the replacement problem abstract a prototypical vintage capital model of economic growth is developed where the decision to replace old technologies with new ones is modeled explicitly technological change is investment specific depreciation in this environment is an economic not a physical concept the vintage capital economy s balanced growth paths and transitional dynamics are analyzed the transitional dynamics are markedly different from the standard neoclassical growth model

the growing supply of physicians has the market become more competitive the stock of u s physicians at any point in time is modeled as a weighted average of the supply that a perfect cartel would produce and that would prevail under perfect competition estimation of a system of stock and income equations over the post world war ii period shows that after holding constant demand and marginal cost conditions and accounting for gradual adjustment to changes in equilibrium the weighting parameter has moved toward the competitive extreme since 1965 this rise in the degree of competition is estimated to have increased physician stock by 6 20 and concomitantly decreased medical incomes by 19 45

quality adjusted cost functions and policy evaluation in the nursing home industry proper evaluation of cost quality trade offs inherent in regulatory policy requires identifying the structure of production from the behavioral response of quality to the policy change however estimating the structure of production with endogenous quality is difficult because of both measurement problems and data availability we develop a simple method for identifying and estimating cost functions in the presence of endogenous and unobserved quality using this method we estimate that a quality adjusted cost function for nursing homes treating quality as exogenous yields seriously misleading estimates of marginal cost and economies of scale we then used the parameter estimates to evaluate the cost quality trade off in nursing home regulatory policy

the transatlantic productivity gap is r d the main culprit the literature has pointed to different causes to explain the productivity gap between europe and united states in the last decades this paper tests the hypothesis that the lower european productivity performance in comparison with the us can be explained not only by a lower level of corporate rd however using different estimation techniques the r d coefficients for the us firms always turn out to be significantly higher to see to what extent these transatlantic differences may be related to the different sectoral structures in the us and the eu we differentiated the analysis by sectors the result is that both in manufacturing services and high tech sectors us firms are more efficient in translating their r d investments into productivity increases

hospital ownership and performance this study compares the performance of three ownership forms of hospitals for profit private nonprofit and public further classified according to whether or not the hospital is run by a hospital chain data come from a 1979 national survey of u s hospitals the authors find that hospital cost is quite similar among alternative ownership forms as is profitability the results do not provide much empirical support for standard property rights theory several reasons are suggested why this may be so

tax based mechanisms in urban regeneration dublin and chicago models the increasing interest in the potential use of fiscal incentives as a mechanism for stimulating urban renewal has been highlighted by a number of influential policy sources this paper assesses the application and outcomes of tax based incentives in urban regeneration with particular focus upon the differing models represented by dublin ireland and chicago usa issues considered include utilisation of tax incentives drawing down of benefits role of actor groups ability to lever private sector finance impact on property market performance and wider economic influences conclusions advance the case for tax based mechanisms as an instrument in the delivery of urban regeneration but stress the need for complementary structures to exploit fully the fiscal incentives

growth accounting with investment specific technological progress a discussion of two approaches two approaches taken to the embodiment question are compared and discussed quantitative theory and traditional growth accounting the two approaches give very different estimates for the contribution of investment specific technological advance to economic growth therefore the approach taken matters it is argued that the measures used in traditional growth accounting to gauge the importance of investment specific technological progress have little economic content unlike the measure obtained from quantitative theory

the effects of regulation and competition in the nhs internal market the case of general practice fundholder prices the 1989 reforms of the uk national health service introduced competition in supply within a tightly regulated framework the paper examines whether this competition affects the prices posted by sellers of medical services we argue that despite regulation market forces may have an impact on price we test this using the posted prices for one of the two types of buyer general practice fundholders we find the regulatory rules are not observed and some evidence of the impact of market forces on price

inflation and stock prices no illusion campbell and vuolteenaho 2004 use var results to advocate inflation illusion as the explanation for the positive association between inflation and dividend yields using a structural approach we find that a fully rational dynamic general equilibrium model can generate a positive correlation between dividend yields and inflation as observed in the data the paper describes a channel by which the technology shock moves both inflation and dividend yields in the same direction resulting in a positive correlation between the two

directed technical change with capital embodied technologies implications for climate policy abstract we develop a theoretical model of directed technical change in which clean zero emissions and dirty emissions intensive technologies are embodied in long lived capital stocks switching from dirty to clean innovation leads to ongoing reductions in the relative costs of producing clean investment goods making them ever cheaper to purchase and so encouraging clean investment at the same time falling replacement costs imply falling asset values consequently continuing innovation in capital embodied clean technologies also generates obsolescence costs which are borne by users of clean capital the negative effect of obsolescence costs on demand for clean investment and consequently on the speed of transition to clean growth has been neglected in the literature on directed technical change we show theoretically and using numerical simulations that optimal policies differ in our model of embodied technological change relative to an otherwise comparable model of disembodied technological change with embodied technologies i optimal emissions taxes start higher and rise faster ii much higher clean research and development subsidies are required to effect the switch to clean innovation and iii climate damages under optimal policies are greater we suggest that more attention should be paid to the role of obsolescence costs in modelling transitional effects of climate policies

tax expenditures and other programs to stimulate housing do we need more abstract discussions to aid the housing industry raise several questions first does stimulation of housing demand require new direct subsidy programs and second are any programs to increase demand worth their costs to society the results in this paper indicate that the answer to both questions is no the existing subsidy to homeownership in the tax code is when combined with mortgage instruments that offset cash flow problems fully capable of generating large increases in demand at the cost of significant tax expenditures and the social benefits of increased housing demand are shown to be worth only about 60 of their costs consequently increasing housing demand can be readily achieved but doing so will be costly to the government and inefficient for society

cross sectional heterogeneity and the persistence of aggregate fluctuations abstract the microevidence indicates that small firms grow faster than big firms i argue that this relationship between the expected growth rate of a firm and its size may provide a microfoundation for the well known high degree of persistence of shocks to aggregate output the logic goes as follows almost any shock tends to temporarily alter firms incentive to invest in growth thereby leading to a reallocation of firms across size categories if small firms grow faster than big ones the impact effect of the shock on aggregate output is gradually absorbed but as fast growing small firms become big and start to grow at the lower rate of big firms the rate at which the shock is absorbed decreases over the adjustment path as a result shocks are absorbed yet at a very low decreasing rate which induces long memory in aggregate output i argue that this transmission mechanism may reconcile the microevidence with the observed degree of aggregate persistence it requires changes in neither the number of firms in the market nor the rate of technological progress it is merely the result of the cross sectional heterogeneity that we observe in real economies

market structure and prices the responses of hospitals in the uk national health service to competition abstract the internal market reforms to the uk national health service nhs are a model adopted in many health care systems they introduce competition in supply little is known about the impact of these reforms this paper examines the pricing responses of nhs suppliers to competition the incentives of the reformed system are analysed these indicate that prices should differ between buyers and markets these hypotheses are tested using data on spot market transactions between hospitals and health care buyers the results indicate considerable price variability but offer broad support for the hypotheses

structural change and labor productivity growth in latin american manufacturing industries 1970 96 abstract this paper examines recent changes in the pattern of production specialization attained by latin american manufacturing industries comparing argentina brazil colombia chile and mexico to the united states the paper identifies catching up and lagging behind industries during 1970 96 it considers the evolution of macro and micro forces that affect whether an industry manages to close down the gap with the international technological frontier evidence is presented showing that recent structural reforms did not result in a major discontinuity with the past rather path dependency forces have acted as a major factor explaining differential performance among industries after recent changes in the global incentive regime

technology shocks and job flows we consider a version of the solow growth model where technological progress can be investment specific or investment neutral the labour market is subject to search frictions and the existing productive units may fail to adopt the most recent technological advances technological progress can lead to the destruction of technologically obsolete jobs and cause unemployment we calibrate the model to replicate the high persistence that characterizes the dynamics of firms neutral technology and the frequency of firms capital adjustment we find that neutral technological advances increase job destruction and job reallocation and reduce aggregate employment investment specific technological advances reduce job destruction have mild effects on job creation and are expansionary hence neutral technological progress prompts schumpeterian creative destruction while investment specific technological progress operates essentially as in the standard neoclassical growth model using structural var models we provide support to the key dynamic implications of the model copyright 2007 wiley blackwell

technological change and the stock market tobin s average q has usually been well above 1 but fell below 1 during 1974 1984 our model explains this pattern and reconciles it with unchanging aggregate investment the stock market value in the numerator of q reflects ownership of physical capital and knowledge but the denominator measures just physical capital therefore q is usually above 1 periodic arrivals of important new technologies such as the microprocessor in the 1970 s suddenly render old knowledge and capital obsolete causing the stock market to drop national accounts measures of physical capital miss this rapid obsolescence then q appears to drop below 1 jel e44 o3 o41

what do not for profit hospitals maximize abstract massive structural change is occurring in health care provision in the united states significantly reducing the number of not for profit suppliers this trend is fueled in part by government policies to evaluate these policies one must know about the motives of not for profit health care providers the theory of not for profit hospitals suggests buyers may prefer dealing with sellers who are not acting out of avarice yet this theory does not imply the absence of rent seeking motives we formulate a test of not for profit hospitals goals and apply it to hospitals in virginia modeling average revenues as a function of caseload private medicare medicaid charity we identify prices as latent variables by analyzing the response of the estimated private price to exogenous differences in medicare medicaid and charity caseload we reject the hypothesis that not for profit hospitals maximize profits i e maximize rents for a set of agents who control the hospital we also reject pure welfare output maximization these results combined with other evidence we discuss are consistent with the hypothesis that these hospitals consider both profits and output as objectives current us government policies treat all not for profit hospitals as if they were profit maximizers these policies appear to be biased towards reenforcing the trend towards less health care provision from not for profits and our results suggest that this may not be entirely beneficial to consumers

the cyclical behavior of the price cost markup countercyclical markups constitute the key transmission mechanism for monetary and other demand shocks in new keynesian models this paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost the first part of the paper studies markups in the aggregate economy and the manufacturing sector we use bils s 1987 insights for converting average cost to marginal cost but do so with richer data we find that all measures of markups are either procyclical or acyclical moreover we show that monetary shocks lead markups to fall with output the second part of the paper merges input output information on shipments to the government with detailed industry data to study the effect of demand changes on industry level markups industry level markups are found to be acyclical in response to demand changes

cyclical productivity in europe and the united states evaluating the evidence on returns to scale and input utilization this paper studies procyclical productivity growth at the industry level in the united states and three european countries france germany and the netherlands industry specific demand side instruments are used to examine the prevalence of non constant returns to scale and unmeasured input utilization for the aggregate us economy unmeasured input utilization seems to explain procyclical productivity however this correction still leaves one in three us industries with procyclical productivity this failure of the model can also be seen in europe and is mostly concentrated in services industries

an econometric model of production with endogenous improvement in energy efficiency 1970 1995 the purpose of this paper is to introduce a modification of a standard four input production process where energy is used in an inefficient way due to partly unnecessary waste of energy in this production process r d investment is an additional input in order to improve energy efficiency it closes the gap between energy purchased and energy used effectively the more is invested the less is the waste of energy with the cost and benefit of r d investment incorporated in our model of the firm we analyze the impact of an energy tax on r d effort on output and on the waste of energy the model is implemented empirically by choosing a translog cost function and a set of first order conditions using data for the german chemical industry 1970 1995 in a simulation study based on higher energy prices we found outsourcing as the consequent reaction of the firm more material is used and less of energy labor and capital given the unchanged output level there is no indication of a double dividend in terms of environmental improvement as well as higher demand for labor on the industry level calling for a computable general equilibrium approach in order to answer this open question

two sided market r d and payments system evolution abstract it takes many years for more efficient electronic payments to be widely used and the fees that merchants consumers pay for using those services are increasing decreasing over time we address these puzzles by studying payments system evolution with a dynamic model in a two sided market setting we calibrate the model to u s payment card data and conduct welfare and policy analysis our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes and the welfare impact of regulations may vary significantly through the endogenous r d channel

the impact of hospital market structure on patient volume average length of stay and the cost of care a variety of recent proposals rely heavily on market forces as a means of controlling hospital cost inflation sceptics argue however that increased competition might lead to cost increasing acquisitions of specialized clinical services and other forms of non price competition as means of attracting physicians and patients using data from hospitals in 1972 we analyzed the impact of market structure on average hospital costs measured in terms of both cost per patient and cost per patient day under the retrospective reimbursement system in place at the time hospitals in more competitive environments exhibited significantly higher costs of production than did those in less competitive environments

models of energy use putty putty versus putty clay energy use is inelastic in time series data but elastic in international cross section data two models of energy use reproduce these elasticities a putty putty model with adjustment costs developed by pindyck and rotemberg 1983 and a putty clay model in the pindyck rotemberg model capital and energy are highly complementary in both the short run and the long run in the putty clay model capital and energy are complementary in the short run but substitutable in the long run we highlight the differences in the cross section implications of the models by considering the effect of an energy tax on output in both models in the putty putty model an energy tax that doubles the price of energy leads to a fall in output in the long run of 33 in contrast the same tax in the putty clay model leads to a fall in output of only 5 3

nonprofit hospital mergers and the exercise of market power government challenges to mergers within the hospital industry have become more frequent many of those mergers involve nonprofit organizations rather than the for profit firms that are the norm in most other industries this difference in ownership has made no apparent difference in the antitrust agencies approach to proposed hospital mergers in this article i test the proposition that nonprofit and for profit hospitals price differently in response to the structure of the markets in which they compete based on a cross sectional analysis of california hospitals i find that estimated merger effects on hospital prices do vary by type of ownership in response to either higher market share or to the joint combination of higher share and higher market concentration private nonprofit hospital prices are statistically significantly lower than for profit hospital prices and on balance in this sample there is no evidence of any systematic price increasing effect on private nonprofit hospitals

workers machines and economic growth this paper models technology adoption as replacing workers by machines which perform the same job in the production process the paper shows that such modelling of technology adoption affects significantly the analysis of economic growth this model can explain large and persistent international differences in output levels and growth rates caused by small differences in underlying parameters

balanced growth despite uzawa i use an event study approach to present novel evidence on the impact of trade liberalization on firm level profits using the uncertainty surrounding the negotiation and ratification process of the canada united states free trade agreement of 1989 cusfta i estimate the impact of different types of tariff reductions on the abnormal returns of canadian manufacturing firms i find that canadian import tariff reductions lead to lower and reductions in canadian intermediate input tariffs to higher abnormal returns the impact of u s tariff reductions is less clear and depends on the size of the affected firms i also calculate the total profit increase implied by my estimates overall cusfta increased per period profits by around 1 2 this was mainly driven by intermediate input tariff reductions which more than offset the negative effect of canadian import tariff reductions

industry dynamics and the minimum wage a putty clay approach we document two new findings about the industry level response to minimum wage hikes first restaurant exit and entry both rise following a hike second there is no change in employment among continuing restaurants we develop a model of industry dynamics based on putty clay technology that is consistent with these findings in the model continuing restaurants cannot change employment and thus industry level adjustment occurs gradually through exit of labor intensive restaurants and entry of capital intensive restaurants interestingly the putty clay model matches the small estimated short run disemployment effect of the minimum wage found in other studies but produces a larger long run disemployment effect

nonconvex factor adjustments in equilibrium business cycle models do nonlinearities matter recent empirical analysis has found nonlinearities to be important in understanding aggregated investment using an equilibrium business cycle model we search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs we find that while such costs lead to nontrivial nonlinearities in aggregate investment demand equilibrium investment is effectively unchanged our finding based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity is robust to the introduction of shocks to the relative price of investment goods

inflation risk taxes and the demand for owner occupied housing a bstract a portfolio choice model is formulated which focuses on the possibility of inflation hedging motives in housing demand in the 1970s an asset demand equation is used to estimate the capitalization of inflation expectations into house prices through tax mortgage and hedging effects the empirical results indicate that even after accounting for tax and mortgage effects the hedging motive was significant in bidding up house prices one implication is that the tax effects of inflation may have been overstated in previous research that ignored inflation risk

leviathan in the crosshairs following in the spirit of the leviathan hypothesis this paper empirically examines how the degree of local government market power influences efficiency in the local public sector market power is measured by the number and relative size distribution of similar government units in the same market area to avoid confusing market power with the comparative efficiency or superiority of larger sized organizations the relative size distribution of the individual government unit is held constant in the empirical analysis in the empirical test aggregate property values serve as the measure of efficiency the empirical results suggest that aggregate property values are lower and thus efficiency suffers in more concentrated municipal market areas ceteris paribus thus providing some evidence for leviathan type governments in connecticut

menu costs and the neutrality of money a model of endogenous price adjustment under money growth is presented firms follow s s pricing policies and price revisions are imperfectly synchronized in the aggregate price stickiness disappears and money is neutral the connection between firm price adjustment and relative price variability in the presence of monetary growth is also investigated the results contrast with those obtained in models with exogenous fixed timing of price adjustment

the relationship between hospital mortality rates and hospital market and patient characteristics this study analyses the relationship between hospital outcome specifically mortality rates and various hospital and market characteristics the data are for all general acute care hospitals in california in 1991 that had at least 50 medicare cases selected by the health care financing administration hcfa for their computation of 1991 observed and predicted mortality rates the dependent variable was constructed from these mortality rates hospital and market characteristics were obtained from california s office of statewide health planning and development 1991 tapes the american hospital association s annual 1991 report 1990 census data and hcfa s 1991 medicare hospital mortality information report highly significant results p 0 01 were found for three of the predictor variables improved mortality rates were associated with a lower proportion of medicaid patients with a larger market and with a higher prior year profit margin other factors that contributed to improved mortality rates p

vintage human capital growth and the diffusion of new technology we develop a model of vintage human capital in which each technology requires vintage specific skills we examine the properties of a stationary equilibrium for our economy the stationary equilibrium is characterized by an endogenous distribution of skilled workers across vintages the distribution is shown to be single peaked under general conditions there is a lag between the appearance of a technology and its peak usage a phenomenon known as diffusion an increase in the rate of exogenous technological change shifts the distribution of human capital to more recent vintages thereby increasing the diffusion rate

productivity and the embodiment of technical progress this survey of the issues involved in the embodiment hypothesis that technical change and productivity can be explained by changes in the quality of inputs into the production process treats the interrelationships of technical change and productivity presents some empirical findings on this subject and discusses some fundamental issues in further studies of embodiment topics covered include the nature of the embodiment hypothesis the vintage model of capital and embodiment in other inputs the use of the embodiment hypothesis to study productivity trends the embodiment hypothesis and the productivity slowdown in the 1970s and 1980s and potential future applications of the embodiment hypothesis

critical survey savings and economic growth in neoclassical theory in neoclassical economics economic growth depends upon savings the paper discusses problems with this conventional view and how these have been tackled from pre solowian authors up to the recent new or endogenous growth theory egt these difficulties became particularly clear with the solow swan model of growth in which the savings rate did not affect the rate of growth in the absence of exogenous circumstances savings would only depress the marginal productivity of capital forcing the economy towards a stationary state the paper interprets egt as an attempt to react to this gloomy theoretical prospect the paper examines various difficulties with this attempt

the role of hospital competition on treatment expenditure and outcome evidence from stroke and cardiac treatment in taiwan this article examines whether market competition affects treatment expenditure and health outcomes of stroke and cardiac treatment in taiwan our measure of treatment expenditure is the hospital expenditure paid at the index admission short term and the sum of inpatient and outpatient expenditures paid in the subsequent year long term our measure of health outcome is the probability of death in 1 and 12 months after the hospital s discharge our measure of competition follows the method developed by kessler and mcclellan that calculates the herfindal index based on the predicted patient flows using exogenous variables e g traveling distance to hospitals using data of patients hospitalized for new stroke and cardiac treatment between 1997 and 2001 in taiwan we find that an increase of market competition results in an insignificant impact on a patient s mortality in terms of treatment expenditure our results indicate that hospitals facing more competition incur higher expenditures either the short or long term expenditure finally we find evidence showing that an increase of treatment expenditure at admission is due to a raise of length of stay and treatment intensity per day as well as the usage of expensive equipment jel i11 l13 l41

price and concentration in hospital markets the switch from patient driven to payer driven competition perhaps the most widely accepted paradigm of industrial organization i o is that competition lowers prices or alternatively that price cost margins are lower in less concentrated markets 1 the applicability of this paradigm for hospital markets has been questioned for example in united states vs carilion health system and roanoke valley hospital the district and appellate courts accepted evidence that hospital prices are lower in more concentrated markets and thereby approved a merger between the two largest hospitals in a three hospital market 2 the view that competition has a weak or perverse effect on hospital prices is shared by a number of researchers 3 is a common theme in newspaper stories

the competitive effects of not for profit hospital mergers a case study applying conventional horizontal merger enforcement rules to nonprofit hospitals is controversial critics contend that the different objective function of not for profits entities should mitigate competitive concerns about mergers involving nonprofit hospitals we analyze a merger that reduced the number of competitors both nonprofit in the alleged relevant market from three to two we find that the transaction was followed by significant price increases we reject the hypothesis that these price increases reflect higher post merger quality this study should help policymakers assess the validity of current merger enforcement rules especially as they apply to not for profit enterprises

energy price energy efficiency and capital productivity empirical investigations and policy implications abstract the immediate effect of carbon pricing policy is to raise energy costs which in turn reduces energy consumption either through induced capital under utilization or investments in new energy efficient capital the latter mechanism which implies improvements in energy efficiency is realized in the long run while the former which has implications for capital productivity tends to occur in the short run we employ panel vector autoregressions as well as co integration and error correction techniques to identify these short and long run relationships including their differences across canadian industries

a unified model of entrepreneurship dynamics we develop an incomplete markets q theoretic model to study entrepreneurship dynamics precautionary motive borrowing constraints and capital illiquidity lead to underinvestment conservative debt use under consumption and less risky portfolio allocation the endogenous liquid wealth illiquid capital ratio w measures time varying financial constraint the option to accumulate wealth before entry is critical for entrepreneurship flexible exit option is important for risk management purposes investment increases and the private marginal value of liquidity decreases as w decreases and exit becomes more likely contrary to predictions of standard financial constraint models we show that the idiosyncratic risk premium is quantitatively significant especially for low w

explaining investment dynamics in u s manufacturing a generalized s s approach we are grateful to olivier blanchard whitney newey james stock an editor three anonymousreferees and seminar participants at brown cepr champoussin chicago columbia econometric society meetings caracas and tokyo efcc harvard impa lse nber princeton rochester site toronto u de chile and yale for their comments financial support to caballero from the national science and sloan foundations and to engel from fondecyt grant 195 510 and the mellon foundation grant 9608 is gratefully acknowledged 2since plants entry is excluded from their sample these statistics are likely to represent lowerbounds on the degree of lumpiness in plants investment patterns 3we use the word project to emphasize the fact that the actual implementation of a projectmay cover more than a year observation realistic time to build aspects of investment are not incontradiction with the view that investment episodes are lumpy in nature 4 see chirinko 1994 for a survey of the empirical investment literature

a note on growth accounting with vintage capital abstract we show how growth accounting can be performed in the classic vintage capital model of solow solow r 1956 technical change and the aggregate production function review of economics and statistics the growth in real output can be decomposed into the labor share times the growth of labor plus the gross quasi rents on capital times the saving rate we show that data easily obtained from conventional national income accounts can be used to perform this growth accounting

does competition between hospitals improve the quality of care hospital death rates and the nhs internal market payer driven competition has been widely advocated as a means of increasing efficiency in health care markets the 1990s reforms to the uk health service followed this path we examine whether competition led to better outcomes for patients as measured by death rates after treatment following heart attacks using data that until 1999 was not publicly available in any form on hospital level death rates we find that the relationship between competition and quality of care appears to be negative greater competition is associated with higher death rates controlling for patient mix and other observed characteristics of the hospital and the catchment area for its patients however the estimated impact of competition is small jel classification i1 l8 h4

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

competition among hospitals the traditional view of hospital competition has posited that hospitals compete primarily along quality dimensions in the form of fancy equipment to attract admitting physicians and pleasant surroundings to entice patients price competition among hospitals is thought to be non existent this paper estimates the effects of various hospital market characteristics on hospital prices and expenses in an attempt to determine the form of hospital competition the results suggest that both price and quality competition are greater in markets that are less concentrated although the net effect of the two on prices is insignificant it appears therefore that despite important distortions hospital markets are not immune to standard competitive forces

education and economic growth in taiwan a case of successful planning abstract taiwan s education system had three features which were instrumental to its spectacular economic success first it had an infrastructure already built up by 1950 for basic education that extended fairly broadly among the population second a ready supply of highly educated labor arrived in 1949 50 from the mainland to replace the japanese and to begin the process of building the local economy most important the education system was planned to grow in a manner that closely matched the changing requirements of the growing economy the compulsary basic education was raised from six to nine years the secondary level curriculum was shifted more toward vocational fields the supply of university graduates was strictly limited and the university curriculum changed to emphasize science and engineering subjects the levels above basic junior high level were expanded but disproportionately into the private sector so they were not as costly to the government

computers obsolescence and productivity this paper develops a new technique for measuring the effect of computer usage on u s productivity growth standard national income and product accounts nipa measures of the computer capital stock which are constructed by weighting past investments according to a schedule for economic depreciation the rate at which capital loses value as it ages are shown to be inappropriate for growth accounting because they do not capture the effect of a unit of computer capital on productivity this is due to technological obsolescence machines that are still productive are retired because they are no longer near the technological frontier and anticipation of retirement affects economic depreciation using a model that incorporates obsolescence alternative stocks are developed that imply a larger computer usage effect this effect together with the direct effect of increased productivity in the computer producing sector accounted for the improvement in u s productivity growth over 1996 1998 relative to the

measuring factor adjustment costs i estimate adjustment costs for labor and capital from the euler equations for factor demand for both factors i find relatively strong evidence against substantial adjustment costs my estimates use annual data from two digit industries my results support the view that rents arising from adjustment costs are relatively small and are not an important part of the explanation of the large movements of the values of corporations in relation to the reproduction costs of their capital i investigate the potential effects of three types of specification error 1 aggregation over time 2 aggregation over firms with heterogeneous demand shocks and 3 estimation of a convex adjustment cost technology in the presence of nonconvex discrete adjustment costs i find that the likely biases from these specification errors are relatively small

the quantitative consequences of raising the u s saving rate the authors investigate the consequences of a permanent unphased increase in the u s gross saving rate they find that the sacrifice time the time that elapses until consumption surpasses the value it would have had under the initial saving rate is roughly six years and is insensitive to the percentage increase in the saving rate delta sub s the percentage gain in output at the end of decade the decade gain is roughly 26 of delta sub s while the percentage gain in consumption is roughly 8 of delta sub s the saving rate return the internal rate of return on a permanent increase in the saving rate is roughly 16 and is insensitive to delta sub s copyright 1991 by mit press

a paler shade of green environmental policy under induced technical change conventional wisdom argues that environmental policy is less costly if it induces the development of cleaner technologies in contrast to this argument we show that once the second best nature of actual economies is taken into account the cost of environmental policy may well be larger with induced technical change itc than without thus itc may lower both the emissions reductions and the welfare gains associated with environmental policy in an endogenous policy framework itc may reduce the desired stringency of the policy

economic growth lessons from two centuries of american agriculture this paper reviews the growth experience of u s agriculture over the past two centuries in consonance with the view that growth is determined by the economic environment which consists of the available technology incentives constraints and institutions within this framework the implemented technology is determined jointly with the resource allocation the review covers the role played by resource endowment resource flow technical change and its factor bias and product demand it highlights the importance of the income elasticity of demand and the labor augmentation of the technical change the total factor productivity tfp was almost nil at the beginning of the nineteenth century increasing gradually to the point where it exhausted output growth in the latter part of the twentieth century this pattern is consistent with the postulate emerging from this framework where the tfp is endogenous and determined jointly with growth rather than determining it the more recent performance of u s agriculture is placed within a global perspective in order to generalize the discussion

ambiguous changes in product quality economic goods are frequently sold according to a price per unit quantity where the quantity characteristic does not measure all the economically important characteristics of the good milk is sold by the quart automobiles rented by the mile physicians services bought by the visit and tennis lessons by the hour in all cases heterogeneous units are available in the market and the price per unit quantity depends upon the amount of the unpriced characteristic contained in each unit the per quart price of milk depends upon the butterfat content the mileage costs of automobile rentals on the cars make and the price per unit time for personal services on the providers skill and training the common distinction made between these variants of the same good is that they differ in quality where quality refers to the amounts of the unpriced attributes contained in each unit of the priced attribute thus milk is packaged according to the attribute milk liquid and the quality of milk refers to the ratio of butterfat per unit of liquid 2 this paper considers some of the unique aspects of the economics of supply and demand under this situation where products contain at least two desired attributes only one of which is quantified and measured prior to purchase product quality is here defined by the ratio of the second quality attribute per unit of the measured quantity attribute 3 this simple specification of quality allows a direct link between standard economic models of related products and the economics of variable product quality previous analyses which treat quality simply as a shift parameter in the demand function are shown to obscure the actual subtleties of supply and demand with variable endogenous quality 4 the paper proceeds by first examining the efficient quality and quantity and the competitive equilibrium the market equilibrium under monopoly is then contrasted in the second section the general theme of the

does hospital competition save lives evidence from the english nhs patient choice reforms recent substantive reforms to the english national health service expanded patient choice and encouraged hospitals to compete within a market with fixed prices this study investigates whether these reforms led to improvements in hospital quality we use a difference in difference style estimator to test whether hospital quality measured using mortality from acute myocardial infarction improved more quickly in more competitive markets after these reforms came into force in 2006 we find that after the reforms were implemented mortality fell i e quality improved for patients living in more competitive markets our results suggest that hospital competition can lead to improvements in hospital quality

hospital integration and vertical consolidation an analysis of acquisitions in new york state abstract while prior studies tend to view hospital integration through the lens of horizontal consolidation i provide an analysis of its vertical aspects i examine the effect of hospital acquisitions in new york state on the distribution of market share for major cardiac procedures across providers in target markets i find evidence of benefits to acquirers via business stealing with the resulting redistribution of volume across providers having small effects if any on total welfare with respect to cardiac care the results of this analysis along with similar assessments for other services can be incorporated into future studies of hospital consolidation

taxation and the cost of capital the uk experience since the 1960s the uk has witnessed a series of reforms to its corporation tax system these include the creation of corporation tax as an independent tax in 1965 the gradual introduction of generous capital allowances in the early 1970s the introduction of the partial imputation system in 1973 and stock relief in 1975 and the 1984 reforms which reduced the tax rate and capital allowances and abolished stock relief a number of these reforms were designed with the specific intention of influencing company decisions regarding investment and finance through the real cost of capital

entry and exit of manufacturing plants over the business cycle abstract this paper analyzes the plant level entry and exit over the business cycle we document basic patterns of entry and exit of u s manufacturing plants between 1972 and 1997 we find that the entry rate is more cyclical than the exit rate we also find that the differences in productivity and employment between booms and recessions are particularly larger for entering plants than for exiting plants our new finding suggests that the selection at the entry margin may be more important than the selection at the exit margin in understanding the plant level dynamics over the business cycle

the impact of vintage and survival on productivity evidence from cohorts of u s manufacturing plants this paper examines the evolution of productivity in u s manufacturing plants from 1963 to 1992 we define a vintage effect as the change in productivity of recent cohorts of new plants relative to earlier cohorts of new plants and a survival effect as the change in productivity of a particular cohort of surviving plants as it ages both factors contribute to industry productivity growth but play offsetting roles in determining a cohort s relative position in the productivity distribution recent cohorts enter with higher productivity than earlier entrants did whereas surviving cohorts show productivity increases as they age these two effects roughly offset each other however so there is a rough convergence in productivity across cohorts in 1992 and 1987

is hospital competition socially wasteful we study the consequences of hospital competition for medicare beneficiaries heart attack care from 1985 to 1994 we examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes in the 1980s the welfare effects of competition were ambiguous but in the 1990s competition unambiguously improves social welfare increasing hmo enrollment over the sample period partially explains the dramatic change in the impact of hospital competition

medicaid managed care effects on children s medicaid coverage and utilization abstract we use data from the national health interview surveys nhis to measure the effects of the growth of medicaid managed care on children we examine both the probability that individual children were medicaid covered and their utilization of care we find that managed care penetration has significant effects on the composition of the medicaid caseload young children are less likely to be covered while poor school age children are more likely to be covered when we examine coverage by race we find that black children are less likely to be covered where medicaid managed care organizations mmcos are more prevalent these lower medicaid enrollment rates are linked to increases in the numbers of young children who go without any doctor visits in a year these results suggest that it is important to examine the potential effects of changes in medicaid on selection into the medicaid program rather than focusing exclusively on the effects of managed care on those who are enrolled in addition among those enrolled in medicaid higher managed care penetration is associated with an increase in the number of black children with chronic conditions who go without doctor visits but with decreases in the number of hispanic children and poor teens who go without care

putty clay technology and stock market volatility abstract firms first order conditions imply that stock returns equal investment returns from the production technology much applied work uses the adjustment cost technology which implies that the realized return is high when the investment capital ratio is high this paper derives for an arbitrary stochastic discount factor the investment return implied by the putty clay technology the combination of capital heterogeneity and irreversibility creates a novel channel for return volatility the investment return is high when the ratio of investment to gross job creation is low empirically the putty clay feature helps account for u s stock market data

the role of non convex costs in firms investment and financial dynamics abstract this paper shows that non convex costs of financial adjustment are quantitatively relevant for explaining firm dynamics first empirically financial activity is lumpy more than investment activity second non convex costs are necessary in the context of a dynamic investment and financing model to rationalize this lumpiness two versions of the model with and without non convex costs are compared only the non convex costs version replicates the dynamics in the data generating financial lumpiness higher than investment lumpiness other predictions of the model with respect to investment and finance are discussed

interacting nominal and real labour market rigidities abstract the note analyses interactions between nominal wage stickiness and costly employment adjustment under rule based and optimal monetary policy policy regimes affect and optimal policy lowers the welfare cost of rigidities no quantitatively important second best interaction between both rigidities is found

labor supply with job assignment under balanced growth abstract we consider a competitive equilibrium growth model where technological progress is embodied into new jobs which are assigned to workers of different skills in every period workers decide whether to actively participate in the labor market and if so how many hours to work on the job balanced growth requires that the job technology is complementary with the worker s total labor input on the job which is jointly determined by his skill and his working hours since lower skilled workers can supply longer hours we show that the equilibrium features positive assortative matching higher skilled workers are assigned to better jobs only if differences in consumption are small relative to differences in worker skills when the pace of technological progress accelerates wage inequality increases and workers participate less often in the labor market but supply longer hours on the job this mechanism can explain why as male wage inequality has increased in the us labor force participation of male workers of different skills has fallen while their working hours have increased

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

rational inefficiency adjustment costs and sequential technologies abstract in this paper we propose a novel approach to estimate the rational inefficiency of decision making units in the presence of adjustment costs using sequential definitions of the production technology we show how cost inefficiency can be decomposed into rational and residual inefficiency as well as inefficiency caused by technical change furthermore we estimate lower bounds for the unobserved adjustment costs based on unexploited cost reductions due to rational inefficiency these adjustment costs are used to evaluate the feasibility of exploiting cost reductions caused by residual inefficiency we demonstrate the empirical applicability of our model by estimating and decomposing the cost inefficiency of u s coal fired power plants using panel data which cover the period between 1994 and 2009

labor and the market value of the firm what role does labor play in a firm s market value we explore this question using a production based asset pricing model with frictions in the adjustment of both capital and labor we posit that hiring of labor is akin to investment in capital and that the two interact with the interaction being a crucial determinant of the time series behavior of market value we use aggregate u s corporate sector data to estimate firms optimal hiring and investment decisions and the consequences for firms value the model generates a good fit of the data we decompose the estimated market value thereby quantifying the link between firms value and gross hiring flows employment gross investment flows and physical capital we find that a conventional specification quadratic adjustment costs for capital and no hiring costs performs poorly hiring and investment flows unlike employment and capital stocks are volatile and both are essential to account for market value volatility a key result is that firms value embodies the value of hiring and investment over and above the capital stock

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

measuring the cost of capital when taxes are changing with foresight abstract the familiar hall jorgenson 1967 cost of capital perturbation is not a uniquely feasible one because of institutional features of actual tax systems the optimal holding time for an incremental unit of capital will generally be infinite the impossibility of an optimal rule for recapturing excess depreciation allowances on disposal is demonstrated when tax changes are foreseen the error in the traditional measure of cost of capital can become highly significant ignorance of this effect led to underestimates of the extent to which the radical changes to the u k corporation tax in 1984 would affect cost of capital and incentives to forestall planned investment

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

innovation and productivity growth the puzzle confronting economists has been that the rate of growth of output that was being observed has been much larger than the rate of increase in the principal resources that were being measured it is now clear that this puzzle is of our own making because we have been using measures of capital and labor which had been refined and narrowed in ways that excluded many of the improvements that have been made in the quality of these resources theodore w schultz 1962

fiscal policy and occupational employment dynamics we document substantial heterogeneity in occupational employment dynamics in response to government spending shocks in the united states employment rises most strongly in service sales and office pink collar occupations by contrast employment in blue collar occupations is hardly affected by fiscal policy we provide evidence that occupation specific changes in labor demand are key for understanding these findings we develop a business cycle model that explains the heterogeneous occupational employment dynamics as a consequence of composition effects due to heterogeneous employment changes across industries and occupation specific within industry employment shifts due to differences in the short run substitutability between labor and capital services across occupations

the distribution of housing tax expenditures and subsidies in an urban area this paper examines the distribution of housing tax expenditures and subsidies among households in the owner occupied and public rented sectors in the birmingham area uk subsidies to tenants are defined as the difference between market rents and the rents actually set tax expenditures to owner occupiers are defined as the absence of tax on imputed rental income and capital gains the results presented indicate that tax expenditures tend to be more regressively distributed than subsidies to tenants arising from non market pricing the benefits from the latter are more dependent on a household s location and property type than on income the paper concludes that efficiency and equity objectives are not met by the current housing finance system

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the information technology revolution and the stock market technological progress comes in waves the british industrial revolution 1760 1850 ushered in cort s puddling and rolling process for making iron crompton s mule for spinning cotton and the watt steam engine the second industrial revolution 1890 1930 witnessed the rise of electricity the internal combustion engine and the chemical industry the birth of information technology it may herald the start of a third industrial revolution a new technology or product is often developed by the single entrepreneur who initially finds it hard to get funds develop the product and find customers but if the product is good customers eventually line up and investors flock in other firms then move in to make the product and may drive the innovator out or acquire him whether he reaches the initial public offering ipo stage or is acquired by a listed firm though it takes time for the innovator to add value to the stock market indeed the innovation may at first reduce the market s value because some firms usually large or old will cling to old technologies that have lost their momentum figure 1 plots the market value of u s equity relative to gdp this paper argues that a the market declined in the late 1960 s because it felt that the old technologies either had lost their momentum or would give way to it and that b it innovators boosted the stock market s value only in the 1980 s if the stock market provides a forecast of future events then the recent dramatic upswing represents a rosy estimate about growth in future profits for the economy this translates into a forecast of higher output and productivity growth holding other things equal such as capital s share