recursive equilibria in dynamic economies with stochastic production in this paper we prove the existence of recursive equilibria in stochastic production economies with infinitely lived agents and incomplete financial markets we consider a general dynamic model with several commodities which encompasses heterogeneous agent versions of both the lucas asset pricing model and the stochastic neo classical growth model as special cases our main assumption is that there are atomless shocks to fundamentals that have a purely transitory component and a component that does not depend on last period s shocks directly

effects of profitability and liquidity on r d intensity japanese and u s companies compared this study investigates the proposition that japanese companies have a greater propensity than u s companies to sustain commitment to r d in the face of fluctuating profits and liquidity the anal

in search of insights into the generation of techno economic trends micro and macro constituencies in the microprocessor industry abstract in the field of technology policy few challenges are more intriguing than understanding the nature of technical and market trends this paper deals with this problem by using the sociotechnical constituencies approach in order to integrate the treatment of micro macro issues from product to industry the case study is that of the microprocessor industry where at present a risc reduced instruction set computer technology is emerging in a field where a powerful and far from exhausted cisc complex instruction set computer technology tends to occupy almost every segment of the market the analysis reveals how emerging product constituencies do implement pro active trend creating strategies in order to establish themselves as industrial trends and by so doing they simultaneously re define the existing content of the macro industrial level the study also reveals the important role of the nature and maturity of microprocessor technology in conditioning the constituency building strategies implemented by different players microprocessor technology is specifically characterised as an architectural codified knowledge component with indirect network externalities and weak appropriability regime finally the paper also highlights the potential risks of both fragmentation and complete proprietary control of technology in technological processes involving strongly competitive situations

meta paradigm change and the theory of the firm many seemingly unrelated debates on the theory of the firm are in fact part of a single deeper transformation of the social sciences as the foundational assumptions of 20th century social science have slowly been shown by science to be false new sub paradigms have emerged which cumulatively drop i theoretical assumptions about markets to explain firms ii epistemological assumptions about knowledge to explain diversity and iii metaphysical assumptions about causality to explain technical change debates occur across each of these levels

international economic structures government interests and international coordination of macroeconomic adjustment policies analysts have commonly argued that there has been a decline in international coordination of the kinds of policies that governments can use to manage the international payments imbalances that emerge when different governments pursue different macroeconomic policies the decline typically has been attributed to a posited decline in american hegemony in contrast this article argues that international coordination of macroeconomic adjustment policies trade and capital controls exchange rate policies balance of payments financing and monetary and fiscal policies was at least as extensive for much of the 1980s as it had been in the 1960s there was however a shift away from coordination of balance of payments financing and other policies that have limited direct consequences for domestic economic and political conditions and a concurrent shift toward coordination of monetary and fiscal policies that are critically important for domestic politics and economics this change is best explained as a consequence of changes in the structure of the international economy most important international capital market integration encouraged governments to coordinate monetary and fiscal policies because balance of payments financing and exchange rate coordination alone are insufficient to manage the enormous payments imbalances that emerge when capital is able to flow internationally in search of higher interest rates and appreciating currencies

a large scale mapping of territorial development dynamics in latin america summary this paper summarizes a study of changes in per capita income monetary poverty and income distribution in 9 045 subnational administrative units of nine latin american countries between the mid 1990s and mid 2000s the results largely support spatial convergence of mean household incomes although the estimates indicate it has been slow territorial inequality is found to be persistent and reduces the pro poor effect of local income growth although national context specific the estimates also indicate that territorial development dynamics are influenced by the structural features of the territories in view of the evidence territorial development policies in latin america seem well warranted

the new industrial relations british electricians new style agreements this study analyzes the response of the british electricians union to economic adversity and to new managerial strategies as embodied in the union s novel agreements in three japanese owned british electronics firms these agreements provide that the union is the sole bargaining representative in each firm most british plants by contrast have multiple union representation most of the new style agreements also contain a no strike clause final offer arbitration of interest disputes and measures to increase labor flexibility reduce the diversity in conditions among plant office and managerial employees and enhance employee participation in major company decisions the author views these agreements as evidence that fundamental changes in collective bargaining relationships are taking place

forms of trust and conditions for their stability of the three principal approaches to trust we decided to investigate in greater detail the one in which trust is regarded as a belief that the individuals involved hold about a relationship trust was defined as a delegatory relationship based on anticipation of the delegatee s behaviour we reached four main conclusions first the solution to the problem posed by the indeterminacy of trust lies in the differentiation and hierarchisation of the various forms of trust contractual organisational and tacit on the basis of their degree of irreversibility and stability second contractual trust is unstable because it comes up against the problem of guarantees of individual intentions this leads to the third conclusion rational evaluation by individuals cannot by itself establish trust which is based on collective beliefs practices and rules fourth we identified two conditions for the stability of trust the creation of irreversibilities through adherence to a rule and the creation of a confidence interval within which different interpretations of contradictory individual strategies are tolerated thus the viability of the various forms of trust depends on the ability of institutions and organisations to create rules that are likely when applied to produce an interval in which tolerance of mutual intentions is the norm these analyses of trust hence highlight the role of time and period of time in the notion of trust

a percolation based model explaining delayed takeoff in new product diffusion a model of new product diffusion is proposed in which a site percolation dynamics represents socially driven diffusion of knowledge about the product s characteristics in a population of consumers a consumer buys the new product if her valuation of it formed after her witnessing the product in use among her friends or neighbors is not below the price of the product announced in a given period our model attributes the empirical finding of a delayed takeoff of a new product to a drift of the percolation dynamics from a nonpercolating regime to a percolating regime this drift is caused by learning effects lowering the price of the product or by network effects increasing its individual valuations by consumers both with an increasing number of buyers

hedonic price indexes for spreadsheets and an empirical test for network externalities in this article i first estimate hedonic price equations for computer spreadsheet programs and then use the analysis to empirically test whether network externalities exist in this industry the study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the lotus platform and for spreadsheets that offer links to external databases and a similar premium for spreadsheets that offer local area network externalities finally the quality adjusted real price of computer spreadsheets declined by approximately 15 per year from 1986 to 1991

on non existence of markov equilibria in competitive market economies abstract this paper presents some examples of regular dynamic economies with externalities and taxes that either lack existence of a markov equilibrium or such equilibrium is not continuous these examples pose further challenges for the analysis and computation of these economies journal of economic literature classification numbers c10 c62

dynamic competition with network externalities why history matters we consider dynamic competition among platforms in a market with network exter nalities a platform that dominated the market in the previous period becomes focal in the current period in that agents play the equilibrium in which they adopt the focal platform whenever such equilibrium exists yet when faced with higher quality competition can a low quality platform remain focal in the finite horizon case the unique equilibrium is efficient for patient platforms with an infinite time horizon however there are multiple equilibria where either the lowor high quality platform dominates if qualities are stochastic the platform with a better average quality wins with a higher probability even when its realized quality is lower and this probability increases as platforms become more patient hence social welfare may decline as platforms become more forward looking

employee stock ownership and corporate control an empirical study abstract this study reexamines the wealth and corporate control effects of employee stock ownership plans esops and finds that the adoption of an esop is in general associated with positive wealth effects however the polaroid court ruling significantly changed the market s perception by enhancing the antitakeover role of esops a significant negative market response is found only after the court ruling analysis of speculation and bid activity initiated after an esop adoption shows a significant decline in takeover related activity following the court decision regression analysis corroborates this evidence consistent with stulz journal of financial economics 20 1988 25 54 and harris and raviv journal of financial economics 20 1988 55 86 the results also suggests a non monotonic relationship between firm value and managerial ownership the results support the scholes and wolfson financial management 49 1990 12 28 hypothesis that esops are not primarily implemented for tax advantages

privatization in eastern europe irreversibility and critical mass effects abstract this paper proposes a model to shed light on two important policy features of privatization in central and eastern europe the idea of a necessary critical mass of privatization on one hand and the great difficulties encountered in the actual privatization process on the other the model incorporates a positive externality related to the size of the private sector multiple equilibria may arise for political and economic reasons policies of free distribution are analysed with the model they may eliminate the danger of policy reversals due to excess unemployment but may at the same time increase the relative cost of restructuring leading in some cases to pareto inferior outcomes

liquidity constrained markets versus debt constrained markets this paper compares two different models in a common environment the first model has liquidity constraints in that consumers save a single asset that they cannot sell short the second model has debt constraints in that consumers cannot borrow so much that they would want to default but is otherwise a standard complete markets model both models share the features that individuals are unable to completely insure against idiosyncratic shocks and that interest rates are lower than subjective discount rates in a stochastic environment the two models have quite different dynamic properties with the debt constrained model exhibiting simple stochastic steady states while the liquidity constrained model has greater persistence of shocks

adjustment to stagflation and neoliberal reforms in japan the united kingdom and the united states the implications of the japanese case for a comparative analysis of party competition this article explains why the stagflation and neoliberal reforms that reinforced party polarization in the united kingdom and the united states instead led to party convergence in japan in japan industry centered adjustment and bureaucratic coordination distributed the costs of policy changes across societal groups and facilitated party convergence whereas the lack of such societal and state institutions in the united kingdom and the united states led to policy changes with polarizing consequences focusing on industry centered adjustment brings the unions back into japanese politics and provides an alternative to the pluralism neocorporatism dichotomy of organizing societal interests bureaucratic coordination not only includes the opposition in the framework but also provides a more nuanced view than is assumed in the debate over whether the ruling party of the bureaucracy dominates the japanese state when combined these conceptualizations of market and state go a long way toward explaining the dyn

competing technologies the learning curve and rational expectations abstract the problem of choice between several variants of a technology subject to dynamic learning economies is examined in a rational expectations model with overlapping adopters it is shown that even with rational expectations the long term market outcome depends sensitively on the pattern of early chance events and that only one variant of the technology will come to dominate the market in the long run this variant need not be the one which is socially optimal or most promising technically

technological clusters with a knowledge based principle evidence from a delphi investigation in the french case of the life sciences abstract recent works in the theory of technical change show the effect of irreversibility and lock in on the diffusion and creation of innovation processes which are able to stop the development of a generic technology therefore industrial policies play a major role in selecting and supporting the innovative process the purpose of this paper is to prove the possibility to derive a typology of future innovations in terms of generic technology from a delphi type technology survey thus it is possible to get a better understanding of the industrial dynamics and to design an interesting tool for industrial policies or for firm strategies as far as they aim at developing stable technological trajectories this is applied to the french case of the life sciences the paper suggests interesting explanatory trajectories in order to fight against diseases such as cancer alzheimer or schizophrenia

diversification strategy and r d intensity in multiproduct firms this study provides empirical evidence that choice of diversification strategy systematically affects r d intensity in large multiproduct firms research and development intensity in dominant busin

bourgeois revolutions the policy consequences of resurgent conservatism much of the literature on reform politics has focused on social democratic governments this article reexamines the dynamics of reform by concentrating on conservative governments in four advanced

financial performance of leveraged buyouts an empirical analysis abstract this study compares management performance before and after leveraged buyouts of 25 sample companies average performance for the two years before a leveraged buyout is compared to average performance for the two years after a buyout the year of the buyout is omitted from comparisons because it usually includes recognition of a number of atypical events which distort comparisons managers must acquire some equity ownership as part of the buyout and a major restructuring must not occur in either the pre or post buyout periods seven accounting variables adjusted in the pre buyout periods to reflect values reflected in the post buyout periods are used to measure performance comparison of pre and post buy out performance are made directly for the same entity comparisons are also made of pre and post buyout performance in terms of the ratios of company performance to industry performance multivariate analyses of variance using all seven variables reflect change in both comparisons which is significant at the 001 level post hoc tests are performed to attempt to identify the extent of change in the separate variables and to examine the significance of income tax savings financial performance after the buyouts is superior to performance before the buyouts the evidence is convincing that management focus changes apparently from minimizing variability in reported profits to maximizing cash flow the improvement is greater than from income tax savings alone three groups of lbo participants are interviewed to gain insight into the forces behind the changes which are reflected in the financial data executives of institutional investors lbo house principals and chief executive officers of lbo companies all anticipate a higher return on investment in the post buyout period and more efficient use of corporate assets they tend to consider cashflow to be the primary measure of performance of lbo companies the reason for the improvement in performance cannot be identified with certainty but no explanation is more persuasive than the introduction of entrepreneurial management by the small group of new owner managers interviewees provide anecdotal evidence that the utility functions of on site managers and other investors converge on the task of debt reduction indicating a reduction of agency costs absence of free cash flow in the post buyout period also provides support for lesser agency costs however the introduction of entrepreneurial management is interpreted to include the exploitation of a wider set of opportunities to achieve wealth and position for owner managers than from the reduction of agency costs alone the findings are important for investors future lbo players and for makers of public policy efficiency improvements can reasonably be expected from similar future leveraged buyouts improvement not dependent on income tax savings

light emitting diodes and the lighting revolution the emergence of a solid state lighting industry emergence of new industries from evolving technologies is critical to the global economy yet has been relatively understudied due to the paucity of available data this study draws lessons on industry emergence by analyzing how a solid state lighting ssl industry grew out of light emitting diode led technologies that evolved for half a century with participation by tens of thousands of researchers in universities national laboratories and firms using data on publications patents and firms combined with business history we trace the evolution of ssl through a succession of market niches at times a few researchers with unorthodox research approaches made breakthroughs that greatly advanced particular technology trajectories and pushed led research in unexpected directions a succession of led market niches advanced the technology and provided profits to incentivize continuing research while reducing cost and improving efficacy of leds innovating firms developed a thicket of patents and captured substantial profit but were embroiled in extensive litigation that was ultimately resolved through cross licensing a major new generation of lighting products is now disrupting the traditional lighting industry although the leading incumbent lighting firms all invested early and heavily in ssl the industry s future leadership is uncertain

small states in big trouble state reorganization in australia denmark new zealand and sweden in the 1980s in australia denmark new zealand and sweden in the 1980s coalitions of politicians fiscal bureaucrats and capital and labor in sectors exposed to international competition allied to transform the largest single nontradables sector in their society the state particularly the welfare state they exposed state personnel and agencies to market pressures and competition to reduce the cost of welfare and other state services the impetus for change came from rising foreign public and private debt rising public debt levels and expensive welfare states interacted to create a tax wedge between employers wage costs and workers received wages this undercut international competitiveness worsening current account deficits and leading to more foreign debt accumulation two factors explain variation in the degree of reorganization in each country differences in their electoral and constitutional regimes and the willingness of left parties to risk splitting their core constituencies introduction of market pressures is an effort to go beyond the liberalization of the economy common in industrial countries during the 1980s and both to institutionalize limits to welfare spending and to change the nature of statesociety relations away from corporatist forms of interest intermediation in short not just less state but a different state

platform selection in the lab abstract emerging literature explores experimental platform selection games these games converge rapidly on the superior platform under a wide range of conditions we replicate the remarkable results of hossain and morgan 2009 in which such a game tips almost perfectly to the superior platform next we show that platform coordination fails when seemingly innocent increases in out of equilibrium payoffs are introduced the inflated payoffs keep the best reply structure unchanged and do not influence players security levels our design allows control for the explanatory force of risk dominance we find that equilibrium selection theory is unable to account for coordination failure while observed behavior is consistent with non rational learning furthermore and contrary to the literature we find that efficiency suffers when an inferior platform is granted initial monopoly

on the existence and uniqueness of stationary equilibrium in bewley economies with production abstract i prove existence of stationary recursive competitive equilibrium in bewley economies with production under specifications in which i the utility function is allowed to be unbounded and ii the underlying discrete idiosyncratic productivity process can take any form aside from mild restrictions some of the intermediate results provide theoretical basis for assumptions often made in the quantitative macroeconomics literature by providing an example i illustrate that the equilibrium is not necessarily unique even under typical specifications of the model and discuss the underlying reasons for multiplicity

non existence of recursive equilibria on compact state spaces when markets are incomplete abstract this paper analyzes one good exchange economies with two infinitely lived agents and incomplete markets it is shown that there are no recursive markov equilibria for which borrowing debt constraints never bind if the state space of exogenous and endogenous variables is a compact subset of r n moreover for large enough but finite borrowing limits no recursive equilibrium with compact state space exists these non existence results hold for any economy satisfying the following standard assumptions preferences are additively separable across time and states the one period utility function is time and state independent and unbounded from below endowments are bounded and follow a markov chain with stationary transition matrix there is some idiosyncratic risk and no aggregate risk

innovation processes in large technical systems market liberalization as a driver for radical change abstract electricity supply is a large technical system which exhibits strong path dependencies and high barriers for radical innovations recent market liberalization however has initiated a fundamental restructuring the paper analyzes how liberalization has altered innovation processes in the field of electricity supply we examine three radical innovations under monopoly conditions and contrast the findings with the results from a survey on the innovation behavior of electric utilities in liberalized markets we argue that the selection environment for innovations has changed in various respects in our sample new options open to innovation activities have emerged at the level of the firm and utility strategies turn out to be more heterogeneous this may be interpreted as an increase in the variety of search processes which may lead to a mid term decrease of path dependencies

infinite horizon incomplete markets the model of general equilibrium with incomplete markets is a generalization of the arrow debreu model which provides a rich framework for studying problems of macroeconomics this paper shows how the model which has so far been restricted to economies with a finite horizon can be extended to the more natural setting of an open ended future thereby providing an extension of the finite horizon representative agent models of modern macroeconomics to economies with heterogeneous agents and incomplete markets there are two natural concepts of equilibrium over an infinite horizon which prevent agents from entering into ponzi schemes that is from indefinitely postponing the repayment of their debts the first is based on debt constraints which place bounds on debt at each date event the second is based on transversality conditions which limit the asymptotic rate of growth of debt the concept of an equilibrium with debt constraint is a natural concept of equilibrium for macroeconomic analysis however the concept of an equilibrium with transversality condition is more amenable to theoretical analysis since it permits the powerful techniques of arrow debreu theory to be carried over to the setting of incomplete markets in an economy in which agents are impatient expressed by the mackey continuity of their preference orderings and have a degree of impatience at each date event which is bounded below a concept defined in the paper we show that the equilibria of an economy with transversality condition coincide with the equilibria with debt constraints an equilibrium with transversality condition is shown to exist it follows that for each economy there is an explicit bound m such that an equilibrium with explicit debt constraint m exists in which the constraint is never binding this latter property ensuring that the debt constraint whose objective is to prevent ponzi schemes does not in itself introduce a new imperfection into the model over and above the incompleteness of the markets

stationary ramsey equilibria under uncertainty abstract deterministic dynamic equilibrium models with borrowing constraints and heterogeneous agents exhibit stationary solutions where the most patient household owns the economy s capital stock an example shows that this result does not carry over to stationary stochastic environments we prove under some conditions the existence of a stationary rational expectations equilibrium in two related setups the first is the existence of a stationary nash equilibrium where each agent s payoff depends on his capital process and the capital processes of the remaining agents the second existence theorem applies to a stationary competitive equilibrium model journal of economic literatureclassification numbers e13 e21 d80

the optimal public and private provision of safe assets abstract we develop a theory of optimal government debt in which publicly issued and privately issued safe assets are substitutes while government bonds are backed by future tax revenues privately issued safe assets are backed by the future repayment of pools of defaultable private loans we find that a higher supply of public debt crowds out privately issued safe assets less than one for one and reduces the interest spread between borrowing and deposit rates our main result is that the optimal level of public debt does not fully crowd out private lending and maintains a positive interest spread moreover the optimal level of public debt is higher the more severe are financial frictions

competitive equilibria for infinite horizon economies with incomplete markets abstract in this paper we consider a sequential trading economy with incomplete financial markets and a finite number of infinitely lived agents we propose a specification of agents budget sets and show that such specification features several desirable properties we then establish the existence of an equilibrium for a regular class of economies journal of economic literatureclassification numbers c62 d52 d90

the politics of structural change swedish social democracy and thatcherism in comparative perspective the 1930s and the 1980s were decades of significant political economic change in the capitalist democracies depression and the rise of the industrial working class created opportunities for the establishment of social democracy in the 1930s stagflation and the decline of the working class made possible waves of radical rightist reform however this article suggests that only governments that do not have to concentrate myopically on the exigencies of winning the next election have the political space to undertake structural changes the benefits of which may only be manifest in the medium term in turn successful reforms are likely to entail changes in underlying social structural conditions such as the strengthening or weakening of organized labor movements that both expand the electoral constituencies of the government s partisanpreferred policies and improve their macroeconomic efficacy these propositions are examined with respect to the construction social democracy in sweden in the 1930s and the

biodiversity conservation in a dynamic world may lead to inefficiencies due to lock in effects and path dependence abstract although biodiversity is generally diminishing in some areas its conservation is expanding however the exact path of this expansion is uncertain this can lead to problems of path dependence and lock in effects path dependence describes situations where history strongly influences present decisions and lock in effects refer to situations where an earlier decision provides strong incentives to follow a particular path even if more efficient alternatives are available later on we develop a conceptual ecological economic model to investigate which ecological and economic parameters favour the appearance of efficiency losses in biodiversity conservation due to path dependence and lock in effects in a dynamic two period two region model generally we find that efficiency losses occur if there are signals that guide the first period budget into a region that later turns out to be suboptimal if both time periods had been considered right from the beginning to illustrate the conservation relevance of our findings we present potential efficiency losses through path dependence in the hypothetical case of applying offsets to conserving the endangered maculinea teleius butterfly near the city of landau in germany

income and wealth heterogeneity in the macroeconomy how do movements in the distribution of income and wealth affect the macroeconomy we analyze this question using a calibrated version of the stochastic growth model with partially uninsurable idiosyncratic risk and movements in aggregate productivity our main finding is that in the stationary stochastic equilibrium the behavior of the macroeconomic aggregates can be almost perfectly described using only the mean of the wealth distribution this result is robust to substantial changes in both parameter values and model specification our benchmark model whose only difference from the representative agent framework is the existence of uninsurable idiosyncratic risk displays far less cross sectional dispersion and skewness in wealth than u s data however an extension that relies on a small amount of heterogeneity in thrift does succeed in replicating the key features of the wealth data furthermore this extension features aggregate time series that depart significantly from permanent income behavior

rational asset pricing bubbles this paper provides a fairly systematic study of general economic conditions under which rational asset pricing bubbles may arise in an intertemporal competitive equilibrium framework our main results are concerned with nonexistence of asset pricing bubbles in those economies these results imply that the conditions under which bubbles are possible including some well known examples of monetary equilibria are relatively fragile this paper is concerned with the conditions under which asset prices in an intertemporal competitive equilibrium are equal to the present value of the streams of future dividends to which each asset represents a claim according to a central result of the theory of finance this is very generally true in the case of economies with trading at only a finite sequence of dates as long as there are no restrictions upon transactions other than that associated with possible incom pleteness of the set of securities that are traded the result is sometimes called the fundamental theorem of asset pricing here we consider the extent to which such a result continues to be valid in the case of trading over an infinite horizon it has often been observed in the econometric literature on asset pricing bubbles that it is possible in principle for the price of a perpetuity and the dividends on that security to satisfy at all times a present value relation for one period holding returns while the security s price nonetheless does not equal the present value of the stream of dividends expected over the infinite future in such a case the price of the perpetuity is said to involve a bubble component 2 joint stochastic processes for which this component is nonzero are sometimes argued to characterize existing assets for a recent example see froot and obstfeld 1991 but such an inference depends upon aspects of the stochastic

property rights and the role of the state evidence from the horn of africa this study applies extant theories of property rights change to three land tenure systems in imperial ethiopia two of the areas underwent changes in property rights after experiencing changes in the value of land one did not a data set of litigation over land rights is used in conjunction with case studies to understand the mechanisms motivating or impeding property rights change amendments to the role of the state are suggested and two conclusions are reached 1 that movement towards greater specificity of land rights did not always occur and 2 the changes in property rights that occurred were imposed from above rather than occurring endogenously where property rights changes did not occur they appear to have been blocked by the state which was more concerned with political survival than with revenue maximisation

is demand pulled innovation equally important in different groups of firms previous empirical literature has tested the demand pull hypothesis and found that innovation may be driven by output using a balanced panel of 216 italian manufacturing firms 1995 2000 and checking for the path dependent nature of r d we find a role of sales in inducing r d however the demand pull effect plays a varying role for different sub samples of firms exporting firms liquidity constrained firms not subsidised firms and those not heading a group seem to be sensitive to sales in deciding r d these results have been obtained using a least squares dummy variable corrected estimator a recent panel data technique suitable for small samples

adaptation as information restriction the hot stove effect individuals and social systems are often portrayed as risk averse and resistant to change such propensities are characteristically attributed to individual organizational and cultural traits such as risk aversion uncertainty avoidance discounting and an unwillingness to change this paper explores an alternative interpretation of such phenomena we show how the reproduction of successful actions inherent in adaptive processes such as learning and competitive selection and reproduction results in a bias against alternatives that initially may appear to be worse than they actually are in particular learning and selection are biased against both risky and novel alternatives because the biases are products of the tendency to reproduce success that is inherent in the sequential sampling of adaptation they are reduced whenever the reproduction of success is attenuated in particular when adaptation is slowed made imprecise or recalled less reliably the propensity to engage in risky and new activities is increased these protections against the error of rejecting potentially good alternatives on inadequate experiential evidence are costly however they increase the likelihood of persisting with alternatives that are poor in the long run as well as in the short run

seeing the big picture the influence of industry diversification and business strategy on performance much of the strategic management literature separates industry corporate and business levels of analysis and empirical studies tend to examine these levels independently not addressing how indu

limiting the unintended consequences of institutional change students of institutional change pay insufficient attention to the conditions under which institutional reform produces unintended procedural and policy consequences the authors contend that the b

on efficient distribution with private information this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers each of whom is subject to private idiosyncratic taste shocks we propose a recursive method for finding feasible allocations that are incentivecompatible and that are pareto optimal within this set the method is applied to several parametric examples we find that in an efficient allocation the degree of inequality continually increases with a diminishing fraction of the population receiving an increasing fraction of the resources we discuss the extent to which these allocations can be decentralized via market arrangements this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with private information the economy we study has a constant endowment flow of a single non storable consumption good which is to be allocated each period among a large number of consumers each period these consumers experience unpredictable idiosyncratic privately observed taste shocks affecting their marginal utility of current consumption efficiency dictates that more resources be allocated to those consumers who in any given period have a high marginal utility of current consumption

theorizing path dependence a review of positive feedback mechanisms in technology markets regional clusters and organizations the concept of path dependence has often been criticized as vague and only narrowly applicable although we can find some very refined definitions of the concept we also find a wide range of empirical phenomena being described as path dependent we argue that more detailed accounts of the positive feedback mechanisms that form paths can take path dependence beyond this state of being overdetermined but under specified reviewing three well described cases of path dependent dynamics in technology markets regional clustering and organizations we define a core set of positive feedback mechanisms that constitute path dependence at different analysis levels and clarify the relationship between positive feedback and increasing returns we show that path dependent processes that is processes driven by positive feedback that veer toward rigidity or lock in can be but do not have to be found under many labels including structural inertia coevolution or institutional persistence we conclude that a precise definition of path dependence does not need to be at odds with the concept s widespread use in understanding organizational and industrial development processes copyright 2013 the author 2012 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

inefficient standard adoption inertia and momentum revisited i introduction since the establishment of the theory of network effects economists have been concerned with the question of whether a market with network effects will tend to settle on the socially optimal standard it has been postulated that markets may exhibit excess inertia once a technological standard is in place a new superior standard may not displace it because of installed base effects alternatively markets may exhibit excess momentum consumers may adopt a new standard too quickly ignoring the stranding effect they are having on previous users similar issues arise in the adoption of language and social norms the literature has investigated various conditions under which one of these inefficiencies arises such inefficiencies are of particular concern for open technologies such as the qwerty and dvorak keyboards 1 the situation is somewhat different when individual firms own standards in that case a simple argument seems to indicate that there is no possibility that an inefficient standard will persist if a new standard is superior in any objective sense there are gains to be made from switching to it once the standard has been adopted the firm can appropriate these gains therefore the firm has incentive to lower the initial price enough to induce adoption of the standard the preceding argument is made in liebowitz and margolis 1999 and repeated in spulber 2002 spulber expresses a general skepticism about the likelihood of inefficiencies when property rights are defined and markets exist critics might claim that previous models that imply inefficient standard adoption are unrealistic in some way and that if such models were modified slightly the inefficiency would disappear i reconsider the issue of inefficient standard adoption using a parsimonious yet compelling model assuming only that there are successive generations of finitely lived consumers that preferences are heterogeneous and that there are network effects among users adoption decisions can be inefficient this is true even if consumers can coordinate efficiently within a generation and a firm can act as a coordinating device across generations the model presented here generates some of the same results found in other papers collectively but in a more general setting and with more robust results if there is an established standard and a superior alternative emerges no single generation of consumers will be willing to switch to the new standard if the switching cost the loss of network benefit from breaking with past users is too high it may be that the benefits to future generations of consumers are large enough that from a social standpoint it would be efficient for one generation to adopt the new standard even if it is privately optimal for that generation to retain the old standard on the other hand the current generation considers only its own switching cost and not the cost it imposes on the previous generation leading to potential overadoption of new technology even for proprietary standards it is not clear that the incentive of the firm to induce adoption matches the social incentive in particular if consumer preferences are heterogeneous the firm will not be able to price in such a way to extract all of the additional surplus gained from the new standard on the other hand the firm will be able to appropriate some of the surplus generated by the network effect itself which is present for any standard and thus does not affect the social incentive to change standards it is not possible to address this issue with a two period model as in some of the previous literature see for example choi 1994 choi and thum 1998 katz and shapiro 1986 if a new technology is introduced in the second period but then the game ends the welfare of future generations of consumers is neglected 2 this article also differs from previous infinite horizon models of technology adoption

induced adoption and externalities in the regional diffusion of information technology antonelli c 1990 induced adoption and externalities in the regional diffusion of information technology reg studies 24 31 40 information technology can be considered as a set of complex radical innovations which continues to evolve and has a major impact both within the plant and the office in such a context its regional diffusion is likely to be determined by relevant externalities together with the effects of a wage induced process of localized technological change and adoption data on the territorial distribution of fax machines and modems show that the levels of diffusion of information technology in italy is highly uneven favouring central regions endowed with higher levels of fixed and human capital and consequently income the econometric analysis confirms that diffusion levels of both fax and modems across provinces are significantly associated with the level of wages as is to be expected from the induced adoption hypothesis and from the existence of external factors such as the presence

demand dynamics with socially evolving preferences in this work we first identify a few stylized facts concerning microconsumption acts second building on them we develop a simple model of boundedly rational consumers who endogenously evolve their preferences via both innovation and social imitation third we explore some statistical properties of the demand patterns generated by the model which despite its simplicity are surprisingly in line with the empirical evidence these results we suggest bring encouraging support to microfoundations of demand theory based on cognitive and behavioral foundations more in tune with the psychological and sociological evidence based on heterogeneous agents who are much less rational and much more social than in standard theory and who collectively discover along the way what they like within a growing universe of available commodities

sectoral systems of innovation and production the concept sectoral system of innovation and production provides a multidimensional integrated and dynamic view of sectors it is proposed that a sectoral system is a set of products and the set of agents carrying out market and non market interactions for the creation production and sale of those products a sectoral systems has a specific knowledge base technologies inputs and demand agents are individuals and organizations at various levels of aggregation they interact through processes of communication exchange co operation competition and command and these interactions are shaped by institutions a sectoral system undergoes change and transformation through the co evolution of its various elements 2002 elsevier science b v all rights reserved

economic man social woman the case of the gender gap in support for the canada united states free trade agreement do differences in basic values and concerns underlie differences in the issue positions of women and men this article uses a decomposition approach to assess the contribution of male female differ

the two faces of market support how deployment policies affect technological exploration and exploitation in the solar photovoltaic industry the recent years have seen a strong rise in policies aiming to increase the diffusion of clean energy technologies while there is general agreement that such deployment policies have been very effective in bringing technologies to the market it is less understood how these policies affect technological innovation to shed more light on this important question we conducted comparative case studies with a global sample of 9 firms producing solar photovoltaic pv modules complemented by in depth interviews with 16 leading pv industry experts we propose that on the one hand policy induced market growth serves as an important catalyst for innovative activity as it raises the absolute level of firm investments in technological exploration on the other hand however deployment policies create an incentive for firms pursuing more mature technologies to shift their balance between exploitation and exploration toward exploitation firms focusing on less mature technologies cannot tap the potentials of exploitative learning to the same extent as those with more mature technologies therefore stimulating strong market growth may raise the barrier to market entry for less mature technologies we conclude that when designing deployment policies great care should be taken to avoid adverse effects on technological diversity and a premature lock in into more established technologies

the risk free rate in heterogeneous agent incomplete insurance economies abstract why has the average real risk free interest rate been less than one percent the question is motivated by the failure of a class of calibrated representative agent economies to explain the average return to equity and risk free debt i construct an economy where agents experience uninsurable idiosyncratic endowment shocks and smooth consumption by holding a risk free asset i calibrate the economy and characterize equilibria computationally with a borrowing constraint of one year s income the resulting risk free rate is more than one percent below the rate in the comparable representative agent economy

the social construction of an imperative why welfare reform happened in denmark and the netherlands but not in germany this article seeks to explain why denmark and the netherlands made dramatic progress reforming their welfare systems in the 1990s and why germany had a relatively slow start some possible explanations found to be incomplete are institutional differences in welfare programs the uniqueness of circumstances for example german unification and the balance of political power in governing institutions an important part of the puzzle is an increasing perception of the need to reform that was more widespread in denmark and the netherlands the social construction of an imperative to reform in these countries generated a political consensus that was elusive in germany but that may be developing under gerhard schroder s government

consumption dynamics in general equilibrium a characterisation when markets are incomplete we introduce a methodology for analysing infinite horizon economies with two agents one good and incomplete markets we provide an example in which an agent s equilibrium consumption is zero eventually with probability one even if she has correct beliefs and is marginally more patient we then prove the following general result if markets are effectively incomplete forever then on any equilibrium path on which some agent s consumption is bounded away from zero eventually the other agent s consumption is zero eventually so either some agent vanishes in that she consumes zero eventually or the consumption of both agents is arbitrarily close to zero infinitely often later we show that a for most economies in which individual endowments are finite state time homogeneous markov processes the consumption of an agent who has a uniformly positive endowment cannot converge to zero and b the possibility that an agent vanishes is a robust outcome since for a wide class of economies with incomplete markets there are equilibria in which an agent s consumption is zero eventually with probability one even though she has correct beliefs as in the example in sharp contrast to the results in the case studied by sandroni 2000 29 and blume and easley 2006 8 where markets are complete our results show that when markets are incomplete not only can the more patient agent or the one with more accurate beliefs be eliminated but there are situations in which neither agent is eliminated c 2010 elsevier inc all

the economics of convention c onventions regulate much of economic and social life yet they have received surprisingly little attention from economists by a convention we mean a pattern of behavior that is customary expected and self enforcing everyone conforms everyone expects others to conform and everyone has good reason to conform because conforming is in each person s best interest when everyone else plans to conform lewis 1969 familiar examples include following rules of the road adhering to conventional codes of dress and using words with their conventional meanings conventions with direct economic implications include species of money and credit industrial and technological standards accounting rules and forms of economic contracts indeed it would scarcely be an exaggeration to say that almost all economic and social institutions are governed to some extent by convention the main feature of a convention is that out of a host of conceivable choices only one is actually used this fact also explains why conventions are needed they resolve problems of indeterminacy in interactions that have multiple equilibria indeed from a formal point of view we may define a convention as an equilibrium that everyone expects in interactions that have more than one equilibrium the economic significance of conventions is that they reduce transaction costs imagine the inconvenience if whenever two vehicles approached one another the important exceptions are sugden 1986 and ullman margalit 1977 the interested reader might also refer to the symposium on social norms that appeared in the fall 1989 issue of this journal with articles by sugden 1989 and elster 1989

bad eggs learning by doing and the choice of technology we model long run economic development through technology adoption under scientific uncertainty about environmental effects there are four possible long run equilibria in a socially planned economy high growth adopt rapidly but abandon damaging technologies once revealed ddt cfcs cautious brake the introduction of new technologies to avoid mistakes genetically modified organisms no growth halt technological progress to preserve secondary knowledge and collapse adopt rapidly without ever abandoning damaging technologies in the base parameterization a short sighted social planner chooses the cautious strategy a far sighted planner chooses the high growth strategy unless damages are irreversible in which case the cautious strategy again dominates regulatory options in the market economy are investigated pollution taxes do not affect the firm s level of precaution if they can only be applied after the adopting firm has reaped the benefits however they do encourage the abandonment of damaging technologies liability rules do affect precaution but may lead to excessive caution or even a no growth trap

political responses to interdependence what s left for the left heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies interdependence has clearly had a great impact on the types of economic policies that governments can pursue they have been unable to pursue independent fiscal and monetary policies since the mid 1970s furthermore all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets there are however different policies consistent with these goals statistical analyses of economic policies since the mid 1970s show that governments of the left and the right continue to be able to enact distinctive supply side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives

opening the window for reform mandates crises and extraordinary policy making under what conditions are governments within established democratic political systems willing and able to launch ambitious reform programs in other words what conjunctural factors generally serve to open the window for reform the central argument of this article is that extraordinary policy making generally becomes possible only when a macro window is opened by a government s achievement of an impressive mandate and or by the onset of a severe socioeconomic crisis the mandate reform hypothesis is tested with data from britain france and the united states then the significance of both mandates and crises is demonstrated through an analysis of eight reform government case studies ranging from the new deal to thatcher s britain

income fluctuation and asymmetric information an example of a repeated principal agent problem we examine a simple repeated principal agent model with discounting there are a risk averse borrower with an unobservable random income and a risk neutral lender the efficient contract is characterized it tends to the first best constant consumption contract as the discount factor tends to one and the time horizon extends to infinity if the time horizon is infinite and the contract is legally enforceable the borrower s utility becomes arbitrarily negative with probability one if the borrower has constant absolute risk aversion consumption is transferred between any two states at a constant interest rate which is less than the rate of time preference

rational expectations in the overlapping generations model abstract this paper reports results on the character of the rational expectations equilibria of a stochastic overlapping generations model with heterogenous markets the model considered is a stationary overlapping generations model in which the endowments of young agents are subject to i i d random shocks the main result shown is that if there are l 1 commodities traded in every period then for most preferences the rational expectations equilibrium stochastic process of prices and allocations necessarily exhibits serial correlation this is in marked contrast to the one commodity model in which there always exists an equilibrium which is measure isomorphic to the endowment process

regional worlds from related variety in regional diversification to strategic coupling in global production networks this annual lecture paper bridges two influential but parallel literature strands on evolutionary economic geography eeg and global production networks gpn it argues that both strands are prem

recursive equilibria in an aiyagari style economy with permanent income shocks in this paper we prove the existence of a recursive competitive equilibrium rce for an aiyagari style economy with permanent income shocks and perpetual youth structure we show that there exist equilibria where borrowing constraints are never binding this allows us to establish a non trivial lower bound on the equilibrium interest rate to solve the individual s problem we present a new approach that uses lattices of consumption functions to deal with the non compact state space and the unbounded utility function the approach uses only the first order conditions of the problem euler equations the proof is constructive and it serves as a theoretical foundation for the convergence of a policy function iteration procedure

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination