Testing the Applicability of “Ecologically Friendly” Energy Sources in Household Electricity Consumption in Bulgaria

The EU’s “Green Deal” plans a carbonfree energy mix, neglecting nuclear energy, despite high social costs. Photovoltaic and wind power plants lack proper solutions for storing the excessive electricity. Their EROI is still lower compared to that of conventional sources. A complementary pair of combined cycle gas turbines (CCGT) and photovoltaics is a good solution for regular electricity supplies for households at affordable prices. Such a model is based on consumption data in Ruse (Bulgaria), delivered by Nicola Mihaylov et al. It also includes data, delivered by RIS Elektro OOD – a solar park operator. Matching consumption fluctuations with production fluctuations gives the following: A 1 MW CCGT that supplies up to 1,600-1700 households is combined with a 250 kW photovoltaic park. The calculations show that because of the park the CCGT should operate with lower EROI and "green surcharge" in the consumers’ price. The optimal solution for energy deliveries requires a better balance between political, technical and economic factors.

Pseudo-Wealth and Consumption Fluctuations

This paper provides an explanation for situations in which the fundamental state variables describing the economy do not change, but aggregate consumption experiences significant changes. We present a theory of pseudo-wealth—individuals’ perceived wealth that is derived from expectations of gains in bets arising from heterogeneous expectations. This wealth is divorced from society's real assets. The creation of a market for bets necessarily generates positive pseudo-wealth. Changes in the magnitude of differences of prior beliefs will lead to changes in expected wealth and hence to changes in consumption, implying instability in aggregate and individual consumption and ex-post intertemporal consumption misallocations. Moreover, ‘completing markets’ through the creation of a new market for bets can increase individual and aggregate risk. With a utilitarian social welfare function, completing markets leads to lower welfare ex-post, but the first theorem of welfare economics (evaluating each individual's well-being on the basis of her ex ante beliefs) still holds, raising unsettling questions for welfare analysis. We also show that if the planner uses beliefs that are consistent, then the betting equilibrium would be Pareto inferior.

On the welfare cost of consumption fluctuations in the presence of memorable goods

We propose a new category of consumption goods, memorable goods, that generate a utility flow even after physical consumption. Empirically, memorable goods expenditures exhibit frequent zero monthly purchases and lumpy expenditure spikes. Memorable goods expenditures are 20% the size of nondurable expenditures, but three times as volatile. We then develop a consumption‐savings model with borrowing constraints and income risk that formalizes the notion of memorable goods and distinguishes them from other nondurable goods. We show that consumers optimally choose lumpy consumption of memorable goods. We then measure the welfare cost of consumption fluctuations using our calibrated model and empirically evaluate our calibrated model's predictions for the consumption response to predictable income changes. We find that the welfare cost of household‐level consumption fluctuations induced by income shocks fall from 20.4 to 12.3 percentage points if memorable goods are accounted for, and that empirical estimates of excess sensitivity of consumption may significantly be driven by memorable goods expenditures.

Competition and exposure of returns to the C-CAPM

Purpose This study aims to investigate the effect of product market competition on the exposure of firms’ returns to consumption fluctuations (C-CAPM beta). Design/methodology/approach The C-CAPM beta comes from a regression of a stock’s returns against consumption growth, with controls for the Fama–French three factors and momentum. The Herfindahl–Hirschman index of concentration measures competition, with other measures like deregulation and tariff reductions used for robustness tests. Industries are categorized using different SIC digits, with the NAICS measure used for robustness tests. The C-CAPM beta is regressed to competition, with appropriate control variables, to find its relationship. Findings Higher levels of competition reduces the C-CAPM beta. The results are consistently robust to different measures of product market competition and industry identification. Practical implications Product market competition influences the sensitivity of systematic risk, as measured by the C-CAPM beta, to consumption, such that higher levels of competition reduce systematic risk. Originality/value This research contributes to a literature that admittedly is still murky, as the relationship between competition and systematic risk is still unsettled. No study (to the authors’ knowledge) examines the effect of competition on firms’ exposure to consumption. This research adds to the literature on the role of competition in risk, specifically with respect to consumption.

The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security

Policy uncertainty reduces individual welfare when individuals have limited opportunities to mitigate or insure against the resulting consumption fluctuations. We field an original survey to measure the degree of perceived policy uncertainty in Social Security benefits and to estimate the impact of this uncertainty on individual welfare. Our central estimates show that on average individuals are willing to forgo 6 percent of the benefits they are supposed to get under current law to remove the policy uncertainty associated with their future Social Security benefits. This translates to a risk premium from policy uncertainty equal to 10 percent of expected benefits. (JEL D14, D81, H55)