Fulvio Fontini

The Long-Run Oil-Natural Gas Price Relationship and the Shale Gas Revolution

The gas extraction technological developments of the 2000s have allowed shale gas production, which in the US has become a significant part of the total gas production. Such a significant change might have affected the long-run relationship between oil and natural gas prices postulated by several authors. By using monthly data of oil and gas prices, as well as gas quantities from 1997 to 2013, we test for the presence of a longrun relationship, allowing also for possible breaks. We first show the stationarity of gas quantity data before the production of shale gas and the existence of a break in the trend (and in the intercept) on the integrated gas price time series, by the time shale gas enters the market. Then, applying a Vector Error Correction Model, we show that shale gas production has affected the relationship across variables. Gas quantities become relevant in the formation of gas prices after the beginning of shale gas production, while impact of oil prices on the gas ones doubles. However, on the basis of the available data, it is not unequivocally possible to assess whether or not a new long-run relationship between oil and gas has been established.

Probability and uncertainty: the legacy of Georgescu-Roegen

In this paper we consider Georgescu-Roegens approach to uncertainty, showing that his characterization of expectations cannot be reduced to any probabilistic decision-making model. Drawing upon Georgescu-Roegens lesson a lexicographical utility function is proposed and analysed in the mark of his own peculiar scientific methodology. It is demonstrated that such a formulation can be useful in solving the usual failure of the expected utility model, such as the Ellsberg paradoxes. The epistemic limits of our re-construction are considered.

A Rational Explanation for the Redistribution Paradox. Theory and Empirical Evidence

The paper provides a rational explanation for the redistribution paradox, whereby low‐income individuals seeking more social security prefer a lower taxation although this might imply a reduced welfare. A simple model of tax transfer and redistribution is presented, with various agents facing two different unemployment probabilities. We investigate how the preferred tax rate changes with the probability of being unemployed. We show that, when the probability of unemployment for the less‐skilled correlates negatively with that of the highly skilled, the relationship with the tax rate is not monotonic and depends on the level of risk aversion. This theoretical framework is confirmed in an empirical investigation based on microeconomic data, and in a robustness test based on macroeconomic data.

The energy conservation supply curve from investments in energy savings in the existing Italian buildings

In the paper we estimate an energy conservation supply curve form the investment in energy savings works in the Italian residential sector. First the average ldquotyperdquo of building, in terms of heating dispersion, is calculated for each age of construction and climatic zone. Then several possible strategies are considered, that range from substituting old heaters with new ones to installing thermal collectors and refurbishing the buildings, reducing the heating dispersion according to the new transmittance limits that will be compulsory in Italy (for new buildings) from the year 2010. The cost of implementing specific energy-saving works is calculated; a step-wise supply curve is obtained that measures the potential Mtep saved ad the merit order of the various instruments considered.

CONSTITUTIONAL CONSTRAINTS UNDER AMBIGUITY: A GAME-THEORETIC APPROACH

In the paper a game between private and public individuals is set in order to study under which conditions the former would like to limit ex-ante the choices of the latter. Ambiguity, as distinguished from risk, is explicitly introduced by means of capacities and Choquet Expected Utility. It is shown that constitutional constraints are necessary to prevent private individuals from being exploited by public individuals whenever citizens feel a too high level of ambiguity.