Foregone Revenue Research Articles

Valuing habitat regime models for the red-cockaded woodpecker in Mississippi

Managing Mississippi's forest lands to produce both quality wildlife habitat as well as merchantable timber can be a daunting challenge for forest managers and a source of great concern for the public. In some cases, producing both the quantity and quality of habitat needed and the timber desired is all but impossible. In other cases, a delicate balance that achieves both objectives can be struck. The objective of this study was to quantitatively estimate monetary gains and losses and changes in timber inventories relative to the timber growing stock when producing more or less habitat for the red-cockaded woodpecker (RCW) ( Picoides borealis). USDA Forest Service vegetation data, habitat ratings, and economic variables were compiled for those regions of Mississippi best suited for RCWs. Data was then analyzed with Spectrum, the USDA Forest Service-based forest planning software. Models maximizing such objectives as net present value (NPV) alone as well as five different levels of RCW habitat quality over a 50-year rotation were developed. Revenue foregone, acres and volumes harvested, land expectation value (LEV), and equivalent annual income (EAI) were compared for all objectives for the South Central Hills and Pine Belt regions of Mississippi (1,036,208 acres) for three ownership types. As expected, when maximizing for any quality level of RCW habitat, revenue forgone was higher ($0.11–$49/acre/year) than for NPV alone. Volume harvested for high-quality habitat ranged from 152,296 to 10,237,649 cunits, while harvests from low-quality habitat ranged from 637,491 to 116,357,673 cunits. Lower levels of habitat management allowed for an increased emphasis on timber harvesting. In general, we determined that increases in habitat quality resulted in lower timber harvest levels and increased revenue forgone than regimes maximizing NPVs. While this result may be expected, of greater importance are the relative differences between regimes and the ability to use these values for policy decisions.

Personal Income Taxation in Poland

The Polish taxation system has been undergoing substantial changes in recent years, aimed at creating a more transparent system and conforming to the taxation standards of market economy countries. The two most important changes were introduction of the personal income tax (PIT) in 1992 and replacement of the turnover tax with the value added tax (VAT) in 1993. The uniform personal income tax covered all incomes generated by natural persons irrespective of where the sources of income are located. The reform provided also a more equitable distribution of the tax burden by introducing a progressive system with three nominal tax rates (in 1992-20%, 30%, 40%).A comparative study of the effective PIT rate for pensioners and other groups of PIT payers is the main goal of this paper. The study refers to our own research on data received from The information of Polish Ministry of Finance about accounting of PIT in several subsequent years. Statistics cover a period from 1993 to 2003. However, numbers of taxpayers refer also to year 1992 when the PIT has been established and a period from 2004 to 2006.Concluding the situation in Poland, taxpayers with the highest income make exhaustive use of tax reductions. There are occurring situations when well-off people benefit more than people with relatively minor income (e. g. pensioners). It happens even if most of deductions were aimed generally at all taxpayers. Such a situation reduces the impression of the system fairness. Because tax deductions reduce budgetary revenues, the foregone revenues have to be compensated by other taxes or / and higher rates. Therefore, the system of deductions and relief, on the one hand, supports the special gains (e. g. house building), however, on the other it generates costs. It is possible that the reduction of tax rate for the I tax bracket and removal of some tax exemptions and deductions would make the Polish personal income tax more transparent, equal and simple.

Estimating opportunity costs of Avoided Deforestation (REDD): application of a flexible stepwise approach to the Indonesian pulp sector

SUMMARY Developing countries are expected to contribute to climate change mitigation efforts by reducing deforestation, with fi nancial compensations for associated economic losses. These losses are due to foregone revenues and limited economic development, all of these labeled “opportunity costs”. Their accurate estimation is strategic for at least two reasons: to determine fair compensations, and to prioritize low cost strategies to reduce emissions. However, numerous interpretations of the opportunity cost concept coexist in the literature and in infl uential reports (e.g. Stern review), with differing estimated values for similar cases. This paper presents a framework to better identify relevant values to the calculations: profi ts / total national economic value, conservation site / downstream industries. When applied to the pulp sector in Indonesia, the framework yields contrasted opportunity costs. This contrast is due to several factors, including the heterogeneity of the pulp industry, or the availability of non-forested lands to displace activities. These values range from zero to one thousand dollars per hectare per year. To use such a framework would help gain credibility and achieve fairness in negotiations between host countries and other stakeholders, in particular those who fund activities to reduce deforestation.

A methodology to estimate impacts of domestic policies on deforestation: Compensated Successful Efforts for “avoided deforestation” (REDD)

Climate change mitigation would benefit from Reduced Emissions from Deforestation and Degradation (REDD) in developing countries. The REDD mechanism, still in discussion, would be in charge of distilling the right incentives and promoting the right policies for fostering forest conservation. The estimation of reduced emissions induced by the mechanism has been raised as an issue, either for issuing the proper amount of carbon credits or for providing appropriate compensations of foregone revenues and other costs to host countries. This estimation would be based on the gap between observed deforestation and a counterfactual value. Although any prediction of deforestation rates (i.e. business-as-usual scenarios) is challenging, and any negotiated target is subject to obvious political influence, these two ways have been prioritirized so far to determine the counterfactual value. In other words proposals focused on a results-based approach, the relevance of which is questionable because estimations of avoided deforestation are hardly reliable. With this approach, issuance of carbon credits and distribution of financial compensations could threaten respectively environmental integrity of the scheme and equity outcomes. Rather than considering overall deforestation (predicted and observed), we argue that a REDD mechanism would gain from linking distribution of carbon finance to real efforts (opposed to “results”) that developing countries implement for slowing deforestation rates. This would provide strong incentives to design and enforce suitable policies and measures. The methodology we present to measure these efforts (labeled Compensated Successful Efforts) is based on the rationale that overall deforestation is partly due to structural factors, and to domestic policies and measures. This typology differs from others presented in the literature such as proximate/underlying causes, or economic/institutional factors. Using an econometric model, our approach estimates efforts that are (i) independent of structural factors (economic development, population, initial forest area, agricultural export prices), (ii) estimated ex post at the end of the crediting period, and (iii) relative to other countries. In order to illustrate the methodology we apply the model to a panel of 48 countries (Asia, Latin America, Africa) and four periods between 1970 and 2005. We conclude on the feasibility to estimate avoided deforestation using the Compensated Successful Efforts approach. In addition to being conservative from an environmental perspective, this approach tends to guarantee fairness by accounting for dramatic changes during the commitment period. Last, such estimations of avoided deforestation could provide guidance for decisions on further financing of national programs to curb deforestation, as it would help to distinguish between successful and unsuccessful policies.

First Exits from the Swedish Labor Market Due to Disability

Nowadays, with an increasingly aging population, an increasing proportion of the population on disability benefits, and an implicitly lower level of economic output and foregone tax revenue, disability has become a major public policy issue in many countries. Estimating both single risk and competing risks models on a Swedish longitudinal database, this study analyzes the risk of exit from the labor market due to disability at a certain age, conditional on having remained in the labor force until that age. The explanatory variables did not have identical coefficients across destination types. For example, the estimated single risk model shows that a higher level of education decreased the hazard of exiting the labor market with a disability pension, while the estimated competing risks model suggests that a higher level of education increased the hazard of exiting with a partial disability pension, but it decreased the hazard of exiting with a full disability pension.

The Quiet Life Hypothesis in Banking - Evidence from German Savings Banks

The quiet life hypothesis (QLH) posits that banks enjoy the advantages of market power in terms of foregone revenues or cost savings. We suggest a unied approach to measure competition and efficiency simultaneously to test this hypothesis. We estimate bank-specific Lerner indices as measures of competition and test if cost and profitt efficiency are negatively related to market power in the case of German savings banks. We find that both market power and average revenues declined among these banks between 1996 and 2006. While we find clear evidence supporting the QLH, estimated effects of the QLH are small from an economical perspective.

Quantifying the impact of phytosanitry standards with spesific reference to MRLs on the trade flow of South African avocados to the EU

In this study a gravity model was used to investigate the impact of country specific MRLs that are more stringent than the MRLs set by CODEX on avocado exports by South Africa to the EU with specific reference to Prochloraz. The results revealed that the more stringent Prochloraz MRLs indeed have an impact on avocado exports to the EU. The simulation results show that the revenue foregone due to the more stringent Prochloraz MRLs is US$15.27 million. In relative terms this is significant, and should the Prochloraz MRLs be relaxed to the CODEX levels the contribution of the avocado industry to the gross domestic value of agricultural products would increase significantly. Furthermore, several studies have revealed the potentially negative impacts of abnormal levels of Prochloraz. The question arises why there are anomalies in the application of Prochloraz MRLs between countries and whether the CODEX MRL already account for these negative impacts. In depth analysis should be done with respect to the anomalies prevailing for Prochloraz MRLs to provide a proper scientific basis for applying them. Other recommendations are that much more attention should be given to the development of the national market for avocados and that other markets than the EU market should be explored for exports.

Securing Access in Network Operations — Emerging Tools for Simplifying a Carrier's Network Security Administration

ABSTRACT Security administrators at the global communications service providers have traditionally experienced difficulties in enforcing access security policies in their network operations. It has not, however, been for lack of trying. Whether security breaches have been intentional (hackers) or inadvertent (well-intentioned network operators misusing commands), network outages and intrusions due to an inability to enforce access security policies have been a serious problem, often resulting in tens of millions of dollars in foregone revenues while impairing a service provider's ability to provide continuous service to its customers. This article reviews the challenges that have existed to date for security administrators while exploring a 4-step approach, using newly available security administration automation tools, to overcome these challenges for network operating environments that involve many hundreds of network operators administering tens of thousands of network elements in a global network.

Economic costs of obesity and the case for government intervention

Economic costs of obesity and the case for government intervention

Efficiency Losses from Overlapping Economic Instruments in European Carbon Emissions Regulation

Energy markets and energy-intensive industries in all EU member states – especially in Germany – are subject to a diverse set of policies related to climate change. We analyse the potential efficiency losses from simultaneous application of emission taxes and emissions trading in qualitative and quantitative terms within a partial equilibrium framework for the EU. It turns out that those firms within the EU Emissions Trading Scheme (EU ETS) which at the same time are subject to domestic energy or carbon taxes will abate inefficiently much while other firms within the EU ETS will benefit from lower international emission permit prices. The same logic disproves the argument that additional national emission taxes will reduce inefficiencies in abatement supposed to be resulting from allowance (over-) allocation. In essence, unilateral emission taxes within the EU ETS are ecologically ineffective and subsidise net permit buyers. Thus, all firms that are subject to emissions trading and any CO2 emission taxes at the same time should be exempt from the latter. The foregone tax revenue could be generated by auctioning a small fraction of the permits instead. This would be cheaper for the emissions trading sectors as a whole and could be compatible even with the tight auctioning restrictions of the EU directive.

Economic development through state ownership of oil and gas: evaluating Alaska's royalty-in-kind programme

Government owners of petroleum subsurface rights often face constituent pressure to exercise control over the disposition of these resources in pursuit of economic development objectives. At the same time, states cannot simply dissipate the potential rent from their resources without losing a principal revenue source. The paper takes a retrospective look at the state of Alaska's policies and programmes regarding the disposition of oil and gas resources, focusing on the evolution of the royalty-in-kind programme. It examines the relative success of different programmes in achieving the objectives of import substitution and value-added export relative to the cost in foregone revenue. The analysis leads to general conclusions about programmes of this type, along with specific insights as the state prepares to embark on the biggest test yet related to the disposition of North Slope natural gas.

Quantifying the UK’s incentives for low carbon investment

The UK climate change programme has introduced a range of instruments to foster investment in low carbon technologies and markets. We estimate the total value of these interventions, in terms of the redirection of financial flows and directly foregone tax income, to be about £1.3 billion per year (c. Euro or US$ 2 billion per year), as from 2002 to 2003 when the renewable obligation certificates (ROCs) first take effect. About 20% of this consists of direct expenditure, the remaining 80% is in the form of indirect expenditures contained within sectors (ROCs, the energy efficiency commitments), and foregone tax revenues. Most of the energy-efficiency investment is estimated to recoup expenditure within normal life-cycles and may thus be considered profitable; the profitability of the supply-side interventions is predicated mostly upon expected cost reductions associated with the build up of the associated industries.

Quantifying the UK's incentives for low carbon investment

The UK climate change programme has introduced a range of instruments to foster investment in low carbon technologies and markets. We estimate the total value of these interventions, in terms of the redirection of financial flows and directly foregone tax income, to be about £1.3 billion per year (c. Euro or US$ 2 billion per year), as from 2002 to 2003 when the renewable obligation certificates (ROCs) first take effect. About 20% of this consists of direct expenditure, the remaining 80% is in the form of indirect expenditures contained within sectors (ROCs, the energy efficiency commitments), and foregone tax revenues. Most of the energy-efficiency investment is estimated to recoup expenditure within normal life-cycles and may thus be considered profitable; the profitability of the supply-side interventions is predicated mostly upon expected cost reductions associated with the build up of the associated industries.

Are Tax Subsidies for Private Medical Insurance Self-financing? Evidence from a NHS Outpatient Microsimulation Model

This paper analyses whether tax subsidies to private medical insurance are self-financing by means of a structural approach. We construct a simulation routine based on a microeconometric discrete choice model that allows us to evaluate the impact of premium changes on outpatient health care utilisation. We simulate the 1999 Spanish tax reform that abolished the tax deduction for expenditures on private health insurance using a representative sample of the Catalan population. Prior to this reform, foregone tax revenue arising from deductions after the purchase of private insurance amounted to 69.2 M. per year. In contrast, the elimination of the subsidies to private policies is estimated to generate an extra cost of about 5.6 M. per year.

A mixed-species yield model for eastern Bering Sea shelf flatfish fisheries

A variety of eastern Bering Sea (EBS) flatfish including yellowfin sole (Limanda aspera), rock sole (Lepidopsetta bilineata), flathead sole (Hippoglossoides elassodon), and Alaska plaice (Pleuronectes quadrituberculatus), co-occur in various degrees in EBS trawl fisheries, impeding attempts to obtain single-species management targets. A further complication is the bycatch of Pacific halibut (Hippoglossus stenolepis); halibut bycatch limits, rather than single-species catch quotas, have been the primary factor regulating EBS flatfish harvest in recent years. To examine bycatch interactions among the EBS flatfish listed above, an equilibrium mixed-species multifishery model was developed. Equilibrium yield curves, scaled by recent average recruitment, are flat topped or asymptotically increasing, reflecting low fishing selectivity during the first several years of life and low growth relative to natural mortality. A linear programming analysis indicated that relaxation of the halibut bycatch constraint at the optimal solution of catch by fishery would produce approximately 20 times more flatfish yield than a similar relaxation of any flatfish catch quota. A strategy for establishing halibut bycatch limits that considers the foregone revenue in the halibut and flatfish trawl fisheries reveals how the choice of halibut bycatch limit is affected by the management goal for the flatfish complex.

The Range Adjusted Measure (RAM) in DEA: Comment

Cooper, Park, and Pastor (1999) propose the range adjusted measure (RAM) as a measure of inefficiency in Data Envelopment Analysis (DEA). This comment purports to show that some maintained properties of RAM hold under specific assumptions only. Moreover, RAM is a misleading measure: large and inefficient decision making units (DMU) seem to be less efficient than small and inefficient DMUs, according to RAM. An important advantage of conventional radial inefficiency measures is that the solutions of CCR and BCC variants of DEA are unit invariant. On the other hand, the radial inefficiency fails to take slacks into account. Thus, radial inefficiency is not strongly monotone in the slacks, which is a desirable property of an inefficiency measure. As a consequence, radial inefficiency does not increase if any input or output that has positive slack in the solution to the envelopement problem (or a multiplier equal to zero in the multiplier problem) increases in the CCR or BCC variants. Thus, a valid ranking of decision making units (DMUs) with respect to their radial inefficiency is not possible. To overcome this shortcoming, slack-based measures such as additive DEA models have been introduced. These additive models are strongly monotone, but fail to be unit invariant. Moreover, they do not result in a meaningful inefficiency measure without additional information about the value of inputs and outputs. The results of an additive model is nothing but a sum of (unweighted) slacks. If the slacks were weighted by their market prices, inefficiency would then be simply the sum of excess expenses and foregone revenues (with the technically most successful DMUs, which would serve as the benchmarks, being characterized by no excess and foregone revenues).

Strategic Research Partnerships: Constructing Policy-Relevant Indicators

Absent a set of indicators based on a set of valid constructs, it will remain difficult to determine the importance of strategic research partnerships (SRP) for the U.S. economy and the enterprise of science and technology in general. The purpose of this paper is to identify characteristics of a desirable policy indicator for strategic research partnerships. In choosing among the many possible conceptualizations and indicators of SRP, a framing question should be: “what is the public stake?” The fact that SRP activity has great economic import (still an open question) does not imply an equivalent government or public policy importance. This seems to imply, then, that SRP indicators should focus on such factors as the composition of R&D (e.g. do they shift the balance in available public domain research?), impacts of labor and human resources, tax implications (e.g. use of tax credits, foregone revenue and its impacts), and, especially, public-private partnerships (e.g. how are government-sponsored or -brokered SRPs different from others?).

The economic cost of low domestic product prices in OPEC Member Countries

The present state of subsidies on major oil products (gasoline, kerosene, diesel and fuel oil) in OPEC Member Countries is analysed, in order to quantify their economic cost, keeping in mind the importance of reforming or gradually removing subsidies as one of the crucial economic challenges facing many Member Countries. The paper begins with a general definition and description of subsidies, then discusses briefly the key issues in reforming/removing them, with the potential benefits. Following a section on subsidy level estimations in recent years, the subsidy implications in terms of the accruing budget burden and foregone revenues from additional export potential are presented. This is together with some arguments supporting the process of adjustment towards internationally competitive prices for oil products as an inescapable development for Member Countries; this should progress in gradual, but firm steps.

The State of Resource Taxation in Australia: ‘An Inexcusable Folly for the Nation’?

This article discusses the principal claims made for the Resource Rent Tax (RRT) by Garnaut and Clunies‐Ross (1975, 1979) relating to its efficiency and potential for generating tax revenue relative to other forms of resource taxation, and also their concern about the greater uncertainty of these revenues. An analysis of the risk‐return trade‐off associated with a shift from ad valorem royalties to an RRT finds this shift to be worthwhile. Estimates are also provided of the foregone tax revenue from the North West Shelf associated with the use of ad valorem royalties rather than the RRT.

Firm Relocation Threats and Copy Cat Costs

To retain firms, states are forgiving billions of dollars in tax liabilities. Some firms move even after a relief package is offered; other firms obtain tax concessions by bluffing. When firms threaten to relocate unless their current tax burden is lightened, what should a local government do? If it offers relief, at best it retains the firm, but it also encourages other firms ("copy cats") to demand similar treatment. At worst, it loses the firm and has to deal with the additional threats. Tax incentive packages can cost much more than foregone revenues related to the single threatening firm. We solve a local government's constrained optimization problem to identify its optimal response in a game theoretic framework with asymmetric information. Industrial recruitment is modeled as a sealed-bid process in which the government does not know what alternative tax package(s) may be offered to the firm. We show that the probability of a relief offer being the optimal response is positively related to the rate of expansion and indirect revenue (income and sales taxes related to firm activity in the locale) and negatively related to copy cat costs and the magnitude of tax relief. The problem is analyzed theoretically and graphically. The choice rules are related to other empirical work and illustrated numerically.