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Essays on Resource Allocation and Management, Price Volatility and Applied Nonparametrics


This dissertation is composed of three research topics. The first topic proposes an intrabasin allocate-and-trade, institution, to manage the eastern Nile River basin with the objective of increasing the overall basin's welfare through improving efficiency, equity and sustainability. By developing the Nile Environmental and Economic Optimization Model (NEEOM), we estimate the current, planned and improved welfare value. We find that a water trade institution can achieve nearly 100% of the welfare created by economically efficient allocation, and secure equivalent volumes of water compared with the status quo scheme. We estimate that riparian countries could raise about $660 million per annum for protecting and conserving the natural resources of the basin. Finally, using Global Circulation Models, we find that the institution will recover nearly all of the efficient outcomes.

The second topic is designed to study the behavior of carbon price volatility before, within and after the 2008/09 global recession using Markov Regime Switching model. The results show that an unregulated voluntary carbon market was in high-volatile regime within, and two years before, the recession. A regulated compliance carbon market was relatively in stable and low-volatile regime for these periods, except at the end of the recession. It can be inferred that high-volatile regimes were, however, not caused by the recession per se. The Wald tests show that there were distinct low-and high-volatile regimes during the recession period, indicating that the recession aggravated the volatility of both voluntary and compliance markets.

The third topic is designed to study the relationship between economic growth and pollution using nonparametric econometric technique. The results indicate a partial relationship between GDP per capita and the level of PM10 pollution for low- and high-income countries. Hence, environmental policies for reducing the level of PM10 pollution have to emphasize middle-income and oil-producing high-income countries that show unprecedented increase in the level of PM10 pollution. Further, the Li and Wang test indicates that nonparametric analysis turns out to produce better results than quadratic and cubic specifications. Semiparametric models show decreasing pollution level as income rises and improve the smoothness of the relationship.

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