Emma Aisbett

When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning

Using the international investment regime as its point of departure, the article applies notions of bounded rationality to the study of economic diplomacy. Through a multimethod approach, it shows that developing countries often ignored the risks of bilateral investment treaties (bit s) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that routinely observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific “vivid” instances to mind.

Environmental and Health Protections, or New Protectionism? Determinants of SPS Notifications by WTO Members

The drastic reductions in bound tariffs agreed by WTO members over the past half century have been accompanied by a substantial rise in non-tariff barriers to trade. Many commentators have drawn a causal link between these two phenomena, but there have been few attempts to empirically test this claim. This lack is particularly apparent with regard to Sanitary and Phytosanitary (SPS) measures, despite their increasing prevalence both in the media and in WTO disputes. SPS measures, like other health and environment regulations, ostensibly serve legitimate national policy objectives and cannot be labeled as “green” protectionism merely by considering posterior trade impacts. The determinants of these regulations matter. This paper uses members’ SPS notifications to the WTO at the product level to test the importance of negotiated tariff reductions as a driver for additional SPS regulations. By exploiting time-series, cross-country and cross-product variation in the data we confirm that decreases in bound tariff rates increase the probability of new SPS measures. The policy implications of this result are, however, tempered by our other major finding, namely, that the impact of tariff constraint on SPS notifications is minor compared to that of demographic, governance and environmental variables

Police Powers, Regulatory Takings and the Efficient Compensation of Domestic and Foreign Investors

Modern international investment agreements have challenged the customary exclusion of public good regulations from being considered government ‘takings’ subject to compensation rules. Full compensation for regulatory takings can, however, lead to over-investment and excessive entry in risky industries. An alternative is to ‘carve-out’ apparently efficient regulation from compensation requirements. We design a carve-out/compensation rule that induces efficient regulation and firm-level investment even when the regulator suffers fiscal illusion and has private information about the social benefit from regulation. We also show that a carve-out reduces the subsidy to risky industry implicit in compensation rules, and thus mitigates the entry problem.

Natural replacements for ozone-depleting refrigerants in eastern and southern Asia

Abstract A computer model has been written to predict the consumption of refrigerants for vehicle air conditioning in China, India, South Korea and South-East Asia, their effect on ozone depletion and global warming, and their costs. A simple logarithmic relationship between per capita income and population growth rate is assumed. Correlations between vehicle ownership and air-conditioning usage are obtained from worldwide data. Both synthetic HFC (134a) and natural (hydrocarbons) refrigerants are considered. Sample calculations, assuming reasonable economic growth rates, predict that the use of hydrocarbons will lead to significant reductions in global warming potential and large savings in cost. The synthetic HFC option will incur costs exceeding a billion US dollars per year after the year 2005.

Compensation for Indirect Expropriation in International Investment Agreements: Implications of National Treatment and Rights to Invest

International investment agreements allow investors to bring compensation claims when their investments are hurt by new regulations. This requirement that host governments compensate for indirect expropriation helps solve post-investment moral hazard problems such as hold-ups, thereby helping to prevent inefficient over-regulation and encouraging foreign investment. However, when the social or environmental harm of a project is uncertain pre-investment, compensation requirements can interact with National Treatment clauses in a manner that reduces host government welfare and makes them less likely to admit investment. A police powers carve-out from the definition of compensable expropriation can be Pareto-improving and increase foreign investment.

Disequilibrium Adjustment and the Rate of Tropical Deforestation

Tropical deforestation has been one of the most significant global environmental changes of recent decades and has spurned a substantial academic literature. Despite this, the most basic theoretical predictions — such as the role of income and population growth in driving forest changes — fail to be consistently confirmed in the empirical literature. We argue that part of this failure lies with the implicit assumption of instantaneous adjustment of forest cover to changes in determining variables; and we use dynamic panel data analysis to provide evidence that the agreement between theory and empirics can be substantially improved by paying more attention to disequilibrium adjustment processes. Additionally, our results suggest an important role for ethnic fractionalization in deterring deforestation but no evidence of an effect of corruption.

Does anybody give a dam? The importance of public awareness for urban water conservation during drought

Demand management has been of interest in dry climates such as Australia, Spain and the Western United States for decades. It is particularly important to understand policy options during drought conditions, as drought periods have a disproportionate effect on supply infrastructure decisions. While water�?conservation campaigns aimed at inducing voluntary consumption reductions are almost universally employed by water managers in times of supply constraint, voluntary measures are generally dismissed in the economics literature as ineffective. We argue that the robust positive correlation between dam levels and consumption after controlling for policy changes suggests that there is a significant component of voluntary conservation. Furthermore, omitting dam levels from regressions may bias estimated impacts of policy changes.

Regulatory Takings and Environmental Regulation in NAFTA's Chapter 11

NAFTAs investment treaty has led to several expropriation compensation claims from investors hurt by new environmental regulations. Expropriation clauses in international treaties solve post-investment moral hazard problems such as hold-ups. However, these clauses can interact with National Treatment clauses in a manner that hinders investment. A police powers carve-out from the definition of expropriation can be Pareto-improving and can increase the level of foreign investment.