Judith A. McDonald

Third-world debt and tropical deforestation

Abstract The deforestation and degradation of tropical forests are taking place at an extremely rapid pace. According to the Food and Agriculture Organization (FAO), the estimated annual rate of tropical deforestation during the 1981–1985 period was 113 846 square kilometers or 0.6% of the 1981 total forested area. The implications of the loss of these forests are staggering (Myers, N., 1989. Deforestation Rates in Tropical Forests and Their Climatic Implications. Friends of the Earth, London). Tropical forests are extremely rich ecosystems which support a disproportionately large share of the worlds plant and animal species. Forests play a crucial role in both nutrient and hydrological cycling and may provide sustainable economic benefits through managed harvesting of timber and the collection of non-timber products such as fruits, nuts, and rubber. Also, deforestation is a significant source of global warming through its effects on the global carbon cycle. This paper focuses on the relationship between debt and deforestation, examining conceptual and empirical arguments that debt is a source of deforestation pressure. Our study develops a behavioral model which suggests that debt can lead to myopic behavior, leading to deforestation rates that may not be optimal in the long run, but are necessary in the short run to meet current constraints. Then, country-by-country data on debt, deforestation, and other variables are analyzed with regression analysis. It is shown that debt is significantly correlated with deforestation under a wide variety of assumptions and specifications. Our results indicate that debt is an important factor in the deforestation of tropical countries. There are certainly other sources of deforestation, both micro- and macroeconomic, which may vary significantly from country to country. However, we focus on debt because of its dominant role in the economies of developing countries, and because of the increased use of debt-for-nature swaps. The link between debt and deforestation that is suggested in this paper implies that debt-for-nature swaps may have a dual effect on deforestation. First, the contractual agreement is designed to preserve forests as part of the swap. Second, the reduction in debt may itself reduce the pressure to deforest, although this indirect effect is small. Our research provides evidence that reducing debt reduces deforestation, which may be an argument to offer deforesting third-world countries some form of debt relief, and to utilize more fully debt-for-nature swaps as a tool for preserving environmental quality.

Do New Male and Female College Graduates Receive Unequal Pay

We analyze the female-male gap in starting-salary offers for new college graduates using data from the annual surveys of the National Association of Colleges and Employers (NACE), unique (and proprietary) data that have not previously been used for this purpose. A major advantage of working with a data set on salaries for new college graduates is that we can remove the possible influence of gender differences in experience, promotions, job changes, and other factors on the salary gap. We find that as much as 95 percent of the overall gender gap in starting-salary offers can be explained by differences in college majors selected.

Trade Wars: Canada 's Reaction to the Smoot-Hawley Tariff

Strange as it seems, the infamous Smoot-Hawley Tariff might have had an expansionary effect on the U.S. economy. Basic macroeconomic principles indicate that the direct effect of a tariff increase is expansionary. This expansionary effect might be offset by retaliatory increases in foreign tariffs. Barry Eichengreen has recently questioned whether significant retaliation to Smoot-Hawley occurred. This article demonstrates that the tariff increases enacted during 1930 in Canada—the largest trading partner of the United States—were in direct response to Smoot-Hawley. The conventional wisdom that Smoot-Hawley hurt the U.S. economy may be right after all.

Rethinking the optimal level of environmental quality: justifications for strict environmental policy

Abstract Traditional environmental theory suggests that the optimal level of a pollution emission occurs when the marginal damage created by the emissions is equal to the marginal cost of reducing the emissions. We argue that the benefits from reducing pollution should be much more broadly defined to include at least three other sources of benefits. First, we develop a game-theoretic model in which firms may under-invest in cost-saving ‘green technologies’. Second, we demonstrate that consideration of future damages and abatement costs leads to a lower current optimal pollution level than that obtained in traditional models. Finally, we show that ecological complexity creates indirect pathways by which greater pollution increases the likelihood of generating irreversible environmental damage. This broader definition of the benefits of pollution abatement yields an optimal level of pollution that may actually be less than the level at which conventionally-measured marginal damages are equal to marginal abatement costs. Thus, environmental policy should be stricter.

Dynamic capital mobility, capital-market risk, and contagion: evidence from seven Asian countries

Abstract This paper analyzes three important issues related to the Asian financial crisis. First, was capital mobility increasing in this area during the 1990s? Second, was there a sudden increase of capital-market risk in those countries? Finally, is there any evidence of contagion in the Asian capital market? Using monthly time-series data, we find that capital mobility had been rapidly increasing before the crisis; there was a sudden increase in capital-market risk; and there is evidence of contagion in the Asian capital market from Thailand to other Asian countries.

Estimating Gender Wage Gaps

Course research projects that use easy-to-access real-world data and that generate findings with which undergraduate students can readily identify are hard to find. The authors describe a project that requires students to estimate the current female-male earnings gap for new college graduates. The project also enables students to see to what extent female-male differences in college majors and types of first jobs affect the gender earnings gap. The data set is the annual salary survey reports of the National Association of Colleges and Employers (NACE) and is available in many colleges’ career placement offices. Moreover, the estimation procedure requires only basic Excel calculations.

Retreat from Protectionism: R. B. Bennett and the Movement to Freer Trade in Canada, 1930–1935

Both the United States and Canada enacted sharp increases in tariff s in 1930 as the Great Depression was beginning. Th e failure of high tariff s to lead to economic recovery in the following years helped to undermine political support for protectionism. Although the conversion to free trade in the United States during the 1930s has been studied, the similar movement in Canada has been relatively neglected. 1 McDonald et al. fi nd that R. B. Bennett’s surprising victory in 1930 was due to Canadian voters’ resentment over the Smoot-Hawley Tariff . 2 As promised during his campaign, Bennett quickly enacted tariff increases on U.S. goods and took steps to make Canada independent of the United States and to strengthen its ties to the United Kingdom. Beginning with Bennett’s election, we chronicle his deliberations during the period 1930–35 as he reformulated his views about the appropriate role of the tariff as a policy tool. We fi nd that Bennett’s dramatic about-face on trade policy was largely driven by forces beyond his control: the establishment of a “new order,” brought about by changes in the trade policies of Canada’s two major trading partners, the United States and Britain, very much restricted Bennett’s policy choices.

Comparable Worth in Academe: Professors at Ontario Universities

In 1988 a comparable-worth pay policy was implemented in Ontario, Canada, with the passage of the Pay Equity Act. The Ontario policy is unique in the scope and nature of its involvement in pay determination: it is proactive rather than complaints-based and it covers employees in both the private and public sectors. In this paper we relate the experiences of Ontario faculty under the Act, drawing upon information from a survey we conducted. We then use pay data from the Council of Ontario Universities and Statistics Canada to perform several counterfactual experiments. We find that while the Act had no direct effects, indirectly it may have brought about a slight reduction in the female-male pay gap that exists among Ontario professors especially in the latter part of the 1990s.

Estimating gender wage gaps: A data update

ABSTRACT In the authors’ 2011 JEE article, “Estimating Gender Wage Gaps,” they described an interesting class project that allowed students to estimate the current gender earnings gap for recent college graduates using data from the National Association of Colleges and Employers (NACE). Unfortunately, since 2012, NACE no longer reports starting salaries for college graduates broken down by gender. In this note, the authors describe several alternative data options that instructors can use for the class project using the simulation procedure that was described in the earlier article.

Have Pay Equity Laws in Canada Helped Women? A Synthetic-Control Approach

ABSTRACT Ontario passed a very aggressive Pay Equity Act in 1988, and in 1996 Quebec passed a similar Pay Equity Act. We use synthetic-control methods to examine what has happened to the gender pay gap (female–male earnings ratio) in Ontario since 2005 and to see whether Quebec’s Pay Equity Act has had any effect on its pay gap. Ontario and Quebec are chosen simply because they are the provinces with the most comprehensive and “aggressive” pay equity laws. We also use synthetic-control methods to investigate whether these acts may have had an adverse effect on the female–male employment ratios in Ontario and Quebec. We find that Ontario’s act has had a negligible effect on that province’s gender pay gap and employment ratio. However, Quebec’s act appears to have reduced the gender pay gap, although at a cost of a somewhat smaller employment ratio for women in that province.