the replacement problem abstract a prototypical vintage capital model of economic growth is developed where the decision to replace old technologies with new ones is modeled explicitly technological change is investment specific depreciation in this environment is an economic not a physical concept the vintage capital economy s balanced growth paths and transitional dynamics are analyzed the transitional dynamics are markedly different from the standard neoclassical growth model

corporate taxation and capital accumulation evidence from sectoral panel data for 14 oecd countries abstract we present new empirical evidence that sector level capital output ratios are strongly influenced by corporate tax incentives as summarised by the tax component of a standard user cost of capital measure we use sectoral panel data for the usa japan australia and eleven eu countries over the period 1982 2007 our panel combines internationally consistent data on capital stocks value added and relative prices from the eu klems database with corporate tax measures from the oxford university centre for business taxation our results for equipment investment are particularly robust and strikingly consistent with the basic economic theory of corporate investment

the long run relationship between productivity and capital abstract using panel cointegration techniques we show a cointegrating relationship exists between capital and productivity in 446 manufacturing industries panel dols and fmols estimates reveal that innovations to productivity increase and granger cause capital movements

on success and dissolution of the labor managed firm in the capitalist economy labor managed firms lmfs in the developed capitalist economy exhibit an interesting life cycle pattern often they come into existence as a way of reorganizing insolvent entrepreneurial profit maximizing firms yet successful lmfs tend to be assimilated to the entrepreneurial modus operandi in the long run i propose a simple theoretical model that explains this lmf phenomenon as the outcome of the lmf s interaction with outside markets especially competitive spot labor markets the interpretations and limitations of the model are also discussed as the basic framework is extended to deal with imperfections in capital markets and with contractual labor markets

labor managed cooperatives and private firms in north central italy an empirical comparison the authors analyze the differences between the behavior of private firms and that of producer cooperatives in a matched sample of the two organizational types from the regions of emilia romagna and toscana in north central italy where producer cooperatives are numerous individual firm level surveys provide new detailed comparative data on key issues such as investment productivity wages employment and industrial relations differences between the two types of firm are found in labor relations employment pay production methods the relationship to the external market environment and the level of economic performance the authors find no significant differences in investment horizons or criteria for finance despite theoretical assertions to the contrary the cooperatives apparently have higher productivity more labor intensive production methods lower income differentials and a more tranquil industrial relations environment than the private firms

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

total factor productivity and the measurement of technological change tfp is interpreted in the literature in different mutually contradictory ways changes in tfp are shown to measure not technological change only the super normal returns to investing in such change returns that exceed the full opportunity cost of the activity thus in the limit technological change can proceed with unchanged tfp measuring the effects of technological change instead requires counterfactual estimates reasons why changes in tfp are imperfect measures of super normal returns are also studied reasons connected with the timing of output responses the treatment of r d in the national accounts the omission of resource inputs and two types of aggregation la productivite totale des facteurs et la mesure du changement technologique la productivite totale des facteurs ptf est interpretee dans la litterature de manieres differentes et mutuellement contradictoires on montre que les changements dans la ptf ne mesurent pas le changement technologique mais seulement les rendements supra normaux sur les investissements dans de tels changements des rendements qui depassent le plein cout d opportunite de cette activite donc a la limite le changement technologique peut proceder sans que la ptf change mesurer les effets du changement technique reclame des evaluations d hypotheses de rechange les raisons pour lesquelles les changements dans la ptf sont des mesures imparfaites des rendements supra normaux sont aussi etudiees raisons connectees avec la reponse des niveaux de production le traitement de la r d dans les comptes nationaux l omission des intrants de ressources et deux types d agregation

capital skill complementarity sectoral labor productivity and structural transformation abstract in the postwar u s economy labor productivity has been growing faster in the goods sector versus the service sector this paper argues that this sectoral labor productivity growth gap can largely be explained by the fact that capital intensity also increases faster in the goods sector i build a two sector neoclassical growth model in which capital substitutes low skilled labor but complements high skilled labor and the goods sector is more intensive in low skilled labor relative to the service sector as observed in the data as capital becomes more abundant relative to labor along economic growth low skilled labor is substituted by capital leading to faster growth of capital intensity and hence labor productivity in the goods sector using a calibrated model i find that two thirds of the sectoral labor productivity growth gap can be explained by capital accumulation and its interaction with capital skill complementarity

cross sectional heterogeneity and the persistence of aggregate fluctuations abstract the microevidence indicates that small firms grow faster than big firms i argue that this relationship between the expected growth rate of a firm and its size may provide a microfoundation for the well known high degree of persistence of shocks to aggregate output the logic goes as follows almost any shock tends to temporarily alter firms incentive to invest in growth thereby leading to a reallocation of firms across size categories if small firms grow faster than big ones the impact effect of the shock on aggregate output is gradually absorbed but as fast growing small firms become big and start to grow at the lower rate of big firms the rate at which the shock is absorbed decreases over the adjustment path as a result shocks are absorbed yet at a very low decreasing rate which induces long memory in aggregate output i argue that this transmission mechanism may reconcile the microevidence with the observed degree of aggregate persistence it requires changes in neither the number of firms in the market nor the rate of technological progress it is merely the result of the cross sectional heterogeneity that we observe in real economies

technology shocks and job flows we consider a version of the solow growth model where technological progress can be investment specific or investment neutral the labour market is subject to search frictions and the existing productive units may fail to adopt the most recent technological advances technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment we calibrate the model to replicate the high persistence that characterizes the dynamics of firms neutral technology and the frequency of firms capital adjustment we find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment investment specific technological advances reduce job destruction have mild effects on job creation and are expansionary hence neutral technological progress prompts schumpeterian creative destruction while investment specific technological progress operates essentially as in the standard neoclassical growth model using structural var models we provide support to the key dynamic implications of the model copyright 2007 wiley blackwell

employee ownership and internal governance abstract this paper is designed to counter oliver williamson s hypothetical peer group model of organization with a discussion of three prosperous populations of employee owned firms worked owned scavenger companies taxi cooperatives and professional partnerships such as the large law firm it will be shown here that these firms are formed endure and prevail over their competition for reasons that williamson more than anyone else has taught us to appreciate in particular this paper will argue that the metering problems and human asset considerations that are so prominently featured in williamson s work are crucial for understanding the success of these firms

the aggregate implications of machine replacement theory and evidence the authors study an economy in which producers incur resource costs to replace depreciated machines the process of costly replacement and depreciation creates endogenous fluctuations in productivity employment and output of a single producer the authors explore the spillover effects of machine replacement on other sectors of the economy and provide conditions for synchronized machine replacement by multiple independent producers the implications of their model are generally consistent with observed monthly output employment and productivity fluctuations in automobile plants synchronization of retooling across plants within the auto industry is widespread so that the fluctuations observed at the plant level have aggregate implications copyright 1993 by american economic association

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

comparative empirical observations on worker owned and capitalist firms abstract the paper analyzes the available quantitative information on worker owned and capitalist firms in a few industrialized countries in an attempt to draw a comparative profile of their respective sectors the population of worker owned firms is found to be heterogeneous changing over time and significantly different from the population of capitalist firms worker owned firms are smaller concentrate in a few industries and since the mid 1970s have higher birth rates and lower demise rates than capitalist firms these findings are interpreted with the aid of a theoretical framework and in a broad historical context

labor and investment frictions in a real business cycle model abstract this paper develops a prototype real business cycle model in which labor and investment frictions may compete directly with technology shocks in accounting for fluctuations in the postwar us economy using ireland s 2004a a method for taking models to the data journal of economic dynamics and control 28 1205 1226 methodology we establish that both types of friction are quantitatively important technology shocks still explain a substantial fraction of the fluctuations in aggregate output as the baseline real business cycle model predicts formal hypothesis tests suggest that changes in the recurrence of shocks frictions and structural parameters all play a role in accounting for the shift in the time series properties of the data between the periods before and after 1980

nonconvex factor adjustments in equilibrium business cycle models do nonlinearities matter recent empirical analysis has found nonlinearities to be important in understanding aggregated investment using an equilibrium business cycle model we search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs we find that while such costs lead to nontrivial nonlinearities in aggregate investment demand equilibrium investment is effectively unchanged our finding based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity is robust to the introduction of shocks to the relative price of investment goods

investor mood and financial markets abstract numerous studies in recent decades have linked investor mood and financial market behavior but most works have been empirical investigations this paper bridges the gap between empirical findings and financial theory by slightly modifying the lucas lucas r e 1978 asset prices in an exchange economy econometrica 46 1429 1445 model this study shows how investor mood variations affect equilibrium asset prices and expected returns analysis results indicate that both equity and bill prices correlate positively with investor mood with higher asset prices associated with better mood conversely expected asset returns correlate negatively with investor mood further the mood effect on asset prices increases when investors are in a good mood and mood variations exhibit a greater influence on equity markets than on bill markets results of this study suggest that investor mood is a vital factor in equilibrium asset prices and returns and integrating investor mood into asset pricing models helps to interpret the growing body of seemingly anomalous evidence regarding investor behavior

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

entrepreneurial skills technological progress and firm growth using cross country establishment level data i show that employment profiles over a firm s life cycle are flatter in fast growing economies than in slow growing economies the difference in average employment over the firm s life cycle increases with plant age i propose a frictionless overlapping generations model with exogenous technological progress firm productivity also depends on entrepreneurs skills entrepreneurs can increase their skills over their life cycle but the growth of the vintage component of younger cohorts skills is higher in fast growing economies than in slow growing economies this model is able to explain most of the differences observed in the sample between fast growing and slow growing economies

comparing dsge var forecasting models how big are the differences abstract i generate priors for a vector autoregression var from a standard real business cycle rbc model an rbc model with capital adjustment costs and habit formation and a sticky price model with an unaccommodating monetary authority the response of hours worked to a tfp shock differs sharply across these models i compare the accuracy of forecasts made from each of the resulting dynamic stochastic general equilibrium vector autoregression dsge var models despite having different structural characteristics the dsge vars are comparable in terms of forecasting performance as in previous work dsge vars compare favorably with atheoretical vars

the coevolution of the real and financial sectors in the growth process the role of debt and equity changes over time and with the level of development what are these changes and why should they systematically occur across different countries and time periods this article characterizes financial innovation as a dynamic process that both influences and is influenced by the development of the real sector it focuses on the emergence and development of equity markets using a model that allows for growth and for capital accumulation that is financed externally through a combination of debt and equity as an economy develops the aggregate ratio of debt to equity will generally fall yet debt and equity remain complementary sources for the financing of capital investments the results suggest how various government policy actions might affect capital accumulation and equity market activity

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

productivity capital and labor in labor managed and conventional firms an investigation on french data using two new data sets from france the authors present the first study of the comparative productivity of labor managed and conventional firms involving large representative samples of firms in a

worker participation and productivity in labor managed and participatory capitalist firms a meta analysis using meta analytic techniques the author synthesizes the results of 43 published studies to investigate the effects on productivity of various forms of worker participation worker participation in decision making mandated codetermination profit sharing worker ownership employee stock ownership or individual worker ownership of the firm s assets and collective ownership of assets workers collective ownership of reserves over which they have no individual claim he finds that codetermination laws are negatively associated with productivity but profit sharing worker ownership and worker participation in decision making are all positively associated with productivity all the observed correlations are stronger among labor managed firms firms owned and controlled by workers than among participatory capitalist firms firms adopting one or more participation schemes involving employees such as esops or quality circles

a monetary explanation of the equity premium term premium and risk free rate puzzles this paper develops and estimates a monetary model that offers an explanation of some puzzling features of observed returns on equities and default free bonds the key feature of the model is that some assets other than money play a special role in facilitating transactions which affects the rate of return that they offer the model is capable of producing a low risk free rate a high equity premium and an average positive relationship between maturity and term premium for default free bonds the model s implications for the joint distribution of asset returns velocity inflation money growth and consumption growth are also compared to the behavior of these variables in the u s economy

the augmented solow model and the productivity slowdown abstract in an insightful and influential paper mankiw et al 1992 quarterly journal of economics 107 407 437 have suggested that an augmented solow growth model can account for 80 of the variation in output per capita across countries due to different steady state growth paths that result from differences in saving rates education and population growth this paper carries their analysis one step further and asks whether changes in the growth rate between the 1960s and the 1980s can also be explained by this framework our results provide further support for several of mankiw et al s key conclusions investment in physical capital population growth and the initial levels of output seem to matter a great deal however investment in human capital has no ability to account for changes in growth rates over time we conclude that investment in physical capital seems to be quite important for economic growth though the reasons for this importance may not be fully captured by the augmented solow growth model

capital reallocation and liquidity this paper studies the cyclical properties of capital reallocation and the frictions which inhibit such reallocation we show that the amount of capital reallocation and the benefits to reallocation vary at the business cycle frequency the amount of capital reallocation is procyclical in contrast the benefits to capital reallocation appear countercyclical we measure the amount of reallocation using data on flows of capital across firms and the benefits to capital reallocation using several measures of the cross sectional dispersion of the productivity of capital we then study a calibrated model of an economy where capital reallocation is costly and impute the cost of reallocation which is consistent with the amount of and benefits to reallocation in the data we find that the cost of reallocation needs to be substantially countercyclical to be consistent with the observed joint cyclical properties of reallocation and productivity dispersion the cyclical variation in this cost is interpreted as variation in the liquidity of capital broadly defined since physical costs are unlikely to vary countercyclically

asset returns with transactions costs and uninsured individual risk abstract we explore whether incorporating an explicit motive for holding liquid assets within an equilibrium asset pricing model helps explain the following features of asset returns and turnover in the post war u s economy i the low risk free real interest rate ii the large spread between returns on liquid assets and stocks and iii the greater transaction velocity of liquid assets relative to stocks we introduce a demand for liquid assets by adding uninsured individual risk together with differential costs of trading securities numerical simulations attempting to match the return data generate a ratio of liquid assets to income considerably below observed levels

the spirit of capitalism asset pricing and growth in a small open economy abstract conventional models of economic behavior have failed to account for a number of observed empirical regularities in macroeconomics and international economics this may be due to preference specifications in conventional models in this paper we consider preferences with the spirit of capitalism the desire to accumulate wealth as a way of acquiring status we analyze a number of potential effects of international catching up and the spirit of capitalism on savings growth portfolio allocation and asset pricing moreover we obtain a multi factor capital asset pricing model capm our results show that status concerns have non trivial effects on savings growth portfolio allocation asset prices and the foreign exchange risk premium

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

the economic crisis from a neoclassical perspective abstract this paper assesses the 2007 2009 recession using neoclassical business cycle theory i find that the 2007 2009 u s recession differs substantially from other postwar u s recessions and also from the 2008 recession in other countries in that lower labor input accounts for virtually all of the decline in income and output in the united states while lower productivity accounts for much of other u s recessions and the 2007 2009 recession in other countries i also find that existing classes of models including financial market imperfections models do not explain the u s recession this is because the 2007 2009 recession is almost exclusively related to what appear to be labor market distortions that drive a wedge between the marginal product of labor and the marginal rate of substitution between consumption and leisure a topic about which current classes of financial imperfection models are largely silent i discuss future avenues for developing this class of models and i consider alterna

the information technology revolution and the stock market evidence since 1968 the ratio of stock market capitalization to gdp has varied by a factor of 5 in 1972 the ratio stood at above unity but by 1974 it had fallen to 0 45 where it stayed for the next decade it then began a steady climb and today it stands above 2 we argue that the it revolution was behind this and moreover that the capitalization gdp ratio is likely to decline and then rise after any major technological shift the three assumptions that deliver the result are

can natural disasters have positive consequences investigating the role of embodied technical change it has been suggested that disasters might have positive economic consequences through the accelerated replacement of capital this possibility is referred to as the productivity effect this effect is investigated using a model with embodied technical change in this framework disasters can influence the production level but cannot influence the growth rate in the same way than the saving ratio in a solow like model depending on reconstruction quality indeed accounting for embodied technical change can either decrease or increase disaster costs but is never able to turn disasters into positive events moreover a better but slower reconstruction amplifies the short term consequences of disasters but pays off over the long term regardless the productivity effect cannot prevent the existence of a bifurcation when disaster damages exceed the reconstruction capacity potentially leading to poverty traps c 2008 elsevier b v all rights reserved

long run implications of investment specific technological change an attempt is made to disentangle its effects from the more traditional hicksneutral form of technological progress the balanced growth path for the model is characterized and calibrated to u s national income and product account nipa data the quantitative analysis suggests that investment specific technological change accounts for the major part of growth jel e13 030 041 047

organizational capital technology adoption and the productivity slowdown abstract there is evidence linking the productivity slowdown of the 1970s and 1980s to changing patterns of technological adoption related to the spread of information technology it notably it appears to require plant level reorganization for its full implementation i develop a general equilibrium model in which organizational capital plays a central role in establishment dynamics and study its transition path after a shock in the form of an incompatibility between new technologies and previously accumulated plant level expertise the behavior of the model is consistent with the structure of the slowdown as well as the subsequent resurgence further applications are discussed

the equity premium why is it a puzzle corrected this article takes a critical look at the equity premium puzzle the inability of standard intertemporal economic models to rationalize the statistics that have characterized u s financial markets over the past century a summary of historical returns for the united states and other industrialized countries and an overview of the economic construct itself are provided the intuition behind the discrepancy between model prediction and empirical data is explained after detailing the research efforts to enhance the model s ability to replicate the empirical data i argue that the proposed resolutions fail along crucial dimensions

on the fit of new keynesian models this article provides new tools for the evaluation of dynamic stochastic general equilibrium dsge models and applies them to a large scale new keynesian model we approximate the dsge model by a vector autoregression and then systematically relax the implied cross equation restrictions and document how the model fit changes we also compare the dsge model s impulse responses to structural shocks with those obtained after relaxing its restrictions we find that the degree of misspecification in this large scale dsge model is no longer so large as to prevent its use in day to day policy analysis yet is not small enough to be ignored

volatility and slow technology diffusion abstract i study the effects of uncertainty on technology adoption and thereby on volatility and growth i present an analytically tractable model in which i uncertainty about the returns to adoption delays technology diffusion and ii the mean and volatility of output growth are jointly determined in equilibrium i then test the key predictions of the model by studying the introduction of three major information and communication technologies icts computers internet and cell phones i find that countries with more volatile growth rates of real gdp per capita have higher time adoption lags and lower average growth as predicted by the model

the economic determinants of technology shocks in a real business cycle model abstract creative destruction due to new technologies causes both long run growth and short run business fluctuations new technologies push the economy on a higher productivity level but also imply partial obsolescence of old production units obsolescence induces an adjustment period during which growth rates gradually fall at some endogenously determined point research for the next technology starts once the new technology is discovered a technology shock occurs and the next cycle starts this is shown in a continuous time rbc model with risk averse agents where savings can be used for financing deterministic capital accumulation and stochastic r d for new technologies

the effects of workers participation on enterprise performance empirical evidence from french cooperatives abstract the results of estimating production functions augmented by various measures of workers participation on a large enterprise level data set of french cooperatives are reported value added is found to be an increasing function of participation in profits in collective membership and in ownership even when a wide assortment of enterprise specific and environmental factors are taken into account this finding is very robust surviving tests between alternative specifications of technology for reverse causality for simultaneous equation bias and for multicollinearity the typical productivity effect from participation however is small around 5 of output the results suggest that western policymakers should investigate ways to increase workers participation in capital stakes and profit shares

aggregate fluctuations and the industry structure of the us economy abstract in a two sector economy changes in intermediate input trade as reflected in cost share fluctuations are key to determining the amplification properties of investment specific and neutral shocks i document that the cost shares of intermediate inputs produced by the investment sector correlate positively with gdp whereas those of inputs produced by the consumption sector correlate negatively with gdp the two sector model of greenwood et al 1988 is extended to allow for trade of intermediate goods and to show that the documented correlations discipline heterogeneous elasticities of substitution in intermediate inputs across sectors shock amplification that is the effect of a sectorial shock on aggregate value added depends on the degree of heterogeneity in these elasticities of substitution for a calibrated economy to that of the united states i find that shock amplification is stronger than in a unitary elasticity economy it is also stronger than in an economy with a common non unitary elasticity that is either inferred from data via reduced form estimates or calibrated to match the same targets as our benchmark economy

fiscal policy and asset prices with incomplete markets we study the simultaneous impact of fiscal policy decisions on macroeconomic activity wealth distribution and asset prices we consider a general equilibrium overlapping generations model with incomplete markets and heterogeneous agents where government debt and capital are imperfect substitutes increases in public debt lead to significant increases in the riskless rate and to a reduction in the equity premium while higher capital income tax rates lead to a higher equity premium the crowding out effects on capital and output are much higher than in models where government debt and capital are perfect substitutes which thus ignore households portfolio reallocation decisions the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

the viability of employee owned firms evidence from france this study examines data on french producer cooperatives for the years 1970 79 to test the widely accepted theoretical prediction that employee owned firms either will fail as commercial undertakings or degenerate into capitalist firms as the proportion of hired workers who are not members of the cooperative firm increases contrary to this prediction the authors find a high rate of survival among the producer cooperatives studied with many cooperatives still healthy after fifty years of operation and they find no evidence of degeneration either in terms of the proportion of hired workers productivity profitability or capital intensity the findings do however suggest that the firms financial structure became increasingly inefficient with age

the dynamic effects of neutral and investment specific technology shocks the neoclassical growth model is used to identify the short run effects of neutral technology shocks which affect the production of all goods homogeneously and investment specific shocks which affect only investment goods the real equipment price crucial for identifying the investment shocks experiences an abrupt increase in its average rate of decline in 1982 so the analysis is based on a split sample on the basis of the preferred specification the two technology shocks account for 73 percent of hours and 44 percent of output s business cycle variation before 1982 and 38 percent and 80 percent afterward the shocks also account for more than 40 percent of hours and 58 percent of output s forecast errors over a three to eight year horizon in both samples the majority of these effects are driven by the investment shocks

employment flows capital mobility and policy analysis this article extends hopenhayn and rogerson s analysis of firing taxes by introducing a flexible form of capital and considering transitionary dynamics the article finds that capital is not important for understanding the long run and welfare effects of firing taxes however capital is crucial for determining the short run consequences of eliminating this type of policy

comparative dynamics of an equilibrium intertemporal asset pricing model this paper uses recursive competitive theory to develop a general equilibrium asset pricing model in this framework all prices and rates of return are endogenously determined thus enabling us to analyze the effects of changes in preferences technological uncertainty and expectations on the structure of security prices in particular we focus on how the market risk premium varies with changes in the underlying economic environment an issue which other asset pricing models have chosen not to address