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The Department of Environmental Economics and Management

The Robert H. Smith Faculty
of Agriculture, Food and Environment
The Hebrew University of Jerusalem

PO Box 12, Rehovot 76100
Fax: 08-9466267

Department Head:
Prof. Ayal Kimhi, Tel: 08-9489376

Head of the teaching program:

Dr. Iddo Kan, Tel: 08-9489233

Miri Arazi, Tel: 08-9489230


Raveh, O. ; Tsur, Y. Reelection, growth and public debt. European Journal of Political Economy Forthcoming, 63, 101889. Publisher's VersionAbstract
In this work we examine how economic growth affects public debt when interacted with reelection prospects. Reelection considerations shorten political time horizons and give rise to political myopia that exacerbates debt accumulation. That laxer institutional reelection restrictions (e.g., no term limits) mitigate this effect due to electoral accountability is well known. Incorporating growth, we find that this mitigation can be reversed because less myopic, and more accountable, incumbents put more emphasis on smoothing the effects of growth across generations. We test these predictions using an annual-based panel of U.S. states over the period 1963–2010. Our identification strategy rests on constitutionally-entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in reelection prospects, and aggregate national TFP shocks that are exogenous to individual states. Our estimates indicate that when reelection is possible a one standard deviation positive income shock induces, within the same year, a relative increase of approximately $40 in real per capita public debt.
Tsur, Y. Optimal water pricing: Accounting for environmental externalities. Ecological Economics Forthcoming, 170, 106429. Publisher's VersionAbstract
A pricing-based mechanism that implements the optimal water policy while accounting for environmental externalities is developed. The analysis is presented in the context of a comprehensive water economy, stressing the tradeoffs between water use in the provision of ecosystem services vs. other uses. A distinction is made between conveyed and instream environmental water, which turns out to have important policy implications. It is shown that the allocation of instream water can be implemented by properly incorporating the (marginal) instream value of water within the shadow (in situ) price of natural water. The regulation of conveyed environmental water requires a quota-price combination. An example based on Israel's water economy is presented.
Raveh, O. ; Tsur, Y. Resource windfalls and public debt: A political economy perspective. European Economic Review Forthcoming, 123, 103371. Publisher's VersionAbstract
Can natural resource windfalls increase public debt in democracies? Adopting a political economy perspective, we show that the answer is in the affirmative. Resource windfalls increase both the government’s income and wealth. The former mitigates the need to borrow, whereas the latter encourages further borrowing (as it improves its terms), implying an ambiguous pure effect of resource windfalls on debt. Re-election considerations shorten political time horizons and give rise to political myopia. We show that higher political myopia, induced by more stringent (institutional) re-election restrictions, magnifies the wealth effect, turning positive the effect of resource windfalls on debt. We test the model’s predictions using a panel of U.S. states over the period 1963-2007. Our identification strategy rests on constitutionally-entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in re-election prospects, and geographically-based cross-state differences in natural endowments. Our baseline estimates indicate that a resource windfall of $1 induces an increase of approximately ¢20 in the public debt of states with more stringent re-election restrictions.
Tsur, Y. ; Zemel, A. Water policy guidelines: A comprehensive approach. Water Resources and Economics 2018, 23, 1 - 13. Publisher's VersionAbstract
We study water management in the context of a prototypical water economy containing the main water sources and user sectors. A water policy consists of water allocation from each source to each user sector at each point of time as well as the capital investments needed to carry out these allocations. We show that the optimal policy brings the water capital stocks (infrastructure and equipment) to well-specified turnpike processes as rapidly as possible and evolves along these turnpikes thereafter, eventually converging to a unique steady state. Implications for water pricing, as well as for the timing and extent of recycling and desalination activities, are discussed.
Tsur, Y. ; Hochman, E. Economic aspects of the management of algal production; CRC Handbook of Microalgal Mass Culture; 2017; pp. 473-483. Publisher's VersionAbstract
This chapter concerns the economic aspects associated with the development of the biotechnology of algal mass culture. Economic considerations have a major role in the chain of events that lead from the first research ideas and lab experiments up to the development of a self-sustained industry. Throughout the process there is an interaction between economic factors, such as prices of inputs and outputs as well as cost of research, and the various biological factors. © 1986 by Taylor & Francis.
Tsur, Y. Bounding reasonable doubt: implications for plea bargaining. European Journal of Law and Economics 2017, 44, 197–216. Publisher's VersionAbstract
A bound for reasonable doubt is offered based on the cost of type I and type II errors. The bound increases with the punishment, hence its use as a conviction threshold may leave too many offenders of severe crimes at large. Plea bargaining addresses this limitation but introduces strategic interaction between concerned parties. Considering strategic interaction between defendants and judge/jury, it is shown that to any plea offer there corresponds a unique equilibrium. Moreover, all equilibria share the same conviction threshold, given by the reasonable doubt bound. The latter property ensures that the plea bargaining procedure is consistent with the `equality before the law' principle. The former property (that to any plea offer there corresponds a unique equilibrium) bears implications for the design of plea bargain schemes.
Tsur, Y. ; Zemel, A. Coping with Multiple Catastrophic Threats. Environmental and Resource Economics 2017, 68, 175 - 196. Publisher's VersionAbstract
We study intertemporal policies for dealing with multiple catastrophic threats with endogenous hazards, allowing, inter alia, for gradual mitigation efforts that accumulate to reduce occurrence risks. The long-run properties of the optimal policies are characterized in terms of the key parameters (damage, hazard sensitivity and natural degradation rate) associated with each type of catastrophic threat. Effects of background threats on the optimal response to a potential catastrophe are illustrated numerically.
Tsur, Y. ; Zemel, A. Steady state properties of multi-state economic models. Canadian Journal of Economics/Revue canadienne d'économique 2017, 50, 506-521. Publisher's VersionAbstract
Abstract A simple method to derive optimal steady states of multi-state dynamic economic systems with minimal assumptions on the underlying processes is developed. This is accomplished by an n-dimensional function defined over the n-dimensional state space in terms of the model's primitives. The location and stability properties of optimal steady state candidates are characterized by the roots and derivatives of this function. A resource management example illustrates the simplicity and applicability of the method.
Dinar, A. ; Tsur, Y. Management of Transboundary Water Resources under Scarcity; WORLD SCIENTIFIC, 2017. Publisher's Version
Malkawi, A. I. H. ; Tsur, Y. Reclaiming the Dead Sea: Alternatives for Action. Water Resources Development and Management 2016, 205-225. Publisher's VersionAbstract
The sustainable supply of natural water available in the water basin feeding the Dead Sea (comprising of Israel, Jordan and the Palestinian Authority) will soon drop below 100 cubic metres (m3) per person per year. This has resulted from upstream diversions that over time have deprived the Dead Sea of more than 90 % of its historical inflow and led to a progressive decline of its water level with detrimental effects on the surrounding environment and infrastructure. We examine four alternatives to stabilise or restore the Dead Sea and evaluate the costs associated with each alternative. We also offer a mechanism to pay for the reclamation alternatives based on a surcharge levied on all upstream diversions (including water consumed by the potash industries). The surcharge rates associated with the four alternatives range between zero and USD 0.10 per m3. © The Author(s) 2016.
Tsur, Y. ; Zemel, A. The Management of Fragile Resources: A Long Term Perspective. Environmental and Resource Economics 2016, 65, 639 - 655. Publisher's VersionAbstract
Excessive exploitation diminishes the capacity of natural resources to withstand environmental stress, increasing their vulnerability to extreme conditions that may trigger abrupt changes. The onset of such events depends on the coincidence of random environmental conditions and the resource state (determining its resilience). Examples include species extinction, ecosystem collapse, disease outburst and climate change induced calamities. The policy response to the catastrophic threat is measured in terms of its effect on the long-term behavior of the resource state. To that end, the L-methodology, developed originally to study autonomous systems, is extended to non-autonomous problems involving catastrophic threats.
Tsur, Y. ; Zemel, A. Policy tradeoffs under risk of abrupt climate change. Journal of Economic Behavior & Organization 2016, 132, 46 - 55. Publisher's VersionAbstract
By now it is widely recognized that the more serious threats of climate change are associated with abrupt events capable of inflicting losses on a catastrophic scale. Consequently, the main role of climate policies is to balance between mitigation efforts, aimed at delaying (or even preventing) the occurrence of such events, and adaptation actions, aimed at minimizing the damage inflicted upon occurrence. The former affects the accumulation of greenhouse gases in the atmosphere; the latter determines the impact of loss once the event occurs. This work examines the tradeoffs associated with these two types of policy measures by characterizing the optimal mitigation–adaptation mix in the long run.