Patrick Kent Watson

The Gathering Storm: managing adaptation to environmental change in coastal communities and small islands

Small island communities are inherently coastal communities, sharing many of the attributes and challenges faced by cities, towns and villages situated on the shores of larger islands and continents. In the context of rapidly changing climates, all coastal communities are challenged by their exposure to changing sea levels, to increasingly frequent and severe storms, and to the cumulative effects of higher storm surges. Across the globe, small island developing states, and small islands in larger states, are part of a distinctive set of stakeholders threatened, not only by climate change but also by shifting social, economic, and cultural conditions. C-Change is a collaborative International Community–University Research Alliance (ICURA) project whose goal is to assist participating coastal communities in Canada and the Caribbean region to share experiences and tools that aid adaptation to changes in their physical environment, including sea-level rise and the increasing frequency of extreme weather events associated with climate change. C-Change researchers have been working with eight partner communities to identify threats, vulnerabilities, and risks, to improve understanding of the ramifications of climate change to local conditions and local assets, and to increase capacity for planning for adaptation to their changing world. This paper reports on the knowledge gained and shared and the challenges to date in this ongoing collaboration between science and society.

Kalman filtering as an alternative to Ordinary Least Squares — Some theoretical considerations and empirical results

The purpose of this paper is to highlight the superiority of the Kalman filter over Ordinary Least Squares for estimating the unknown coefficients of the classical linear regression model. Both methods are analyzed with respect to their optimality properties and their usefulness in dealing with multicollinearity. Theoretical results are applied to two economic models.

Small-Business Participation in the Informal Sector of an Emerging Economy

Abstract We investigate the characteristics of the owners of small businesses that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so. Data are gathered from a survey covering 1027 small businesses in Trinidad and Tobago. Results suggest that small business owners are motivated to participate in the informal sector when they believe that the risk of detection by the tax authorities is low and that government regulations are burdensome, but there is no evidence that the tax rate itself is an issue. Their perception of the risk of detection by the tax authority is determined largely by the time they spend and the income they earn in the formal sector.

Characteristics of households in the informal sector of an emerging economy

Using the case study of Trinidad and Tobago, we investigate the socio-economic, demographic and attitudinal characteristics of households that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so. Data are gathered from a cross-sectional field survey covering 570 households. Results using multinomial logit and ordered probit models suggest that households are motivated to participate in the informal sector when members spend little time in formal sector activity, believe that taxes are too high and their incomes are too low, have dependents to support and believe that the resulting tax evasion will go undetected. Their perception of the risk of detection by the tax authority is determined largely by the income they earn in the formal sector and the extent of government bureaucracy prevailing there.

Measuring the size of the hidden economy in Trinidad & Tobago, 1973–1999

Abstract In this paper, an attempt is made to measure the hidden economy of Trinidad & Tobago over the period 1973–1999, within the Structural Cointegrating VAR (SCVAR) framework. Using a Tanzi-type currency demand approach as a starting point, a multiple equation SCVAR model is estimated that contains two long-run relationships linking the demand for currency with other variables. The model is evaluated on the basis of its persistence profiles, its impulse responses and other statistical criteria. It is solved using a Gauss–Siedel algorithm and is used to establish that the size of the hidden economy rose from a low of about 14% of measured GDP in the early 1970s to a high of 36% in 1981, and is currently about 20% of measured GDP. Hidden economic activity is also found to be highly positively correlated with activity in the regular economy.

Innovative Activity in the Caribbean: Drivers, Benefits, and Obstacles

We investigate the determinants of innovation and the benefits from it in making firms more productive in the Caribbean. To this end we use a rich firm level dataset covering 14 different countries and various non-parametric, semi- parametric and parametric statistical tools. Our results show that, while firms may be productive for many reasons, there are substantial productivity benefits resulting from investment in innovation. Moreover, these benefits do not appear to be particularly low compared to what prevails in other developing countries. However, there is some indication that factors that would normally encourage innovation investment, such as patent protection, public subsidies, or cooperation among innovators, may not bear fruit.

Linking tourism flows and biological biodiversity in Small Island Developing States (SIDS): evidence from panel data

Small Island Developing States (SIDS) are characterized by high levels of biodiversity that are under threat. Simultaneously, the tourism sector plays a key role in many of these economies. In this paper, the Hausman-Taylor estimator is used to investigate a tourism demand function in SIDS in which marine and terrestrial biodiversity play a key role, in addition to the traditional economic and price variables. This estimator allows for both the presence of time-invariant variables, a standard feature of environmental data, and the existence of endogenous covariates. Levels of biodiversity are found to have a significant influence on tourism in SIDS and, in particular, a test for redundant variables shows that the biodiversity variables are jointly significant. This justifies their inclusion in a tourism demand function, over and above the conventional economic factors, and points to the importance of national and international policy in protecting the biodiversity of SIDS.

The efficiency of the stock market in the CARICOM sub-region: an empirical study

The objective of this article is to determine whether the stock exchanges of Barbados, Jamaica, Trinidad and Tobago and the virtual Caribbean Community and Common Market (CARICOM) Regional Stock Exchange (CRSE), as well as the banking, conglomerate, financial and manufacturing sectors of these exchanges, are weak-form efficient or not. Three sets of tests are used: two parametric and one nonparametric. There are lot of similarities in the evidence provided by the two parametric approaches: a traditional Box–Jenkins-type ‘correlation’ analysis to test the random-walk hypothesis and the Lo–MacKinlays heteroscedasticity-robust and nonrobust variance-ratio tests. However, a nonparametric variant of the Lo–MacKinlay test due to Wright, based on ranks and signs, generally provides quite different results, particularly the sign test. A recommendation is made to use Wrights tests in preference to the others when examining efficiency in the CARICOM and similar exchanges. This leads to the conclusion that all exchanges and their sectors are inefficient although the Box–Jenkins and Lo–MacKinlay parametric variance ratio tests suggest that the Barbados Stock Exchange (BSE) and some of the sectors in this and the Jamaica Stock Exchange (JSE) function efficiently.

A Model of the Financial Sector of Trinidad and Tobago

Abstract This paper proposes a theory of the functioning of the financial sector in Trinidad and Tobago which is tested within the framework of a simultaneous equation econometric model. The parameter estimates are obtained using the method of Two Stage Least Squares, and validation of the model is based principally on the dynamic simulation properties of the fitted model.

A MODEL OF THE FINANCIAL SECTOR OF TRINIDAD AND TOBAGO

This paper proposes a theory of the functioning of the financial sector in Trinidad and Tobago which is tested within the framework of a simultaneous equation econometric model. The parameter estimates are obtained using the method of Two Stage Least Squares, and validation of the model is based principally on the dynamic simulation properties of the fitted model.