does grassroots democracy reduce income inequality in china abstract using village and household survey data collected from 48 villages of eight chinese provinces for the period 1986 2002 this paper studies how the introduction of village elections affects income distribution at the village level we estimate both a static fixed effect panel model and a dynamic panel model for the within village gini coefficient and take care of the endogeneity of the introduction of elections the dynamic panel model shows that having elections reduces the gini coefficient by 0 04 or 14 3 of the sample average we also find that elections tend to increase the income shares of poorer portions of the population further econometric analysis based on dynamic panel models shows that elections increase per capita public expenditures by 271 yuan but do not increase the level or progressiveness of net or total income transfer in a village therefore elections positive role in reducing income inequality is not played through more income redistribution but through more pro poor public investment

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

total factor productivity intangible assets and spatial dependence in the european regions dettori b marrocu e and paci r total factor productivity intangible assets and spatial dependence in the european regions regional studies the aim of this paper is to analyse the determinants of the efficiency levels across the european regions firstly a regression based measure of regional total factor productivity is derived by estimating a spatial cobb douglas production function secondly the role played by intangible factors human capital social capital and technological capital on total factor productivity levels is investigated by applying the spatial two stage least squares 2sls method and the spatial heteroskedasticy and correlation consistent shac estimator to account for both heteroskedasticity and spatial autocorrelation it turns out that a large part of total factor productivity differences across the european regions is explained by disparities in the endowments of these intangible assets dettori b marrocu e and paci r

targeting target shareholders we integrate heterogeneity and uncertainty in investor valuations into a model of takeovers investors have dispersed valuations holding shares in firms they value more highly and a successful offer must win approval from the median target shareholder we derive the consequences for an acquiring firm s takeover offer its size and cash equity structure and implications for takeover premia firm returns share price dynamics the probability that a takeover succeeds and shareholder welfare we characterize when the acquirer prefers cash offers and when equity offers are best our model collectively reconciles various empirical regularities that have proven elusive to explain in one unified framework and we derive new testable predictions this paper was accepted by neng wang finance

the effect of public capital in state level production functions reconsidered using a panel data set for the forty eight contiguous states from 1970 to 1983 several estimates are provided of a cobb douglas production function with three types of public capital as inputs various specification tests are systematically applied to test for both random and fixed state effects nonstationarity endogeneity of the private inputs and measurement error in the preferred specification which is first differences with fixed state effects the public capital variables are not significant while the fixed state effects and private input variables are significant copyright 1996 by mit press

estimating intertemporal allocation parameters using synthetic residual estimation we present a novel structural estimation procedure for models of intertemporal allocation this is based on modelling expectations errors directly we refer to it as synthetic residual estimation sre the flexibility of sre allows us to account for measurement error in consumption and for heterogeneity in intertemporal allocation parameters an investigation of the small sample properties of the sre estimator indicates that it dominates generalized method of moments gmm estimation of both exact and approximate euler equations in the case when we have short panels and noisy consumption data we apply sre to two panels drawn from the panel study of income dynamics psid and estimate the joint distribution of the discount factor and the elasticity of intertemporal substitution we reject strongly homogeneity of the discount factor and the elasticity of intertemporal substitution we find that on average the more educated are more patient and less willing to substitute intertemporally than the less educated within education strata patience and willingness to substitute are positively correlated 2010 the review of economic studies limited

institutions infrastructure and economic growth abstract this paper develops a structural model of infrastructure and output growth that takes account of institutional and economic factors that mediate in the infrastructure gdp interactions cross country estimates of the model indicate that the contribution of infrastructure services to gdp is substantial and in general exceeds the cost of provision of those services the results also shed light on the factors that shape a country s response to its infrastructure needs and offer policy implications for facilitating the removal of infrastructure inadequacies

does infrastructure investment stimulate building supply the case of the english regions ball m and nanda a does infrastructure investment stimulate building supply the case of the english regions regional studies policies to improve infrastructure to stimulate regional growth remain common this paper investigates whether increases in infrastructure investment in the english regions lead to subsequent rises in new commercial and residential property using time series modelling both physical roads and harbours and social infrastructure education and health impacts are investigated hardly any infrastructure effects with respect to commercial property investment were found which raises doubts about whether extra infrastructure creates employment though some impact was related to residential building overall these results raise doubts about the supposed direct effects of infrastructure policies on regional jobs and growth

choosing size of government under ambiguity infrastructure spending and income taxation i examine choice of size of government by a planner who has partial knowledge of population preferences and the productivity of public spending focusing on income tax financed spending for infrastructure i examine scenarios where the planner observes the outcome of a status quo policy and uses various decision criteria to choose policy the analysis shows that the planner can reasonably choose a wide range of spending levels thus a society can rationalise having a small or large government i conclude that to achieve credible conclusions about the desirable size of government we need to improve current knowledge of preferences and the productivity of spending vastly

infrastructures and productivity in the spanish regions mas m maudos j perez f and uriel e 1996 infrastructures and productivity in the spanish regions reg studies 30 641 649 the aim of this paper is to analyse the role of public capital the types of infrastructures in which it is invested and their territorial distribution in the gains in productivity of the private sector in the spanish regions in the period 1964 91 using panel data techniques to control for unobserved state specific characteristics the results obtained show how the infrastructures most directly linked to the productive process present a significant and positive effect on productivity they also show the importance of the network effect of the infrastructures of a productive nature as well as a decrease in the elasticity associated with such infrastructures as development progresses mas m maudos j perez f et uriel e 1996 les infrastructures et la productivite aux regions espagnoles reg studies 30 641 649 cet article cherche a analyser le role du capital public les

the nature of precautionary wealth abstract this paper uses the panel study of income dynamics to provide some of the first direct evidence that wealth is systematically higher for consumers with predictably greater income uncertainty however the apparent pattern of precautionary wealth is not consistent with a standard parameterization of the life cucle model in which consumers are patient enough to begin saving for retirement early in life wealth is estimated to be far less sensitive to uncertainty than implied by that model instead our results suggest that over most of their working life time consumers behave in accordance with the buffer stock models of saving described in carroll 1992 1997 or deaton 1991 in which consumers hold wealth principally to insulate consumption against near term fluctuations in income

urban biased policies and rising income inequality in china since the start of economic reforms in 1978 china has experienced the largest increase in income inequality of all countries for which comparable data are available according to the world bank 1997 china s gini coefficient increased from 28 2 in 1981 to 38 8 in 1995 based on official survey data another study that used internationally standard definitions for incomes estimated china s gini ratio at 38 2 in 1988 and 45 2 in 1995 a level that already surpassed many developing economies in asia azizur khan and carl riskin 1998 are these income inequality changes the consequence of institutional reforms that replaced egalitarian rewards with work incentives employment contracts and labor mobility this paper uses household survey data collected by china s state statistical bureau ssb to investigate the sources and causes of this rising inequality by analyzing gini ratios and generalized entropy measures i decompose the overall inequality into three sectoral components i inequality within rural areas ii inequality within urban areas and iii sectoral disparity the data indicate that increases in rural urban income differentials have been the driving factor behind the rising overall inequality in china i argue that urbanbiased policies and institutions including labor mobility restrictions welfare systems and financial policies of inflation subsidies and investment credits to the urban sector are responsible for the long term rural urban divide and the recent increases in disparity

dynamic equilibrium with liquidity constraints this article studies an intertemporal economy with liquidity constrained and unconstrained individuals we use a stopping time approach to solve the finite horizonconstrained consumption portfolio problem with constant relative risk aversion and to examine the structure of equilibrium the impact of the constraint on the optimal consumption and the financing portfolio is assessed the equilibrium state price density is related to the exercise boundary of an american style contingent claim with nonlinear payoff this stopping time characterization enables us to prove the existence of an equilibrium and can be implemented numerically properties of equilibrium bond and stock returns are examined copyright 2003 oxford university press

social security and retirement in uruguay abstractwe estimate a structural life cycle model for retirement behaviour using work history records of the main uruguayan pension programme the estimated coefficient of relative risk aversion is around 1 5 and the estimated discount rate is about 1 8 per cent per annum the marginal disutility of work increases with age and is larger for women than men and for private than public employees simulations show a very low impact of the 1995 pension reform on retirement ages many individuals in this population respond little to economic incentives and some individuals would advance rather than postpone retirement after the reform

linking local business with global growth opportunities the role of infrastructure infrastructure is instrumental when it comes to linking local businesses with their global growth opportunities this paper shows that by making this link the transport network can act as a catalyst for regional economic growth using a novel approach we find that firms in regions with a more developed transport infrastructure are better placed to benefit from positive growth opportunities than those in regions with a less well developed transport network this advantage is most pronounced in times of economic slack making a better transport network a key ingredient for economic recovery it is against this background that the recent slowdown in infrastructure investment in europe is worrisome but it is through this channel among others that the substantial ramp up of activity by the european investment bank is expected to foster growth and enhance competitiveness in europe

optimal portfolio choice for long horizon investors with nontradable labor income this paper examines how risky labor income and retirement affect optimal portfolio choice with idiosyncratic labor income risk the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors consistent with the typical recommendations of investment advisors increasing idiosyncratic labor income risk raises investors willingness to save and reduces their stock portfolio allocation towards the level of retired investors positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors financial advisors typically recommend that their customers invest more in stocks than in safe assets when they are working and to shift their investments towards safe assets when they retire jagannathan and kocherlakota 1996 malkiel 1996 by contrast the standard academic models of portfolio choice merton 1969 1971 samuelson 1969 show that retirement is irrelevant for portfolio decisions if investment opportunities are constant and human capital is tradable in this case the fraction of wealth optimally invested in risky assets should be constant over the lifetime of an individual recent research building on the pioneering work by merton 1971 shows that time varying investment opportunities result in portfolio rules with an intertemporal hedging component whose magnitude depends on the investment horizon of the investor kim and omberg 1996 balduzzi and lynch 1997 brennan schwartz and lagnado 1997 brandt 1999 campbell and viceira 1999 2001 barberis 2000 with time variation in investment opportunities retirement and death play an instrumental role as events that exogenously fix the individual s investment horizon more importantly retirement also marks the time at which individuals stop working and thereafter must live off their lifetime savings and possibly transfers from this perspective retirement matters for portfolio choice

a welfare criterion for models with distorted beliefs this paper proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs instead of taking a stand on whose belief is correct our criterion asserts an allocation to be belief neutral ine cient if it is ine cient under any convex combination of agents beliefs while this criterion gives an incomplete ranking of social allocations it can identify negative sum speculation in a broad range of prominent models with distorted beliefs

accommodating public expenditure policies the case of fast growing asian economies abstract it is widely believed that the exceptional economic performances of the east asian economies are attributable as much to the visible hand of the state as to the invisible hand of the market this paper analyzes the experiences of japan south korea singapore and taiwan in implementing a key instrument of state intervention namely public expenditure policy the analysis shows that these economies could achieve high standards of physical and social infrastructure even with relatively low spending the key features of complementary spending policy include emphasis on macroeconomic stability cost effective spending involvement of private sector in providing quasi public goods minimum distortions in the labor markets and human resource development to achieve a broad based development

food security policy options for china lessons from other countries the authors gratefully acknowledge financial support from the world bank and australia s rural industries research and development corporation

common factors and common breaks in panels an empirical investigation abstract unobserved common factors and common breaks are two important features in empirical studies using large panels recently baltagi feng and kao 2016 2019 extended pesaran s 2006 common correlated effects cce approach by allowing for common breaks and endogenous regressors in large heterogeneous panels in this note we empirically investigate these estimators and compare them with cce and bai s 2009 interactive fixed effects ife estimators in the context of china s provincial infrastructure investment

leviathan and competition among jurisdictions the case of benefit taxation abstract this paper shows that interjurisdictional competition for mobile factors of production forces the government to raise the efficiency of the public sector and thus helps to tame leviathan governments however this result is derived under some restrictive assumptions concerning the kind of tax policy used by the government in the case of benefit taxes e g user charges a leviathan may be tamed by interjurisdictional competition whereas this is not necessarily true in the case of lum sum taxes

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

how misleading is linearization evaluating the dynamics of the neoclassical growth model this paper investigates the reliability of employing linearization to evaluate the dynamic adjustments to changes in productive government spending in a ramsey growth model if government expenditure is introduced as a flow and the dynamic adjustment is fast linearization may yield a reasonably good approximation to the true dynamics even for fairly large policy shocks if government expenditure assumes the form of a stock leading to more sluggish adjustment linearization may yield misleading predictions these errors occur at the beginning of the transition and weigh heavily in welfare calculations the implications for temporary shocks and the speed of convergence are also considered

scale congestion and growth this paper explores the relationship between aggregate and relative congestion returns to scale and economic growth aggregate congestion reduces the effective productivity of capital relative congestion reduces the effective productivity of labour both forms of congestion adversely affect the equilibrium growth rate although their relative effects depend upon aggre gate returns to scale the two forms of congestion have contrasting effects on the transitional dynamics relative congestion retards the rate of adjustment aggregate congestion accelerates it the externalities generated by congestion and non optimal expenditure can be fully cor rected both during the transition and in steady state by a time invariant income tax the role of public expenditure as an instrument of economic growth has been a major policy issue as governments throughout the world design stimulus packages as in japan and face difficult choices to meet the emu criteria in europe empirical research investigating the impact of public investment on the productivity of private capital and output was stimulated by aschauer 1989a b who found the effects to be strongly positive the nature of public investment is however diverse in general public goods vary extensively in terms of the nature of their services spanning the range between the polar cases of pure private and pure public goods but the treatment of public expenditures in formal growth models is limited barro 1990 and futagami et al 1993 treat government expenditure as a pure pub lic good and in so doing they fail to take account of the congestion typically associated with public goods however as barro and sala i martin 1992 have argued almost all public services are characterized by some degree of congestion so that the pure public good should be viewed as only a bench mark these considerations suggest that congestion is an important consider ation in assessing the effect of public expenditures on economic growth attempts to analyse the effects of congestion on economic growth have been limited in various dimensions drawing on the public goods literature edwards 1990 proposes a number of specifications of congestion two notions particularly relevant in a growth context are relative congestion and aggregate absolute congestion the former specifies the level of services derived by an individual from the provision of a public good in terms of the usage of his individual capital stock relative to the aggregate capital stock aggregate congestion sometimes called crowding indicates how aggregate usage of the service alone influences the services received by an individual 2 existing applications of congestion to growth theory introduce it into ak models see barro and sala i martin 1992 1995 glomm and ravikumar 1994 1997 and turnovsky 1996 1997 however the ak model features two limitations that restrict its flexibility to examine the relationship between congestion and growth first as solow 1994 pointed out sustained ongoing

ict and transport infrastructure development an empirical analysis of complementarity abstractthis paper provides an empirical framework to assess the nonlinear complementary linkage effects that arise from the interaction between motorway capital and information and communications

urban growth and transportation we estimate the effects of interstate highways on the growth of u s cities between 1983 and 2003 we find that a 10 increase in a city s initial stock of highways causes about a 1 5 increase in its employment over this 20 year period to estimate a structural model of urban growth and transportation we rely on an instrumental variables estimation that uses a 1947 plan of the interstate highway system an 1898 map of railroads and maps of the early explorations of the u s as instruments for 1983 highways we investigate the role of interstate highways in the growth of u s cities our investigation is in three parts in the first we develop a simple structural model describing the joint evolution of highways and employment in cities in the second we develop an instrumental variables strategy that allows us to identify key parameters of our structural model we are also able to provide out of sample evidence for the validity of our estimates and for the central assumptions of our model in the third we use our estimates to assess counterfactual transportation policies we find that a 10 increase in a city s stock of interstate highways causes about a 1 5 increase in its employment over 20 years and that an additional kilometre of highway allocated to a city at random is associated with a larger increase in employment or population than is a road assigned to a city by the prevailing political process our results also suggest that too many new highways were built between 1983 and 2003 these findings are important for three reasons first transportation generally and infrastruc ture in particular are large segments of the economy the median u s household devotes about 18 of its income to road transportation while all levels of government together spend another 200 billion dollars annually overall the value of capital stock associated with road transporta tion in the u s tops 5 trillion dollars united states bureau of transportation statistics 2007 2010 given the magnitude of transportation expenditures it is important that the impact of these expenditures on economic growth be carefully evaluated and not assessed on the basis of the claims of advocacy groups our analysis provides a basis for assessing whether these resources are well allocated our results also provide useful guidance to policy makers charged with planning cities since changes in a city s transportation infrastructure cause changes to the city s employment new transportation infrastructure causes complementary changes in the demand for public utilities and schools our results provide a basis for estimating the magnitude of such changes finally this research is important to furthering our understanding of how cities operate and grow transportation costs are among the most fundamental quantities in theoretical models

valuing rail access using transport innovations this paper uses a powerful empirical method to evaluate the benefits of rail access to consumers we study the effects on house prices of a transport innovation that altered the distance to the nearest station for some households but left others unaffected the transport innovation we study is the construction of new stations in london in the late 1990s using this innovation we implement a quasi experimental approach that allows us to avoid the biases inherent in cross sectional valuation work our evidence on distance station effects on local prices identified through distance changes induced by the transport innovation suggests that households value rail access and that these valuations are large compared to the valuations of other local amenities

the contribution of local public infrastructure to private productivity and its political economy evidence from a panel of large german cities this paper proposes a simultaneous equation approach to theestimation of the contribution of infrastructure accumulationto private production a political economy model for theallocation of public infrastructure investment grants isformulated our empirical findings using a panel of largegerman cities for the years 1980 1986 and 1988 suggest thatcities ruled by a council sharing the state bundesland government s current political affiliation were particularlysuccessful in attracting infrastructure investment grants with regard to the contribution of infrastructure accumulationto growth we find that public capital is a significant factorin private production moreover at least for the samplestudied we find that simultaneity between output and publiccapital is weak thus feedback effects from output toinfrastructure are negligible

the impact of china s economic reforms on agricultural productivity growth this paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post 1978 increase in china s agricultural productivity data on post 1978 chinese agricultural performance suggest that a little over three quarters of the measured productivity increase is due to payment system changes and the remainder to price increases we also use our method to calculate incentive indices giving an estimate of the fraction of their marginal product that peasants received under the pre 1978 regime

on the effectiveness of private and public capital this study assesses the effectiveness of private and public capital investments in the performance of manufactures within the framework of the duality theory the response of costs of production and input utilization to changes in the stocks of private and public capital is measured by the appropriate elasticities obtained from a cost function instead of considering private capital either as a variable or fixed input on a priori grounds its nature is checked that is the study discriminates between a long and a short run situation the empirical exercise is made for the manufacturing industries in the spanish regions

is infrastructure capital productive a dynamic heterogeneous approach this paper offers an empirical evaluation of the output contribution of infrastructure drawing from a large data set on infrastructure stocks covering 88 countries and spanning the years 1960 2000 and using a panel time series approach the paper estimates a long run aggregate production function relating gdp to human capital physical capital and a synthetic measure of infrastructure given by the first principal component of infrastructure endowments in transport power and telecommunications tests of the cointegration rank allowing it to vary across countries reveal a common rank with a single cointegrating vector which is taken to represent the long run production function estimation of its parameters is performed using the pooled mean group estimator which allows for unrestricted short run parameter heterogeneity across countries while imposing the testable restriction of long run parameter homogeneity the long run elasticity of output with respect to the synthetic infrastructure index ranges between 0 07 and 0 10 the estimates are highly significant both statistically and economically and robust to alternative dynamic specifications and infrastructure measures there is little evidence of long run parameter heterogeneity across countries whether heterogeneity is unconditional or conditional on their level of development population size or infrastructure endowments

endogenous structural breaks public investment in agriculture and agricultural land productivity in taiwan using time series data for taiwan s agricultural sector and with the government s public investment in the agricultural sector serving as a proxy variable for nonfarm current inputs aside from the original labour and capital input variables usually taken into consideration this article examines the relationship between public investment in agriculture public investment land and agricultural land productivity output land in taiwan our main findings are as follows first the cointegration test reveals that public investment in agriculture and the productivity of agricultural land exhibit a significant positive relationship in the long run where the elasticity of land productivity in relation to public investment in agriculture is 0 55 second when controlling for endogenous structural breaks the long run equilibrium relationship for the productivity of the agricultural land model is still supported third the results of the weak exogeneity test indicate that a causal relationship exists in the lo

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

is all public capital created equal this paper uses a var approach to investigate the effects of public investment on private sector performance in the united states this approach is consistent with the argument that the analysis of

public capital and total factor productivity new evidence from the italian regions 1970 98 destefanis s and sena v 2005 public capital and total factor productivity new evidence from the italian regions 1970 98 regional studies 39 603 618 this paper analyses the relationship between industrial total factor productivity and public capital across the 20 italian administrative regions it adds upon the existing literature in a number of ways it analyses a longer period 1970 98 it allows for the role of human capital accumulation it tests for the existence of a long run relationship between total factor productivity and public capital through previously suggested panel techniques and for weak exogeneity of public capital and it assesses the significance of public capital within a non parametric set up based on the free disposal hull the results confirm that public capital has a significant impact on the evolution of total factor productivity particularly in the southern regions this impact is mainly ascribed to the core infrastructures road and airports harbours railroads w

research productivity and output growth in chinese agriculture recent attempts to quantify the sources of growth in chinese agriculture have attributed an exceptionally large share of this growth to the contemporary institutional and market reforms within china to analyze this important issue we use a newly constructed panel data set that includes an agricultural research or stock of knowledge variable our results suggest that while still a significant source of growth the direct growth promoting consequence of institutional change and market reforms have been overstated by these earlier studies research induced technical change accounts for a significant share 20 of the growth in agricultural output since 1965

the consumption based capital asset pricing model the paper provides conditions on the primitives of a continuous time economy under which there exist equilibria obeying the consumption based capital asset pricing model ccapm the paper also extends the equilibrium characterization of interest rates of cox ingersoll and ross 1985 to multi agent economies we do not use a markovian state assumption this work provides sufficient conditions on agents primitives for the validity of the consumption based capital asset pricing model ccapm of breeden 1979 as a necessary condition breeden showed that in a continuous time equilibrium satisfying certain regularity conditions one can characterize returns on securities as follows the expected instantaneous rate of return on any security in excess of the riskless interest rate the security s expected excess rate of return is a multiple common to all securities of the instantaneous covariance of this excess return with aggregate consumption increments this common multiple is the arrow pratt measure of risk aversion of a representative agent rubinstein 1976 published a discrete time precursor of this result the exis tence of equilibria satisfying breeden s regularity conditions had been an open issue we also show that the validity of the ccapm does not depend on breeden s assumption of markov state information and present a general asset pricing model extending the results of cox ingersoll and ross 1985 as well as the discrete time results of rubinstein 1976 and lucas 1978 to a multi agent environment since the ccapm was first proposed much effort has been directed at finding sufficient conditions on the model primitives the given assets the agents preferences the agents consumption endowments and in a production econ omy the feasible production sets conditions sufficient for the existence of continuous time equilibria were shown in duffie 1986 but the equilibria demonstrated were not shown to satisfy the additional regularity required for the ccapm in particular breeden assumed that all agents choose pointwise interior consumption rates in order to characterize asset prices via the first order conditions of the bellman equation interiority was also assumed by huang 1987 in demonstrating a representative agent characterization of equilibrium an approach exploited here the use of dynamic programming and the bellman equation aside from the difficulty it imposes in verifying the existence of interior 1 financial support from the national science foundation is gratefully acknowledged we thank

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

income risk borrowing constraints and portfolio choice economic theory suggests that uninsurable income risk and the expectation of future borrowing constraints can reduce the share of risky assets in a household s portfolio if the utility function exhibits decreasing absolute risk aversion and decreasing prudence an individual will reduce his exposure to rate of return risks when confronted with other independent risks if there are transaction costs the expectation of future borrowing constraints should induce individuals to keep a lower proportion of their wealth in the form of illiquid and risky assets the authors find support for these propositions in a cross section of italian households copyright 1996 by american economic association

agricultural productivity and economic growth role of tax revenues and infrastructures 1 introductiondevelopment economists such as rostow 1960 and ranis and fei 1961 have stressed a positive linkage between agricultural productivity and industrialization the positive link however has been argued to be nonexistent by matsuyama 1992 in a two sector endogenous growth model of small open economies with a low elasticity of agricultural goods and the existence of learning by doing only in the domestic manufacturing sector 1 as a result of comparative advantage higher agricultural productivity solicits labor inputs from the manufacturing sector in his model leading to lower learning by doing and economic growth matsuyama s results however may not be consistent with what has actually happened in japan and other east asian economies in japan a land reform has been implemented and allocation of resources to agricultural research has been increased since the meiji restoration as a result of agricultural technical progress 2 agricultural productivity in japan is much higher than before the meiji restoration in particular evidence has shown that the agricultural technical change after the meiji restoration tends to increase nonagricultural output by pushing resources out of the agricultural sector into the nonagricultural sector for example see yamaguchi and binswanger 1975 table 7 for the quantitative effects of the agricultural technical change in japan on nonagricultural output column 3 and on input reallocation columns 5 and 7 in 1880 1965 similarly the agricultural technical change was higher in korea s and taiwan s early stages of economic development as they have founded agricultural research institutes and farmers associations during the japanese colonial period3 and implemented land reforms after world war ii for evidence see mason et al 1980 chapter 7 for the case of korea and thorbecke 1979 for the case of taiwan a world bank 1982 p 45 study reports that for the 23 developing countries whose agricultural growth rate in the 1970s exceeded 3 a year 17 countries had a gdp growth rate above 5 a year in the same period finally using cross country data for 14 asian developing countries in 1960 1986 mellor 1995 finds a positive and significant relationship between growth rate of per capita agricultural and nonagricultural gdps in which both agricultural and nonagricultural sectors grow more rapidly than 31 sub saharan and 20 latin american countries these above observations lead to interesting questions as to what mechanism lies in the positive impact of accelerated agricultural growth on nonagricultural growth what policies might increase the efficiency with which a productive agricultural sector moves a nonagricultural sector forward the purpose of this study is to revisit the linkages between agricultural productivity and economic growth with a government policy our model is based on matsuyama s 1992 framework with a small twist so that we can clearly identify the mechanism leading to a positive relationship the departure in this article lies in introducing a government which collects taxes and then conducts expenditures on infrastructures an important role played by higher agricultural productivity in an early stage of economic development is the one by which it renders the government larger tax revenues so that larger expenditure on infrastructures is facilitated 4 in a study investigating taiwan s rice for fertilizer bartering system in the 1950s and 1960s koo 1996 table 2 finds that the resulting hidden taxes on rice alone account for 10 20 of total tax revenue in the period extending from 1950 to 1969 along with other taxes the agricultural sector is thus an important source of government revenue in a developing economy 5 following barro 1991 public expenditure on infrastructures is assumed to be productive in that the learning by doing effect of the manufacturing sector becomes enhanced with public expenditure on infrastructures

efficient portfolios when housing needs change over the life cycle abstract we address the issue of the efficiency of household portfolios in the presence of housing risk we treat housing stock as an asset and rents as a stochastic liability stream over the life cycle households can be short or long in their net housing position efficient financial portfolios are the sum of a standard markowitz portfolio and a housing risk hedge term that multiplies net housing wealth our empirical results show that net housing plays a key role in determining which household portfolios are inefficient the largest proportion of inefficient portfolios obtains among those with positive net housing who should invest more in stocks

public investment and regional inequality in rural china this paper develops a method for decomposing the contributions of various types of public investment to regional inequality and applies the method to rural china public investments are found to have contributed to production growth in both the agricultural and rural non agricultural sectors but their contributions to regional inequality have differed by type of investment and the region in which they are made all types of investment in the least developed western region reduce regional inequality whereas additional investments in the coastal and central regions worsen regional inequality investments in rural education and agricultural r d in the western region have the largest and most favorable impacts on reducing regional inequality

cost and preference heterogeneity in risky financial markets summary this paper estimates the magnitude of participation costs and preference parameters exploiting information on households participation decisions in the equities market a structural model for portfolio choices over the life cycle is solved numerically the parameters of interest are estimated using an indirect inference approach which makes use of the computed participation gains losses participation costs are found to be significant education and lagged participation being the major sources of heterogeneity also the least educated are the least risk averse and the positive effect of risk aversion on wealth accumulation dominates its negative influence on the risky asset demand copyright 2013 john wiley sons ltd

rural reforms and agricultural growth in china this paper employs province level panel data to assess the contributions of decollectivization price adjustments and other reforms to china s agricultural growth in the reform period decollectivization is found to improve total factor productivity and to account for about half of the output growth during 1978 84 the adjustment in state procurement prices also contributed positively to output growth its impact came mainly from the responses in input use the effect of other market related reforms on productivity and output growth was very small reasons for slowdown in agricultural growth after 1984 are also analyzed copyright 1992 by american economic association

public sector capital and the productivity puzzle a number of studies have suggested a quantitatively important relationship between public sector capital accumulation and private sector productivity with the most compelling evidence derived from analyses of state level data estimates herein of production functions that use standard techniques to control for unobserved state specific characteristics however reveal essentially no role for public sector capital in affecting private sector productivity only estimates of state production functions that do not include such controls find substantial productivity impacts this result reconciles existing econometric estimates with the findings of hulten and schwab based on growth accounting techniques as such techniques effectively control for state specific effects region level estimates are essentially identical to those from state data suggesting no quantitatively important spillover effects across states copyright 1994 by mit press

disagreement speculation and aggregate investment abstract when investors disagree speculation between them alters equilibrium prices in financial markets because managers maximize firm value given financial market prices disagreement alters firms value maximizing investment policies disagreement therefore impacts aggregate investment consumption and output in a production economy with recursive preferences and disasters we demonstrate that static disagreement among investors generates dynamic aggregate investment that is positively correlated with capital shocks leading to stochastic volatility in aggregate consumption investment and equity returns the direction of these effects is consistent with business cycle facts and with several features of the 2008 financial crisis

two trees with heterogeneous beliefs spillover effect of disagreement in a model where investors disagree about the fundamentals of two stocks the state price density depends on investor disagreements for both stocks especially the larger stock this implies that disagreement among investors in a large firm has a spillover effect on the pricing of other stocks owned by these investors the pricing effects of investor disagreements crucially depend on the average belief biases empirical findings support the novel model prediction of a disagreement spillover effect and help reconcile some mixed evidence in the literature

belief dispersion in the stock market we develop a dynamic model of belief dispersion with a continuum of investors differing in beliefs the model is tractable and qualitatively matches many of the empirical regularities in a stock price its mean return volatility and trading volume we find that the stock price is convex in cash flow news and increases in belief dispersion while its mean return decreases when the view on the stock is optimistic and vice versa when pessimistic moreover belief dispersion leads to a higher stock volatility and trading volume we demonstrate that otherwise identical two investor heterogeneous beliefs economies do not necessarily generate our main results

infrastructure provision and macroeconomic performance this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy 2011 elsevier b v all rights reserved

collateral constraints and asset prices abstract we study the effects of collateral constraints in an economy populated by investors with nonpledgeable labor incomes and heterogeneous preferences and beliefs we show that these constraints inflate stock prices and generate spikes and crashes in price dividend ratios and volatilities clustering of volatilities and leverage cycles they also lead to substantial decreases in interest rates and increases in sharpe ratios when investors are anxious about hitting constraints due to production crises in the economy furthermore stock prices have large collateral premiums over nonpledgeable incomes we derive asset prices and stationary distributions of the investors consumption shares in closed form

corrigendum to congestible public goods and local indeterminacy a two sector endogenous growth model journal of economic dynamics control 31 7 2007 2486 2518

differences of opinion endogenous liquidity and asset prices this paper studies how investors differences of opinion affect liquidity and asset prices in our economy excessively optimistic investors are subject to an endogenous funding constraint that prevents default due to ex ante limited commitment when the funding constraint binds optimists use their savings to increase their consumption share deterring default this allows them to place speculative trades increasing market liquidity their losses on these trades make them prone to default leading to a renewed binding of the funding constraint this feedback between funding illiquidity disagreement and market liquidity is consistent with several empirical features of liquidity and financial asset prices

capital utilization economic growth and convergence abstract optimal decisions by economic agents regarding the utilization of capital lead to empirically plausible speeds of convergence in one sector models of economic growth the relationship between depreciation and capital utilization plays a crucial role in slowing down convergence to the steady state cross country differences in the extent to which the capital utilization decision is internalized along the transition path may lead to differences in convergence rates even for countries with similar initial and terminal conditions finally by assuming a constant depreciation rate and full capital utilization standard growth models may be overstating the magnitude of the steady state equilibrium

a new approach to test the effects of decentralization on public infrastructure investment this paper proposes a simple theoretical framework to obtain a tractable equation that considers the traditional criteria for allocating public infrastructure investment and variables to capture de

the intertemporal elasticity of substitution an analysis based on japanese data this paper investigates whether the intertemporal elasticity of substitution ies for japan possesses similar properties to that found for the united states in the literature as the existing empirical findings are mixed there is no clear consensus this paper uses a model with both production and non separability between nondurables and durables in order to control for possible factors that cause a bias in the ies we present the empirical results demonstrating that the ies is quite similar between the two countries

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

public infrastructure and the productive performance of canadian manufacturing industries this article examines the effects of public infrastructure on the productive performance of 12 two digit canadian manufacturing industries a flexible cost function incorporating public capital infrastructure is estimated for each industry separately using annual time series data for 1961 1995 the effects of public infrastructure on productivity are measured in terms of both cost saving dual and output augmenting primal measures we also investigate how public capital influences the input demand and cost structure in each industry and calculate the rate of return to public capital the empirical results provide strong evidence of the important role public infrastructure plays in the productivity of manufacturing industries the public capital serves as a substitute for both private capital and labor in most industries the rates of return to public capital are significant and vary over the years

legal institutions and fragile financial markets abstract this study investigates equity liquidity variation with a funding constraint across 38 countries and examines whether the effectiveness of a country s legal institutions is systematically related to cross country differences in fragile equity liquidity our results show that firms from countries with more extensive disclosure requirements tend to have lower liquidity shocks due to funding constraints leading to higher firm value this effect is stronger for ex ante disclosures especially for countries with a high level of openness and market volatility our empirical results are robust to the 2sls regression model the random effect regression model the alternative measure of fragile equity liquidity and the alternative measure of disclosure and enforcement variables our study provides a better understanding of the effect of information environments amidst periods of funding constraint

effects of technological change and institutional reform on production growth in chinese agriculture recent rapid agricultural production growth in chinese agriculture could be attributed to an increase in inputs technological change and institutional reform an accounting approach was used to separate the relative contribution of these three factors institutional change like the introduction of the household production responsibility system has contributed to past growth in production however technological change is crucial to furthering production growth because of the limited potential for significant increase in the use of conventional inputs in particular land continued institutional change must accompany corresponding technological changes

infrastructure and education as instruments of regional policy evidence from spain regional policy and spain infrastructure and education as instruments of regional policy evidence from spain governments have often tried to influence the regional distribution of economic activity through supply side measures such as investment in training and infrastructure using evidence from spain we examine whether such policies can have an impact and whether they have done so in the past our results indicate that disparities in the stocks of human and public capital account for a third of observed regional inequality about evenly split between the two factors hence public investment can in principle be used to reduce regional disparity its actual impact however will depend both on its overall volume and on the extent to which its regional allocation does indeed vary with regional need in spain investment in infrastructure has made only a small contribution to regional convergence primarily because it has not in practice been allocated to redistribute across regions to any great extent in contrast efrd transfers have clearly been allocated among regions with redistribution in mind the impact of the fund has been significant but it has been limited by the relatively small size of the programme angel de la fuente and xavier vives

public capital and private productivity this paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity the juxtaposition of approaches removes

endogenous borrowing constraints with incomplete markets this article develops ways to endogenize the borrowing constraints used in a class of computable incomplete markets models we allow the constraints to depend on an investor s characteristics such as time preference risk aversion and income streams the proposed constraint can be interpreted as a borrowing limit within which an investor has no incentive to default using a numerical algorithm we find that for an array of structural parameters the endogenous borrowing constraints can be much less stringent than the ad hoc borrowing constraints adopted by the existing studies

reprint to infrastructure provision and macroeconomic performance abstract this paper studies the differences between private and government provision of infrastructure capital utilization decisions and their differential role in determining market prices for capital goods under the two regimes of infrastructure provision serve as a critical transmission mechanism for fiscal policy a subsidy to private providers of infrastructure is preferable to direct government provision irrespective of how the subsidy or expenditure is financed the case for private provision is much stronger in economies characterized by high levels of congestion the choice between private and government provision also has a crucial effect on the design of optimal fiscal policy

efficiency adjusted public capital and growth summary this paper constructs an efficiency adjusted public capital stock series and re examines the public capital and growth relationship the paper also examines the effects of four specific stages of the public investment process appraisal selection implementation and evaluation on capital accumulation and growth the results show that public capital is a significant contributor to economic growth the quality of public investment as measured by variables capturing the adequacy of project selection and implementation is statistically significant in explaining variations in economic growth a result mainly driven by low income countries

evaluating the impact of tax for fee reform fei gai shui on water resources and agriculture production in the zhanghe irrigation system china this article questions the effectiveness and viability of rural tax for fee reform fei gai shui on water resources and agriculture production taking the zhanghe irrigation system of china as a case study example the fei gai shui reform has been heralded as a possible solution for reducing the excessive fiscal burden on peasants while the reform may achieve in relieving peasant burdens significantly the initial impact of fei gai shui on water resources and agricultural production indicate least satisfactory trends the policy shows significant impact on rice yield and area it might also have profound impact on cropping pattern but it has yet to be seen dependence on local water resources such as ponds show significant increase after fei gai shui as it discouraged farmers to rely on regional water sources although the lower regional water use under fei gai shui reduced the water charges paid by farmers the savings were mostly offset by increasing pumping costs in accessing water from local ponds without any adjustments the fei gai shui is likely to cause serious predicament in agricultural sector it is visioned that local water resources such as water ponds will continue to play an important role in sustaining agricultural production

services sector and economic growth in india this study examines the long run equilibrium and short run dynamic relationship between services sector and gross domestic product gdp and between services and nonservices sectors in india the model is estimated using the optimal single equation and the maximum likelihood system estimators all the estimators consistently suggest the cointegrating relationship between services sector and gdp as well as between services and nonservices sectors the estimates of long run elasticity parameters are statistically significant and dimensionally consistent across the estimators the conventional cumulative sum cusum and the new cusum and moving sum mosum tests suggest the stability of the equilibrium residuals and reinforce the cointegrating relationship between the model series the error correction model provides some support for unidirectional granger causality from services sector to gdp the impulse response and variance decomposition analyses instead suggest the bidirectional causality between servic

spillover effects of public capital formation evidence from the spanish regions maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level the issue of the po ssible existence of the regional spillovers from public capital formation has received little attention the objective of this paper is to provide evidence on the possible existence of such spillovers we consider the case of spain and its seventeen regions our methodological approach consists in estimating an aggregate var model for spain as well as seventeen region specific var models in which both capital installed in the region and capital installed outside the region are allowed to play a role in en hancing regional output the estimation results can be summarized as follows the aggregate effects of public capital formation in spain are important they cannot however be captured in their entirety by the direct effects in each region from public capital installed in the region itself when for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results furthermore the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation ultimately this paper establishes the relevance of both capital installed in each region and s pillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation in doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects

interprovincial disparities in china output and consumption 1952 1987 the flood of economic information from china in recent years has permitted reassessment of the chinese model of development and the extent to which china s own development experience has conformed to it the prevailing consensus of the 1970s concerning the substance of the model itself typically characterized in terms of the chinese leadership s objectives and priorities and its strategy for pursuing them has stood up quite well the same cannot be said about past appraisals of the extent to which china s economic reality has been reshaped to accord with the model s prescriptions one of the most widely remarked elements of the chinese model is the high priority assigned to regional objectives and more specifically to balance in the distribution of productive capacity and equity in the distribution of income and hence consumption during the maoist era i e prior to 1979 the central government pursued regional objectives through such measures as interregional transfers of investment resources effected via the planning system subsidization of health and education expenditures in poor regions and attempts to maintain a safety net of state relief effected largely via control of grain surpluses in short there is little doubt that prior to 1979 the chinese leadership placed an unusually high value on the spread of modern growth and the improvements in welfare associated with it and persistently acted to limit the emergence or widening of interregional disparities although china s post mao leaders have shown greater concern with efficiency and with the potential trade offs between efficiency and such goals as balance and equity their continuation of many redistributive policies indicates that they have not abandoned regional objectives but how successful has china been in achieving these objectives

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

public infrastructure and regional economic development a simultaneous equations approach an analysis of how central bank exchange market intervention can affect both the level of exchange rates and the risk premium in asset returns showing how the risk premium is related to the conditional variances of intervention and other exogenous processes

public investment and economic growth this article uses an extension of mankiw romer and weil s augmented solow swan growth model to examine whether public investment has a distinct role as a determinant of economic growth it considers both the predictions of the model in steady state and in transition to steady state for the steady state model there is no significant effect from public investment on the level of output per worker using standard ordinary least squares ols methods for the transition model it observes a significant contribution to economic growth from public investment when instrumental variables methods are used however the associated standard errors are much larger and the contribution of public investment is statistically insignificant

differences of opinion and international equity markets we develop an international financial market model in which domestic and foreign residents differ in their beliefs about the information content in public signals we determine how informational advantages of domestic investors in the interpretation of home public signals affect equity markets we evaluate the ability of our model to generate four international finance anomalies i the co movement of returns and capital flows ii home equity preference iii the dependence of firm returns on home and foreign factors and iv abnormal returns around foreign firm cross listing in the home market their relationships with empirical differences of opinion proxies are consistent with the model received january 15 2011 editorial decision may 16 2016 by editor geert bekaert

debt constrained asset markets we develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature if an agent defaults on a contract he can be excluded from future contingent claims markets trading and can have his assets seized he cannot be excluded from spot markets trading however and he has some private endowments that cannot be seized all information is publicly held and common knowledge and there is a complete set of contingent claims markets since there is complete information an agent cannot enter into a contract in which he would have an incentive to default in some state in general there is only partial insurance variations in consumption may be imperfectly correlated across agents interest rates may be lower than they would be without constraints and equilibria may be pareto ranked

international aspects of public infrastructure investment m odelling infrastructure as an international public good in a two country m odel of trade where each country s social planner behaves strategically we show that the equilibrium levels of infrastructure are sub optimal from a global perspective utilising an appropriate econom etric fram ework and data from 16 european countries over the period 1987 95 we find evidence that accords well with the m ain predictions of our theory thus we are able to offer a plausible theoretical explanation why public capital m ay be undersupplied as suggested by previous em pirical literature