets and (ii) spatially uniform water prices, both with sub-optimal conveyance. A numerical illustration is provided.

Heterogeneous Demand And Order Of Resource Extraction, Ujjayant N. Chakravorty, Darrell Krulce

Ujjayant Chakravorty

No abstract provided.