dynamics of output and employment in the u s economy this paper investigates the changing relationship between employment and real output in the u s economy from 1948 to 2010 both at the aggregate level and at some major industry grouping levels of disaggregation real output is conventionally measured as value added corrected for price ination but there are some industries in which no independent measure of value added is possible and existing statistics depend on imputing value added to equal income indexes of output that exclude these imputations are closely correlated with employment over the whole period and remain more closely correlated during the current business cycle this analysis oers insights into deeper

long run equilibrium in the empirical study of monopoly and competition long run equilibrium in the empirical study of monopoly and competition i introduction one of the central propositions of economic theory formulated by among others hirshleifer 1976 319 and malinvaud 1972 239 is that industry rates of return should equalize in the long run although the actual observed rates of profit at any point in time may differ between industries according to this proposition such differences should not persist 1 according to stigler 1963 55 economic analysis tells us that the rates of return in competitive industries will be strictly equal in long run equilibrium but this very concept of long run equilibrium reminds us that in a world where all events are not perfectly anticipated there will be a stream of unexpected disturbances that call for a stream of changes in the allocation of resources unanticipated shifts in consumers desires the impact upon international markets of wars and political events the irregular march of major advances in technology and others however rates of return in long run equilibrium are not directly observable and it is further unclear whether they can be proxied by averages and if so over what time periods bain 1951 309 recognized the problem true profits will seldom in individual cases exactly average through time to a long run equilibrium level but will be influenced by lagging response to and faulty anticipation of a never ending succession of dynamic changes because of this ambiguity there has been debate regarding the proper interpretation of empirical studies of rates of return and market structure numerous studies such as those by bain 1951 mann 1966 stigler 1963 sherman 1968 weiss 1963 and fuchs 1961 have found a positive correlation of rates of return with concentration ratios and barriers to entry however because these studies were cross sectional the concept of long run equilibrium was either ignored or proxied by short term industry averages bain for example considered a selection of four digit industries for the years 1936 40 the four year average was a proxy for long run equilibrium in the sense that persistence was defined as above average levels sustained over four years he found a weak positive relationship between concentration and these proxies stigler used three digit industries and chose ten year profit averages rather than four year proxies he also reported a weak relationship between profit rate and concentration likewise mann related ten year average industry rates of profit to concentration and barriers to entry and discovered a weak positive relationship brozen 1970 1971 critized these studies arguing that if they truly revealed that monopolistic structures caused above average profit rates to persist then these industries should be able to sustain high profit rates for longer than four to ten years when he examined the same industries in a later period he found that the high rates of profit tended to decline while the low profit rates tended to increase as time passed he concluded that bain and others had modeled long run equilibrium inadequately because the time periods considered in those studies were too short brozen also scrutinized the selection methods by which industries were included in the sample and claimed that the samples were biased toward overstating the effects of concentration while brozen argued that the positive relationships observed in prior studies were due to either sample bias or to disequilibrium he never undertook a study which might have helped settle the issue of whether profit rate differentials were persistent even after brozen studies published in the industrial organization literature were still cross sectional and the observed relationship between industry profit rates and market structure varied depending on the particular year chosen

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

labour s shares and profitability crisis in the u s recent experience and post war trends extends work on u s rate of profit by t e weisskopf 1979 firstly the author finds by extending weisskopf s data into the early 1980s that continued downward pressure on profitability i s explained by capacity utilization in contrast to weisskopf s explanation of rising labor share secondly it is found that ri sing labor share in the post war period is largely composed of r ising levels of supplemental fringe benefits and is in the earl y part of the period also explained by rising nonproduction lab or costs production worker wage share falls secularly and this may be explained particularly in the 1960s by rising price mar k ups on direct cost copyright 1987 by oxford university press

saving puzzles and saving policies in the united states in the past two decades the widely reported personal saving rate in the united states has dropped from double digits to below zero first we attempt to account for the decline in the national income and product accounts nipa saving rate the macroeconomic literature suggests that 40 50 per cent of the drop since 1988 can be attributed to households spending stock market capital gains another 30 per cent is accounting transfers from personal saving into government and corporate saving because of the way pensions and capital gains taxes are treated in the nipa second while nipa saving measures are well suited to measuring the supply of new funds for investment and capital accumulation it is not clear that they should be the target of government saving policies finally we emphasize that the nipa saving rate is not useful in judging whether households are preparing for retirement or other contingencies many households have accumulated significant wealth primarily through retirement saving vehicles and capital gains even as the saving rate slid there remains a segment of the population who save little and whose behaviour appears untouched either by the stock market boom or the slide in personal saving we explore reasons and policy options for their puzzling low saving rate copyright 2001 oxford university press

taxation and housing old questions new answers this paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets there are three principal conclusions 1 reductions in marginal tax rates particularly for high income households reduced the tax induced distortion in the user cost of owner occupied housing this lowered the deadweight losses associated with the favorable tax treatment of homeownership 2 the increase in the standard deduction in the tax reform act of 1986 tra86 removed several million middle income homeowners who previously itemized from the ranks of itemizers for these households tra86 raised the marginal cost of owner occupied housing these changes also exacerbated the regressive nature of the mortgage interest subsidy in 1988 more than half of the tax losses associated with mortgage interest deductions accrued to the 8 of taxpayers with the highest economic incomes 3 tra86 reduced incentives for rental housing investment contributing to the decline in new multifamily housing starts from 500 000 per year in 1985 to less than 150 000 in 1991 in the long run these policies will lead to higher rents this abstract was borrowed from another version of this item

a sraffian critique of the classical notion of centre of gravitation in this paper we use insights from sraffa s classic production of commodities by means of commodities to argue that the classical notion of centre of gravitation is not a sound concept the market mechanics of labour allocation through price signals and quantity adjustments given effectual demands do not lead to a centre of gravitation we work out all such possible market mechanisms including the specific classical case and show that the centre of gravitation is a non attractive point in all cases copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

human resource planning in japanese multinationals a model for u s firms the efficient operation of a multinational corporation is contingent upon the availability of numerous technology capital know how and people in this paper the argument is made that human power is a key ingredient to the successful operation of a multinational without which all the other aforementioned resources could not be effectively and efficiently utilized or transferred from corporate headquarters to the various subsidiaries in the world hence there is a need for multinationals to devote more attention to human resource planning which is viewed as part of the overall planning and control process in a firm the paper compares and contrasts the human resource development programs between a sample of u s and japanese multinationals and discusses the implications for u s multinationals

a statistical equilibrium model of competitive firms abstract we find that the empirical density of firm profit rates measured as returns on assets is markedly non gaussian and reasonably well described by an exponential power or subbotin distribution we start from a statistical equilibrium model that leads to a stationary subbotin density in the presence of complex interactions among competitive heterogeneous firms to investigate the dynamics of firm profitability we construct a diffusion process that has the subbotin distribution as its stationary probability density this leads to a phenomenologically inspired interpretation of variations in the shape parameter of the subbotin distribution which essentially measures the competitive pressure in and across industries our findings have profound implications both for the previous literature on the persistence of profits as well as for understanding competition as a dynamic process our main formal finding is that firms idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin and that a ratio of these two effects ultimately determines the dispersion of the equilibrium distribution

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

intra industry trade in financial services abstract intra industry trade iit has been central to increasing the variety of products available to consumers unlike traditional trade theories the recent trade theories have placed an emphasis on the role of foreign direct investment fdi in generating trade and increasing the volume of iit this study is the first study of intra industry trade in banking services in which the key elements of the new trade theories of iit have been taken into account in measuring the determinants of iit in banking services the empirical results of the determinants of iit in banking services indicate that factor endowments average per capita income fdi in banking economies of scale in the banking sector trade intensity between the us and its partners and market openness make a positive contribution to the volume of iit in banking services furthermore the empirical results indicate that intra trade activities amongst the us multinational corporations reduce the level of iit in banking services for the us

welfare analysis of tax reforms using household data abstract this paper discusses a methodology for calculating the distribution of gains and losses from a policy change using data for a large sample of households estimates are based on the equivalent income function which is money metric utility defined over observable variables this enables calculations to be standardised and a computer program to compute the statistics presented in the paper is available for a general demand system equivalent income is related to measures of deadweight loss and standard errors are computed for each of the welfare measures an application to u k data for 5 895 households is given which simulates a reform that involves eliminating housing subsidies

fiscal incidence in an overlapping generations model with a fixed asset abstract we analyze a model of overlapping generations with a fixed factor land malleable capital and labor we consider the dynamic effects of various fiscal policies including taxes on rent wages and creation of public debt on capital accumulation land prices and intergenerational welfare minimal assumptions uniqueness and stability imply that a land tax may initially raise land values but the upper bound is less than one half of the tax revenues assuming homothetic utility the ratio between the long run capital responses to a land tax and to a lump sum transfer of equivalent revenue from the young to the old depends solely on the share of labor

financial services global perspectives the purpose of this paper is to discuss the issues related to the deregulation of the financial services sector and the role of multilateral negotiations which has opened up opportunities for the expansion of international financial services the paper analyses various categories of international financial services and highlights those factors that contribute to an increase in the competitiveness of financial institutions in their attempt to increase the supply of international financial services the paper also analyses the complementary role of fdi and trade in international financial services and discusses some of the benefits of fdi in financial services that have led to a more efficient and more competitive financial services industry in the host countries

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

financial services and the urban system an exploration financial services have come to represent an increasingly important sector in the economies of developed nations although a substantial literature has accumulated on this topic relatively little attention has been given to the locational aspects of nancial services an attempt is made here to examine the spatial structure of this sector in terms of the urban system drawing on the principles of central place theory the limitations and applicability of which are considered this is followed by a discussion of the salient features of financial services within the overall urban system after describing the differentiation of financial services in frequency terms the hierarchical structure of the uk urban system is outlined these two aspects are then related in order to demonstrate the ordered nature of the spatial structure of financial services there follows a brief discussion of the findings and their implications for future work

technology distribution and the rate of profit in the us economy understanding the current crisis this paper offers a synoptic account of the state of the debate among marxist scholars regarding the current structural crisis of capitalism identifies two broad streams within the literature dealing in turn with aggregate demand and profitability problems and proceeds to concentrate on an analysis of issues surrounding the profitability problem in two steps first evidence on profitability trends for the non farm non financial corporate business the non financial corporate business and the corporate business sectors in post war usa are summarised a broad range of profit rate measures are covered and data from both the us bureau of economic analysis nipa and fixed assets tables and the federal reserve flow of funds account are used second the underlying drivers of profitability in terms of technology and distribution are investigated the profitability analysis is used to offer some hypotheses about the current structural crisis copyright oxford university press

monetary analysis the equilibrium method and keynes s general theory compared with the work of his contemporaries keynes s general theory represented a radical change in theoretical method from sequence analysis to the method of equilibrium the nature of this change is discussed together with its implications for the substance of keynes s message and for the subsequent development of macroeconomics

determinants of international financial services abstract this paper analyses the determinants of international financial services it argues that the main difficulty in obtaining data about international financial services is the consequence of the current treatment of financial services in the system of national accounts sna of the united nations which treats the imputed service charge as intermediate consumption of industries the empirical results of import and export demands for financial services indicate that disposable income domestic and foreign price of financial services are the important determinants of international financial services flows

the indexation of interest depreciation and capital gains and tax reform in the united states abstract the treasury s 1984 tax plan suggests features of a comprehensive income tax including the indexation of interest depreciation and capital gains the 1985 president s proposal retains some of these indexing provisions but the tax reform act of 1986 does not this paper looks at the incentives under these tax regimes to make marginal investments in the corporate sector noncorporate sector and owner occupied housing it finds that inflation in the old system caused effective tax rates to rise for some assets and fall for others under the treasury or president s proposals the interference of inflation is virtually eliminated also the effects of inflation are substantially reduced by the 1986 act because mismeasured depreciation and interest deductions are taken at much lower rates

the classicals and the neoclassicals a rejoinder to frank hahn refutes the classical and marxist analysis of prices and competition presentation of an intertemporal equilibrium model in a simple formalism possibility of locating prices of production and a distributed profit rate in an intertemporal equilibrium relationship between prices in intertemporal equilibrium and prices of production ebsco

order process and morphology sraffa and wittgenstein this contribution is based on an exploration of the nature and meaning of some of sraffa s and wittgenstein s mutual ontological methodological and philosophical influences whose initial findings are set out in arena 2013 the article has two core objectives first i argue that based on earlier findings a different interpretation of sraffa s contribution to economics is possible from those that have been predominant so far and that hold that sraffa s approach is primarily a contribution to the theory of relative prices i consider the two main interpretations of sraffa s price system in this regard whilst these differ in important aspects i argue that they share a core feature namely an approach to prices based on the concept of economic or social order understood as a final outcome independent of the possible process through which this outcome can be achieved second i am interested in highlighting a number of connections between wittgenstein s works post tractatus and certain developments contained in sraffa s unpublished papers taking wittgenstein post tractatus as the starting point i proceed to argue that core concepts employed by wittgenstein are compatible with and reinforce an interpretation of sraffa s contribution in terms of a morphological and comparative analysis of the economic foundations of surplus based societies from this perspective the notions of surveyable representation and snapshot are employed to characterise an analysis in which agents are guided by social rules and the concept of mechanical causality is discarded this convergence of sraffa s and wittgenstein s approaches does not however exclude differences concerning the social facts investigated and the use of analytical tools such as mathematics

on measuring the wealth of nations the us economy 1964 2001 this paper examines the methodology of shaikh and tonak measuring the wealth of nations 1994 underlying their calculation of estimates of productive labour in the us economy from 1964 to 2001 the focus is not on the results but on the methods that generate them the paper finds that the compromises made by shaikh and tonak because of data unavailability are unreliable and that better approximations are possible on this latter basis the shaikh and tonak methodology can be used to provide the labour and wage estimates needed for empirical investigations in the surplus based tradition copyright 2005 oxford university press

the second theorem of the second best abstract this paper interprets many results from the literature on incentive compatibility and cost benefit analysis as illustrations of a second theorem of the second best the theorem states that if there exists any restriction on transactions required for first best efficiency then there is no presumption that a social welfare maximum entails equal marginal social utilities of income across individuals one reason is that incentive constraints shift with redistributions of wealth so that redistributions have an instrumental role in relaxing constraints that make the economy second best two examples relate such wealth effects to countervailing incentives and hostage taking

technology and distribution historical trajectories a la marx abstract in capital marx introduces a system of historical tendencies accounting for the trends of the major technological and distributional variables notably the profit rate quite distinct from the usual steady states marx s main insight is that of a difficulty to innovate it is difficult to find new processes allowing for the growth of labor productivity while not considerably reducing the productivity of capital the growth of the wage rate is stimulated by the rise of employment but the stabilization of the share of wages forbids a direct imputation of the decline of the profit rate to the excessive growth of the wage rate

housing taxation and capital accumulation this paper studies the impact of the preferential tax treatment of housing capital in a dynamic general equilibrium life cycle economy populated by heterogeneous individuals the model includes the main housing tax provisions currently in place in the u s and a minimum downpayment requirement upon purchasing non divisible houses the tax code makes the return on housing capital larger than that on business capital which distorts the lifetime profile and composition of individuals savings the wedge between the two rates of return emanates from the failure to tax imputed rents and is amplified by the presence of mortgage interest deductibility simulations show that individuals at all income levels would rather live in a world where imputed rents are taxed or one where mortgage interest payments are not deductible furthermore distributional effects are much smaller than conventionally believed

taxing residential housing capital this paper discusses the main aspects of the taxation of housing drawing on general principles of optimal taxation it focuses on the role of the property tax in achieving neutrality between rental and owner occupied housing assuming that landlords are taxed according to a neutral profits tax it follows that the property tax should be based on the rate of interest the paper discusses how the tax rate could be adjusted to account for the lack of effective taxation of capital gains the double taxation of dividends and the differences in the cost of labour between rental and owner occupied housing in most oecd countries the combined effect of the different housing taxes amounts to a tax subsidy to owner occupied housing it is demonstrated how this subsidy has been reduced in sweden as in many other countries in the past decade as a result of tax reforms and a lower rate of inflation the subsidy has effects on consumption patterns saving capital accumulation the distribution of welfare across gener

the allocation of capital between residential and nonresidential uses taxes inflation and capital market constraints we have constructed a simple two sector model of the demand for housing and corporate capital economic growth and an increase in the inflation rate were then simulated with a number of model variants the model and simulation experiments illustrate both the tax bias in favor of housing and the manner in which the increase in inflation between 1965 and 1978 magnified it the existence of capital market constraints offsets the bias against corporate capital but it introduces a sharp inefficient reallocation of housing from less wealthy constrained households to wealthy households who do not have gains on mortgages and are not financially constrained

law finance and firm growth we investigate how differences in legal and financial systems affect firms use of external financing to fund growth we show that in countries whose legal systems score high on an efficiency index a greater proportion of firms use long term external financing an active though not necessarily large stock market and a large banking sector are also associated with externally financed firm growth the increased reliance on external financing occurs in part because established firms in countries with well functioning institutions have lower profit rates government subsidies to industry do not increase the proportion of firms relying on external financing the corporate finance literature suggests that market imperfections caused by conflicts of interest and informational asymmetries between corporate insiders and investors constrain firms in their ability to fund investment projects the magnitude of these imperfections depends in part on the effectiveness of the legal and financial systems because these systems differ across countries the literature implies that there should exist systematic cross country differences in firms ability to obtain external capital to finance investment in this paper we examine whether the underdevelopment of legal and financial systems does prevent firms in some countries from investing in potentially profitable growth opportunities in particular we focus on the use of long term debt or external equity to fund growth see our earlier work demirgut kunt and maksimovic 1996a which compares firms financial structures in developed and developing countries and finds the greatest difference to be in the provision of long term credit we estimate a financial planning model to obtain the maximum growth rate that each firm in our thirty country sample could attain without access to long term financing we then compare these predicted growth rates to growth rates realized by firms in countries with differing degrees of development in their legal and financial systems our approach enables us to identify specific characteristics of the legal and financial systems that are associated with long term financing of firm growth thus we provide a micro level test of the hypoth

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

imputed rental income taxation and income distribution in finland in most western countries owner occupied housing is tax favoured compared with other investments and housing tenure modes this paper analyses the effects of imputed rental income and its tax treatment on income distribution in finland using household data from the 2004 wealth survey produced by statistics finland it is found that imputed rental income has a major effect on homeowners well being as it constitutes on average almost 10 per cent of homeowner households disposable income furthermore including imputed rental income in household disposable income decreased overall inequality measured by the gini index the tax subsidy resulting from non taxation of imputed rental income is skewed towards high income households however the effects of a new tax on imputed rental income on overall inequality would depend vitally on the way the increased government tax revenue is transferred back to the households

the dynamics of the liability of foreignness a global study of survival in financial services we study the impact of foreignness on survival in interbank currency trading worldwide over the period 1974 93 in particular we develop hypotheses on the behavior of the liability of foreignness over time and on the consequences of evolving sources of firm level competitive advantage on this liability we test these hypotheses on the population of 2667 market making trading rooms located in 47 countries worldwide that either existed in 1974 or entered the industry between 1974 and 1993 the results show that there is a liability of foreignness and that it changes over time further strategic and organizational factors such as the adoption of technology by these firms and their mode of internal control significantly influenced survival as did location related factors such as the intensity of local and foreign competition 1997 by john wiley sons ltd

on the organization of rural markets and the process of economic development the authors consider how the organization of rural markets will affect capital accumul ation and long run aggregate income in the development process they show that in a simple dual economy overlapping generations model c apital accumulation and aggregate income will be lowest when both fac tor markets in the agricultural sector are fully competitive both ca pital and aggregate income will be higher when land is not traded but the labor market is competitive and highest in the absence of compe titive markets in both factors in the agricultural sector when incom e distribution favors rural workers over landlords copyright 1988 by american economic association

sraffa s system equal rate of profits and the notion of center of gravitation abstract this paper argues that the condition of uniform rate of profits in sraffa s system is not based on his implicit assumption that the system is at the equilibrium or the center of gravitation it is rather a logical requirement of a reproducing system of basic goods as long as prices are not imposed from outside the system this condition holds irrespective of supplies being equal to their respective effectual demands it conjectures that sraffa could have arrived at this conclusion through his analysis of the standard system on the basis of this result a critique of the received interpretation led by garegnani of sraffa s prices is developed

real estate assets and consumer spending in an interesting contribution to this journal elliott 1980 shows that consumer spending is better explained if permanent income is estimated from explicit measures of wealth the wealth approach rather than current and past incomes the income approach in the income approach permanent income yp is computed as a distributed lag mechanism in the wealth approach this procedure is followed for labor income but permanent nonhuman income is specified as a constant multiple 72 of actual nonhuman wealth at the beginning of a period ant the distinction between income and wealth approaches is intuitively appealing and has been tried before elliott s equation 12 is the same as equation 5 in bhatia 1972 except that elliott uses actual wealth instead of bhatia s expected wealth the novelty in elliott s specification lies in considering different components of wealth which is also appealing because measures of wealth ranging from real money balances to broad aggregates of human and nonhuman wealth have been used in the literature elliott s most striking result that real assets mainly real estate and durable goods have no significant effect on consumer spending however is disturbing because real estate is a major household asset in fact the largest one in many years according to frb balance sheets 1983 and accrued gains on real estate have often been larger than gains on corporate equities during the last decade or two also there is some recent empirical evidence that gains on real assets significantly reduce personal saving peek 1983 the main purpose of this note is to reexamine and rehabilitate the role of real assets one can question elliott s specification which does not adequately allow for expected gains or his use of undistributed corporate profits as a contemporaneous proxy for all capital gains tenuous at best but the heart of the matter is the residential value series derived by elliott from perpetual inventory benchmarks pp 533 34 which being accumulations of construc

micro adjustment toward long term equilibrium abstract a dynamic model is constructed in which the behavior of economic agents is based on adjustment decisions are made in disequilibrium prices respond to differences between supply and demand inventories capital is moved according to profitability differentials and money is issued by a bank which reacts to the general price level a proof of local stability of long term equilibrium with production prices is demonstrated we further distinguish between two aspects of the stability problem concerning the allocation of capital and relative prices stability in proportions and with respect to the general levels of activity and prices stability in dimension

introducing risky housing and endogenous tenure choice into a portfolio based general equilibrium model abstract portfolio based general equilibrium models are useful for analyzing the interaction between the structure of individual tax rates and the way particular assets are taxed for considering the role of differential tax rules and risk in determining household portfolio choices and for addressing distributional questions unfortunately current versions of these models give housing short shrift owner housing is assumed to be riskless rental housing is not a separately identifiable asset and tenure choice is of necessity exogenously determined this paper extends one of these models to incorporate a full housing subsector and uses the model to analyze the impact of the u s 1986 tax reform act

a general equilibrium model of housing taxes and portfolio choice we describe a model in which rental and owner housing are risky assets tenure choice is endogenous and each household is constrained to consume the same amount of owner housing that it has in its investment portfolio at each iteration in the search for an equilibrium we determine the new taxable income for each of 3 578 households from the survey of consumer finances and we use statutory schedules to find the marginal rate and tax paid equilibrium net rates of return are major determinants of the amount of owner housing but a logit model indicates that demographic factors are the main determinants of ownership rates in our simulation taxes on owner housing would raise welfare not only by reallocating capital but also by the government s taking part of the risk from individual properties and diversifying it away measures to disallow property tax or mortgage interest deductions do not help share this risk simulations of the 1986 tax reform indicate a small shift from rental to owner housing and

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

sources of imitation improving bank process capabilities abstract this paper argues that imitators are more likely than innovators to use a wider variety of channels for improving their process capabilities and that the sources of imitation are more informal or non market mediated than formal yet the search for know how is a variegated process even within the same industry these variations stem from factors other than industry specific technical requirements regulatory intervention has important implications for firm history skill bases size and competitive focus taken together these background elements guide firms from the same industry towards somewhat different sources of know how the case under study is banking a service industry rarely considered in the literature on technical change

eastern europe s experience with banking reform is there a role for banks in the transition are there lessons to be learned about how eastern european countries have dealt with problems in their banking systems what role have these countries assigned to banks during the transition how have they used banks in dealing with the enterprise problem the author addresses these questions by analyzing experience in bulgaria hungary poland romania and the former czech and slovak federal republic most of these countries have made substantial progress in restructuring their banking systems but few have used their banking systems to improve the allocation of credit and hence stimulate the supply response the author finds the following the problem is not whether banks hold nonperforming loans but how banks can avoid accumulating more nonperforming loans the underlying problem is how to close loss making and nonviable enterprises the countries that have encouraged the establishment of new private banks that have introduced regulation and supervision and that have tried to make banks more competitive have been more successful at improving the allocation of credit and achieving more control over loss making enterprises banks must focus on assessing risk and for this capital private ownership and adequate regulation are crucial how quickly banks achieve independence in credit decisions depends on how fast new governance structures can be introduced in this the five countries have been less successful the objectives of bank recapitulation should be to prevent banks from accumulating more nonperforming loans that is dealing with the enterprise problem and to give them the governance structure that would prevent them from incurring new nonperforming loans this requires introducing a system of risk and reward by making banks comply with capital adequacy requirements by privatizing a critical number of banks and by introducing strong regulation and supervision government should see that banks provide efficient payment systems the basis for trust in banking systems introducing adequate regulation and supervision has been difficult as it requires knowing what the banks role should be evidence strongly supports the need to recapitalize and privatize a critical number of banks authorities cannot rely on banks to exert control on enterprises early in the transition in the early stages control over state owned enterprises should be exercised by a semipublic institution

housing and endogenous long term growth abstract in this paper we develop an endogenous growth model where housing plays a role as a consumption and an investment good for households as an input to production and as a production sector we show that the long term endogenous growth rate for the economy while not affected by housing related preference parameters depends critically on housing related production parameters the key modeling assumption is that housing and other assets in the economy are not perfect substitutes with this we can show that the endogenous long term growth rate depends on the relative price of housing and other types of capital accordingly the effects of productivity shocks on growth can be understood through their effects on the relative asset price and the corresponding changes in capital intensity we show that productivity shocks to the three sectors of production manufacturing construction and educational and training activities have positive effects on long term growth for reasonable parameter values however the responsiveness of the long term growth rate to shocks in construction is greater than responsiveness to shocks in manufacturing

values prices of production and market prices some more evidence from the greek economy this paper extends the empirical investigation of the relation between labour values and different price forms in the case of the greek economy subjecting the labour theory of value to empirical tests with data from various countries helps in the derivation of general conclusions regarding its empirical validity and practical usefulness our results on the closeness of values and prices as measured by their absolute deviation and correlation the shape of the wage profit curves the predictive power of labour values over market prices compared with other value bases and the comparison of fundamental marxian categories when estimated in value and price terms provide further support for the empirical strength of the labour theory of value

do urban neighborhoods benefit from homeowners evidence from housing prices homeownership is heavily subsidized in most countries the adverse effects of this policy on economic efficiency and income distribution are well documented in the economics literature the main argument in favor of subsidizing homeownership is that it creates positive externalities that offset these adverse effects in this paper we test whether homeowners create positive externalities that capitalize into housing prices in multi storey buildings using semi parametric hedonic regressions with and without instrumental variables we find no evidence of positive externalities although the results with instrumental variables are somewhat imprecise this result is robust to several sensitivity checks and to a relaxation of the identification assumptions of our instrument using set identification

values prices and wage profit curves in the us economy this paper presents labor values and prices of production calculated for the postwar u s economy using a seventy one sector input output model with fixed capital as well as actual wage profit curves during the same period it is found that the cross sectional deviations of values and prices of production from market prices are quite small between 12 and 14 percent on average over time approximately 75 percent of the variation of market prices is accounted for by changes by both values and prices of production and 93 percent of the variation of prices of production is accounted for by changes in labor values wage profit curves exhibit near linearity casting some doubt on the significance of reswitching for actual economies copyright 1989 by oxford university press

on measuring the deviation of prices from values it has often been found useful to measure in some way the extent to which with profit prices diverge from zero profit values but it is not satisfactory to employ a measure which varies with the choice of numeraire for this element of arbitrariness has nothing to do with the central idea of asking how much the direction of the price vector differs from that of the value vector the authors develop a measure which involves no numeraire and then illustrate its use with data from the united kingdom the irish republic and australia copyright 1998 by oxford university press

a dynamic specific factors model of international trade in a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from working periods to retirement changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and on the composition of output as they do in a static framework changes in these variables affect both total savings and the amount of savings that is diverted toward investment in capital results derived from the traditional specific factors model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital in this case the land using sector dominates factor markets more than asset markets once the roles for land and capital as assets are recognized the possibility of natural resource booms that reduce steady state welfare arises at the same time an increase in population can raise steady state welfare

tax treatment of housing in a dynamic sequenced general equilibrium model this paper evaluates the efliciency effects of possible changes in the tax treatment of housing using a dynamic sequenced general equilibrium model based on canadian data for 1972 our model is similar in structure to that used by fullerton shoven and whalley fsw 1983 to analyze the impacts of a switch to a consumption tax in the united states except that we include two assets rather than one the motivation for the paper arises from existing literature on the treatment of housing under the income tax most of this literature emphasizes the non taxation of imputed income from owner occupied housing as a deviation from the haig simons concept of income and approaches taxation of housing as a static resource allocation issue this implicitly argues for the inclusion of imputed income in the income tax base and suggests that a welfare gain would result when viewed from a dynamic perspective one s perception of the appropriate tax treatment for housing correspondingly changes evaluated relative to a pure consumption tax rather than a pure income tax housing is appropriately treated if imputed income goes untaxed since the income stream to the asset is not further taxed once the asset has been purchased the intertemporal misallocation problem arises not with housing but from taxation of non housing capital income this issue is however more complex than this discussion indicates because of inter asset distortions arising from the differential tax treatment of housing

the neo ricardians focuses on the neoclassical theory of economics in great britain calculation for the standard commodity assumptions of piedro sraffa on the cycle of production functions of the rate of return ebsco

relative consumption of housing marginal saving subsidies and income taxes as a second best policy this paper analyzes whether marginal taxation of labor and capital income are useful second best instruments for internalizing the externalities caused by conspicuous housing consumption when the

on optimal taxation of housing abstract this paper studies the question of optimal taxation of housing when the set of tax instruments at the government s disposal is not artificially restricted there are two groups of persons who differ in earning abilities and in tastes and two types of housing goods high and low quality the paper characterizes the pareto efficient allocations that are attainable through the tax policy it demonstrates that optimality calls for differential tax treatment of housing and that the required tax rates are nonlinear it derives conditions under which consumption of housing by the poor must be subsidized it also notes the circumstances under which taxation rather than subsidization is the required policy

labour time versus alternative value bases a research note this paper provides empirical support for the law of value understood as the proposition that embodied labor time is conserved in exchanges of commodities market prices are well correlated with the sum of direct and indirect labor content is it possible to produce equally good correlations by taking the sum of direct and indirect x content where x is some input other than labor time the authors repeat the analysis for electricity iron and steel and oil and show that the answer is no the high correlations in the case of labor time are therefore not a statistical artifact copyright 1997 by oxford university press

intra industry specialization in a multi country and multi industry framework the paper tests alternative hypotheses as to the factors determining the extent of intra industry trade defined as the share of this trade in total trade in a multi country and multi industry framework the empirical results show that the extent of intra industry trade in a particular industry between any two countries depends on the characteristics of the industry and the countries concerned the explanatory power of the regressions for the entire group of countries exporting manufactured goods as well as for trade among the developed countries is relatively high and practically all the hypotheses concerning the impact of industry trade are supported by the empirical results lower coefficients of determination have been obtained for trade between developed and developing countries and for trade among developing countries but the estimates generally support the hypotheses put forward in the paper in these cases also

patterns in the expansion of u s banks foreign operations combining foreign direct investment theory with data on 32 countries from the federal reserve board we examined u s banks patterns of foreign operations including their levels of banking services and choice of organizational forms in host countries results generally supported predictions but only in developed countries the lack of support in rapidly growing markets of asia and latin america raises serious theoretical concerns and presents fresh research opportunities into the global banking industry

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

the dynamics of competition a restoration of the classical analysis the main purpose of this article is to show that it is possible to construct a model of competition based on the classical perspective smith ricardo and marx an analysis of the work of the classics is presented and their views of the workings of competition is contrasted with neoclassical and keynesian approaches a simple model with two commodities is constructed in which the stability of the classical long term equilibrium is shown under certain conditions this first model is developed to include the treatments of gravitation rationing deficiency in demand choice of the technology and three commodities copyright 1987 by oxford university press

labour values prices of production and the missing equalisation tendency of profit rates evidence from the german economy during recent years several empirical studies have found that deviations from labour values to market prices are quite small however most of these articles do not offer a detailed reason for this result in this paper two theoretical justifications of the labour theory of value are brought together with some data concerning labour values prices of production and market prices on the basis of german input output tables from 2000 and 2004 in addition the statistical characteristics of profit rates are analysed both of the theoretical arguments are much in line with the empirical observations because there is only a slight transformation tendency and at the same time profit rates and capital intensity are negatively correlated moreover during the period under observation the german economy seems to be in a state of statistical equilibrium copyright oxford university press

quantitative empirical research in marxist political economy a selective review this paper surveys quantitative empirical research in some key areas of marxist political economy following an introductory section on the value controversy the paper surveys quantitative empirical research on the following topics a marxist national accounts b classical marxist theory of relative prices c probabilistic political economy d profitability analysis and e classical marxian theories of growth and technical change i end by highlighting two important puzzles in the extant literature

the dynamic efficiency cost of not taxing housing traditional welfare cost estimates of tax subsidies for owner occupied housing are less than 0 5 of gnp in the united states and canada this paper argues that these static measures understate the true cost of the tax subsidy increasing the capital income tax makes untaxed housing more valuable delivering a windfall bonus to existing homeowners at the expense of future generations this intergenerational transfer has real efficiency effects in the presence of pre existing tax distortions when housing is in fixed supply the dynamic efficiency cost of preferential tax treatment for housing is as much as 2 2 of gnp or 120 billion dollars in 1990

inventories and sticky prices more on the microfoundations of macroeconomics the role of inventories in making prices sticky is studied by analyzing a dynamic linear quadratic model of a monopoly firm facing stochastic demand but able to store its finished goods in inventory it is shown that in contrast to the usual presumption firms that exhibit the smallest output responses to demand fluctuations may also exhibit the smallest price fluctuations specifically firms which have very flexible inventory storage facilities or are subjected to very transitory demand shocks will rely on inventories as buffers and will change neither production nor price very much on the other hand firms which have very inflexible storage facilities or whose demand shocks are quite permanent will display large swings in both price and output the standard assumption about inventory carrying costs that has been used in the literature that they are linear is shown to imply that production is impervious to fluctuations in demand it is also established that prices may respond more strongly to positive demand shocks than to negative ones if it is impossible to hold negative inventories i e to have unfilled orders the model offers an explanation for stickiness in relative prices however under certain circumstances it may help explain the persistence of inflation this abstract was borrowed from another version of this item

service sector protection considerations for developing countries the inclusion of services in the uruguay round of multilateral trade negotiations has focused attention on the protection of domestic service suppliers against competition from foreign suppliers issues arising from these negotiations however may obscure another and more important issue the case for unilateral liberalization this article first surveys methods of protection in the service sector and then examines the likely cost of protection particular attention is given to developing countries what evidence there is suggests that the costs of protection may be high the article also discusses economic principles that could guide a review of policy toward international transactions in the service sector quantitative restrictions or bans on foreign service suppliers whether they wish to supply through trade or establishment cannot easily be defended in economic terms and provide an obvious first target

on the classical theory of competition this paper identifies some important theoretical issues remaining unresolved in the wake of piero sraffa s seminal work a central problem concerns the process of gravitation towards uniform profit rates and production prices stringent requirements for convergence and stability are discussed the issue of path dependence being regar ded as most basic other issues concern inter and intraindustry mechanisms of competition choice of technique and technical change and mechanisms of wage profit rate determination prospects for advancing a theory of differentiated profit rates that would be consistent with classical theory are examined against this background it is suggested that sraffa s contribution encompasses two theoretically distinct research programs copyright 1988 by oxford university press

the deviation of production prices from labour values some methodology and empirical evidence contrary to what is expected from indirect evidence and two commodity hypothetical examples the evdie nce provided in this paper supports david ricardo s empirical proposi tion that relative prices of production are mainly determined by labo r value ratios the results obtained indicate that a 1 percent change in profit rate will cause relative prices to change up to 2 percent and as the profit rate on gross capital is approximately 5 percent o ne ends up with a 90 percent labor theory of value the empirical evidence refers to the yugoslav economy but the factors that determ ine the deviations considered turn out to be of the same order of mag nitude as in other economies copyright 1987 by oxford university press

on the keynesian notion of equilibrium and dynamics harrod had always maintained that keynes s treatise was much more amenable for dynamic analysis than the general theory however in much of the later work on keynesian dynamics the general theory became the foundation in this paper i argue that recent developments in neoclassical general equilibrium theory have the effect of undermining the conventional keynesian conception of dynamics based on the general theory and recasting keynes as a coarse precursor of modern general equilibrium analysis opposing this renewed orthodox reinterpretation of keynes might require a reconsideration of the treatise as the foundation for an alternative keynesian dynamics 1996 academic press limited