an aggregate model of technical change a simple aggregate growth model is presented in which technology is described by a probability distribution from which new plants are drawn especially good draws are viewed as technological innovations that shift the mean of the following period s plant distribution function the resulting technical change is endogenous random and cumulative in contrast to conventional growth models the model s growth path displays nonstationary drift rather than deterministic trend and the long run per capita growth rate has positive rather than zero sensitivity to the model s saving parameter

premia for correlated default risk abstract using data on corporate default experience in the u s and market rates of cdx index and tranche swaps of various maturities we estimate reduced form models of correlated default timing in the cdx high yield and investment grade portfolios under actual and risk neutral probabilities the striking contrast between the estimated processes followed by the actual and risk neutral arrival intensities of defaults and between the parameters governing the actual and risk neutral dynamics of the risk neutral intensities indicates the presence of substantial default risk premia in cdx swap market rates the effects of risk premia on swap rates covary strongly across maturities and depend on general stock market volatility and several measures of credit spreads large moves in the effects of these premia on swap rates have natural interpretations in terms of economic and financial market developments during the sample period april 2004 to october 2007 our results suggest that a large portion of the movements in cdx swap market rates observed during the sample period may be caused by changing attitudes toward correlated default risk rather than changes in the economic factors affecting the actual risk of clustered defaults which ultimately governs swap payoffs

imports domestic production and transnational vertical integration a theoretical note suppose a developing country has the choice of importing cars i or producing them at home in a subsidiary s of a transnational company or in a domestic firm under a licensing l contract from a transnational which ties the import of components from the latter if the criterion of national benefit is given by consumer surplus under i or s and by consumer surplus plus the profits of the domestic firm under l we compare the benefits from the alternative regimes i s or l under different market structure assumptions in most cases the regime s seems to dominate the conclusions are then modified by pointing to factors excluded from the basic model

the dynamics of international differentiation a multi country evolutionary model the paper presents some admittedly preliminary results on evolutionary modeling of open economies interactions the dynamics is microfounded in a multiplicity of boundedly rational agents who imperfectly learn how to innovate in environments characterized by notionally unlimited opportunities micro discoveries is shown can generate persistent system level effects despite the absence in the model of any institutional specificity of individual countries processes of innovative exploration and imitation yield international divergence less often convergence catching up and falling bebind

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

the effect of business cycles on growth keynes vs schumpeter i introduction do business cycles matter the question would have seemed recherche a scant decade ago when understanding and explaining business cycle phenomena were the bread and butter of macroeconomics but recently with the revival of interest in growth theory it has become customary to argue that business cycles are an unimportant second order problem the locus classicus for this position is lucas 1987 a particularly sharp statement of it launches the recent growth textbook by barro and sala i martin 1995 4 5 if we want to understand why countries differ dramatically in standards of living then we have to understand why countries experience such sharp divergences in long term growth rates even small differences in these growth rates when accumulated over a generation or more have much greater consequences for standards of living than the kind of short term business fluctuations that have typically occupied the attention of macro economists to put it another way if we can learn about government policy options that have even small effects on the long term growth rate then we can contribute much more to improvements in standards of living than has been provided by the entire history of macroeconomic analysis of countercyclical policy and fine tuning certainly there is a superficial ring of truth to this assertion since one s standard of living today is obviously higher in a rich country in a recession than in a poor country in a boom however to infer from this that business cycles are unimportant one needs to assume additionally a dichotomy between business cycles and growth so that explaining why economies grow and why they experience fluctuations are treated as analytically distinct questions 1 if the dichotomy is granted then the conclusion follows because a policy of eliminating business cycle fluctuations would have no effect on the growth rate and so would confer a smaller welfare benefit over a long time horizon than a small increase in the growth rate over that same horizon but in our view this is a false dichotomy we believe that business cycles can affect growth granted this are business cycles good or bad for growth much of the emerging literature seems to suggest that recessions are good for growth if correct this would seem to make countercyclical stabilization policy not just unimportant but positively harmful caballero and hammour 1994a b present models in which recessions are viewed as times of cleansing or a pit stop for the economy so that recessions are good for growth aghion and saint paul 1991 argue in the same vein at first glance these models would seem to suggest that recessions and therefore business cycles are good for growth but on closer inspection there are two analytically distinct questions i are recessions good for growth and ii are business cycles good for growth suppose one accepts the caballero hammour argument that recessions are good for growth pari passu it should follow symmetrically that booms are bad for growth so that the net effect of a business cycle washes out to a first order of approximation so that a fortiori a successful countercyclical policy which eliminated business cycles would have no first order effect on growth conlisk 1989 by contrast presents a model which focuses specifically on the second question one of the few such papers of which we are aware his model is a neo schumpeterian evolutionary growth model which predicts that business cycles will be good for growth because of greater opportunities for innovation we disagree with these conclusions a more severe business cycle leads to increased uncertainty for firms which we think ought to reduce the return to capital and hence reduce the incentive to invest this should lead to reduced capital accumulation and therefore to slower growth along the transitional path and also to a smaller steady state capital labour ratio in a neoclassical growth model or lead to a slower overall growth rate in an endogenous growth model

opportunities incentives and the collective patterns of technological change in a few pages in the introductory article for this debate vernon ruttan succeeds in the unlikely task of flagging many issues at the core of the economic interpretation of technological change and by doing so he implicitly addresses also a few sensitive spots for the economic discipline at large here i will not attempt to provide any thorough view of what i consider the achievements and limitations of the current state of the art see however freeman i 994 for a critical survey which i largely share rather i shall put forward a series of remarks which hopefully could be seen as part of a much wider and still largely unexplored research programme as a premise just note that some form of attention to technology related phenomena has spread over the last 20 30 years from small enclaves of heterodox economists and economic historians to become an important concern even for quite mainstream theories of e g the firm industrial organisation macroeconomics trade growth etc from patent races all the way to new trade and new growth theories and even real business cycle macro models technical change has drawn a consideration which is less by default than it was say in robert solow s original growth models orjoe bain s barriers to entry views on industrial structures and in parallel empirical studies at the levels of specific technologies firms sectors and countries have boomed for overviews cf dosi i988 nelson i993 freeman i982 i 994 cohen i 995 and granstrand i 994 among others so at least in this sense those decreasing returns to the economics of technical change suggested by ruttan do not seem to have set in however ruttan s paper raises also substantive questions about the relative success of three interpretative perspectives which he calls induced evolutionary and path dependent in the following i shall argue that an evolutionary perspective broadly defined can easily accommodate both inducement effects and path dependent patterns of technical change let me start from what i consider the major building blocks of an

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

patent protection imitation and the mode of technology transfer abstract this paper analyzes a model in which a firm endowed with a new technology can choose between exports licensing and direct investment as entry modes in a foreign market i endogenize the vintage of the transferred technology and allow for imitation by the licensee subsidiary production and exports circumvent imitation but involve higher costs for the innovating firm the firm can strategically use the vintage of the technology to deter imitation by the licensee as a result transfers to affiliates might be of later vintage than technologies sold to outsiders through modification of the imitation costs the host country s system of patent protection influences the mode of technology transfers which in turn affects the welfare of the recipient economy

the location of overseas production and production for export by u s multinational firms abstract the location of overseas manufacturing production is influenced by common factors that operate in all industries notably proximity to the united states and to other markets within industries opposites attract low wage and low capital intensity parents choose high wage countries production for export is attracted by large internal markets in host countries economies of scale in production presumably make large markets economical as export bases another factor is high trade propensities of host countries u s firms tend to export from high wage countries but labor cost is not in general a major influence on the location of export production

technology transfer under asymmetric information licensing contracts for newly patented innovations are observed to vary along several dimensions including the form and size of the payment to the inventor fixedfee versus some output based royalty the degree of exclusivity and the division of rents in this article we show that theform of the contract can be explained by two problems in technology exchange the superiority of a licensor s precontractual information about the economic value of the innovation and thefact that sharing this information with the licensee mayfacilitate imitation we show that a licensor signals her technology type with an output based payment or royalty and may leave some of the rents with the licensee conditions under which exclusive license contracts linear and nonlinear and nonexclusive linear contracts are used to transfer technology are identified

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

recent evolutionary theorizing about economic change this famous passage from marshall s principles of economics it first appeared in the fifth edition which came out in 1907 nicely brings out two issues which are as germane to economics today as they were when marshall wrote the first is the heavy reliance by economists in their formal theorizing on the notion of equilibrium the other is the appeal that biological conceptions3x201d have for many economists particularly when their focus is on economic change

taxation and the transfer of technology by multinational firms this paper analyzes a multinational s transfer of technology to a foreign subsidiary for the case where there is a risk of expropriation an expropriation is assumed to give rise to competition between the parts of the previous multinational enterprise to reduce the benefit of expropriation the multinational generally transfers an inferior technology even if the transfer of technology is costless with a reduced benefit of expropriation the multinational has to pay lower taxes to prevent expropriation the multinational optimally transfers additional technology over time if it has a finite horizon in the country for this case tax payments also are shown to increase over time in a tax holiday like fashion

common failings how corporate defaults are correlated we test the doubly stochastic assumption under which firms default times are correlated only as implied by the correlation of factors determining their default intensities using data on u s corporations from 1979 to 2004 this assumption is violated in the presence of contagion or frailty unobservable explanatory variables that are correlated across firms our tests do not depend on the time series properties of default intensities the data do not support the joint hypothesis of well specified default intensities and the doubly stochastic assumption we find some evidence of default clustering exceeding that implied by the doubly stochastic model with the given intensities why do corporate defaults cluster in time several explanations have been explored first firms may be exposed to common or correlated risk factors whose co movements cause correlated changes in conditional default probabilities second the event of default by one firm may be contagious in that one such event may directly induce other corporate failures as with the collapse of penn central railway in 1970 third learning from default may generate default correlation for example to the extent that the defaults of enron and worldcom revealed accounting irregularities that could be present in other firms they may have had a direct impact on the conditional default probabilities of other firms our primary objective is to examine whether cross firm default correlation that is associated with observable factors determining conditional default probabilities the first channel on its own is sufficient to account for the degree of time clustering in defaults that we find in the data

tariffs technology transfer and welfare it is found that the welfare gain per unit of revenue raised is maximized for an export tariff on technology transfer followed by an import tariff on goods with an export tariff on goods the poorest policy alternative these results are derived within a monopolistic competition model where the production of any good requires some initial research and development r d and technology transfer occurs when r d is done in one country for production of goods in the other an intuitive explanation is presented based on the public good nature of r d and also the elasticity of demand for technologies from firms

risk analysis of collateralized debt obligations collateralized debt obligations which are securities with payoffs that are tied to the cash flows in a portfolio of defaultable assets such as corporate bonds play a significant role in the financial crisis that has spread throughout the world insufficient capital provisioning due to flawed and overly optimistic risk assessments is at the center of the problem this paper develops stochastic methods to measure the risk of positions in collateralized debt obligations and related instruments tied to an underlying portfolio of defaultable assets it proposes an adaptive point process model of portfolio default timing a maximum likelihood method for estimating point process models that is based on an acceptance rejection resampling scheme and statistical tests for model validation to illustrate these tools they are used to estimate the distribution of the profit or loss generated by positions in multiple tranches of a collateralized debt obligation that references the cdx high yield portfolio and the risk capital required to support these positions

international technology transfer with an information asymmetry and endogenous research and development abstract in this paper an information asymmetry concerning technology type and the cost of operating across national boundaries interact with location considerations to determine whether international technology transfer occurs via the export of goods subsidiaries or licensing it is shown that market share restrictions and per unit royalties can signal technology type and make licensing the most attractive option in addition it is shown that policies which restrict the mode of technology transfer do not necessarily reduce the amount of research and development undertaken

licensing versus direct investment implications for economic growth we develop a symmetric two country model of foreign direct investment fdi that captures the internalization decision and its implications for both the rate and magnitude of innovations when mode choice licensing versus fdi is fixed a subsidy to multinational production increases the rate but decreases the size of innovations when mode can switch the rate and size of innovations both increase provided the subsidy is not too large although innovation size decreases for industries where firms already were choosing fdi innovation size increases for industries where firms switch from licensing to fdi because multinationals choose larger innovations than licensors 2002 elsevier science b v all rights reserved