policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

gasoline price volatility and the elasticity of demand for gasoline abstract we examine how gasoline price volatility impacts consumers price elasticity of demand for gasoline results show that volatility in prices decreases consumer demand for gasoline in the intermediate run we also find that consumers appear to be less elastic in response to changes in gasoline price when gasoline price volatility is medium or high compared to when it is low moreover we find that when we control for variance in our econometric model gasoline price elasticity of demand is lower in magnitude in the long run

a political economy theory of trade agreements we develop a model where trade agreements in addition to correcting terms of trade externalities help governments to commit vis a vis domestic industrial lobbies the model allows us to explore how the characteristics of the political environment aect the structure of the trade agreement and the extent of trade liberalization the model also highlights the role of intersectoral capital mobility in determining trade liberalization in a dynamic extension of the model we explore the extent to which trade liberalization occurs gradually and how its speed depends on the fundamentals of the problem

uncertainty and the specificity of human capital this paper studies the choice between general and specific human capital a trade off arises because general human capital while less productive can easily be reallocated across firms accordingly the fraction of individuals with specific human capital depends on the amount of uncertainty in the economy our model implies that while economies with more specific human capital tend to be more productive they also tend to be more vulnerable to turbulence as such our theory sheds some light on the experience of japan where human capital is notoriously specific while japan benefited from this predominately specific labor force in tranquil times this specificity may also have been at the heart of its prolonged stagnation

institutional investment patterns and corporate financial behavior in the united states and japan abstract this paper examines the agency problem between shareholders and debtholders of japanese and u s firms whereas u s institutional investors are restricted from doing so japanese financial institutions take large equity positions in firms to which they lend particularly in firms more susceptible to the agency problem debt ratios of u s firms are negatively related to the firm s potential to engage in risky suboptimal investments whereas japanese debt ratios show no such relation the evidence is consistent with the notion that the agency problem is mitigated to a greater degree in japan than in the u s

clusters and comparative advantage implications for industrial policy abstract cases of industrial agglomeration or clusters arise in the presence of industry specific and local externalities also called marshallian externalities the standard argument is that such externalities may justify a policy of infant industry protection to allow and encourage clusters to emerge in this paper i explore this carefully and show that different policy implications emerge under a more realistic modeling of clusters in particular rather than distorting prices to promote clusters in advanced sectors that may exhibit strong clustering possibilities countries should focus instead on promoting clustering in current sectors which have revealed to have the strongest comparative advantage import substitution is not a proper way to achieve this

a comparative analysis of intertemporal behavior of profits japan and the united states this paper first asks whether the working of market forces in japanese manufacturing industries is unique to them or similar to u s counterparts it is found that autoregressive profit equations for 376 japanese firms over 1964 82 are on average similar to those for 413 u s firms over 1964 80 the paper next asks whether the interindustry pattern of profit adjustments in japan is related to industry traits in a manner analogous to the united states in this case specific national differences between the two countries in the effects of imports industry growth and capital intensity on the profit adjustment process are found copyright 1989 by blackwell publishing ltd

gasoline demand revisited an international meta analysis of elasticities meta analysis is used to determine if there are factors that systematically affect price and income elasticity estimates in studies of gasoline demand four econometric models are estimated using long run and short run price and income elasticity estimates from previous studies as the dependent variables explanatory variables include functional form lag structure time span national setting estimation technique and other features of the model structure elasticity estimates are found to be sensitive to the inclusion or exclusion of some measure of vehicle ownership static models appear to overestimate short run elasticities underestimate long run price elasticities but pick up the full long run income responsiveness there is variation in the elasticity of demand across countries especially in the short run and gasoline demand appears to be getting more price elastic and less income elastic over time

short run fuel price responses at the pump and on the road abstract we provide evidence that motorists respond to short run fluctuations in fuel prices at the gas pump and not on the road employing variants of censored panel regression to control for censoring of the dependent variable we find that the fuel price has a negative impact on the quantity of fuel purchased but no consistently significant impact on the subsequent distance driven until the next refill over the short run drivers thus appear to cope with high fuel prices by adjusting fuel purchases with each visit to the filling station but without altering their daily mileage

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

top executive rewards and firm performance a comparison of japan and the united states this paper studies top executive turnover and compensation and their relation to firm performance in the largest japanese and u s companies japanese executive turnover and compensation are related to earnings stock returns and to a lesser extent sales performance measures the fortunes of japanese top executives therefore are positively correlated with stock performance and current cash flows or with factors contributing to such performance the relations for the japanese executives are generally economically and statistically similar to those for their u s counterparts there is some evidence however that the fortunes of japanese executives are more sensitive to low income but less sensitive to stock returns than those of u s executives

public versus private venture capital seeding or crowding out a pan european analysis abstract this paper analyzes the relationship between public and private sources of venture capital in europe and the development of the industry controlling for characteristics of the legal systems in 15 european countries over the period 1990 1996 large public participation is correlated with smaller vc industries but analyses do not support the view that public venture capitalists are acting to seed the industry or that are they crowd out private funds on the contrary public involvement seems to cause greater amounts of money to be invested in the industry as a whole we argue that the effects of public intervention whatever the motives are real and probably result from demonstrating sanctioning the social merit of venture capital and from signaling an enduring commitment to it

slack in the state owned enterprise an evaluation of the impact of soft budget constraints abstract in this paper slack in resource utilization is estimated using data envelopment analysis for a sample of 67 indian state owned 63 private sector and 27 foreign owned enterprises on a comparative basis the study is cross sectional and carried out for the year 1991 to assess how far the operation of soft budget constraints has had an impact on the economic performance of indian firms particularly operated as state owned enterprises specifically the presence of debt capital provided primarily by government owned financial institutions is strongly and negatively related to performance the results show that if firms turn out to be all equally efficient then average materials costs human capital usage costs costs associated with other operating items and physical capital usage by each state owned enterprise sampled can be reduced by rs 203 million rs 201 million rs 53 million and rs 255 million respectively if existing levels of inputs are used efficiently then the average addition to the value of output by each state owned enterprise can rise by rs 693 million the analyses reveal significant slack in resource utilization in indian state owned firms resulting from soft budget constraints and the implications of the existence of slack are discussed

state owned and privately owned firms an empirical analysis of profitability leverage and labor intensity for some it is an article of faith that governmentowned firms must be less efficient or at least less profitable than privately owned firms maxim boycko et al 1996 argue that politicians cause government owned firms to employ excess labor inputs anne o krueger 1990 suggests that such firms may be pressured to hire politically connected people rather than those best qualified to perform desired tasks more generally government owned firms are thought to forgo maximum profit in the pursuit of social and political objectives such as wealth redistribution in addition the residual cash flow claims of these firms are not readily transferable like the shares of a private corporation this impairs residual claimant incentives to monitor managers and ultimately degrades firm performance as a consequence one expects government owned firms to be technically less efficient and therefore less profitable than private firms the implication is that in competitive markets without significant externalities private ownership is the superior organizational form the view that government firms are inherently less efficient than private ones however remains controversial among economists john vickers and george yarrow 1991 among others point out that agency problems arise in private firms as well as public ones in most large private corporations managers own little of the stock because monitoring managers is costly a divergence arises between their objectives and those of private shareholders private shareholders typically hold a small stake in any one firm and it may not pay any shareholder to bear the cost of monitoring management it follows from this discussion that whether government firms are more or less efficient than private firms is primarily an empirical issue to date the body of empirical evidence is mixed in this paper we report further empirical evidence on the relative efficiency of public and private enterprises we build on previous work by studying larger samples over longer time periods and by allowing for additional factors that influence firm performance in particular our analysis controls for time series variation in the general level of economic activity that may otherwise confound performance comparisons between government and private firms 2 we approach the issue in two different ways first using accounting numbers we conduct a large sample cross sectional comparison of government owned and privately owned corporations this comparison is similar in design to that of boardman and vining 1989 but our sample is three times the size of theirs and includes three

policy watch corporate average fuel economy standards initially the minimum corporate average fuel economy cafe program was promoted as a policy to reduce u s vulnerability to oil shocks in the past two years however concern about global warming has resulted in new political pressures to raise cafe once again to reduce the growth in u s emissions of carbon dioxide a greenhouse gas in this paper i do not attempt to provide a detailed critique of these two objectives i simply take the goals as given and draw upon estimates from the empirical literature to show that cafe is a very costly instrument for achieving them in addition i compare the costs of meeting the same objectives through a fuel or carbon tax

private saving in india this article studies the evolution of the private saving rate in india during 1960 9s its distinctive feature is that it proposes three new measures of private saving which are incremental improvements to the naive national accounts measure the improvements consist of accounting for capital losses to private net worth due to inflation including expenditures on durable goods as a form of saving and expanding the definition of saving to include human capital expenditures after examining descriptive trends and reviewing the related literature the article tests the hypothesis that households that save in india pierce the corporate veil the evidence shows that in fact changes in corporate saving are offset by changes in household saving indicating that the unit of analysis should be aggregate private saving the core analytical section of the article studies how the behavior of the private saving rate is related to the real interest rate per capita income the dependency ratio financial depth the government saving rate and the share of agriculture in gross domestic product the empirical analysis is done by estimating error correction models on aggregate annual data although most of the discussion centers on long run effects

density dependence in the evolution of populations of newspaper organizations a model of density dependence is proposed to explain regularities in the growth and decline of organizational populations density the number of organizations is assumed to be a function of the social processes of legitimation and competition at low density the model predicts that the legitimation process will dominate and will lead to high organizational founding rates and low organizational mortality rates at high levels of density competition will dominate and consequently founding rates will decline and mortality rates will rise the model is tested with hazard function models using data from nine newspaper populations spanning the 19th and 20th centuries and covering over 5200 newspapers analysis offounding rates provides strong empirical support for the model analysis of mortality rates reveals that the model holds for large populations

business groups financing constraints and investment the case of india we examine the effect of business group affiliation on corporate investment behaviour in india more specifically we test whether group affiliation reduces financing constraints for the affiliated firms we use a data set containing 694 listed indian companies for the 1989 97 period we estimate a simple investment equation and find evidence that the investment cash flow sensitivity is much lower for group affiliates this suggests that business group affiliates have better access to external funds than stand alone firms

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

crowding out the role of state companies and the dynamics of industrial competitiveness in india this article examines growth patterns of government companies in india whether their presence has crowded out private entrepreneurial activity and whether there has been a decline in the competitiveness of india s industry measured as relative productive efficiency for a 45 year period from 1957 1958 to 2001 2002 there was a significant growth in the number of government companies in india that effectively crowded out the entry and growth of private enterprise this took place from the mid to late 1950s to the late 1980s and early 1990s correspondingly the amount of private equity capital invested in firms declined until the late 1980s and early 1990s when there was an upsurge of private investment activity another feature was that a small number of government companies absorbed most of the corporate sector equity investment in india the growth in the share of government companies in india that crowded out the entry and growth of private enterprises has had a significantly negative effect on india s industrial competitiveness after the introduction of reforms in 1991 there has been a significant crowding in by private enterprises displacing the government companies from their key position as holders of a very large portion of equity capital and also reversing the trend in the decline of competitiveness of indian industry as a whole copyright 2009 oxford university press

heterogeneity in the rebound effect further evidence for germany rebound effects measure the behaviorally induced offset in the reduction of energy consumption following efficiency improvements using both panel estimation and quantile regression methods on household travel diary data collected in germany between 1997 and 2009 this study investigates the heterogeneity of the rebound effect in private transport with the average rebound effect being in the range of 57 to 62 our results are in line with a recent german study by frondel peters and vance 2008 but are substantially larger than those obtained from other studies furthermore our quantile regression results indicate that the magnitude of estimated fuel price elasticities from which rebound effects can be derived depends inversely on the household s driving intensity households with low vehicle mileage exhibit fuel price elasticities and hence rebound effects that are significantly larger than those for households with high vehicle mileage

the debt wish rent seeking by business groups and the structure of corporate borrowing in india business groups play an important role in emerging economies the transactions cost perspective which has dominated our understanding of such groups argues that the emergence of business groups is a natural response to market failures in developing countries in this paper we propose an alternate theoretical perspective the rent seeking view that takes these groups as engaging in coordinated lobbying for the capture of rents created by governments we develop and implement an empirical strategy to test for the rent seeking view drawing from the property rights theory of corporate finance we find strong empirical support for the rent seeking view using a large cross sectional data set of firms in india

assessing comparative efficiency of the state owned mixed and private sectors in indian industry this paper evaluates performance differences between government owned mixed sector and private sector enterprises in india for the period 1973 1974 to 1988 1989 the results establish that enterprises owned by the central government and state governments are less efficient than mixed or private sector enterprises while mixed sector enterprises are less efficient than those in the private sector the results contradict extant evidence finding no performance differences between government owned and private firms in india there have however been inter temporal efficiency gains for the sector as a whole perhaps resulting from reforms undertaken towards improving government owned enterprises performance

estimating the mark up over marginal cost a panel analysis of japanese firms 1971 1994 abstract in this paper we propose a new method to estimate mark ups over marginal cost at the firm level this method is based on the identity between the short run elasticity of output to inputs the mark up rate and the factor shares we then apply this method to a panel of japanese firms in 21 industries over 24 years we have three main results first there is strong evidence of imperfect competition in this panel in which internationally competitive industries show low mark ups second the mark up rate differs considerably among firms and its distribution is skewed third the mark up rate over marginal cost shows strong procyclicality and its sensitivity is uniform within the industry

welfare loss calculation for japanese industries abstract this paper calculates social welfare loss due to market imperfections in japanese industries for the two periods 1966 1970 and 1976 1980 utilizing firm data and then investigates into the characteristics at a disaggregated level our principal findings are 1 the aggregate loss as a percent of national income is relatively stable over time and is similar to the order of magnitude reported for the u s and european countries 2 a relatively small number of industries and also a few firms account for a larger share of total loss and 3 regulated industries show larger loss to sales ratio

corporate governance in japan past performance and future prospects much has been written about the japanese model of corporate governance indeed japanese style corporate governance has been described as an efficient alternative to corporate governance mechanisms available in the west and as a model for developing economies as opposed to american style corporate governance in which hostile takeovers and managerial incentive schemes play a major role japanese firms have traditionally relied on monitoring by large shareholders and banks this article describes the evolution of corporate governance in japan since the second world war and surveys the empirical evidence on its performance although there is substantial evidence on the effectiveness of the japanese system there is also evidence on its significant shortcomings the article also evaluates the effects of the current macroeconomic and banking crises on corporate governance in japan and suggests possible directions for future changes which are likely to make japan more similar to the usa in this respect copyright 2000 by oxford university press

is public expenditure productive abstract this paper considers the relationship between aggregate productivity and stock and flow government spending variables the empirical results indicate that i the nonmilitary public capital stock is dramatically more important in determining productivity than is either the flow of nonmilitary or military spending ii military capital bears little relation to productivity and iii a core infrastructure of streets highways airports mass transit sewers water systems etc has most explanatory power for productivity the paper also suggests an important role for the net public capital stock in the productivity slowdown of the last fifteen years

r d spillovers patents and the incentives to innovate in japan and the united states national surveys of r d labs across the manufacturing sectors in the us and japan show that intraindustry r d knowledge flows and spillovers are greater in japan than in the us and the appropriability of rents due to innovation less patents in particular are observed to play a more central role in diffusing information across rivals in japan and appear to be a key reason for greater intraindustry r d spillovers there suggesting that patent policy can importantly affect information flows uses of patents differ between the two nations with strategic uses of patents particularly for negotiations being more common in japan

do high oil prices matter evidence on the mobility behavior of german households focusing on travel survey data from germany this paper investigates the determinants of automobile travel with the specific aim of quantifying the effects of fuel prices and fuel economy the analysis is predicated on the notion that car mileage is a two stage decision process comprising the discrete choice of whether to own a car and the continuous choice of distance traveled to capture this process we employ censored regression models consisting of probit and ols estimators which allows us to gauge the extent to which sample selectivity may bias the results our elasticity estimates indicate a significant positive association between increased fuel economy and increased driving and a significantly negative fuel price elasticity which ranges between 35 and 41 taken together these results suggest that fuel taxes are likely to be a more effective policy measure in reducing emissions than fuel efficiency standards

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

soft budget constraints and regional industrial policy reinterpreting the rise and fall of delorean the rise and fall of delorean motor cars limited has traditionally been interpreted as either the result either of john delorean s psychological flaws or as confirming the supposed limitations of activist industrial policy however when the episode is examined in greater historical detail neither of these interpretations is compelling the reinterpretation outlined here draws on institutional analysis as well as a range of archival sources much of it previously unreleased the inefficiencies within the original contractual agreement are highlighted the lack of credibility associated with this agreement was in turn traceable to the institutional environment with its associated risk reward implications under which industrial policy operated this environment had a political element it had been distorted by the troubles and the resulting fears policymakers had of a cumulative causation relationship between violence and unemployment officials in belfast against treasury opposition advocated state led entrepreneurship as a policy response

is the german retail gasoline market competitive a spatial temporal analysis using quantile regression we explore whether noncompetitive pricing prevails in germany s retail gasoline market by examining the influence of the crude oil price on the retail gasoline price focusing specifically on how this influence varies according to the brand and to the degree of competition in the vicinity of the station our analysis identifies several factors other than cost including the absence of nearby competitors and regional market concentration that play a statistically significant role in mediating the influence of the oil price on the retail gas price suggesting moderate price setting power among stations

competition in japan japan registered a remarkable 6 5 percent rate of economic growth from 1955 to 1990 catching up with high income western countries in its level of economic development during the 1950s 1960s 1970s and into the 1980s japan s share of world exports rose dramatically from 2 9 percent in 1960 to 6 1 percent in 1970 8 2 percent in 1980 and a peak of 9 8 percent in 1985 porter takeuchi and sakakibara 2000 japanese firms were increasingly successful internationally in large visible industries such as automobiles semiconductors and consumer electronics the striking economic success of japan was widely attributed to a set of economic institutions and policies that encouraged collaboration and limited competition the japanese case then called into question many of the bedrock assumptions of competition thinking it seemed to show that there was a different path to economic prosperity this article begins by examining competition in japan and the supporting policies and institutions during the twentieth century many factors seem to suggest that competition in japan has been less intense but there is an awkward complication the empirical evidence about the intensity of competition in japanese industry does not support the conclusion the story clearly is more complicated we seek to reconcile the apparent differences between policy and institutional circumstances and the empirical evidence by examining the types of competition that prevail across japanese industries and the underlying causes japan indeed pursued an array of policies that limited competition but these policies were not applied throughout the economy in fact those industries in which competition

capitalism and socialism a review of kornai s dynamism rivalry and the surplus economy understanding the nature of capitalism has been a central theme of economics the collapse of the eastern bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism janos kornai s book dynamism rivalry and the surplus economy two essays on the nature of capitalism fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image socialism to further develop the themes contained in the book serious challenges are posed theoretically and empirically as well as in subjects such as hybrid capitalism