financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

non walrasian equilibria with speculation abstract the paper examines equilibria with out of equilibrium trading there are two types of consumers speculators who feel they have insight into where the ultimate equilibria price of the economy will be and non speculators the limit of the price process is a pareto optimum if and only if speculators are right and at the limit all consumers have zero excess demand when speculators are wrong price processes may converge to non pareto optimal limits with zero excess not every price process has a limit and not every limit of every price process will lead to zero excess demand

the determinants of growth the growth theories of the 1950s and 1960s emphasized capital accumulation and technical progress as explanations of growth more recently theoretical attention has focused on the understanding of progress in terms of learning human capital in the tradition of k arrow and investment in research following h uzawa these newer developments have made some but only limited progress the experience of developing countries suggests that the agenda should be broadened to include the efficiency of factor use infrastructure broadly interpreted and sectoral allocation these aspects together with the kaldorian concern for dynamic increasing returns provide substantial promise for future research copyright 1991 by royal economic society

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

learning by doing and the introduction of new goods a dynamic general equilibrium model is developed in which goods are valued according to the characteristics they contain the set of goods produced in any period is endogenously determined and learning by doing is the force behind sustained growth it is shown that the set of produced goods changes in a systematic way over time with goods of higher quality entering each period and those of lower quality dropping out the model is then used to study the effect of introducing a traditional sector in which there is no learning

market watch information and availability cascades among the media and investors in the u s ipo market in this study we advance current research on social influence in markets by examining how the recency and availability of information about others actions within and between different communities influence their allocation of attention and their evaluations specifically we examine how the media and investors allocate attention to and evaluate newly public firms in the days following their initial public offerings ipos our findings have implications for understanding the fieldwide processes through which the value of new firms is established in markets

does improved environmental policy enhance economic growth the environmental impacts on an economy is studied over time using endogenous growth theory externalities from the environment on production are central in the analysis and we examine whether an optimal path realizes more rapid economic growth the paper focuses mainly on developing countries where production is largely influenced by the environmental quality the result of the analysis indicates that the economic growth rate may not depend on the internalization of the environmental externality but rather on the internalization of the human capital externality the level of economic activity however generally seems to depend on the internalization of both externalities

the effect of professional advice on the stability of a speculative market the paper is motivated by the apparent inconsistency of situations in which speculators rely heavily on relatively few advisers when theory and evidence indicate that market fluctuations are predominantly random and unpredictable a highly stylized model is used to show how such situations can arise if speculators choose advisers on the basis of observed track records and how block behavior and increased market instability can result it is argued that inferences based on track records may represent a confusion of luck with skill or more formally an inappropriate choice of null hypothesis to be tested other related issues are discussed

are there dynamic gains from a poor area development program poor area development programs in which the government transfers extra resources to unusually poor areas have been widely used to fight poverty there has been some research on such programs but little is known about their impact on household living standards over time the authors address the issue for a sizable poor area development program in rural china china s program had a significant impact on rural living standards in the targeted areas of the sample the consumption growth model suggests that households living in the targeted areas had a higher rate of consumption growth than one would have otherwise expected nonetheless the authors found that while the gains in growth were enough to prevent an absolute decline in average living standards they were not enough to reverse the strong underlying divergent tendencies in the rural economy

the rise and fall of bank control in the united states 1890 1939 this article studies how equity ownership and corporate control were separated in the united states initially railroads and industrial firms were tightly controlled by a few shareholders this situation was altered in the 1890s by massive mergers and reorganizations which allowed private banks to control railroads and industrial firms between 1912 and 1939 bank control faded away as a result of a political reaction against financial institutions using stock market data from 1914 the author shows that the eviction of banks from corporate boards depressed firm values by about 7 percent and that part of this value came from cartelization copyright 1998 by american economic association

information diversity and market behavior the paper addresses two major issues raised by information diversity in a speculative market first we analyze what property of an investor s information leads to an expected speculative profit and show that independence is more important than accuracy second we consider whether the market price must become fully efficient in the sense that every investor s information is accurately discounted when traders use it rationally as an information source we prove that for any information structure there is a unique equilibrium weighting of investor beliefs at which the price is fully efficient and also every trader s expected profit is zero except for special structures however this equilibrium need not be attained in finite time much of modern capital market theory depends heavily on the assumption that investors know the expected values variances and covariances of asset returns although the assumption of homogeneous expectations is a conventional one and necessary for many theoretical results it is not one which can be offered with much confidence real world investors have access to differing information and may also disagree on the correct interpretation of widely held information when asset returns are assumed to be governed by a known probability distribution many features of trading in real world markets are eliminated from consideration there is no role for information gathering and no way for an investor to profit from having superior information indeed this term has no real meaning since all relevant information is contained in the known returns distribution speculative trading is also hard to explain without divergence of opinion a speculator who thought the market price impounded all available information would never trade against it with heterogeneous information we lose some of the neat results of standard capital market theory but new questions can be addressed about how information diversity among investors affects the markets in which they participate one issue concerns the impact of informational differences on investor profits investors who are better informed than others or are better able to evaluate widely held information should be able to earn higher returns all effort devoted to security analysis and market research depends on the belief that this is so but what makes one investor s information superior to another s beyond the circular observation that those investors with consistent profits must be better informed than those with losses do investors with inferior information however measured continually lose money until they are squeezed out of the market or can an

speculation optimism and differential information speculative trading has for quite some time been an important question for at least two reasons firstly as a positive question of whether speculative behavior basically is caused by differences in information or by differences in aversion to risk secondly the question is related to the informational efficiency of decentralized market systems if access to information not currently available to the market makes possible a speculative profit the incentive to acquire information may be too excessive from a social point of view the aim of this paper is to clarify the relationship between information and speculation in his seminal article on information acquisition in decentralized market economies hirshleifer 12 showed that the private value of acquiring information depends critically on the speculative profits to be made from this information hirshleifer 12 distinguished between information foreknowledge which affects productive decisions and information which only has implications for exchange similarly fama and laffer 5 distinguish between operational information which improves a firms operating decisions and trading information which only affects trading decisions it is argued due to the speculative profits to be made from having access to information not available to the market that there are excessive private incentives to acquire information without any relevance for productive decisions

information diversity and market behavior a reply professor minassian has raised technical points regarding my paper which for the most part seem to be well founded though not crucial to the basic results in this reply my objective will be to discuss what these mean in the context of the model and to offer slightly revised statements of theorems 1 and 3 to eliminate the problems equation 1 which duplicates equation 9 in 1 gives the following expression for the expected profits earned by trader i from trading in a pure speculative market

investment banks as corporate monitors in the early twentieth century united states we study the effect of financial relationships on firms investment decisions and access to external finance in the early twentieth century securities underwriters commonly held directorships with american corporations section 10 of the clayton antitrust act prohibited bankers from serving on the boards of railroads for which they underwrote securities we find that following the implementation of section 10 railroads with strong preexisting relationships with underwriters saw declines in their investment rates valuations and leverage and increases in their costs of external funds reassuringly we do not observe similar effects among industrials and utilities which were not subject to section 10 our results are consistent with underwriters on corporate boards acting as delegated monitors and highlight the potential for regulations intended to address conflicts of interest to disrupt valuable information flows

the global configuration of a speculative trading operation an empirical study of foreign exchange trading this paper proposes a theory of firm boundaries based on fore knowledge development and exploitation in speculative or informed trading foreign exchange trading provides this study s empirical context from research on information economics we suggest optimal speculative trading operations are multiunit and globally dispersed alternatively transaction cost economics suggests atomistic actors prevail in the market for fungible commodities like currencies we also develop competing hypotheses about information technology s effects on foreign exchange trading operations speculation arguments predict that the global scope of trading operations will expand after the introduction of generic information technologies transaction cost economics proposes that when atomistic actors do not prevail trading operations will contract after this introduction we test competing predictions with models of the expansion contraction and net change in a firm s global dispersion we estimate these models with data from the population of banks worldwide engaged in interbank foreign exchange currency fx trading from 1974 to 1993 our results uncover two types of firms those that approach the atomistic actor of transaction cost economics and those that resemble the globally dispersed multiunit configuration from our speculation discussion these results encourage reflection on how the theory of the firm differs when firms trade to produce versus speculate

international transmission of transitory and persistent monetary shocks under imperfect information abstract we analyze the transmission of monetary shocks in a new open economy macroeconomics model with one period nominal contracts and imperfect information shocks may have transitory and persistent components that can be disentangled only through the accumulation of information over time as a consequence the responses to shocks are significantly altered compared with the case of full information there are persistent effects on international relative prices and delayed exchange rate overshooting is possible following a persistent shock in some cases there are ex post excess returns as a positive interest rate spread is accompanied by an appreciating currency or vice versa lastly it is demonstrated that staggering reinforces persistence

luck versus forecast ability determinants of trader performance in futures markets statistical techniques are used to demonstrate that the fortunes of individual futures traders are determined by luck not forecast ability even though a large number of traders appear to exhibit significantly superior forecast ability the investigation strongly supports three conclusions there are fewer participants with significantly superior skill than expected if participants trade randomly there are more traders exhibiting no skill than expected if participants trade randomly and forecast ability is not correlated over time superior forecasters in the early period are only average forecasters in the later period therefore it is luck that determines trader performance copyright 1991 by university of chicago press

investment and technical progress models in which the growth rate is exogenous provide no role for government in determining growth in our model growth is associated with investment through externalities from learning by watching rather than with the level of the capital stock presumption of a technical progress function with first increasing and then decreasing returns leads to multiple steady state growth equilibria there is also an explicit role of government policy in setting tax rates on output it follows that two economies with identical structures and stochastic tax policies may exhibit very different growth paths over sustained periods although the stationary distribution of growth rates is the same given the desirability in principle of subsidizing investment various practical methods are considered copyright 1992 by oxford university press

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

engendering macroeconomics a reconsideration of growth theory abstract macroeconomics is gender biased because of its neglect of the reproductive sector this neglect is formalized in the assumptions supporting most macroeconomic models that population and the mapping from population to the labor force are determined exogenously the use of these assumptions is demonstrated for the case of the aggregate growth models which have evolved from harrod s original contribution in addition the development growth literature is shown to harbor a similar neglect some suggestions are made as to how these assumptions might be relaxed and some elements of a consequent theory and data project outlined

anticipated inflation in a monetary economy with endogenous growth this paper makes a new attempt to investigate the role of anticipatedmonetary growth in economic growth combining the barro 1990 rebelo 1991 type endogenous growth model with sidrauski s 1967 framework we show that the pre announcement of money supply behaviour may have significant effects on the rate of growth during the transition process the key factor indetermining adjustment patterns of the economy to anticipated monetary changes is the degree of relative risk aversion however changes in the rate of monetary growth do not affect the rate of long run growth regardless of the degree of relative risk aversion

intergenerational trade longevity and economic growth we develop an overlapping generations model of endogenous growth in which human capital is the engine of growth and the generations are linked through material and emotional interdependencies within the family parents invest in their children to achieve both old age support care and emotional gratification and material support from children is determined through self enforcing implicit contracts we show that optimal intergenerational trade can then lead to maximization of growth opportunities our model produces a theory of the demographic transition linking longevity fertility and economic growth we also show that while population aging may raise the growth rate an increase in young age longevity is likely to produce a greater increase in the growth rate and a reduction in the fertility rate in a growth equilibrium these predictions and the model s implications concerning the behavior of private savings during the takeoff period appear consistent with empirical evidence

banks as coordinators of economic growth and stability microfoundation for macroeconomy with externality abstract competition among banks promotes growth and stability for an economy with production externality following arrow and debreu 1954 6 i formulate a standard growth model with externality a two period version of romer 1986 39 as a game among consumers firms and intermediaries the walrasian equilibrium with an auctioneer does not achieve the social optimum without an auctioneer or intermediaries i show that no nash equilibrium exists with several banks strategically intermediating capital a nash equilibrium emerges with a realistic institution i e an interbank market with a negotiation process in the loan market the equilibrium outcome is uniquely determined and socially optimal

quality ladders and product cycles we develop a two country model of endogenous innovation and imitation in order to study the interactions between these two processes firms in the north race to bring out the next generation of a set of technology intensive products each product potentially can be improved a countably infinite number of times but quality improvements require the investment of resources and entail uncertain prospects of success in the south entrepreneurs invest resources in order to learn the production processes that have been developed in the north all r d investment decisions are made by forward looking profit maximizing entrepreneurs the steady state equilibrium is characterized by constant aggregate rates of innovation and imitation we study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

the strategy of professional forecasting we develop and compare two theories of professional forecasters strategic behavior the first theory reputational cheap talk posits that forecasters endeavor to convince the market that they are well informed the market evaluates their forecasting talent on the basis of the forecasts and the realized state if the market expects forecasters to report their posterior expectations honestly then forecasts are shaded toward the prior mean with correct market expectations equilibrium forecasts are imprecise but not shaded the second theory posits that forecasters compete in a forecasting contest with pre specified rules in a winner take all contest equilibrium forecasts are excessively differentiated

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

policy implications of endogenous growth theory harrod domar growth theory sanctioned the overriding importance of capital accumulation in the quest for enhanced growth since budgetary surpluses could substitute for domestic savings fiscal policy became identified as the primary growth instrument government had a role to play the influence of harrod domar economics was far reaching development agencies gave great prominence to the need to raise savings ratios in doing so they were reflecting the spirit of contemporary development doctrine lewis i954 i958 rostow i960 and fei and ranis i964 had pinpointed the raising of the savings ratio as the key to understanding the process of development and the take off into sustained growth in advanced market economies concerned with the apparent success of soviet economic growth similar sentiments were expressed and the strict fiscal easy money prescription for economic growth was frequently advocated the introduction of the neo classical growth model especially in the contributions of solow i956 and swan i956 provided the necessary antidote to the excessive claims made for capital accumulation in neoclassical one sector models the ultimate determinant of the growth rate is shown to be the autonomously determined rate of population expansion fiscal policy is thus rendered an irrelevancy in the pursuit of higher growth per se although it may still have a part to play in the more esoteric pursuit of golden rules to achieve golden ages what the early harrod domar and neo classical formulations of growth theory possessed in common was the belief that the third ingredient in growth namely technical progress was an exogenously determined fortuitous and costless occurrence descending like manna from the heavens even though it was recognised that technical progress could be the dominant element in the growth equation especially following the publication of solow i957 there was no satisfactory account of the determinants of technical change indeed in the neo classical growth model with exogenous population expansion and exogenous technical change there was virtually no role for government to play discussion turned to the rather sterile issue of whether government intervention could speed up the process of adjustment in the event of some temporary disturbance from the steady state path but there was no growth policy as such this essentially unsatisfactory position has continued until very recent times the present paper offers an attempt to detail recent contributions which seek to rectify this situation and to draw out the more important implications for economic policy

fat tails and volatility clustering in experimental asset markets abstract this paper presents results from experimental asset markets with asymmetric fundamental information we observe leptokurtic returns and a slowly decaying autocorrelation function of absolute returns in contrast to results from heterogeneous agent models hams we find that noise has no significant influence on the emergence of fat tails instead we observe a significantly positive relationship between the degree of heterogeneity of fundamental information and absolute returns which suggests that heterogeneous fundamental information is the source of fat tails with respect to volatility clustering we discover an intra periodical pattern where absolute returns decrease after the arrival of new asymmetric fundamental information

j shaped returns to timing advantage in access to information experimental evidence and a tentative explanation abstract the question of how useful information is in financial markets has been discussed for decades and is still unresolved in this paper we challenge the widely held belief that additional information is never a disadvantage we present results from experimental financial markets with asymmetrically informed traders in all treatments we conduct we find a j shaped distribution of returns while the best informed outperform all others average informed traders have significantly lower returns than the least informed this can mainly be attributed to trend reversals in the fundamental information prices in our markets do not reflect ree but rather naive trader equilibrium

catching the wave alertness responsiveness and market influence in global electronic networks this paper introduces the concepts of alertness and responsiveness as key capabilities for firms in fast moving information intensive environments such as global currency trading hypotheses drawn from the resource based view of the firm from network theory and from austrian economics are tested on objective cross section and time series data for the population of 4 088 banks engaged in foreign exchange trading on the reuters dealing system results strongly support the hypotheses that banks that are alert i e use their information networks in ways that expand the range of information they are exposed to and responsive those that act quickly in volatile markets tend to exercise greater market influence in this industry

is more information always better experimental financial markets with cumulative information abstract we study the value of information in financial markets by asking whether having more information always leads to higher returns we address this question in an experiment where information about an asset s intrinsic value is cumulatively distributed among traders we find that only the very best informed traders i e insiders significantly outperform less informed traders however there is a wide range of information levels from zero information to above average information levels where additional information does not yield higher returns the latter result implies that the value of additional information need not be strictly positive

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

a microeconomic mechanism for economic growth this paper constructs a dynamic general equilibrium model in which economic growth is explained by the evolution of the division of labor the relationships among the accumulation of human capital the evolution of the division of labor endogenous comparative advantage trade dependence the market structure and economic growth are investigated

information diversity and market behavior a comment in figlewski 1 the author construct s a model of a purely speculative market in which speculation on price changes is the only motive for trading and the return for investors as a group is zero even though each trader possesses information which he believes will allow him personally to make a profit p 90 lines 8 12 1 this zero sum game of commodity speculation is played over several successive periods in each period information is released the market opens and a market clearing price is established by tatonnement so that investors know what the market price pm will be before they trade and thereby obtain additional information about other traders estimates of p the ultimate endof period commodity spot price they use this information to update their expectations and all trading by the ith investor is ultimately based on forecasts conditioned on both 4ji trader i s information set and pm p 91 paragraph 2 of course investor i believes he has information that pm does not accurately reflect which will allow him to earn a speculative profit trading against the market p 91 paragraph 3 figlewski presents four theorems in his paper the major result of his paper is theorem 1

on endogenous growth with physical and human capital this paper presents a class of models in which agents may devote part of their nonleisure activities to going to school so as to increase the efficiency units of labor they supply to the firms and the wages they receive the interaction among the technology of human capital accumulation and agents preferences will determine endogenously the economy s rate of growth given a constant returns to scale technology for physical capital accumulation we characterize the set of steady states as a ray from the origin and show the global convergence of every off balanced path to some point on this ray further properties concerning the dynamic evolution of the state and control variables around the ray of steady states are also established our analysis is useful to understand the role played by the technologies of physical and human capital in the process of accumulation and to evaluate the impact of policies geared toward attaining higher levels of capital our results highlight the importance of human capital

why regulate insider trading evidence from the first great merger wave 1897 1903 we use event time methodology to study legal insider trading associated with mergers circa 1900 for mergers with prospective disclosures similar to today s we find substantial value gains at announcement implying participation by outside shareholders despite the absence of insider constraints furthermore preannouncement stock price runups relative to total value gain are no more than those observed for modern mergers insider regulation apparently has produced little benefit for outsiders with the inside information pricing function and related gains shifting to external information specialists other results suggest market penalties for nondisclosure i e insider trading is less successful in a restricted information environment

market efficiency and natural selection in a commodity futures market while the literature usually justifies informational efficiency in the context of rationality this article shows informational efficiency by applying the evolutionary idea of natural selection in a dynamic futures market speculators are assumed to merely act upon their predetermined trading types buyer or seller their predetermined fractions of wealth allocated for speculation and their inherent abilities to predict the spot price reflected in their distributions of prediction errors with respect to the spot price this article shows that the proportion of time that the futures price equals the spot price converges to one with probability 1 article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

on endogenizing long run growth this assessment of recent theoretical work on endogenous growth identifies three different engines of long run growth i the asymptotic average product of capital is positive ii labor productivity increases as an external effect of capital accumulation iii there are feedback effects on the cost of accumulating knowledge or innovating a general model encompassing all three is considered and then used to review different proposed determinants of long run growth rates the contribution of endogenous growth theory has been to create a framework in which to explain why economic institutions and policies can have long run effects on growth rates

real effects of futures speculation asymptotically rational expectations to what extent does the diversity in the forecasting ability of futures speculators simply result in transfers of wealth among themselves and to what extent does it affect the allocation of resources on the basis of bayesian analysis it is assumed that the variance of forecast errors between the subjective and objective expectations of the subsequent price differs among groups two major conclusions are as follows 1 if given our parameter estimates the forecast error variance of the amateur speculators is less than six times that of the professionals then the existence of futures markets will lower the expected price to consumers increase expected output and lower the variance of the price 2 since small speculators lose to the professionals the relative variance of the forecast error of the amateurs to the professionals exceeds their relative weights as measured by the ratio of numbers to average risk aversion

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

the division of labor coordination costs and knowledge this paper considers specialization and the division of labor a more extensive division of labor raises productivity because returns to the time spent on tasks are usually greater to workers who concentrate on a narrower range of skills the traditional discussion of the division of labor emphasizes the limitations to specialization imposed by the extent of the market we claim that the degree of specialization is more often determined by other considerations especially emphasized are various costs of coordinating specialized workers who perform complementary tasks and the amount of general knowledge available