measuring the spillovers from technical advance mainframe computers in financial services measuring the social gains from recent technological advances is difficult because there are no output indexes from some important adopters measurement methods that infer the willingness to pay of theadopting industries from the derived demand curve for a new technologyovercome this difficulty the derived demand for high speed computersfor use in banks finance and insurance is shown to imply a very largesocial gain to computerization that is not captured by computer manufacturers copyright 1986 by american economic association

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

the lechatelier principle the lechatelier principle in the form introduced into economics by paul a samuelson asserts that at a point of long run equilibrium the derivative of long run compensated demand with respect to own price is larger in magnitude than the derivative of short run compensated demand the authors introduce an extended lechatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory this extension also clarifies the intuitive basis of the principle copyright 1996 by american economic association

on investment and exchange rate movements we investigate the ways in which permanent exchange rate changes may affect investment by influencing domestic and foreign revenue the cost of imported variable inputs and the investment price of imported capital goods we find that the revenue and investment price channels have a quantitatively greater effect on investment than the cost channel the negative effect of the revenue channel which affects the marginal profitability of capital outweighs the positive effect of the investment price channel which affects the marginal cost of capital implying that exchange rate appreciation has a net negative influence on investment the estimation results are robust to different approaches to extracting the permanent components of exchange rates

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

customer and supplier driven externalities the purpose of this paper is to provide empirical evidence helpful for distinguishing different types of externalities we pursue this by extending the productionfunction framework of robert e hall 1990 and caballero and lyons 1990 1992 to exploit two key dimensions of the data disaggregate input output relationships and differences between estimates emphasizing time series versus cross sectional aspects of the data we obtain three main results first from the within estimates using annual data which emphasize the time series properties common across sectors we find a strong reduced form relationship between industry productivity and the activity level input growth of customers in sharp contrast supplier activity levels are insignificant the second result derives from between estimates which emphasize the cross sectional dimension of the data here we find the opposite is true there is a strong reduced form relationship between industry productivity and the activity level of suppliers but no relationship with customer activity levels we interpret the first two results as suggesting that over shorter horizons the linkage between an industry and its customers is pivotal in the transmission of external effects while in the long run external effects are mostly related to intermediate goods linkages the third result concerns the transition from short to long run we find that as the number of periods over which the variables are averaged is incrementally increased from one year toward the full sample period 27 years the significance of customers versus suppliers smoothly reverses itself the remainder of the paper is organized in four sections section i presents the core model and the econometric methods for disentangling the external effects section ii describes the data and estimation section iii presents the main results and our conclusions are presented in section iv

rational actors tit for tat types and the evolution of cooperation abstract evolutionary models in economics have often been criticized for failing to allow for rational maximizing behavior the present paper represents a step toward correcting this deficiency by introducing rational actors into an evolutionary model of the finitely repeated prisoners dilemma at the same time the model endogenizes the uncertainty postulated in the classic model of kreps et al 1982 thus explaining cooperation by rational actors in the finitely repeated prisoners dilemma a testable implication of the model is that the level of voluntary cooperation in a society will be relatively high where geographical mobility is relatively low

investment pass through and exchange rates a cross country comparison using detailed data from the united states canada the united kingdom and japan we examine the implications of exchange rates for time series of sectoral investment both theoretically and empirically we show that investment responsiveness to exchange rates varies over time positively in relation to sectoral reliance on export share and negatively with respect to the share of imported inputs in production important differences exist in investment endogeneity across high and low price over cost markup sectors with investment in low markup sectors often significantly more responsive to exchange rates cross country differences in investment response are only partially explained by industrial organization arguments

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

evolution in economic games abstract this paper examines the conditions under which evolutionary processes select equilibrium strategies of agents or firms under plausible dynamics optimal selection takes place provided that economic agents are small relative to the environment that is each such agent has a negligible effect on others payoffs however when this assumption is not met survival need not imply optimality examples in the contexts of bargaining bidding and market competition are presented

hope springs eternal learning and the stability of cooperation in short horizon repeated games abstract this paper considers learning rates in finitely repeated prisoners dilemmas if players think their opponents might be relatively cooperative e g tit for tat or grim types they will cooperate in finitely repeated prisoners dilemmas see kreps et al j econom theory 27 1982 245 however if there are actually no cooperative types players will eventually learn this and cooperation will break down this paper shows that this learning is extremely slow so it will take an extremely long time for cooperation to break down thus suppose the world is either good or bad the probability of a grim type is 0 if the world is good and zero if the world is bad successive generations pair up to play finitely repeated prisoners dilemmas players observe play in previous generations and use bayes rule to update their prior that the world is good we show that if the world is really bad then falls o 2 log 1 per generation on average thus if is small there is less cooperation if the world is good but cooperation may become more stable for a representative 19 period repeated prisoners dilemma beliefs fall one percentage point on average after a thousand generations to derive these learning rates we must refine existing results on the sensitivity of repeated games to kreps et al 1982 type perturbations specifically we show cooperation is possible in perturbed prisoners dilemmas repeated o log 1 times this improves significantly on the o 1 results in previous work the paper thus provides two new reasons why cooperation tends to be stable even in short horizon repeated games

urban rural income disparities and development in a panel data set of china for the period from 1978 to 2006 we examine the relationship between urban rural income disparities and development in a panel data set of 30 provinces and regional subsets of china during the period of 1978 to 2006 there is an inverted u relationship between the urban rural income gap and per capita gross domestic product gdp financial development by scale widens the urban rural income gap in all regional samples while financial sector efficiency and rural bank loans may reduce it in some regions government spending raises the urban rural income gap as well we also examine the effects of urbanization openness and education

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

evolution in the finitely repeated prisoner s dilemma abstract this paper examines some aspects of evolutionary dynamic behavior in the finitely repeated prisoner s dilemma the fitness of cooperation found in the best known simulation of this type that by robert axelrod stems from strategy set restrictions the game used for the simulation has a continuum of pure cooperation equilibria and no pure defection equilibrium some new simulations are presented here for the finitely repeated game although cooperation is ultimately exploited and extinguished dynamic paths can pseudo converge in ways that allow partial cooperation to flourish for extended periods of time

cooperation secret handshakes and imitation in the prisoners dilemma building on a j robson 1990 j theoret biol 144 379 396 we introduce into the repeated prisoners dilemma mutants who have the ability to send a costly signal i e the secret handshake before each round of the game and to condition their actions on whether or not they observe the same signal from their opponent we show that as mutation probabilities approach zero in the limit cooperation occurs a positive fraction of the time using simulations to study the behavior of the system with nonzero mutation probabilities we obtain similar results surprisingly in some cases an increased payoff to unilateral defection actually raises the level of cooperation journal of economic literature classification numbers c70 c72 d60

the impact of initial financial state on firm duration across entry cohorts recent theories of industry dynamics emphasize the role of financial frictions in determining post entry performance of firms testing these theories has been dicult because of the lack of financial data on the small young and private firms using a unique data set this paper considers the survival of new firm in canadian manufacturing from a financial perspective duration analysis quantifies the eects of firm

the long breadth of cities revisiting worldwide urbanization patterns 1950 2030 abstracta comparative analysis of population dynamics worldwide contributes to profile distinctive demographic and economic trajectories of urban growth discriminating processes of settlement conc

computing productivity firm level evidence we explore the effect of computerization on productivity and output growth using data from 527 large us firms over 1987 1994 we find that computerization makes a contribution to measured productivity and output growth in the short term using one year differences that is consistent with normal returns to computer investments however the productivity and output contributions associated with computerization are up to five times greater over long periods using five to seven year differences the results suggest that the observed contribution of computerization is accompanied by relatively large and time consuming investments in complementary inputs such as organizational capital that may be omitted in conventional calculations of productivity the large long run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association