Browsing by Author "Loch-Temzelides, Ted"

Now showing 1 - 7 of 7
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    A double-slit experiment with human subjects
    (Public Library of Science, 2021) Duffy, John; Loch-Temzelides, Ted
    We study a sequence of “double-slit” experiments designed to perform repeated measurements of an attribute in a large pool of subjects using Amazon’s Mechanical Turk. Our findings contrast the prescriptions of decision theory in novel and interesting ways. The response to an identical sequel measurement of the same attribute can be at significant variance with the initial measurement. Furthermore, the response to the sequel measurement depends on whether the initial measurement has taken place. In the absence of the initial measurement, the sequel measurement reveals additional variability, leading to a multimodal frequency distribution which is largely absent if the first measurement has taken place.
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    Aggregate Economic Implications of New Technologies in Energy Industry
    (2013-09-16) Zhang, Xinya; Hartley, Peter R.; Medlock, Kenneth B., III; Loch-Temzelides, Ted; Embree, Mark
    This thesis studies technological progress in the energy sector and the transition path from fossil fuels to renewable energy, with a particular emphasis on the conse- quences to the whole economy. Currently, there is an active discussion regarding sub- sidizing renewable energy sources, which are often portrayed as the sole future source of energy and the driver of signi cant employment and economic growth. However, innovation in the fossil fuel sector and its continuing development can also be a game changer and should not be ignored. In the rst chapter, we use a dynamic general equilibrium model with endogenous technological progress in energy production to study the optimal transition from fossil fuels to renewable energy in a neoclassical growth economy. We emphasize the importance of modeling technology innovation in the fossil fuel sector, as well as in the renewable energy industry. Advancements in the development of shale oil and gas increase the supply of fossil fuel. This implies that the \parity cost target" for renewables is a moving one. We believe that this important observation is often neglected in policy discussions. Our quantitative analysis nds that these advancements allow fossil fuels to remain competitive for a longer period of time. While technological breakthroughs in the fossil fuel sector have postponed the full transition to renewable energy, they have also created many jobs and stimulated local economies. In the third chapter, we use an econometric analysis to compare job creation in the shale gas and oil sectors with that in the wind power sector in Texas. The results show that shale development and well drilling activities have brought strong employment and wage growth to Texas, while the impact of wind industry development on employment and wages statewide has been either not statistically signi cant or quite small. The rst and third chapters question the current enthusiasm in policy circles for only focusing on alternative energy. Chapter 2 provides some theoretical support for subsidizing renewable energy development. Here we develop a decentralized ver- sion of the model in Chapter 1 and allow for technological externalities. We analyze the e ciency of the competitive equilibrium solution and discuss in particular dif- ferent scenarios whereby externalities can result in an ine cient outcome. We show that the decentralized economy with externalities leads to under-investment in R&D, lower investment and consumption, and delayed transition to the renewable economy. This may provide an opportunity for government action to improve private sector outcomes.
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    Balancing economic and epidemiological interventions in the early stages of pathogen emergence
    (AAAS, 2023) Dobson, Andy; Ricci, Cristiano; Boucekkine, Raouf; Gozzi, Fausto; Fabbri, Giorgio; Loch-Temzelides, Ted; Pascual, Mercedes; Baker Institute for Public Policy
    The global pandemic of COVID-19 has underlined the need for more coordinated responses to emergent pathogens. These responses need to balance epidemic control in ways that concomitantly minimize hospitalizations and economic damages. We develop a hybrid economic-epidemiological modeling framework that allows us to examine the interaction between economic and health impacts over the first period of pathogen emergence when lockdown, testing, and isolation are the only means of containing the epidemic. This operational mathematical setting allows us to determine the optimal policy interventions under a variety of scenarios that might prevail in the first period of a large-scale epidemic outbreak. Combining testing with isolation emerges as a more effective policy than lockdowns, substantially reducing deaths and the number of infected hosts, at lower economic cost. If a lockdown is put in place early in the course of the epidemic, it always dominates the “laissez-faire” policy of doing nothing.
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    Conservation, risk aversion, and livestock insurance: The case of the snow leopard
    (Wiley, 2021) Loch-Temzelides, Ted; James A. Baker III Institute for Public Policy
    Livestock insurance consists of livestock owners pooling resources together in order to hedge against the risk of attacks by predators on their individual herds. We use an economic model to study optimal livestock insurance and to discuss its viability in improving outcomes for livestock owners. The benefit from insurance depends on the livestock owners' level of risk aversion. We calibrate the model using data from Project Snow Leopard and investigate the potential of livestock insurance for achieving conservation goals. The model predicts that leopard killings would decline under the proposed livestock insurance contract. The level of the decline depends on the degree of risk aversion. Our analysis calls for surveys that measure risk aversion of local livestock owners to be conducted in any situation where insurance is considered as a policy towards achieving conservation goals. Finally, we discuss how the proposed livestock insurance scheme could be implemented in practice.
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    Electricity grids and geopolitics: A game-theoretic analysis of the synchronization of the Baltic States’ electricity networks with Continental Europe
    (Elsevier, 2024) Fang, Songying; Jaffe, Amy Myers; Loch-Temzelides, Ted; Lo Prete, Chiara; Baker Institute for Public Policy
    Can supply of electricity be used as an energy weapon? This question rises in importance as more countries trade electricity across borders to smooth out grid stability issues and improve cost-efficient dispatching across large geographic areas. In the context of the Baltics’ disentanglement from the BRELL (Belarus, Russia, Estonia, Latvia, and Lithuania) electricity grid and synchronization with Europe, we develop a game-theoretic model and examine the strategies of the involved parties in light of the potential for electricity trade to be used as a geopolitical weapon. We conceptualize the process of the synchronization project as a sequential-move game between three actors (Russia, the Baltic states, and the EU-U.S.). Our findings suggest that, in large part due to reputational concerns, Russia is unlikely to cooperate in the synchronization process. Instead, our model predicts that Russia will not wait for the Baltic states to complete their synchronization with the European grid before disconnecting them from the BRELL system. Direct Russian cyberattacks against Baltic grids are not implemented and the Baltics do not have to make concessions, provided that Western allies signal a strong likelihood of deterrent retaliation. We offer policy recommendations for Europe, Russia and the Baltic states.
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    Race and ethnic minority, local pollution, and COVID-19 deaths in Texas
    (Springer Nature, 2022) Xu, Annie; Loch-Temzelides, Ted; Adiole, Chima; Botton, Nathan; Dee, Sylvia G.; Masiello, Caroline A.; Osborn, Mitchell; Torres, Mark A.; Cohan, Daniel S.
    The costs of COVID-19 are extensive, and, like the fallout of most health and environmental crises in the US, there is growing evidence that these costs weigh disproportionately on communities of color. We investigated whether county-level racial composition and fine particulate pollution (PM2.5) are indicators for COVID-19 incidence and death rates in the state of Texas. Using county-level data, we ran linear regressions of percent minority as well as historic 2000–2016 PM2.5 levels against COVID-19 cases and deaths per capita. We found that a county's percent minority racial composition, defined as the percentage of population that identifies as Black or Hispanic, highly correlates with COVID-19 case and death rates. Using Value-of-Statistical-Life calculations, we found that economic costs from COVID-19 deaths fall more heavily on Black and Hispanic residents in Harris County, the most populous county in Texas. We found no consistent evidence or significant correlations between historic county-average PM2.5 concentration and COVID-19 incidence or death. Our findings suggest that public health and economic aid policy should consider the racially-segregated burden of disease to better mitigate costs and support equity for the duration and aftermath of health crises.
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    Three Essays on Sovereign Default and Robust Policy Design
    (2014-04-23) Li, Xin; Loch-Temzelides, Ted; Narajabad, Borghan N.; El-Gamal, Mahmoud A.; Fang, Songying
    Chapter 1 discusses the optimal fiscal response of a small open economy to business cycle fluctuations at the presence of sovereign default risks. The most recent sovereign debt crisis in Europe has demonstrated that the risk of sovereign default is not a problem in developing economies only. However, empirical studies show that fiscal policy tends to be countercyclical or acyclical in developed small open economies and procyclical in developing countries. This chapter presents a general equilibrium model with endogenous government spending, external debt financing, and sovereign default decisions for a small open economy. The model shows that developed countries’ acyclical fiscal response to productivity fluctuations can be motivated by their larger size of public sectors, lower demand elasticity of public goods, and lower volatilities of domestic investments relative to foreign investments, compared to their developing counterparts. Along this line, the recently observed fiscal policy graduation in some Latin American countries can be rationalized by the shifts in the characteristics of their public sectors towards developed countries. The model also implies that fiscal austerity is always optimal for countries with sufficiently high debt-to-output ratio, and the optimal consolidation consists of tax hikes, cuts in public consumption but not in public investment. Based on Chapman, Fang, Li and Stone (2013), Chapter 2 studies the effect of new official bailouts on capital markets when borrowing countries economic state is private information. We first analyze a game-theoretical model of crisis lending that incorporates bargaining, compliance and enforcement. The presence of asymmet- ric information yields two interesting scenarios. There are conditions under which lending reduces the risk of a deepening crisis and reduces the risk premium demanded by market actors. On the other hand, the political interests that make lenders willing to lend weaken the credibility of commitments to reform, and the act of accepting an agreement reveals unfavorable information about the state of the borrower’s economy. The net “catalytic” effect on the price of private borrowing depends on whether these effects dominate the beneficial effects of the liquidity the loan provides. Decomposing the contradictory effects of crisis lending provides an explanation for the discrepant empirical findings about market reactions, especially with regard to IMF programs. We test the implications of our theory by examining how sovereign bond yields are affected by IMF program announcements, loan size, the scope of conditions attached to loans, and measures of the geopolitical interests of the United States, a key IMF principal. Based on Li, Narajabad, and Temzelides (2013), Chapter 3 turns to the study of robust policy design when decision makers are concerned about model uncertainty. We study a dynamic stochastic general equilibrium model where agents are concerned about model uncertainty regarding climate change. An externality from greenhouse gas emissions adversely affects the economy’s capital stock. We assume that the mapping from climate change to damages is subject to uncertainty, and we adapt and use techniques from robust control theory in order to study efficiency and optimal policy. We obtain a sharp analytical solution for the implied environmental externality, and we characterize dynamic optimal taxation. A small increase in the concern about model uncertainty can cause a significant drop in optimal energy extraction. The optimal tax which restores the social optimal allocation is Pigouvian. Under more general assumptions, we develop a recursive method and solve the model computationally. We find that the introduction of uncertainty matters qualitatively and quantitatively. We study optimal output growth in the presence and in the absence of concerns about uncertainty and find that these can lead to substantially different conclusions.