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

anonymity efficiency wages and technological progress although the industrial revolution is often characterized as the culmination of a process of commercialisation the precise nature of such a link remains unclear this paper provides an analysis of one such link the role of commercialisation in raising wages as impersonal labour market transactions replace personalized customary relations in the presence of an aggregate capital externality we show that the resulting shift in relative factor prices will under certain conditions lead to higher capital intensity in the production technology and hence a faster rate of technological progress we provide historical evidence using european data to show that england was among the most urbanized and the highest wage countries at the onset of the industrial revolution the model highlights the effects of changes in the availability of information typical of a modernising country on efficiency wages and technological progress

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

contractual structure and wealth accumulation can historical wealth distributions affect long run output and inequality despite rational saving convex technology and no externalities we consider a model of equilibrium short period financial contracts where poor agents face credit constraints owing to moral hazard and limited liability if agents have no bargaining power poor agents have no incentive to save poverty traps emerge and agents are polarized into two classes with no interclass mobility if instead agents have all the bargaining power strong saving incentives are generated the wealth of poor and rich agents alike drift upward indefinitely and history does not matter eventually d31 d91 i32 o17 q15

on the origins of entrepreneurship evidence from sibling correlations we assess the broad importance of family and community background for entrepreneurship outcomes we go beyond traditional intergenerational associations by estimating sibling correlations in unincorporated and incorporated entrepreneurship using register data from sweden sibling correlations range from 20 to 50 they are consistently higher for more committed and incorporated entrepreneurship than for less committed or unincorporated entrepreneurship they are also higher for brothers than sisters we then assess what factors drive these correlations parental entrepreneurship neighborhoods shared genes and financial resources help explain these high correlations whereas immigration status family structure and sibling peer effects have a limited contribution the higher correlation for incorporated versus unincorporated entrepreneurship is explained mainly by the type of parental entrepreneurial engagement and financial resources while the gap between brother and sister correlations in unincorporated entrepreneurship is largely driven by the geographic concentration of male dominated industries

hierarchies and entrepreneurship we establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees using a sample of 16 million observations of swedish workers and a novel proxy for hierarchies based on occupation data conditional on firm size and many other variables employees in firms with more layers are less likely to enter entrepreneurship to become self employed and to switch to another employer the effects of layers are much stronger for business creation than for job switching and they are stronger for entrepreneurship than for self employment we discuss two potential explanations for the distinctive hierarchy effect we find part of the effect could be to be due to preference sorting by employees and part due to employees in firms with fewer layers having a broader range of skills one test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting

self control and the rise and fall of factory discipline abstract we propose a dynamic general equilibrium model that accounts for the historical pattern of the rise and fall of factory discipline in the course of economic development firms have two alternative means to increase work effort discipline and control vs monetary incentives a key ingredient of our model lies in the fact that workers suffer from present bias we show that this lack of self control makes discipline relatively cheap when workers outside option is low even in the absence of moral hazard then as one economy develops it endogenously goes through three stages where firms successively use low powered monetary incentives factory discipline and then high powered monetary incentives when moral hazard is introduced multiple development paths may emerge

patent protection and strategic delays in technology development implications for economic growth we present an endogenous growth model in which both the investment to develop a new technology that upgrades the quality of machines and entry of imitators are determined endogenously according to the model how soon the new technology machine is launched after the patent is granted is influenced by two factors returns to scale in technology development and strategic delays strategic delays in technology development are most likely to occur when earlier dates of success enable imitators to enter an industry i e when imitation is swift and relatively cheap and or patent protection is relatively lengthy we then explore the link between the optimal patent length and economic growth and find that the equilibrium investment in technology development and thus the expected rate of technological progress exhibit an inverted u shape relationship with respect to the legal patent length our results further suggest that in order to minimize the strategic delays in technology development and spur technological progress legal patent lengths should be shorter in industries where barriers to entry are relatively low

the impact of higher standards in patent protection for pharmaceutical industries under the trips agreement a comparative study of china and india a comparative study is undertaken that explores chinese and indian pharmaceutical industries under different patent regimes it is found that relative to india which had implemented process patent protection until 2005 china with a product patent regime since 1993 suffers from both lower drug accessibility and availability the latter is a missing parameter in the literature also china lags behind in both lower r d investment and patents filed by chinese nationals based on these findings and associated legal interpretation we conclude that higher patent protection in china generates negative impacts on the pharmaceutical industries thus governments should utilise trips flexibilities and other regimes such as price control to offset the anticompetitive effect in designing patent policies

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

who become serial and portfolio entrepreneurs serial entrepreneurs run multiple businesses in sequence while portfolio entrepreneurs run multiple businesses in parallel they differ from novice entrepreneurs who have so far operated only one venture the present paper is the first to model occupational choices between all three entrepreneurial types it goes on to discuss its theoretical predictions in the light of independent evidence about serial and portfolio entrepreneurship from the extant literature

are nascent entrepreneurs jacks of all trades a test of lazear s theory of entrepreneurship with german data in a recent paper edward lazear proposed the jack of all trades view of entrepreneurship based on a coherent model of the choice between self employment and paid employment he shows that having a background in a large number of different roles increases the probability of becoming an entrepreneur the intuition behind this proposition is that entrepreneurs must have sufficient knowledge in a variety of areas to put together the many ingredients needed for survival and success in a business while for paid employees it suffices and pays to be a specialist in the field demanded by the job taken this study contributes to the entrepreneurship literature by empirically testing lazear s hypothesis using a large recent representative sample of the german population the empirical estimation takes the rare events nature of becoming a nascent entrepreneur and the regional stratification of the sample into account the results illustrate the statistical significance and economic importance of the jack of all t

on the competitive pressure created by the diffusion of innovations abstract we consider the decision of a dominant firm to adopt a sequence of potential cost reducing innovations where the latest technology adopted diffuses to a competitive fringe at an exogenous rate with price competition on the product market the leader optimally spaces apart the adoption dates of successive innovations so the industry is characterized by schumpetarian cycles of alternating innovation and diffusion an increase in the rate of diffusion has ambiguous effects on innovative activity and up to a point hastens the pace of innovation these results may however be reversed in the case of quantity competition

inequality and the organization of knowledge since the seminal work of lawrence f katz and kevin m murphy 1992 the study of wage inequality has taken as its starting point a neoclassical constant elasticity of substitution production function using as inputs capital and lowand high skill labor this approach assumes that the organization of production is fixed and determined by a particular specification of technology and it ignores both the source of the interaction between workers and the organizational aspects of this interaction these shortcomings are particularly important in light of growing empirical evidence that points first to the importance of decreases in the cost of processing and communicating information and second to the complementarity between organizational change and adjustments in the distribution of wages e g timothy f bresnahan et al 2002 this paper argues that theories that seek to guide empirical research on these areas must put knowledge and information at the center of the analysis of organizations and link the organizational structure with aggregate variables via equilibrium frameworks in garicano and rossi hansberg 2003 we present a model of this kind it determines the patterns of organization as manifested by the communication and specialization patterns and the implied wage structure that result from different costs of acquiring and communicating information here we present a simple variant of this theory that allows us to focus on one of the main aspects of that framework the sorting of agents into teams and the wage and organizational structure that accompanies that sorting we use this simple model to analyze the changes in organization and wages that result from a very specific type of technological change a reduction in the cost of communicating knowledge or information this model allows us to consider the effect on within class wage inequality and the impact of information technology on the creation and form of organizations e g size distribution of hierarchies however because knowledge is exogenously given and agents cannot invest in learning an important margin of the model in garicano and rossi hansberg 2003 is fixed namely the degree of decentralization or the extent to which problems are solved at lower levels that model allows the simultaneous study of the acquisition of knowledge spans of control and matching in equilibrium moreover it goes beyond the current analysis in that it allows for organizations with an unconstrained number of layers and in that it studies two aspects of the impact of information technology communication technology like here and the technology to acquire knowledge or information e g processing power through cheaper database access

inside the black box technology and economics economists have long treated technological phenomena as events transpiring inside a black box and on the whole have adhered rather strictly to a self imposed ordinance not to inquire too seriously into what transpires inside that box the purpose of professor rosenberg s work is to break open and examine the contents of the black box in so doing a number of important economic problems be powerfully illuminated the author clearly shows how specific features of individual technologies have shaped a number of variables of great concern to economists the rate of productivity improvement the nature of learning processes underlying technological change itself the speed of technology transfer and the effectiveness of government policies that are intended to influence technologies in particular ways the separate chapters of this book reflect a primary concern with some of the distinctive aspects of industrial technologies in the twentieth century such as the increasing reliance upon science but also the considerable subtlety and complexity of the dialectic between science and technology other concerns include the rapid growth in the development of costs associated with new technologies as well as the difficulty of predicting the eventual performance characteristics of newly emerging technologies

pareto and political economy as a science methodological revolution and analytical advances in economic theory in the 1890s it is argued that schumpeter s widely accepted judgment that pareto s work is completely rooted in walras s system constitutes a misreading of pareto in fact already during the period 1892 1900 pareto traces the methodological outlines of an economic science profoundly different from that of walras it is maintained that his methodological contribution represents an attempt to define the conditions for political economy to be a science in this context pareto examines the theoretical premises of economic theories and questions the hypotheses of perfect foresight and rationality the ordinalist hypothesis is also shown to be a consequence of these methodological reflections

the firm as a communication network this paper analyzes how organizations can minimize costs of processing and communicating information communication is costly because it takes time for an agent to absorb new information sent by others agents can reduce this time by specializing in the processing of particular types of information when these returns to specialization outweigh costs of communication it is efficient for several agents to collaborate within a firm it is shown that efficient networks involve centralization that individuals delegate tasks to subordinates only if they are overloaded and that the number of transits to the top tends to be equalized across individual information items

the labor market and corporate structure abstract we analyze the impact of labor demand and labor market regulations on the corporate structure of firms higher wages are associated with lower monitoring irrespective of whether these high wages are caused by labor market regulations unions or higher labor demand we also find that the organization of firms has important macroeconomic implications in particular monitoring is a type of rent seeking activity and the decentralized equilibrium spends excessive resources on monitoring labor market regulations that reduce monitoring by pushing wages up may increase net output or reduce it only by a small amount even though they reduce employment

escape from the market negotiating work in lancashire list of figures list of tables preface glossary list of abbreviations 1 introduction the myth of the lancashire labour market part i labour market failure 2 custom against the market the early labour market 3 principals and agents the labour market into the second generation 4 who s minding the mill the supervision problem part ii the economics of piece rate bargaining 5 the fair wage model part iii how did labour markets really work 6 fair and unfair wages 1825 50 7 short hours and seniority in the hungry forties 8 rules and standards wage lists in lancashire part iv conclusion 9 more lessons from the cotton mills notes bibliography index

market structure innovation and optimal patent life m uch work has been directed at determining the relative efficiency of various market structures in the allocation of resources to invention while the conclusions are not entirely clear it seems certain that no single market structure results in a pareto efficient allocation of resources to research and development r d in the light of this certain secondbest procedures must be examined social controls may provide an attractive method of lessening the inefficiencies described above 2 while government research and development subsidies and award programs do exist the most prevalent form of social control is the patent system granting the inventor a monopoly on the use of the discovery for a specified period of time eliminates the free rider problem thus restoring the incentive to invent extension of the duration of protection will increase incentives for private resource allocation toward technical advance unfortunately extension of patent protection by definition brings with it the social inefficiencies recognized in a monopolistic market the

on the origins of comparative advantage this paper proposes a simple theory of international trade with en dogenous technological dierences across countries the core of our analysis lies in the determinants of the division of labor we consider a world economy comprising two large countries with a continuum of goods and one factor of production labor each good is characterized by its complexity de ned as the number of tasks that must be per formed to produce one unit there are increasing returns to scale in the performance of each task which creates gains from specialization and uncertainty in the enforcement of each contract which create transac tion costs the trade obetween these two forces pins down the size of productive teams across sectors in each country under free trade the country where teams are larger specializes in the more complex goods in our model it is the country where the product of institutional qual ity and human per worker capital is larger hence better institutions and more educated workers are complementary sources of comparative advantage in the more complex industries

a model of multiproduct price competition abstract we provide a simple model of price competition in a multiproduct oligopoly market the products are of general nature we find that a pure strategy equilibrium exists and every equilibrium consumption maximizes the total social surplus consumers are characterized by a set function which determines their willingness to pay for every subset of products if this function is convex the set of equilibrium prices coincides with the core of a cooperative game generated by this set function and the firms extract total industry surplus if it is concave the only equilibrium price of a product is its marginal contribution to the consumer s total willingness to pay journal of economic literature classification numbers c72 d21 d41 d43 l13

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