Murat Sertel Lecture Helmut Bester, Freie Universität, Germany
This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders’ fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches the Walrasian competitive equilibrium, independently of the traders’ inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining.
Vilfredo Pareto Lecture Costas Arkolakis, Yale University, USA
Title: Clean Growth
We provide a spatial theory of clean growth to assess the global impact of the rise of renewable energy. We model the details of the combined production and transmission network of electricity (“the grid”) that determine the supply and losses of energy in space. Demand is determined through a model of trade and production, and electricity prices are set by regional grid operators. The local rate of clean energy adoption depends on learning-by-doing, the global electricity and trade network, and regional comparative advantage in renewable resources. To quantify the contribution of renewable adoption to global growth, we collect and harmonize global data on transmission lines, power stations, trade, and regional output. We use the model to measure the aggregate and spatial implications of decarbonizing power production, as well as the role of policy in affecting the transition.