energy substitution when model selection depends on the focus abstract in contrast to conventional model selection criteria the focused information criterion fic allows for the purpose specific choice of model specifications this accommodates the idea that one kind of model might be highly appropriate for inferences on a particular focus parameter but not for another ever since its development the fic has been increasingly applied in the realm of statistics but this concept appears to be virtually unknown in the literature on energy and production economics using the classical example of the translog cost function and production data for 35 u s industry sectors 1960 2005 this paper provides for an empirical illustration of the fic and demonstrates its usefulness in selecting production models thereby focusing on the ease of substitution between energy and capital versus energy and labor

estimating elasticities of substitution with nested ces production functions where do we stand abstract prompt by an increasing interest by climate change modelers a rich literature estimating elasticities of substitution in a nested ces production framework has recently developed this article reviews such literature we critically describe the nesting structures estimation approaches data sources and aggregation econometric techniques and types of substitution elasticities used by previous literature to offer a comprehensive description of the various options available to a researcher attempting this estimation we also provide suggestions for potential improvements to the estimation process in particular we warn researchers to use ces production functions with caution in empirical applications given their restrictive build in assumptions

factor demand models with nonlinear short run fluctuations abstract this paper considers asymmetric costs of adjustment that propagate nonlinear shortrun fluctuations in stochastic factor demand systems the model endogenously generates asymmetric cyclical demand for capital and labour between peaks and troughs of the business cycle the empirical analysis of the model is based on quarterly time series data of the dutch manufacturing sector for the period 1971 i 1984 iv and annual time series data of the u k manufacturing sector for the period 1955 1986 i find important differences of adjustment speed of capital and labour inputs between expansionary and contractionary phases of the business cycle

the determinants of aggregate energy use in west germany factor substitution technological change and trade this paper examines the determinants of production related energy use in west germany over the period 1976 1994 the approach is to estimate a system of share equations for energy capital low skilled labor high skilled labor and materials in the west german production sector taking account of biased technological change and increasing trade orientation while technological change is found to be energy saving increased openness is energy using i e tends to increase the energy share factor substitution biased technological change and trade contribute to the year to year volatility of energy intensity in the proportion 66 30 4 the results are robust across several specifications examined

price sensitivity of energy demand in norwegian industries the production side of the latest version of the norwegian msg model has been developed to allow for substitution between various energy goods and between energy and other inputs the production structure and behavior are specified for 19 sectors of the model within the framework of neoclassical production theory formalized by generalized leontief cost functions the main elements of the production model are presented along with the empirical results from estimation of the derived demand relations the analysis focuses on the price sensitivity of energy demand as measured by different types of price elasticities

union responses to changes in non labour input prices abstract the paper extends results on the microeconomics of trade union behavior by deriving a more usable expression for the effect on union wage choices of changes in non labour input prices

the role of energy in real business cycle models abstract this paper modifies hansen s 1985 analysis of a real business cycle mode with indivisible labor by explicitly including energy as a productive input and modelling the relative price of energy as an exogenous random process one goal is to determine the extent to which the introduction of energy price shocks reduces the reliance of the real business cycle model on unobserved technology shocks the other goal following christiano and eichenbaum 1991 is to compare the correlation between real wages and hours predicted by the energy inclusive model to that predicted by hansen s model

opec s production under fluctuating oil prices further test of the target revenue theory abstract oil production cutbacks in recent years by opec members to stabilize price and to increase revenues warrant further empirical verification of the target revenue theory trt we estimate a modified version of griffin 1985 target revenue model using data from 1973 to 2000 the sample period unlike previous investigations includes phases of both price increase 1970s and price decrease 1980s 1990s thus providing a better framework for examining production behavior the results like the earlier study are not supportive of the strict version of the trt however evidence negative and significant elasticity of supply of the partial version are substantiated further empirical estimates do not support the competitive pricing model hypothesizing a positive elasticity of supply opec s loss of market share and the drop in the share of oil based energy should signal an adjustment in pricing and production strategies

the energy rebound effect in china s light industry a translog cost function approach abstract china is in its industrialization and urbanization development stage which requires strong energy support with the largest population in the world the energy endowment of china is relatively small therefore energy conservation is one of the key tools for china s sustainable development and energy security when making policies for conservation the chinese government needs to deal with rebound effect carefully in 2012 china s light industry consumed 316 million tons of coal equivalents accounting for 9 percent of the country s total energy consumption which is about the total amount of energy consumed by south korea based on the translog cost function the magnitude of rebound effect in china s light industry is estimated for the first time using the dynamic ordinary least squares and seemingly unrelated regression methods considering the asymmetric effects of energy prices on energy consumption the rebound effect is approximately 37 7 and all the inputs are substitutes except for labor and energy the different magnitude of rebound effect between light and heavy industry is discussed and some policy implications are provided for more effective energy conservation allowing for the rebound effect

misselling through agents this paper analyzes the implications of the inherent conflict between two tasks performed by direct marketing agents prospecting for customers and advis ing on the product s suitability for the specific needs of customers when structuring salesforce compensation firms trade off the expected losses from misselling unsuitable products with the agency costs of providing market ing incentives we characterize how the equilibrium amount of misselling and thus the scope of policy intervention depends on features of the agency problem including the internal organization of a firm s sales process the transparency of its commission structure and the steepness of its agents sales incentives jel m31 m37 m52 when purchasing unfamiliar products consumers often rely on information and advice pro vided by representatives of the seller this creates the possibility of misselling the question able practice of a salesperson selling a product that may not match a customer s specific needs 1 this problem is particularly severe in markets for technically complex products such as con sumer electronics auto repairs medical care and retail financial services including securities pensions insurance policies and mortgages an important feature of these markets is that the seller often deals with the customer through an agent rather than directly for example financial brokers typically recommend purchase of a specific product after inquiring about their customers particular circumstances and needs the possibility of abuse has led to regulation in some of these markets most notably for securities transactions the financial industry regulatory authority finra the major self regulatory organization for securities firms operating in the united states mandates that broker dealers make a reasonable effort to obtain information about the individual characteristics of their noninstitutional cus tomers and to ensure that their recommendations are suitable to customers financial situations

an examination of the equilibrium specification and structure of production for canadian telecommunications multiple output models of canadian telecommunications production are estimated under different production equilibria a specification test is conducted between the short and long run equilibrium models and the long run equilibrium is rejected in order to capture the nature of the disequilibrium a dynamic cost of adjustment model is estimated for bell canada there are significant adjustment costs and it is estimated that for 1 00 of marginal capital costs the carrier must incur an additional cost of 0 30 to install the new capital into the production process

institutional markets financial marketing and financial innovation firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations because of these agency theoretic relations institu tional behavior in financial markets is not a simple reflection of the preference structures of individuals institutional preferences give rise to a demand for new financial instru ments and innovations even when the returns on these instruments are spanned in the sense of complete pricing the innovations can be thought of as solving moral hazard problems an agency theoretic example serves to illustrate the demand supply and financial marketing of stripped securities in short institutions matter the past two decades have witnessed an explosion of financial innovations the changes are too varied and diffuse to permit an easy taxonomy but broadly they seem to fall into two classes first there are the new securities and their markets beginning with puts and calls we have moved on to euromarkets mortgage pass throughs and cmo s strips straps and swaps putable converti bles primes and scores and s p futures and all of the other instruments that inhibit the financial zoo second there are the dynamic trading strategies that make heavy use of the new instruments basket and program trading the asset pricing theories that now characterize different types of money management and the various incarnations of portfolio insurance have changed financial decision making as dramatically as the available array of instruments has changed along with these changes has come an enormous increase in the demand for the services of financial economists we are called upon not only to value the new instruments and the new strategies but to design them as well like engineers

can market oriented economic reforms contribute to energy efficiency improvement evidence from china since china accelerated its market oriented economic reforms at the end of 1992 its energy intensity has declined 3 6 annually over 1993 2005 however its energy intensity declined 4 2 annually during its first reform period 1979 1992 therefore can we conclude that the accelerated marketization since the end of 1992 has made no contribution to its energy efficiency improvement in order to answer this challenging question we examine the changes of energy own price elasticity as well as the elasticities of substitution between energy and non energy capital and labor in china during the periods of 1979 1992 and 1993 2003 generally in transition or developing economies holding the technology and output level fixed if the energy own price elasticity algebraic value declines or the substitution elasticity between factors rises they will contribute to energy efficiency improvement our empirical study finds that 1 during 1979 1992 the energy own price elasticity is positive 0 285 and capital energy labor energy are both morishima complementary which indicates a distorted energy price and inefficient allocation and 2 during 1993 2003 the own price elasticity for energy is negative 1 236 and capital energy and labor energy are both morishima substitute all factor demands become more elastic and all elasticities of substitution increase the implication is that the accelerated marketization contributes substantially to energy efficiency improvement since 1993 c 2006 elsevier ltd all rights reserved

the relation between energy and non energy inputs in india s manufacturing industries the purpose of this paper is to examine the substitution possibilities among energy inputs and other non energy factors of production in response to price changes we relate this study to india s manufacturing industries this is of special interest since in the recent years indian industries have been gradually moving towards a high energy intensive structure of production in 1970 71 the mining and the manufacturing sector accounted for 52 9 per cent of the total commercial energy consumed in india in coal equivalent terms 8 p 1301 in this study we compute cross and own price elasticities of demand for all inputs a knowledge of the substitution possibilities is of paramount importance in economic planning consider for instance three situations first the effect of rising energy prices will tend to raise the demand for capital if capital and energy are substitute inputs second if energy and capital are complements the higher price for energy will tend to reduce the demand for both new capital equipment and energy thus the availability of cheap and ample supply of energy is significant in determining capital intensity and the future rates of capital formation in the literature on economic development this aspect of the choice of techniques has been by and large neglected third if there are limited substitution possibilities between energy and other inputs the adjustment by industry to higher prices of energy may be quite difficult and costs of production may rise precipitously necessitating a drastic change away from energy based production techniques in section ii of this paper we discuss the technique of analysis and describe the sources of data section iii presents the results and section iv is confined to the concluding remarks

the demand for capital labor and energy in european manufacturing industry before and after the oil price shocks the price and substitution elasticities for factor inputs capital labor fuels and electricity are estimated for total manufacturing industry on the basis of a pooled crosscountry time series analysis for nine west european countries the impact of the economic disturbances in the 1970s on the price sensitivity of demand is analyzed by estimating a translog cost function for two separate periods 1960 72 and 1973 80 hicks neutral technical change is rejected for both periods the results indicate some quite significant changes in the elasticities over the two periods

evidence on the benefits of alternative mortgage products alternative mortgage products have been identified by many as culprits in the financial crisis however because of their lower initial mortgage payments relative to loan amount they may be a valuable tool for households that expect higher and more certain future labor income and that wish to smooth consumption over the life cycle using u k household level panel data this paper provides evidence in support of this hypothesis and highlights other important benefits of alternative mortgages including portfolio diversification tax benefits and a reduction in the transaction costs incurred in housing transactions

expectations and factor demand this paper develops and estimates a model of interrelated factor demand with rational expectations in the presence of internal adjustment costs invariant technological parameters are distinguished from the firm s adjustment parameters which change when the exogenous processes faced by the firm change the capital demand equation is derived by solving the euler equations which stem from minimization of the present value of costs future exogenous variables are supplied from solutions of arima equations the model is tested on postwar quarterly data for u s manufacturing a regime change in the process for energy prices is simulated as is a temporary suspension of the investment tax credit

factor substitution in u s manufacturing does plant size matter we use micro data for 10 412 u s manufacturing plants to estimate the degrees of factor substitution by industry and by plant size we find that 1 capital labor energy and materials are substitutes in production and 2 the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries two important implications of these findings are that 1 small plants are typically as flexible as large plants in factor substitution consequently economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small u s manufacturing plants and 2 since energy and capital are found to be substitutes the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown

securitization and loan performance ex ante and ex post relations in the mortgage market this study examines the relation between securitization and loan performance using a comprehensive dataset from a major national mortgage lender loans remaining on the bank s balance sheet ex post incurred higher delinquency rates than sold loans contrasting the negative relation between screening efforts and ex ante probability of loan sale explored by prior studies moreover the performance gap between sold and retained loans was wider among the subsample of loans that were perceived as easier to resell the investors seeming advantage over the originating bank can mostly be explained by information revealed during the time between loan origination and sale

factor substitution and economies of scale and utilisation in kuwait s crude oil industry abstract the cost structure of the crude oil industry in kuwait has been examined with specific focus on factor substitution and economies of scale and utilisation this has been done by estimating translog cost functions both long run and short run using time series data covering the period from 1976 to 1996 the results indicate that the implied production structure is non homothetic and the pattern of scale effect is labour saving but capital and material using the evidence also supports the presence of an induced exogenous technical change which is non neutral labour and capital using and material saving the elasticity of substitution between capital and labour is positive implying that the two inputs are substitute the results also indicate the existence of diseconomies of scale in the production of crude oil but no economies or diseconomies of utilisation

stochastic house appreciation and optimal mortgage lending w e characterize the optimal mortgage contract in a continuous time setting with stochastic growth in house price and income costly foreclosure and a risky borrower who requires incentives to repay his debt we show that many features of subprime loans can be consistent with properties of the optimal contract and that when house prices decline mortgage modification can create value for borrowers and lenders our model provides a number of empirical predictions that relate the features of mortgage contracts originated in a housing boom and the extent of their modification in a slump to location and borrowers characteristics jel g20 g21 g33

estimating the potential for electricity savings in households abstract improving efficiency in the use of energy is an important goal for many nations since end use energy efficiency can help to reduce co 2 emissions furthermore since the residential sector in industrialised countries requires around one third of the end use electricity it is important for policy makers to estimate the scope for electricity saving in households to reduce electricity consumption by using appropriate steering mechanisms we estimate the level of technical efficiency in the use of electricity using data from a swiss household survey we find an average inefficiency in electricity use by swiss households of around 20 to 25 bottom up economic engineering models estimate the potential in switzerland to be around 15 in this paper we use a sub vector input distance frontier function based on economic foundations our estimates lie at the upper end of the electricity saving potential estimated by the afore mentioned economic engineering approach

short and long term equilibria relationships between first and third generation dynamic factor demand models abstract first generation dynamic models of input demands are theoretically inferior to third generation models yet their simplicity makes them attractive for estimation purposes moreover first generation models can be shown to be generically related to third generation models and under certain assumptions input demand expressions in a third generation model collapse to those of the first generation seemingly offering a short cut for estimation however empirical comparisons suggest that first generation specifications do not afford a reasonable approximation to input functions embedded in more complex third generation models furthermore the reduced form coefficients do not permit identification of third generation model structures

securitization and moral hazard evidence from credit score cutoff rules abstract a growing literature exploits credit score cutoff rules as a natural experiment to estimate the moral hazard effect of securitization on lender screening however these cutoff rules can be traced to underwriting guidelines for originators not for securitizers moreover loan level data reveal that lenders change their screening at credit score cutoffs in the absence of changes in the probability of securitization credit score cutoff rules thus cannot be used to learn about the moral hazard effect of securitization on underwriting by showing that this evidence has been misinterpreted our analysis should move beliefs away from the conclusion that securitization led to lax screening

optimal mortgage design this article studies optimal mortgage design in a continuous time setting with volatile and privately observable income costly foreclosure and a stochastic market interest rate we show that the features of the optimal mortgage are consistent with an option adjustable rate mortgage option arm under the optimal contract the borrower is given discretion of how much to repay until his balance reaches a certain limit the default rates and interest rate payment on the mortgage correlate positively with the market interest rate gains from using the optimal contract relative to simpler mortgages are the biggest for those who face more income variability buy pricey houses given their income level or make little or no down payment our model thus may help to explain a high concentration of option arms among riskier borrowers jel g20 g21 g33

the energy demand in the manufacturing sector of pakistan some further results abstract the purpose of this study was to re examine the role of energy in the manufacturing sector of pakistan using a partial equilibrium approach gl restricted cost function along with the factor demand equations were estimated using zellner s iterative procedure higher energy prices do not seem to adversely affect investment in capital substitution possibilities between energy and non energy inputs are very limited and therefore energy price hikes may directly affect the cost of production inter fuel cross price elasticities indicate that there are substitution possibilities between electricity and gas

interrelated factor demands for manufacturing a dynamic translog cost function approach abstract in this paper we report the results of estimating a joint model for labour capital and energy using the transcendental logarithmic cost function of christensen jorgenson and lau 1973 this allows us to determine both the own price and cross elasticities of substitution between labour capital and energy we combine a model of factor shares with a dynamic adjustment process for each factor we also impose on the cross equation restrictions necessary to provide additivity homogeneity and symmetry since the covariance matrix in systems of share relationships is singular we follow the suggestions of anderson and blundell 1982 and employ a mullivariate error corrrection model the results suggest that additivity symmetry and homogeneity restrictions do hold and that there are short run increasing returns to scale

cost specification and firm behaviour in a hotelling model of resource extraction in applied resource economics much attention has been focused on the ability of the hotelling model to explain observed firm behavior in this paper a preliminary specification search is performed to determine the appropriate cost function parameterization for the firms in the sample before proceeding to the estimation of the euler equation once a cost function specification is chosen the corresponding euler equation is estimated via the generalization method of moments gmm which allows for better estimates of the euler equations than in previous studies even with the preliminary specification search and the use of gmm estimation the behavior of the panel of fourteen canadian copper mining firms in the data set examined does not seem to be consistent with the basic hotelling model used

the rise in unemployment the rise in unemployment is one of the key world economic problems of our time its causes are complex particularly since although unemployment has risen in most countries the size of the increase differs greatly this wide ranging volume written by leading economists in the field contains detailed studies of the unemployment experience of most of the major developed economies providing an invaluable guide to this global dilemma

the capital energy substitutability debate a new look over the last twenty years many studies have been made of the elasticity of substitution between capital and labor the reported estimates are highly variable and reveal an apparent dichotomy between cross sectional and time series studies the former suggest that capital and energy are substitutes while the latter suggest the converse all these studies reported allen partial elasticities of substitution we suggest that the morishima elasticity may be a more useful measure for the issues of concern to capital energy substitution we calculate the morishima elasticities from parameters estimated in a selection of earlier studies and find no excessive variability nor any evidence of the time series cross section dichotomy capital and energy are morishima substitutes copyright 1995 by mit press

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

digitalization and energy consumption does ict reduce energy demand abstract this article investigates the effect of digitalization on energy consumption using an analytical model we investigate four effects 1 direct effects from the production usage and disposal of information and communication technologies ict 2 energy efficiency increases from digitalization 3 economic growth from increases in labor and energy productivities and 4 sectoral change tertiarization from the rise of ict services the analysis combines empirical and theoretical findings from debates on decoupling energy consumption from economic growth and from debates on green it and ict for sustainability our main results effects 1 and 3 tend to increase energy consumption effects 2 and 4 tend to decrease it furthermore our analysis suggests that the two increasing effects prevail so that overall digitalization increases energy consumption these results can be explained by four insights from ecological economics a physical capital and energy are complements in the ict sector b increases in energy efficiency lead to rebound effects c ict cannot solve the difficulty of decoupling economic growth from exergy d ict services are relatively energy intensive and come on top of former production in future digitalization can only boost sustainability when it fosters effects 2 and 4 without promoting effects 1 and 3

oil production responses to price changes an empirical application of the competitive model to opec and non opec countries abstract falling oil prices over the last decade accompanied by over production by some opec members and the growth of non opec supply warrant further empirical investigation of the competitive model to ascertain production behavior a supply function based on a modification of griffin s model is estimated using data from 1973 1997 the sample period unlike griffin s however includes phases of price increase 1970s and price decrease 1980s 1990s thus providing a better framework for examining production behavior using the competitive model the opec results do not support the competitive hypothesis instead a negative and significant price elasticity of supply is obtained this result offers partial support for the target revenue theory for most of the non opec members the estimates support the competitive model opec s loss of market share and the drop in the share of oil based energy should signal adjustments in price and quantity based on a competitive world market for crude oil

rejecting capital skill complementarity at all costs any serious empirical study of factor substitutability has to allow the data to display complementarity as well as substitutability the standard approach reflecting this idea is a translog specification this is also the approach used by numerous studies analyzing the relative capital skill complementarity hypothesis formulated by griliches 1969 according to this hypothesis the degree of substitutability between skilled labor and capital is lower than that for unskilled labor and capital yet the results of empirical studies investigating this hypothesis are controversial this paper offers a straightforward explanation using a translog approach reduces the issue of actor substitutability or complementarity to a question of cost shares our review of translog studies mentioned in hamermesh s 1993 summary on the demand for heterogeneous labor demonstrates that this argument is empirically relevant all these studies can be reconciled with each other on the basis of the cost share argument

engineering and econometric interpretations of energy capital complementarity comment in a recent paper in this review ernst berndt and david wood provide a useful clarification of gross and net complementarity pointing out that energy and capital can be gross substitutes in a production subfunction and yet net complements in the aggregate production function using this theoretical proposition they attempt to reconcile the econometric findings of energy capital complementarity with other studies finding energy capital substitutability their reconciliation rests on the finding that those studies finding energy capital substitutability considered only capital k labor l and energy e by omitting materials m one obtains only a gross elasticity the net elasticity which allows for the additional substitution between the kle aggregate and m can indicate energy capital complementarity in fact klem studies generally find energy and capital complementarity the purpose of this comment is to question whether the net and the gross elasticity distinction provides such a reconciliation among the econometric results i agree that this explanation tends to reduce the disparity between the original berndt wood elasticity estimate and griffin gregory yet three independent sources of evidence suggest that the omission of m is not a sufficient explanation and probably not even a major explanation for the disparity of findings first the difference between the gross elasticity in a kle submodel and the net elasticity in a klem model depends critically on the elasticity of substitution between m and kle let us adopt the berndt wood notation and consider their mathematical example which demonstrates the possibility of gross capital energy substitutability as in the griffin gregory study with net capital energy complementarity

modelling energy and non energy substitution a brief survey of elasticities estimating the degree of substitution between energy and non energy inputs is the key for any evaluation of environmental and energy policies yet given the variety of substitution elasticities the central question arises as to which measure would be most appropriate apparently allen s elasticities of substitution have been the most used measures in applied production analysis in line with frondel 2004 this paper argues that cross price elasticities are preferable for many practical purposes this conclusion is based on a survey of classical substitution measures such as those from allen morishima and mcfadden the survey highlights the fact that cross price elasticities are their essential ingredients

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

technical efficiency and u s manufacturing productivity growth this paper establishes that new inputs increase technical efficiency levels for u s manufacturing over the period 1950 1998 intermediate inputs exhibited higher rates of efficiency growth than labor and capital efficiency adjusted productivity growth annually averaged 0 4 percentage points above measured growth the gap between efficiency adjusted and measured productivity growth arises from aggregating inputs using observed and not efficiency adjusted cost share weights in the calculation of measured growth specifically the decline in efficiency adjusted material cost shares compared to the measured shares coupled with the comparatively high material input growth rate was the main source of the productivity gap

dynamic factor demands and market structure under rational expectations some estimates for the italian manufacturing system this paper deals with a dynamic model of the behaviour of firms under rational expectations the adjustment cost framework is followed to describe production technologies the objective of firms is to maximize the stream of future profits under rational expectation first order conditions for the optimum are derived with respect to input demands and one output supply the output market structure is modelled in order to test price taking behaviour the adjustment costs of quasi fixed inputs are internal and interrelated the model is estimated for the italian manufacturing system with encouraging results

wage rigidity micro and macro evidence on labor market adjustment in the modern sector aggregate data on wages and employment may provide misleading indicators of labor market conditions they may suggest inappropriate wage policies in the face of rising unemployment experienced in many developing countries during the 1980s such increases in unemployment are often attributed to wage rigidities a cursory review of aggregate data for the modern sector in cote d ivoire would support this view suggesting that employment declined during the 1979 84 recession due to an increase in real wages examination of disaggregated data from two labor force censuses of the modern sector however shows that real wages declined for specified classes of labor the work force was characterized by greater education training and experience workers with a given level of attributes received a lower real wage by the end of the recession than before it despite this drop in real wages employment in the modern sector declined

overcoming adverse selection how public intervention can restore market functioning as illustrated by liquidity support equity injections and asset repurchases in financial crises and by imf credit lines to countries authorities often intervene in orderto revive markets that have dried up or to create newones in suchsituations agents participate only if they receive from the governmental scheme more than in the marketplace while the market outcome depends on who joins the scheme the paper provides a first analysis of market jumpstarting and its two way interaction between mechanism design and participation constraints in the model sellers in need of cash have private information about the value of their legacy asset the absence of buyer confidence forces authorities to intervene to jump start the market we characterize the optimal intervention and draw two main implications first the government should clean up the market through buybacks of the weakest assets and then through some equity injections and leave the agents with the strongest legacy assets to the market in particular authorities should not substitute fully for the market even when they have no comparative disadvantage in acquiring assets or shares thereof second the government creates its own competition by cleaning up the market from its most toxic pieces at the optimal intervention the government always strictly overpays for the legacy asset yet and unlike what would be suggested by coasian profit evasion the existence of a later market imposes no welfare cost while it is cast in a public intervention context the analysis of mechanismdependent reservation utilities also admits important private sector applications

financial flexibility and the cost of external finance for u s bank holding companies this paper models a bank with access to two segmented capital markets the market for insured deposits and the market for uninsured claims we illustrate how higher costs of accessing either market leads to lower firm values and a greater incentive to carry liquid assets we test our model on a sample of large banking firms and label banks with relatively lower costs of accessing the two markets as more financially flexible our two key findings are 1 banks with greater financial flexibility have greater value and 2 banks with greater financial flexibility devote a smaller percentage of assets to cash and marketable securities consistent with the notion that financial flexibility reduces the sensitivity of firm profits to internal wealth shocks thus reducing the firm s need to carry financial slack

dynamic factor demands under rational expectations we model the industrial demands for structures equipment and blue and white collar labor in a manner consistent with rational expectations and stochastic dynamic optimization in the presence of adjustment costs but allowing generality of functional form we represent the technology by a translog input requirement function that specifies the amount of blue collar labor needed to produce an output level given quantities of three quasi fixed factors nonproduction workers equipment and structures a complete description of the production structure is obtained by simultaneously estimating the input requirement function and three stochastic euler equations we find adjustment costs are small in total but large on the margin and differ considerably across factors

the attractions and perils of flexible mortgage lending a mortgage program that offered borrowers greater flexibility in the timing of repayments increased a bank s volume by over 35 loans in the program exhibited superior performance despite this a regression discontinuity analysis shows that the causal impact of offering flexibility was to attract borrowers to the bank who experienced quadruple the average delinquency rate these contrasting findings are driven by the fact that the bank engaged in ex post sorting of stronger borrowers into the flexible program this sorting masked the ex ante adverse selection effects that offering flexibility had on the entire borrowing pool the author 2013 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

energy substitution in u s manufacturing a regional approach one response of economists to energy market developments of the 1970s was to launch a series of studies in which the objective was to estimate energy substitution parameters characterizing important sectors of the u s economy relatively high substitution elasticities between energy and other inputs would permit firms to mitigate the effects of energy price increases by shifting to less energy intensive factor proportions the seminal work in this effort was carried out by berndt and wood 5 griffin and gregory 14 pindyck 28 halvorsen 16 and fuss 12 the research was substantially abetted by developments in production theory where the work of mcfadden 23 diewert 8 and christensen jorgenson and lau 6 yielded new and flexible production and cost function forms empirical work on energy substitution has continued 2 for the most part the data analyzed have been highly aggregative applying to say total u s manufacturing or perhaps to the various two digit sectors comprising that total to date little effort has been given to investigating energy substitution relationships at the regional level in the u s this is unfortunate since we know that the u s economy is actually composed of regions which are differently endowed with resources have developed at different rates and are comprised of different sectoral mixes the distinct possibility exists that regions differ in terms of the way in which energy inputs relate to other inputs in production furthermore even though the energy crisis may seem to be a national phenomenon national policy responses are worked out within a context of shifting and colliding regional conflicts stemming in large part from real or imagined perceptions of how energy market developments impact different regions it would seem especially important therefore to identify

consistent tariffs with dynamic supply response abstract this paper models a large importer of a competitively produced good for which there are nonlinear adjustment costs in production if producers have rational expectations and the importer is unable to make a credible commitment regarding future tariffs market power may be disadvantageous this is more likely to occur when the difference between short and long run elasticities of supply are large this result depends on the particular subgame perfect equilibrium that is chosen if producers were capable of strategic behavior other equilibria which rely on trigger strategies would be reasonable and market power could no longer be disadvantageous

the failure of competition in the credit card market the bank credit card market containing 4 000 firms and lacking regulatory barriers casually appears to be a hospitable environment for the model of perfect competition nevertheless this article reports that credit card interest rates have been exceptionally sticky relative to the cost of funds moreover major credit card issuers have persistently earned from three to five times the ordinary rate of return in banking during the periods 1983 88 the failure of the competitive model appears to be partly attributable to consumers making credit card choices without taking account of the very high probability that they will pay interest on their outstanding balances copyright 1991 by american economic association

the impact of green innovation on energy intensity an empirical analysis for 14 industrial sectors in oecd countries abstract this paper analyses the impact of green innovation on energy intensity in a set of 14 industrial sectors in 17 oecd countries over the 1975 2005 period we create a stock of green patents for each industrial sector and estimate a translog cost function to measure the impact of green innovation on energy intensity next to other factors such as input substitution and autonomous technical change we find that green innovation has contributed to the decline in energy intensity in the majority of sectors the median elasticity of energy intensity with respect to green patenting is estimated at 0 03 in our sample hence a 1 increase in green patenting activities in a given sector is associated with a 0 03 decline in energy intensity the magnitude of the effect is robust across various specifications and is larger in more recent years a decomposition exercise shows that overall half of the decrease in energy intensity over the sample period is related to changes in input prices and half to changes in production technologies

capital energy substitution evidence from a panel of irish manufacturing firms abstract we use a translog cost function to model production in the irish manufacturing sector over the period from 1991 to 2009 we estimate both own and cross price elasticities and morishima elasticities of substitution between capital labour materials and energy we find that capital and energy are substitutes in the production process across all firms we find that a 1 rise in the price of energy is associated with an increase of 0 04 in the demand for capital the morishima elasticities which reflect the technological substitution potential indicate that a 1 increase in the price of energy causes the capital energy input ratio to increase by 1 5 the demand for capital in energy intensive firms is more responsive to increases in energy prices while it is less responsive in foreign owned firms we also observe a sharp decline in firms responsiveness in the first half of the sample period

financial structure production and productivity evidence from the u s food manufacturing industry this study integrates production and financing to examine the impacts of financial structure change on the production profitability and productivity growth in the u s food manufacturing industry empirical results show that during the period covered by this study agency cost associated with increased debt use by this industry negatively affected its output growth input demand profitability and overall productivity growth dividend payment positively contributed to the production and performance of this industry via signaling benefit however the negative effects of increased debt use by this industry far outweighed the positive contribution of dividend payment the u s food industry achieved a 0 9 average annual productivity growth which came primarily from technological progress and capital adjustment the rapid increase in debt use by this industry was responsible for slowing down the pace of productivity growth via its negative contribution to the total factor productivity growth capital expansion was the principal driver of output growth and profitability in this industry

the demand for energy in swedish manufacturing industries the price sensitivity of energy demand and the substitution possibilities between energy and other aggregate production factors in swedish manufacturing industries are analyzed both homothetic and nonhomotethic specifications of a translog cost function are estimated using annual data for the period 1952 1976 for total swedish manufacturing and for 12 manufacturing subsectors the results indicate that relative changes in energy prices have significant effects on energy consumption there is evidence however that adjustment to higher energy prices may be accompanied by a deceleration in investment

energy capital substitutability complementarity the dichotomy abstract changes in the price of energy affect not only the demand for energy but also the rates of capital formation and labour utilization these changes depend on the functional relationship between energy and the primary factor inputs in particular the relationship between energy and capital has been characterized by major conflicting evidence time series data classify the two inputs as complements by contrast pooled cross section studies conclude that capital and energy aresubstitutes in the production process in this case higher priced energy will stimulate the demand for investment while several reconciliation attempts on this disparity deserve marked attention the most prominent explanation is that time series studies reflect short term relationships and cross section analyses capture long term effects

european unemployment lessons from a multi country econometric study the paper summarizes the principal empirical findings of the european unemployment program it draws on 10 country studies which utilize the macroeconomic framework set out by sneessens and dreze 1986 the main conclusions are as follows i a major problem in europe is that productivity gains are quickly absorbed into wages and the effect of unemployment on wage settlements is generally weak ii a wage price productivity spiral means the european economies are inflation prone iii demand pressures spill over into the balance of payments rather than leading to price increases iv the major proximate determinant of employment in the 1 980s is the level of effective demand

exploiting naivete about self control in the credit market we develop a model of the credit market where competitive lenders oer long term contracts specifying a non linear schedule of possible repayment schedules to borrowers who may dier both in their taste for immediate gratication and their prior beliefs about that taste the equilibrium contract to a borrower with given beliefs is discontinuous it features an advantageous option involving fast repayment and a penalty for deviating and repaying later these predictions seem to resemble some salient features of many credit card and mortgage contracts for fully sophisticated borrowers the discontinuity acts as a commitment device and yields fast repayment but all other borrowers even those with an arbitrarily small amount of naivete end up delaying repayment despite the penalty and receive little benet from commitment furthermore because they believe they will repay early they underestimate the cost of credit and hence borrow too much non sophisticated borrowers cross subsidize sophisticated borrowers while sophisticated borrowers discipline rms by preventing very exploitative contracts we identify natural conditions under which the above results obtain even if

home is where the equity is mortgage refinancing and household consumption applying a permanent income model with exogenous liquidity constraints and mortgage behavior household refinancing when mortgage interest rates are historically high and rising a persistent empirical puzzle is explained using data from the panel study of income dynamics households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25 more likely to refinance 1991 94 on average such liquidity constrained households converted over two thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted 1991 94 producing an estimated expenditure stimulus of at least 28 billion

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive

the impact of nearly universal insurance coverage on health care utilization evidence from medicare the onset of medicare eligibility at age 65 leads to sharp changes in the health insurance coverage of the u s population these changes lead to increases in the use of medical services with a pattern of gains across socioeconomic groups that varies by type of service while routine doctor visits increase more for groups that previously lacked insurance hospital admissions for relatively expensive procedures like bypass surgery and joint replacement increase more for previously insured groups that are more likely to have supplementary coverage after 65 reflecting the relative generosity of their combined insurance package under medicare