explaining metropolitan housing price differences abstract housing prices differ substantially among metropolitan areas the rent and house price indexes used here measure this variation among 54 metropolitan areas a model of metropolitan housing price determination is presented and used to identify the sources of intermetropolitan price variation reduced form equations explain close to 90 of the variation in rental prices and close to 60 of the variation in house prices

structural change in an open economy we study the importance of international trade in structural change our framework has both productivity and trade cost shocks and allows for non unitary income and substitution elasticities we calibrate our model to investigate south korea s structural change between 1971 and 2005 we nd that the shock processes propagated through the model s two main transmission mechanisms non homothetic preferences and the open economy explain virtually all of the evolution of agriculture and services labor shares and the rising part of the hump shape in manufacturing counterfactual exercises show that the role of the open economy is quantitatively important for explaining south korea s structural change

the u s and u k great depressions through the lens of neoclassical growth theory neoclassical growth theory is increasingly being used to study great depressions see e g mario j crucini and james kahn 1996 cole and ohanian 1999 2001a b 2002 michael bordo et al 2000 see also the january 2002 issue of the review of economic dynamics this paper extends our recent work that focuses on why the u s and u k great depressions lasted so long one of the key messages from our work is that the standard neoclassical growth model fails to account for the long duration of these depressions this paper extends our work by diagnosing the specific failures of the model we do this by measuring the deviations in the model s first order conditions we then use these deviations to identify particular factors that might account for these long durations we find very large deviations in the model s household labor efficiency condition in both countries and in the firm s labor efficiency condition in the united states these deviations provide new support for our recent conclusions that distorting labor market policies are key factors behind the long durations of both depressions cole and ohanian 2001a b

urban land supply natural and contrived restrictions abstract both large bodies of water and local governments restrict the supply of urban land in this paper we measure water s restriction on supply and test its effect on land price we then extend hamilton s and fischel s pioneering work on governmental restriction providing an improved test of the monopoly zoning hypothesis that such restriction further affects land price regression analysis of data from 45 urban areas suggests that the two restrictions combine to explain 40 of typical interurban price differentials

the institutional causes of china s great famine 1959 1961 this paper studies the causes of china s great famine during which 16 5 to 45 million individuals perished in rural areas we document that average rural food retention during the famine was too high to generate a severe famine without rural inequality in food availability that there was significant variance in famine mortality rates across rural regions and that rural mortality rates were positively correlated with per capita food production a surprising pattern that is unique to the famine years we provide evidence that an inflexible and progressive government procurement policy where procurement could not adjust to contemporaneous production and larger shares of expected production were procured from more productive regions was necessary for generating this pattern and that this policy was a quantitatively important contributor to overall famine mortality

convergence and spillover of house prices in chinese cities abstractthe issue of house price convergence in 34 chinese cities is investigated we augmented the convergence model with contemporaneous spatial dependence in house prices and found that price convergence and positive spatial spillover are both present we explicitly addressed the endogeneity problem by introducing a bayesian instrumental variable setup which was estimated with particle filtering techniques from a growth poles perspective the empirical evidence indicates that the spread effect in regional house prices outweighs the backwash effect the identified positive spatial spillover has two effects on the growth of house prices in chinese cities first the spillover elevates the trajectories of the steady state growth paths of house prices second the spillover narrows the gaps between the growth paths of house prices in neighbouring cities shocks to the socio economic variables of a city generate their own effects on domestic house prices that dominate the effects arising from cross city p

the drivers of structural change the main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture manufacturing and services using the ggdc 10 sector database this paper first presents the empirical facts associated with structural change in different regions of the world that is europe and the usa asia latin america and africa then reviews four determinants of structural change i changes in income ii changes in relative sectoral prices iii changes in input output linkages and iv changes in comparative advantage s via globalization and trade

agricultural productivity and structural transformation evidence from brazil we study the eects of the adoption of new agricultural technologies on structural transfor mation to guide empirical work we present a simple model where the eect of agricultural productivity on industrial development depends on the factor bias of technical change we test the predictions of the model by studying the introduction of genetically engineered soybean seeds in brazil which had heterogeneous eects on agricultural productivity across areas with dierent soil and weather characteristics we nd that technical change in soy production was strongly labor saving and lead to industrial growth as predicted by the model

property rights land liquidity and internal migration in the early twentieth century a large number of households resettled from the european to the asian part of the russian empire we propose that this dramatic migration was rooted in institutional changes initiated by the 1906 stolypin land titling reform one might expect better property rights to decrease the propensity to migrate by improving economic conditions in the reform area however this titling reform increased land liquidity and actually promoted migration by easing financial constraints and decreasing opportunity costs treating the reform as a quasi natural experiment we employ difference in differences analysis on a panel of province level data that describe migration and economic conditions we find that the reform had a sizeable effect on migration to verify the land liquidity effect we exploit variation in the number of households participating in the reform this direct measure of the reform mechanism estimates that land liquidity explains approximately 18 of migration during this period

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

fractionalization and the size of government i study the effect of voters with a group based social conscience voters care more about the well being of those belonging to their own group than the rest of the population within a model of political tax determination both fractionalization and group antagonism reduce the support for redistribution whereas within group inequality increases support for redistribution inequality between groups has the opposite effect these results hold even if a poor group forms a majority using a panel constructed from us micro data i find support for the hypothesis that within race inequality increases redistribution while between race inequality decreases redistribution

dictator loyal and opportunistic agents the soviet archives on creating the soviet economic system studies of the mature soviet economy focus on the structuralweaknesses of rent seeking and corruption such an economy ispresumed to perform better in its adolescent phase under astrong stationary bandit dictator dedicated to growth andable to control rent seekers we use the recently openedsoviet state and party archives to show the process that beganin the 1930s of transforming the inner circle of the sovietstationary bandit into a rent seeking bureaucracy lackinglong term goals

market socialism the current debate with the decline of command economies in eastern europe china and elsewhere the systemic issue of the feasability of combining the market mechanism with some form of public or collective ownership or control over the distribution of surplus has assumed topical importance the essays in this book aim at advancing the old debate on this issue to a new analytical stage questions of incentive compatability agency problems depoliticization of economic decisions and those of justice and worker autonomy are at the heart of the discussion the defenders as well as critics of market socialist proposals in this book are particularly sensitive to the centrality of these questions

a political economy theory of the soft budget constraint why do soft budget constraints exist and persist in this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness we develop an infinite horizon political economy model where neither democratic nor autocratic politicians can commit to policies that are not ex post optimal we show that because of the dynamic commitment problem inherent in the soft budget constraint politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do this encourages such entrepreneurs to support them politically though the soft budget constraint may induce economic inefficiency it may be politically rational because it influences the probability of political survival in consequence even when information is complete politicians may fund bad projects which they anticipate they will have to bail out in the future we show that maybe somewhat surprisingly dictators who are less likely to lose power are more likely to use the soft budget constraint as a strategy to gain political support

structural transformation and the deterioration of european labor market outcomes this paper examines hours worked in continental europe and the united states from 1956 to 2003 the empirical work establishes two results first hours worked in europe decline by almost 45 percent compared to the united states over this period second this decline is almost entirely accounted for by the fact that europe develops a much smaller market service sector than the united states a simple model of time allocation is used to understand these patterns i find that relative increases in taxes and technological catch up can account for most of the differences between the european and american time allocations over this period

can leading indicators assess country vulnerability evidence from the 2008 09 global financial crisis abstract we investigate whether leading indicators can help explain the cross country incidence of the 2008 09 financial crisis rather than looking for indicators with specific relevance to the recent crisis the selection of variables is driven by an extensive review of more than eighty papers from the previous literature on early warning indicators our motivation is to address suspicions that indicators found to be useful predictors in one round of crises are typically not useful to predict the next round the review suggests that central bank reserves and past movements in the real exchange rate were the two leading indicators that had proven the most useful in explaining crisis incidence across different countries and episodes in the past for the 2008 09 crisis we use six different variables to measure crisis incidence drops in gdp and industrial production currency depreciation stock market performance reserve losses and participation in an imf program we find that the level of reserves in 2007 appears as a consistent and statistically significant leading indicator of who got hit by the 2008 09 crisis in line with the conclusions of the pre 2008 literature in addition to reserves recent real appreciation is a statistically significant predictor of devaluation and of a measure of exchange market pressure during the current crisis we define the period of the global financial shock as running from late 2008 to early 2009 which probably explains why we find stronger results than earlier papers such as obstfeld et al 2009 2010 and rose and spiegel 2009a b 2010 2011 which use annual data

capital skill complementarity sectoral labor productivity and structural transformation abstract in the postwar u s economy labor productivity has been growing faster in the goods sector versus the service sector this paper argues that this sectoral labor productivity growth gap can largely be explained by the fact that capital intensity also increases faster in the goods sector i build a two sector neoclassical growth model in which capital substitutes low skilled labor but complements high skilled labor and the goods sector is more intensive in low skilled labor relative to the service sector as observed in the data as capital becomes more abundant relative to labor along economic growth low skilled labor is substituted by capital leading to faster growth of capital intensity and hence labor productivity in the goods sector using a calibrated model i find that two thirds of the sectoral labor productivity growth gap can be explained by capital accumulation and its interaction with capital skill complementarity

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

the role of trade in structural transformation abstract low agriculture productivity is considered a key obstacle to economic development for many countries international trade in agricultural goods can help overcome this barrier and facilitate structural transformation because it allows countries to import part of their food needs this article quantifies the role of trade in this context through the examples of south korea during the last 50 years and great britain in the 19th century to do the analysis i calibrate and simulate a two sector neoclassical growth model to match the data and perform the policy experiments i find that agricultural imports played a crucial role in the early transformation of great britain while in south korea trade also had a positive impact on its structural transformation but it could have played a much larger role if the country had not introduced agricultural protection policies

how important are dual economy effects for aggregate productivity this paper brings together development accounting techniques and the dual economy model to address the role that factor markets have in creating variation in aggregate total factor productivity tfp development accounting research has shown that much of the variation in income across countries can be attributed to differences in tfp the dual economy model suggests that aggregate productivity is depressed by having too many factors allocated to low productivity work in agriculture data show large differences in marginal products of similar factors within many developing countries offering prima facie evidence of this misallocation using a simple two sector decomposition of the economy this article estimates the role of these misallocations in accounting for the cross country income distribution a key contribution is the ability to bring sector specific data on human and physical capital stocks to the analysis variation across countries in the degree of misallocation is shown to account for 30 40 of the variation in income per capita and up to 80 of the variation in aggregate tfp

land values and housing rents in urban japan abstract this paper describes and systematically explains observed variation in land values and housing rents in urban japan it fits a structural model s reduced form equations to intertemporal data over 35 years intercity data across 27 major cities and intracity data in the three largest metropolitan areas explanatory variables are population income their growth rates the interest rate the inflation rate urban land supply and distance from the city center

risk management and dynamic network performance an illustration using a dual banking system abstractthis study applies dynamic network data envelopment analysis to compare a dual banking system namely conventional and islamic banks with emphasis on risk measures non oriented variable return to scale dynamic network slacks based measure is used to model the banking performance for the period 2008 2012 under the consideration of risk measures the findings highlight that islamic banks excel in managerial efficiency while conventional banks surpass in profitability efficiency furthermore the regression results find that the number of directors on the risk management committee has a positive impact on banking performance meanwhile the high number of independent directors improves the profitability efficiency but worsens the managerial efficiency

middleman minorities and ethnic violence anti jewish pogroms in the russian empire using detailed panel data from the pale of settlement area between 1800 and 1927 we document that anti jewish pogroms mob violence against the jewish minority broke out when economic shocks coincided with political turmoil when this happened pogroms primarily occurred in places where jews dominated middleman occupations i e moneylending and grain trading this evidence is inconsistent with the scapegoating hypothesis according to which jews were blamed for all misfortunes of the majority instead the evidence is consistent with the politico economic mechanism in which jewish middlemen served as providers of insurance against economic shocks to peasants and urban grain buyers in a relationship based on repeated interactions when economic shocks occurred in times of political stability rolling over or forgiving debts was an equilibrium outcome because both sides valued their future relationship in contrast during political turmoil debtors could not commit to paying in the future and consequently moneylenders and grain traders had to demand immediate re payment this led to ethnic violence in which the break in the relationship between the majority and jewish middlemen was the igniting factor

toward an understanding of economic growth in africa a reinterpretation of the lewis model summary we develop a model economy that has many of the features of lewis 1954 but that also includes an in between sector as described by lewis 1979 our model underscores the importance of the following determinants of structural change i productivity growth in the agricultural sector ii productivity growth in the nonagricultural sector and iii the terms of trade public investment enhances productivity growth in all sectors but when it is financed by foreign inflows it also causes a real exchange rate appreciation leading to a contraction in the open modern sector these results provide a partial explanation for recent patterns of growth in rwanda and elsewhere in africa where the nontradables or what we call the in between sector has expanded more rapidly than the tradable sector our results also highlight the dilemma faced by poor countries in dire need of public investment with a very limited tax base

education s role in china s structural transformation abstract we explore education s role in improving the allocation of labor between china s agricultural and nonagricultural sectors and measure the portion of china s recent growth attributable to this channel using detailed micro level data and an empirical model that allows for the endogenous selection of education and sector of employment we estimate the relationship between an individual s educational attainment sector and income we find that about 11 of aggregate growth in output per worker from 1978 to 2004 is accounted for by increased education with 9 coming through the labor reallocation channel and 2 attributable to increased within sector human capital

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

allocation under dictatorship research in stalin s archives we survey recent research on the soviet economy in the state party and military archives of the stalin era the archives have provided rich new evidence on the economic arrangements of a command system under a powerful dictator including stalin s role in the making of the economic system and economic policy stalin s accumulation objectives and the constraints that limited his power to achieve them the limits to administrative allocation the information flows and incentives that governed the behavior of economic managers the scope and significance of corruption and market oriented behavior and the prospects for economic reform

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

the industrialization and economic development of russia through the lens of a neoclassical growth model this article studies the structural transformation of russia in 1885 1940 from an agrarian to an industrial economy through the lens of a two sector neoclassical growth model we construct a data set that covers tsarist russia during 1885 1913 and soviet union during 1928 1940 we develop a methodology that allows us to identify the types of frictions and economic mechanisms that had the largest quantitative impact on russian economic development we find that entry barriers and monopoly power in the non agricultural sector were the most important reason for tsarist russia s failure to industrialize before world war i soviet industrial transformation after 1928 was achieved primarily by reducing such frictions albeit coinciding with a significantly lower performance of productivity in both agricultural and non agricultural sectors we find no evidence that tsarist agricultural institutions were a significant barrier to labour reallocation to manufacturing or that big push mechanisms were a major driver of soviet growth

structural change and economic growth this paper presents a model in which a country s measured average propensity to save endogenously rises when its economy industrializes the model has agricultural and manufacturing sectors only agriculture uses land if at early dates income per capita is low agricultural consumption is important land is valuable and capital gains on land may constitute most wealth accumulation leaving the country s nipa aps low if exogenous technological progress raises incomes over time engel s law shifts demand to manufactured goods then land s portfolio importance relative to reproducible capital diminishes and the national income and products account saving rate can rise this paper presents a model illustrating that structural change due to the operation of engel s law can systematically affect an economy s measured saving rate according to the model a country s national income and product account average propensity to save will rise naturally if and when technological progress sufficiently lifts its income per capita this suggests a new interpretation of time series evidence while saving rates historically tend to be higher after industrialization than before one cannot automatically infer that changing wealth accumulation behaviour led to modernization rather structural change accompanying growth may have caused the rise in saving rates this paper also warns that international trade could lead to a contrasting pattern in cross sectional data highincome nations might contemporaneously have lower measured saving rates than poor countries recent work by mankiw romer and weil 1992 islam 1995 mankiw 1995 and others investigates long run patterns the analyses assume that each economy has attained or is moving toward a steady state equilibrium as in solow 1956 a country s steady state level of per capita gdp depends on its average propensity to save aps its rate of population growth the efficiency of its production sector etc regression outcomes seem consistent with the solow model s prediction that a higher aps will ceteris paribus lead to a higher level of income per capita the idea is that heterogeneity of exogenous preferences leads to international differences in aps s and in turn to long run differences

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

recent theoretical work on the soft budget constraint the soft budget constraint is a syndrome that was identified and studied by janos kornai in his analysis of centrally planned economies see kornai 1980 the syndrome is said to arise when a seemingly unprofitable enterprise is bailed out by the government or the enterprise s creditors in other words the enterprise is not held to a fixed budget but finds its budget constraint softened by the infusion of additional credit when it is on the verge of failure kornai viewed the soft budget constraint as a crucial ingredient for explaining the salient features of socialist economic performance in particular the pervasiveness of shortages one interesting puzzle is why centrally planned economies have been particularly susceptible to the influence of the soft budget constraint the capitalist world is hardly immune as the recent financial crisis in asia attests but on the whole it has proved less vulnerable indeed the very origin of the soft budget constraint and the mechanism by which it gives rise to shortages and other undesirable effects are also obviously important questions although kornai s work has long been well known and appreciated answers to these associated theoretical questions have been hazarded only recently in maskin 1996 i surveyed some of the initial efforts in this direction including mathias dewatripont and maskin 1995 which argues that centralization of credit can give rise to soft budget constraints because it facilitates the refinancing of

on the heterogeneous welfare gains and losses from trade how are the gains and losses from trade distributed across individuals within a country first we document that tradable goods constitute a larger fraction of expenditures for poor households second we build a trade model with nonhomothetic preferences to generate the documented relationship between tradable expenditure shares income and wealth and uninsurable earnings risk to generate heterogeneity in income and wealth third we use the calibrated model to quantify the differential welfare gains and losses from trade along the income and wealth distribution in a numerical exercise we permanently reduce trade costs so as to generate a rise in import share of gdp commensurate with that seen in the data from 2001 to 2014 we find that households in the lowest wealth decile experience welfare gains over the transition measured by permanent consumption equivalents that are 67 percent larger than those in the highest wealth decile

conformism and structural change using a simple multisector model of endogenous growth we show that commodity specific consumption externalities can be a source of structural change when the degrees of consumption externalities are different between goods each sector grows at a different rate however the aggregate economy exhibits balanced growth in that capital stock and expenditure grow at the same constant rate a three sector version of our model may reconcile kaldor s stylized facts with empirically plausible profiles of industrial structure transformation

employment and hours over the business cycle abstract approximately one quarter of the adjustment in total hours of employment over the business cycle represents adjustments in hours while the remainder is explained by changes in employment real business cycle models characterize agents as either continuously adjusting their hours or making only labor force participation decisions about jobs with indivisible hours in this paper we extend the representative agent framework to allow for decisions on both participation and hours we calibrate and simulate a dynamic version of the model and show that it is better able to mimic some features of the aggregate data

structural change accounting with labor market distortions abstract this paper quantifies the relative importance of sectoral productivity and labor market distortions for structural change in the u s india mexico and brazil between 1960 and 2005 i use census data to compute human capital by sector and infer labor market distortions as sectoral gaps in wage per unit of human capital i incorporate these distortions into a model of structural change and calibrate the model to reproduce the time paths of sectoral shares of labor and value added for each country counterfactuals reveal that 1 tfp growth in agriculture drives most of the decline in its share of labor 2 the role of labor market distortions is limited

preference shifts and the change of consumption composition while most of the literature explaining the change in consumption composition has focused on the role of relative prices and non homothetic preferences this paper examines the importance of preference shifts i introduce dynamics in preferences and find that they play a relevant role and that their exclusion worsens model performance at least as much as the exclusion of allowing non homothetic preferences

the depressing effect of agricultural institutions on the prewar japanese economy why didn t the japanese miracle take place before world war ii the culprit we identify is a barrier that kept prewar agricultural employment constant using a standard neoclassical two sector growth model we show that the barrier induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level without the barrier japan s prewar gnp per worker would have been at least about a half of that of the united states not about a third as in the data the labor barrier existed because we argue the prewar patriarchy forced the son designated as heir to stay in agriculture

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

the rise of mass consumption societies this paper studies mechanisms behind the rise of mass consumption societies the development process depicted follows the flying geese pattern in which a series of industries take off one after another as productivity improves in these industries each consumer good becomes affordable to an increasingly large number of households which constantly expand the range of goods they consume this in turn generates larger markets for consumer goods which leads to further improvement in productivity for such virtuous cycles of productivity gains and expanding markets to occur income distribution should be neither too equal nor too unequal with too much equality the economy stagnates in a poverty trap with too much inequality the development stops prematurely

structural transformation and comparative advantage implications for small open economies data from the last half century show that revealed comparative advantage in agriculture manufacturing is negatively positively associated with the rate of decline in labour share in agriculture motivated by this finding the author constructs and calibrates a simple open economy model where there is learning by doing in manufacturing and industry supplied inputs to agricultural production this paper focuses on the effects of comparative advantage and learning by doing on structural transformation and calibrate the model to the us and the uk data to estimate key parameters of the model quantitative experiments show that holding constant other factors a small difference in a country s comparative advantage can account for a large variation in structural transformation for open economies which does not require nearly as much differential productivity growth as in closed economy models

estimating neighbourhood effects in house prices towards a new hedonic model approach a hedonic equation considers ols models with independently and identically distributed errors however quality of property and location tend to exhibit highly auto regressive correlation due to spatial dependence and heterogeneity a modification is made to multiple regression analysis based on the land rent concept so that the modified hedonic house price function can be determined this paper develops a stochastic approach which is able to correct autocorrelation bias in the hedonic function others tend to model the spatial autocorrelation through the error terms while this study models it through the constant term the sample was orientated by location to reflect the neighbourhood effects thus the neighbourhood effects can be separated from the random disturbance our model using data from hong kong incorporates adjustments reflecting net floor area ratio age floor level views transport accessibility and amenities such as availability of recreational facilities the stochastic model is a more

interurban house price gradient effect of urban hierarchy distance on house prices this paper applies a general spatial equilibrium model to investigate the effect that distance within the urban hierarchy can have on interurban house prices our spatial model predicts a negative

structural change and the kaldor facts in a growth model with relative price effects and non gorman preferences u s data reveal three facts 1 the share of goods in total expenditure declines at a constant rate over time 2 the price of goods relative to services declines at a constant rate over time and 3 poor households spend a larger fraction of their budget on goods than do rich households i provide a macroeconomic model with non gorman preferences that rationalizes these facts along with the aggregate kaldor facts the model is parsimonious and admits an analytical solution its functional form allows a decomposition of u s structural change into an income and substitution effect estimates from micro data show each of these effects to be of roughly equal importance

capital labor substitution structural change and the labor income share abstract recent work has documented declines in the labor income share in the united states and beyond this paper documents that this decline was more pronounced in manufacturing than in services in the u s and in a broad set of other industrialized economies and shows that a model with cross sectoral differences in productivity growth and in the degree of capital labor substitutability is consistent with these trends we calibrate the model exploiting additional information on the pace of structural change from manufacturing to services on which the model also has predictions we then conduct a decomposition to establish the relative importance of several potential drivers of changes in factor income shares and structural change that have been proposed in the literature this exercise reveals that differences in the degree of capital bias of technical change across sectors combined with differences in substitution possibilities are key determinants of the observed patterns

poverty and famines an essay on entitlement and deprivation this book focuses on the causes of starvation in general and famines in particular the traditional analysis of famines is shown to be fundamentally defective and the author develops an alternative analysis

structural change in a multisector model of growth we study a multi sector model of growth with differences in tfp growth rates across sectors and derive sufficient conditions for the coexistence of structural change characterized by sectoral labour reallocation and constant aggregate growth path the conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists we present evidence from us two digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services we show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model

growing up in a recession does the historical macroeconomic environment affect preferences for redistribution we find that individuals who experienced a recession when young believe that success in life depends more on luck than effort support more government redistribution and tend to vote for left wing parties the effect of recessions on beliefs is long lasting we support our findings with evidence from three different datasets first we identify the effect of recessions on beliefs exploiting time and regional variation in macroeconomic conditions using data from the 1972 2010 general social survey our specifications control for nonlinear time period life cycle and cohort effects as well as a host of background variables second we rely on data from the national longitudinal survey of the high school class of 1972 to corroborate the age period cohort specification and look at heterogeneous effects of experiencing a recession during early adulthood third using data from the world value survey we confirm our findings with a sample of 37 countries whose citizens experienced macroeconomic disasters at different points in history

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

population age structure and consumption expenditure composition evidence from european countries abstract this paper aims at evaluating the effect of population age structure on households aggregate preferences and through this channel on the sectoral composition of the final consumption expenditure the analysis of european coicop 2 digit data shows that the contribution of demographic dynamics to model fit is highly relevant only slightly lower than the contribution of the income effect

coordination commitment and enforcement the case of the merchant guild we interpret historical evidence in light of a repeated game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants the merchant guild developed the theoretically required attributes secured merchants property rights and evolved in response to crises to extend the range of its effectiveness contributing to the expansion of trade during the late medieval period we elaborate on the relations between our theory and the monopoly theory of merchant guilds and contrast it with repeated game theories that provide no role for formal organization

changes in sectoral composition associated with economic growth in this paper the author uses dynamic general equilibrium methods to examine the interrelationship between sectoral composition and growth she shows that growth is affected by sectoral composition and vice versa the model is basically a solow model of sustained growth with multiple consumption goods and nonhomothetic preferences each consumption good is produced using different factor intensities the rate of exogenous technological change is different in each sector nonhomotheticity of preferences drives the result that sectoral composition affects growth rates copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

a comprehensive analysis of the effects of risk measures on bank efficiency evidence from emerging asian countries this study investigates the role of risk in determining the cost efficiency of international banks in eight emerging asian countries researchers of this paper consider three distinct risk aspects under a total of eight risk measures credit risk operational risk and market risk we apply a heteroscedastic stochastic frontier model to estimate bank cost efficiency in our analysis additionally this study analyzes the marginal effects of all risk measures on the inefficiency effect in order to explore a more detailed relationship between risks and efficiency the empirical results indicate that the risk measures represent significant effects on both the level and variability of bank efficiency we also find that these effects vary across countries and over time

the 1947 soviet famine and the entitlement approach to famines this paper presents an analysis of the economics of the 1947 soviet famine using data from recently declassified archives it is argued that the best estimate that can currently be given of the number of excess deaths in the range 1 0 1 5 million the demographic loss was greater during the famine surplus stocks in the hands of the state seem to have been sufficient to have fed all those who died of starvation the famine was a fad2 preventable food availability decline famine which occurred because a drought caused a bad harvest and hence reduced food availability but had the priorities of the government been different there might have been no famine or a much smaller one despite the drought the selection of victims can be understood in terms of the entitlement approach

is urban land price adjustment more sluggish than housing price adjustment empirical evidence this article hypothesises that due to factors such as thin trading and lack of publicly available data on transactions in the land market urban land prices react more sluggishly to shocks in market fundamentals than housing prices do based on a vector error correction model utilising quarterly data for the helsinki metropolitan area in finland over 1988q1 2008q2 the empirical analysis provides support for this hypothesis in particular the results suggest that new information regarding the market fundamentals is more rapidly reflected in housing prices than in land prices nevertheless it is the housing price level instead of land prices that adjusts towards a cointegrating long run equilibrium between housing prices land prices and construction costs

social composition social conflict and economic development this article investigates how the existence of non cooperative social groups that appropriate resources either peacefully or through contest affects economic growth when property rights are unenforceable for symmetric groups it shows that economic growth is generated only in peaceful societies for the case of asymmetric groups rebel equilibria are investigated in which a large majority behaves peacefully although challenged by an aggressive minority the article explains how conflict intensity and the rate of economic growth depend on social fractionalisation general productivity of the economy power of social elites and the ease at which resources are appropriated

the determinants of nonresidential urban land values abstract this paper presents the results of an empirical study of nonresidential urban land values in the dallas metropolitan area the data base consists of 467 vacant land transactions from 1978 to 1982 by concentrating on sales prices of vacant land rather than improved property problems normally encountered from use of appraised values or improved properties are eliminated separate models are developed for industrial commercial and office land the study focuses on the tendency toward agglomeration for consumers of each land use as measured by the impact on land values in the central business district suburban nodes and other employment concentrations the results provide insight into a number of influences on urban land value and offer evidence that office land derives greater benefit from agglomeration than does commercial or industrial land

all λ separable demands and rationalizing utility functions abstract frisch demands depend on prices and a multiplier associated with the consumer s budget constraint the case in which demands are separable in has been the case of greatest empirical interest since latent variable methods can be adopted to control for consumer wealth when estimating demands subject only to standard modest regularity conditions we show that quantities demanded are separable if and only if the rationalizing utility function is additively separable in these quantities

hybrid innovation in meiji japan japan s hybrid innovation system during the meiji era provides a useful laboratory for examining the effectiveness of complementary incentives to patents patents were introduced in 1885 and by 1911 1 2 million mostly nonpecuniary prizes were awarded at 8 503 competitions prizes provided a strong boost to patents especially in less developed prefectures and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes relative to distant control prefectures without prizes linking competition expenditures with the expected market value of patents induced by the prizes permits a cost benefit assessment of the prize competitions to be made

can traditional theories of structural change fit the data two traditional explanations for structural changes are sector biased technological progress and non homothetic preferences this paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis a vis time series the exercise identifies a set of puzzles for standard theories i the model cannot account for the steep decline in manufacturing and rise in services in the later data ii the standard model requires implausibly low elasticity of substitution across goods to match the consumption and output data and iii the behavior of consumption and output shares differs significantly from that of employment shares we argue that models that incorporate home production sector specific factor distortions and differences across sectors in the accumulation of human capital are promising avenues to amend the standard models jel o11 o14 o41

the soviet economic decline soviet growth from 1960 to 1989 was the worst in the world after we control for investment and human capital the relative performance worsens over time there is some evidence that the burden of defense spending modestly contributed to the soviet debacle the declining soviet growth rate from 1950 to 1987 can be accounted for by a declining marginal product of capital with a constant rate of growth of total factor productivity the soviet reliance on extensive growth rising capital to output ratios was no greater than that of market economies such as japan and the republic of korea but a low elasticity of substitution between capital and labor implied especially acute diminishing returns to capital compared with the case in market economies copyright 1995 by oxford university press

an examination of the monopoly zoning hypothesis there have been several studies that have investigated the effect of zoning on housing prices one hypothesis is that the restrictiveness of zoning laws will vary with the monopoly power of a town the degree of monopoly power varies with the number of towns in the urban area urban areas with few zoning jurisdictions are likely to have higher housing prices than more fragmented urban areas previous research on this topic has shown mixed results the results in this article suggest that towns with more monopoly power do tend to have significantly higher housing prices than more fragmented urban areas

structural change in an interdependent world a global view of manufacturing decline this paper presents a simple model of the world economy in which productivity gains in manufacturing are responsible for the global trend of manufacturing decline and yet in a cross section of countries faster productivity gains in manufacturing do not necessarily imply faster declines in manufacturing in doing so it aims to draw attention to the common pitfall of using the cross country evidence to test a closed economy model and argues for a global perspective in order to understand cross country patterns of structural change one needs a world economy model in which the interdependence across countries is explicitly spelled out jel f43 o11 o14 o19

theory and estimation in the economics of housing demand the main purpose of this paper is to review recent theoretical and empirical developments in the economics of housing demand in particular we ask what is known concerning the permanent income elasticity of housing demand vis a vis the current or measured income elasticity what is known concerning price elasticities what is the appropriate functional form for housing demand equations what is the role of demographic variables what is known concerning dynamic aspects of housing demand what appear to be the major sources of bias in existing estimates of demand equations

political economy of crime and punishment under stalin why do dictatorships favor harsher punishments than democracies we use a rational choice approach to explain the stylized facts of stalin s dictatorship preference for harsh sanctions higher incarceration rates greater use of capital punishment low tolerance for theft of state property and workplace violations they are shown to be explained by the preferences of a rational dictator who does not internalize the social and private cost of punishment

catching up in education in the economic catch up of japan with the united states 1890 1990 i the problem and the approach the record of modern economic growth a la simon kuznets shows that sustained increases in real national income in advanced market economies depend predominantly on improved efficiency as measured by the growth of total factor productivity tfp real national income is less dependent on increases in conventional inputs that is physical capital and labor in personhours with the strong advocacy of economists such as theodore schultz it has been established that investment in education is a major source of growth in tfp and hence national income estimations of the contribution of tfp to economic growth in advanced market economies have hitherto been limited to periods after these economies reached a stage of relatively high income however recent extensions of growth accounting analysis for earlier stages of industrialization in the united states as well as in japan show that the contribution of tfp growth to national income growth was relatively minor these historical findings are also consistent with other studies indicating that the contribution of tfp growth to economic growth was small in comparison to the contribution of physical capital accumulation in newly industrialized economies nies in recent decades such observations suggest that the role of education may be different between the earlier and the later stages of modern economic growth the validity of this hypothesis is critical for drawing relevant policy implications for developing economies from the historical experiences of developed economies nevertheless a comprehensive analysis on the role of education covering the entire span of modern economic growth has been stymied by the sheer

region specific estimates of the determinants of real estate investment in china this paper utilises a reduced form equilibrium model to investigate the possible sources of real estate investment differentials among 22 provinces five autonomous regions and four municipalities of the people s republic of china the model is estimated using panel data from 2001 to 2006 yielding a total of 186 observations specifically empirical results suggest that demographic economic and planning factors are the major determinants to cause real estate investment to vary among chinese regions the relatively small coefficient estimate of real interest rates indicates that it has a significant but modest impact based on the coefficient estimates this paper finally suggests that the chinese government should focus and work on several policy parameters in order to achieve a more balanced state of real estate investment across chinese regions

output targets the soft budget constraint and the firm under central planning abstract the paper considers the case of an expected profit maximizing firm which has an output target imposed on it by central planners and which may receive partial bailouts if its operating profit is negative the model contains several sources of uncertainty the paper compares the amounts of input use in the pure bailout case the pure output target case the bailout with output target case and the standard competitive case both theoretically and with numerical experiments

the politics of market socialism the debate over market socialism has ignored the importance of the assumptions about the objectives of politicians in determining resource allocation theory and evidence suggest that totalitarian socialism does not lead to efficient resource allocation because dictators do not maximize social welfare but democratic governments have political objectives different from social welfare as well the authors argue that because these governments command greater resources have more control rights under socialism democratic socialism even if it could exist is a less efficient system than democratic capitalism thus the political case against market socialism is even stronger than the economic case

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

unravelling the residential rent value puzzle an empirical investigation this paper tests empirically whether observed variation in the relationship between residential rents and housing prices in us metropolitan areas during the 1974 79 period can be attributed to differences in the user cost of residential capital consistent with user cost models house values are found to be high relative to market rents where real after tax financing costs are low and where expected capital gains from appreciation are large at the same time high rental vacancies lagging rents and high inflation rates per se also are found to raise structure prices relative to market clearing rents suggesting significant adjustment lags from the durability of the housing stock transaction costs and segmentation between owner and rental submarkets

m form hierarchy with poorly diversified divisions a case of khrushchev s reform in soviet russia we test the premise of the theoretical literature that m form political hierarchies are effective in creating yardstick competition between regional divisions only when those divisions have sufficiently diversified or similar industrial composition the reason for this is that the competition among poorly diversified inter related divisions creates incentives for regional leaders to pursue policies that inhibit industrial growth in neighboring regions in order to make their own region look better from the point of view of the center we use a unique episode in soviet history when a traditional soviet unitary form u form hierarchy was replaced by a multidivisional form m form organization namely khrushchev s sovnarkhoz reform first we demonstrate that during this reform regional leaders were subjected to relative performance evaluation which created incentives to generate industrial growth second we show that these career concerns resulted in higher growth in regions with sufficiently diversified and therefore self contained economies and lower growth in highly specialized regions

can total factor productivity explain value added growth in services abstract this paper examines the factors responsible for generating the services led growth witnessed in the indian economy during 1980 2005 a sectoral growth accounting exercise shows that total factor productivity tfp growth was the fastest for services moreover this tfp increase was significant in accounting for service sector value added growth a growth model with agriculture industry and services as three principal sectors is calibrated to indian data using sectoral tfp growth rates the baseline model performs well in accounting for the evolution of value added shares and their growth rates but is unable to capture sectoral employment share trends the performance of the model with respect to value added shares improves when the post 1991 increase in service sector tfp growth following the inception of market based liberalization reforms is accounted for a modified version of the model with public capital can better track trends in sectoral employment shares

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt