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The global pandemic of COVID-19 has underlined the need for more coordinated responses to emergent pathogens. These responses need to balance epidemic control in ways that concomitantly minimize hospitalizations and economic damages. We develop a hybrid economic-epidemiological modeling framework that allows us to examine the interaction between economic and health impacts over the first period of pathogen emergence when lockdown, testing, and isolation are the only means of containing the epidemic. This operational mathematical setting allows us to determine the optimal policy interventions under a variety of scenarios that might prevail in the first period of a large-scale epidemic outbreak. Combining testing with isolation emerges as a more effective policy than lockdowns, substantially reducing deaths and the number of infected hosts, at lower economic cost. If a lockdown is put in place early in the course of the epidemic, it always dominates the “laissez-faire” policy of doing nothing.

We propose an alternative dynamic theory of coalition breakdown. Motivated by recent coalition splitting events through unilateral countries’ withdrawals, we assume that: i) the payoff sharing rule within coalitions is not necessarily set according to any optimality and/or stability criterion, and, ii) players initially behave as if the coalition will last forever. If the sharing rule is non-negotiable or if renegotiation is very costly, compliance to these rules may become unbearable for a given member because the rule, being too rigid, would make exit preferable as time passes. We examine this endogenous exit problem in the case of time-invariant sharing rules. Assuming a Nash non-cooperative game after (potential) splitting where players play Markovian, we characterize the solutions of the endogenous exit problem in a linear-quadratic frame with endogenous splitting time. We find that splitting countries are precisely those which use to benefit the most from the coalition. Suitable sharing rules should be used to prevent coalition splitting. When initial pollution is high, all shares should be low enough and none of the players should detain a payoff share larger than 1/2. If initial pollution is small, we provide with an explicit interval for the sharing rule values preventing the collapse of the coalition.

We study a 2-country differential game with irreversible pollution. Irreversibility is of a hard type: above a certain threshold level of pollution, the self-cleaning capacity of Nature drops to zero. Accordingly, the game includes a non-concave feature, and we characterize both the cooperative and non-cooperative versions with this general non-LQ property. We deliver full analytical results for the existence of Markov Perfect Equilibria. We first demonstrate that when pollution costs are equal across players (symmetry), irreversible pollution regimes are more frequently reached than under cooperation. Second, we study the implications of asymmetry in the pollution cost. We find far nontrivial results on the reachability of the irreversible regime. However, we unambiguously prove that, for the same total cost of pollution, provided the irreversible regime is reached in both the symmetric and asymmetric cases, long-term pollution is larger in the symmetric case, reflecting more intensive free-riding under symmetry.

Sub-Saharan African countries experience various market failures and other constraints in food production, marketing, and food consumption. Consequently, sub-Saharan Africa governments have put in place a myriad of policies to counter these failures. Agricultural, food and nutrition policies address nutrition outcomes, such as hunger, undernourishment, wasting, stunting, child mortality, inadequate food consumption, food insecurity, and volatile food prices, thus improve nutrition outcomes among the population. However, malnutrition persists among the population in the region. To mitigate this challenge, informed, evidence-based policy development and implementation by policy practitioners is of essence. The solutions to the double burden of undernutrition and obesity cut across the agriculture, rural development, and public health sectors. This essay introduces twenty papers of this Special Issue of the Food Policy journal which analyzes 8 policy domains, contributes to the debate on the linkages and pathways through which policies influence food security, nutrition outcomes, and related indicators and points to policy directions in these domains.

International audience

International audience; Since the start of the oil counter-shock in June 2014, Algeria has experienced unprecedented twin deficits. The excessive monetisation of the public deficit coupled with other deep anomalies in the economy of this country acutely calls for reconsideration of its monetary policy. To this end a prior study of the long-run stability of money demand is needed. We estimate the demand for money for monetary aggregates M1 and M2, and cash in Algeria over the period 1979–2019, and study its long-run stability. We show that the transaction motive is significant for all three aggregates, especially for the demand for cash, reflecting the weight of informal economy “practices”. The elasticity of the scale variable is very close to unity for M2 and M1, and even equal to unity for cash demand (1.006). The elasticity of inflation is also significant for all three aggregates, although its level is higher in the case of cash demand (−6.474). Despite the persistence of certain financial repression mechanisms, interest rate elasticity is significant for all three aggregates, but higher for M1 and cash. The same observation is made for elasticity of the exchange rate, reflecting the effect of monetary substitution, especially for M1 and cash. Finally, our study concludes that the demand for money in terms of M1 remains stable, the same observation being confirmed for the M2 aggregate. However, the demand for fiat currency proves not to be stable. The consequences for the optimal design of monetary policy in Algeria are clearly stated.

International audience; In this paper, we tackle a generic optimal regime switching problem where the decision-making process is not the same from one regime to another. Precisely, we consider a simple model of optimal switching from competition to cooperation. To this end, we solve a two-stage optimal control problem. In the first stage, two players engage in a dynamic game with a common state variable and one control for each player. We solve for open-loop strategies with a linear state equation and linear-quadratic payoffs. More importantly, the players may also consider the possibility to switch at finite time to a cooperative regime with the associated joint optimization of the sum of the individual payoffs. Using theoretical analysis and numerical exercises, we study the optimal switching strategy from competition to cooperation. We also discuss reverse switching.

International audience; We study the joint determination of optimal investment and optimal depollution in a spatiotemporal framework where pollution is transboundary. Pollution is controlled at a global level. The regulator internalizes that: (i) production generates pollution, which is bad for the wellbeing of population, and that (ii) pollution flows across space driven by a diffusion process. We solve analytically for the optimal investment and depollution spatiotemporal paths and characterize the optimal long-term spatial distribution when relevant. We finally explore numerically the variety of optimal spatial distributions obtained using a core/periphery model where the core differs from the periphery either in terms of input productivity, depollution efficiency, environmental awareness or self-cleaning capacity of nature. We also compare the distributions with and without diffusion. Key aspects in the optimal policy of the regulator are the role of aversion to inequality, notably leading to smoothing consumption across locations, and the control of diffusive pollution adding another smoothing engine.

International audience; In this paper, we revisit the theory of spatial externalities. In particular, we depart in several respects from the important literature studying the fundamental pollution free riding problem uncovered in the associated empirical works. First, instead of assuming ad hoc pollution diffusion schemes across space, we consider a realistic spatiotemporal law of motion for air and water pollution (diffusion and advection). Second, we tackle spatiotemporal non-cooperative (and cooperative) differential games. Precisely, we consider a circle partitioned into several states where a local authority decides autonomously about its investment, production and depollution strategies over time knowing that investment/production generates pollution, and pollution is transboundary. The time horizon is infinite. Third, we allow for a rich set of geographic heterogeneities across states while the literature assumes identical states. We solve analytically the induced non-cooperative differential game under decentralization and fully characterize the resulting long-term spatial distributions. We further provide with full exploration of the free riding problem, reflected in the so-called border effects. In particular, net pollution flows diffuse at an increasing rate as we approach the borders, with strong asymmetries under advection, and structural breaks show up at the borders. We also build a formal case in which a larger number of states goes with the exacerbation of pollution externalities. Finally, we explore how geographic discrepancies affect the shape of the border effects.

We provide an analysis of institutional dynamics under uncertainty by means of a stochastic differential game of lobbying with two players (conservatives vs liberals) and three main ingredients. The first one is uncertainty inherent in the institutional process itself. The second considers resource windfalls volatility impact on economic and institutional outcomes. Last but not least, the resource windfall level matters in the relative bargaining power of the players. We compute a unique closed-loop equilibrium with linear feedbacks. We show that the legislative state converges to an invariant distribution. Even more importantly, we demonstrate that the most likely asymptotic legislative state is favorable to the liberals. However, the more volatile resource windfalls, the less liberal is the most likely asymptotic state. Finally, we assess the latter prediction on a database covering 91 countries over the period 1973-2005. We focus on financial liberalization policies. We find that as the resources revenues volatility increases, the financial liberalization index goes down. We also find that this property remains robust across different specifications and sample distinctions.

International audience; Does drawing economic benefit from nature impinge on conservation? This has been a subject of controversy in the literature. The article presents a management method to overcome this possible dilemma, and reconcile conservation biology with economics. It is based on recent advances in the mathematical theory of dynamic systems under viability constraints. In the case of a one-locus two-allele plant coexisting with a one-locus two-allele parasite, the method provides a rule for deciding when and to what extent the resistant or the susceptible strain should be cultivated, in the uncertain time-varying presence of the parasite. This is useful for preventing the fixation of the susceptible allele - and thereby limiting the plant's vulnerability in the medium term, should the parasite reappear. The method thus provides an aid to decision for economic and ecology-friendly profitability.

We provide an optimal growth spatio-temporal setting with capital accumulation and diffusion across space to study the link between economic growth triggered by capital spatio-temporal dynamics and agglomeration across space. The technology is AK, K being broad capital. The social welfare function is Benthamite. In sharp contrast to the related literature, which considers homogeneous space, we derive optimal location outcomes for any given space distributions for technology and population. Both the transitional spatio-temporal dynamics and the asymptotic spatial distributions are computed in closed form. Concerning the latter, we find, among other results, that: (i) due to inequality aversion, the consumption per capital distribution is much flatter than the distribution of capital per capita; (ii) endogenous spillovers inherent in capital spatio-temporal dynamics occur as capital distribution is much less concentrated than the (pre-specified) technological distribution; (iii) the distance to the center (or to the core) is an essential determinant of the shapes of the asymptotic distributions, that is relative location matters.

International audience; We construct a spatiotemporal frame for the study of spatial economic and ecological patterns generated by transboundary pollution. Space is continuous and polluting emissions originate in the intensity of use of the production input. Pollution flows across locations following a diffusion process. The objective functional of the economy is to set the optimal production policy over time and space to maximize welfare from consumption, taking into account a negative local pollution externality and the diffusive nature of pollution. Our framework allows for space and time dependent preferences and productivity, and does not restrict diffusion speed to be space-independent. Accordingly, we develop a methodology to investigate the environmental and economic implications of spatiotemporal heterogeneity. We propose a method for an analytical characterization of the optimal paths. An application to technological spillovers is proposed for illustration. We focus on the determination of the optimal short-term spatiotemporal dynamics induced by the resulting non-autonomous problems.

International audience; Besides the dreadful direct effects, enduring epidemics like HIV/AIDS induce much more subtle effects in the economy, principally via labor productivity and factor accumulation.Concerning the former, the impact of morbidity on effective labor has been recognized and accounted for since the early work of Over (1992) and Cuddington and Hancock (1994).The impact of mortality shocks on savings, and therefore on factor accumulation, has also been documented in this early literature, with an emphasis on the detrimental role of the inducedhealth expenditures. Recently, Asiedu, Jin, and Kanyama (2015) show that HIV/AIDS has a negative but diminishing effect on foreign direct investment (FDI), and this adverse effect occurseven when the prevalent HIV rate is low. In contrast, the consequences of HIV/AIDS on human capital accumulation have been more rarely treated. In particular, its impact on schoolingtime n generally omitted in the macroeconomic literature. Ferreira, Pessôa, and Dos Santos (2011) is an exception. The inherent mechanism is known as the Ben Porath mechanism (Ben Porath 1967): a downward trendin life expectancy following mortality shocks reduces the profitability of schooling, leading to a decline of human capital accumulation in the medium and long run. Boucekkine, de la Croix, and Licandro (2002) have proposed a theory ofendogenous growth based on the Ben-Porath mechanism. Notice also that the same essential argument (that shorter time horizons discourage investment) can be applied to physical capitalaccumulation; the latter may collapse not only because of the massive increase in health expenditures undermining savings as in the early literature but also via this indirect mechanism. Bothchannels are taken into account by Freire (2004) in her analysis of saving behavior in South Africa after the outbreak of the HIV/AIDS crisis.

International risk sharing is one of the main arguments in favor of financial liberalization. The pure risk sharing mechanism highlighted by Obstfeld (1994) implies that liberalization is growth enhancing for all countries as it allows the world portfolio to shift from safe low-yield capital to riskier high yield capital. This result is obtained under the assumption that the volatility figures for risky assets prevailing under autarky are not altered after liberalization. This note relaxes this assumption within the standard two-country model with intertemporal portfolio choices, formally incorporating the instability effect invoked by Stiglitz (2000). We show that putting together the pure risk sharing and instability effects in the latter set-up enriches the analysis and delivers predictions more consistent with the contrasted related empirical literature.

International audience; We consider an autocracy where the ruling elite control both the resource wealth and ed- ucation policies. Education prompts economic growth and enriches the budget of the elite. However, education also increases the “awareness of citizens”–capturing their reluctance to accept a dictatorship and their labor market aspirations –and forces the elite to ex- pand redistribution or handover the power. A power handover leads to a more democratic regime, where the elite retains (at least partially) its economic power. This trade-offis the backbone of our Lipsetian theory of voluntary power handover. This theory provides new insights on the positive relationship between economic development, education, and de- mocratization, and on the negative relationship between inequality and democratization. Finally, we revisit the resources-curse hypothesis within our setting

We construct a spatiotemporal frame for the study of optimal growth under transboundary pollution. Space is continuous and polluting emissions originate in the intensity of use of the production input. Pollution flows across locations following a diffusion process. The objective functional of the economy is to set the optimal production policy over time and space to maximize welfare from consumption, taking into account a negative local pollution externality and the diffusive nature of pollution. Our framework allows for space and time dependent preferences and productivity, and does not restrict diffusion speed to be spaceindependent. This provides a comprehensive setting to analyze pollution diffusion with a close account of geographic heterogeneity. The involved optimization problem is infinite-dimensional. We propose an alternative method for an analytical characterization of the optimal paths and the asymptotic spatial distributions. The method builds on a deep economic concept of pollution spatiotemporal welfare effect, which makes it definitely useful for economic analysis.

International audience; We review the most recent advances in distributed optimal control applied to Environmental Economics, covering in particular problems where the state dynamics are governed by partial differential equations (PDEs). This is a quite fresh application area of distributed optimal control, which has already suggested several new mathematical research lines due to the specificities of the Environmental Economics problems involved. We enhance the latter through a survey of the variety of themes and associated mathematical structures beared by this literature. We also provide a quick tour of the existing tools in the theory of distributed optimal control that have been applied so far in Environmental Economics.

We develop a theory of institutional transition from dictatorship to minority dominant-based regimes. We depart from the standard political transition framework à la Acemoglu-Robinson in four essential ways: (i) population is heterogeneous, there is a minority/majority split, heterogeneity being generic, simply reflecting subgroup size; (ii) there is no median voter in the post-dictatorship period, political and economic competition is favorable to the minority (fiscal particularism); (iii) (windfall) resources are introduced, and (iv) we distinguish between labor income and resources, and labor supply is endogenous. We first document empirically fiscal particularism, its connection with resource endowment, and the impact of both on revolutionary bursts. Second, we construct a full-fledged model incorporating the four characteristics outlined above. We show, among others, that polarization is a sufficient condition for revolutions, while resource rents are not: they do matter though when polarization is low. In agreement with our empirical facts, countries engaging in revolutions tend to be slightly less resource-rich than other countries. We also outline the interplay between resource rents, polarization and labor market conditions at the dawn of institutional change. Our theory is appropriate to understand the institutional dynamics in highly homogeneous resource-rich countries, which after post-independence autocratic regimes, turn to be dominated by minorities, Algeria being the paradigmatic case.

International audience; We solve a linear-quadratic model of a spatio-temporal economy using a polluting one-input technology. Space is continuous and heterogenous: locations differ in productivity, nature self-cleaning technology and environmental awareness. The unique link between locations is transboundary pollution which is modelled as a PDE diffusion equation. The spatio-temporal functional is quadratic in local consumption and linear in pollution. Using a dynamic programming method adapted to our infinite dimensional setting, we solve the associated optimal control problem in closed-form and identify the asymptotic (optimal) spatial distribution of pollution. We show that optimal emissions will decrease at given location if and only if local productivity is larger than a threshold which depends both on the local pollution absorption capacity and environmental awareness. Furthermore, we numerically explore the relationship between the spatial optimal distributions of production and (asymptotic) pollution in order to uncover possible (geographic) environmental Kuznets curve cases.

Afin d'expliquer les performances exceptionnelles (croissance soutenue, faible niveau de chômage et de l’inflation, forte accélération de la productivité) de l’économie américaine durant la décennie passée, plusieurs économistes ont évoqué l'émergence d'une "Nouvelle Economie", faisant référence au développement fulgurant des nouvelles technologies de l'information et des communications (TIC). Les partisans de la "Nouvelle Economie" estiment en effet que ces nouvelles technologies ont modifié de façon profonde le fonctionnement de l'économie et que, à l’instar d'autres innovations technologiques importantes au début du siècle passé, elles sont le vecteur d’une nouvelle ère de croissance et de prospérité. Mais est-ce vraiment le cas ? Malgré de fort nombreux aménagements de la comptabilité nationale américaine visant à mieux tenir compte des effets de l’usage des TIC sur la croissance de la productivité, les dernières études statistiques publiées à la fin du premier trimestre 2002, dressent un tableau mitigé de la situation. En particulier, l’impact de l’usage des TIC sur la croissance de la productivité dans les services ayant le plus investi en TIC est parfois même négatif ! De quoi susciter de réelles interrogations sur les mesures effectuées mais aussi et surtout sur les vertus de l’informatisation. Sur la base de certains enseignements récents de la théorie économique, l'article de Regards Economiques revient sur cette dernière question pour tirer quelques conclusions utiles sur le cas d’un "petit" pays comme la Belgique ! A l’évidence, les nouvelles technologies ont créé de réelles opportunités, mais transformer ces opportunités en croissance économique soutenable et créatrice d’emplois nouveaux et stables n’est pas sans coût. La nécessité de réorganiser le travail pour accompagner l’informatisation n’est qu’un défi parmi d’autres pour en assurer le succès et la pérennité. De fait, une informatisation réussie repose au moins sur deux piliers fondamentaux : réorganisation du travail (vers plus d’autonomie notamment) et modernisation soutenue par un effort constant en R&D et/ou d’adoption maîtrisée des avances technologiques. Pour un "petit" pays comme la Belgique et vu le niveau actuel des ressources dévolues à la recherche comme en atteste le dernier rapport sur la R&D en Belgique, l’effort de modernisation ne consiste évidemment pas à lancer des plans de R&D à même de concurrencer Intel ou Microsoft mais à assurer une diffusion rapide des TIC et à développer les qualifications à même de faciliter cette diffusion. Les niveaux actuels de diffusion en Belgique sont de toute évidence trop faibles pour espérer un gain significatif et durable en terme de productivité ou de croissance de PIB et de l’emploi. Mais même si le niveau de diffusion est élevé, l’expérience américaine nous apprend que cela ne garantit pas à coup sûr une augmentation généralisée du taux de croissance de la productivité. Il semble de plus en plus avéré que l’investissement en TIC n’est décisif en termes de gains de productivité que s’il est accompagné d’un changement organisationnel vers plus d’autonomie et de polyvalence notamment. Un troisième pilier sur lequel doit reposer tout processus d’informatisation concerne le volet institutionnel. L’effondrement de très nombreuses start-ups américaines et européennes entre 2000 et 2002 (la dernière à déposer son bilan n’est pas des moindres : Napster) et le procès Microsoft sont autant d’indicateurs des problèmes institutionnels inhérents à la "Nouvelle Economie" et notamment à son volet commerce électronique. Le problème est bien connu : les start-ups vendent un bien particulier, l’information, qui s’avère très facile à copier alors même que sa production est en général coûteuse. Par ailleurs, l’utilisation d’Internet permet aux consommateurs de comparer les prix, ce qui tend à rogner considérablement les profits des entreprises. Mais en même temps, la valeur de nombreux biens d’information, comme par exemple les softwares, augmente avec le nombre d’utilisateurs (c’est la notion d’externalités de réseau), donnant lieu à des monopoles naturels. Dans cette configuration, le démantèlement des monopoles peut avoir des effets négatifs sur le bien-être des consommateurs, sans compter les effets désastreux que cela peut engendrer sur le financement de la R&D, aspect si essentiel dans la viabilité d’un régime de croissance tiré par les TIC.

Ce Working Paper fait l'objet d'une publication in Economics Letters ; Under uncertainty, mean growth of, say, wealth is often defined as the growth rate of average wealth, but it can alternatively be defined as the average growth rate of wealth. We argue that stochastic stability points to the latter notion of mean growth as the theoretically relevant one. Our discussion is cast within the class of continuous-time AK-type models subject to geometric Brownian motions. First, stability concepts related to stochastic linear homogenous differential equations are introduced and applied to the canonical AK model. It is readily shown that exponential balanced-growth paths are not robust to uncertainty. In a second application, we evaluate the quantitative implications of adopting the stochastic-stability-related concept of mean growth for the comparative statics of global diversification in the seminal model due to Obstfeld (1994).

ACL-1; International audience; This is an introduction to the special section on financial frictions and debt constraints.

We investigate how the relationship between economic growth and pollution is affected by the source of pollution: production or consumption. We are interested in polluting waste that cannot be naturally absorbed, but for which recycling efforts aim to avoid massive pollution accumulation with harmful consequences in the long run. We distinguish the cases where recycling efforts are capital-improving or capital-neutral. Based on both environmental and social welfare perspectives, we determine how the interaction between growth and polluting waste accumulation is affected by the source of pollution, i.e., either consumption or production, and by the fact that recycling may or may not act as an income generator, i.e., either capital-improving or capital-neutral recycling efforts. Several new results are extracted regarding optimal recycling policy and the Environmental Kuznets Curve. Beside the latter concern, we show both analytically and numerically that the optimal control of waste through recycling allows to reaching larger (resp., lower) consumption and capital stock levels under consumption-based waste compared to production-based waste while the latter permits to reach lower stocks of waste through lower recycling efforts.

This paper proposes a theoretical model of forecasts formation which implies that in presence of information observation and forecasts communication costs, rational professional forecasters might find it optimal not to revise their forecasts continuously, or at any time. The threshold time- and state-dependence of the observation review and forecasts revisions implied by this model are then tested using inflation forecast updates of professional forecasters from recent Consensus Economics panel data for France and Germany. Our empirical results support the presence of both kinds of dependence, as well as their threshold-type shape. They also imply an upper bound of the optimal time between two information observations of about six months and the co-existence of both types of costs, the observation cost being about 1.5 times larger than the communication cost.

Measuring direct and indirect effects of extending health insurance coverage in developing countries is a key issue for health system development and for attaining universal health coverage. This paper investigates the role played by health insurance in the relationship between parental morbidity and child work decisions. We use a propensity score matching technique combined with hurdle models, using data from Rwanda. The results show that parental health shocks have a substantial influence on child work when households do not have health insurance. Depending on the gender of the sick parent, there is a substitution effect not only between the parent and the child on the labor market, but also between the time the child spends on different work activities. Altogether, results reveal that health insurance protects children against child work in the presence of parental health shocks.