entry in greek manufacturing industry athens vs the rest of greece the paper reports an attempt to estimate the determinants of entry in greek manufacturing industry in the 1984 87 period and to identify the differences between locatio nal entry preferences entry in athens is found to be hesitant with respect to factors such as profitability and increased competition conversely entry in the rest of the country is strongly related to expected profits and safe markets negatively affected by relative labour costs and indifferent to international competition threats the healthier approach of regional entry is enhancing regional development prospects and partly justifies the strict regional policies of the 1980s

optimal capital income taxation with incomplete markets borrowing constraints and constant discounting for a wide class of infinitely lived agent models chamley has shown that the optimal capital income tax rate is zero in the long run lucas has argued that for the u s economy there is a significant welfare gain from switching to this policy this paper shows that for the bewley class of models with incomplete insurance markets and borrowing constraints the optimal tax rate on capital income is positive even in the long run therefore cutting the capital income tax to zero may well lead to welfare losses

the risky steady state we propose a simple quantitative method to linearize around the risky steady state of a small open economy unlike when the deterministic steady state is used the net foreign asset position is well defined we allow for stochastic income and stochastic interest rate

liquid capital and market liquidity this article considers how the supply of liquid capital affects the liquidity of asset markets the article views the former notion as a technological property of real investments and the latter as an endogenous property of financial market equilibrium and describes a channel by which the two are linked when agents hold more wealth in technologically liquid investments a marginal adjustment to portfolio holdings alters discount rates less causing a smaller price impact thus even without intermediaries or frictions the stock of transformable capital may be a crucial determinant of the resilience of financial markets

transaction costs and consumption abstract the rational expectations permanent income hypothesis re pih fails to explain several well documented features of consumption behavior first the estimated marginal propensity to consume mpc for unanticipated transitory income shocks is often much higher than what the theory warrants second the estimated mpc is typically much bigger for small shocks of this type than for large shocks third consumption is often smoothed against large anticipated future income changes but not always against small changes this paper argues that these findings can be reconciled within a re pih model that includes a cash in advance constraint and an assumption that the agent is required to pay a fixed transaction cost to transfer wealth between cash and assets key results of the paper include first the agent follows an s s rule with respect to cash holdings when he makes wealth transfer decisions second the mpc within the no transfer band is higher than that out of the band and can be as high as exactly equal to one and third the agent smoothes consumption in response to news of large future income changes but not necessarily to small ones

opportunities incentives and the collective patterns of technological change in a few pages in the introductory article for this debate vernon ruttan succeeds in the unlikely task of flagging many issues at the core of the economic interpretation of technological change and by doing so he implicitly addresses also a few sensitive spots for the economic discipline at large here i will not attempt to provide any thorough view of what i consider the achievements and limitations of the current state of the art see however freeman i 994 for a critical survey which i largely share rather i shall put forward a series of remarks which hopefully could be seen as part of a much wider and still largely unexplored research programme as a premise just note that some form of attention to technology related phenomena has spread over the last 20 30 years from small enclaves of heterodox economists and economic historians to become an important concern even for quite mainstream theories of e g the firm industrial organisation macroeconomics trade growth etc from patent races all the way to new trade and new growth theories and even real business cycle macro models technical change has drawn a consideration which is less by default than it was say in robert solow s original growth models orjoe bain s barriers to entry views on industrial structures and in parallel empirical studies at the levels of specific technologies firms sectors and countries have boomed for overviews cf dosi i988 nelson i993 freeman i982 i 994 cohen i 995 and granstrand i 994 among others so at least in this sense those decreasing returns to the economics of technical change suggested by ruttan do not seem to have set in however ruttan s paper raises also substantive questions about the relative success of three interpretative perspectives which he calls induced evolutionary and path dependent in the following i shall argue that an evolutionary perspective broadly defined can easily accommodate both inducement effects and path dependent patterns of technical change let me start from what i consider the major building blocks of an

existence of stationary equilibrium in an incomplete market model with endogenous labor supply in this article i first study an income fluctuation problem with endogenous labor supply let be the agent s time discount factor and r 0 be the constant gross rate of return on assets for r 1 i show that the agent s wealth either approaches infinity almost surely or converges to a finite level almost surely for r

capital income taxation wealth distribution and borrowing constraints the theorem of zero taxation of capital income is reexamined and is shown to hinge critically on the assumptions of a long horizon and perfect markets for the inter temporal allocation of resources the theorem does not hold when borrowing constraints prevent individuals from insuring against idiosyncratic shocks and have a precautionary motive for savings structural assumptions are made such that with no taxation aggregate savings are socially excessive in the long run i e the rate of return is smaller than the discount rate sufficient conditions for a pareto efficient taxation or subsidization of capital in the long run depend on the correlation between individuals consumption and savings a subsidy may be efficient when individuals incomes follow a predictable pattern of life cycles with no negative bequest 2001 elsevier science b v all rights reserved

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

export diversification and international debt under terms of trade uncertainty abstract this paper proposes an intertemporal approach to export diversification in developing countries facing uncertain terms of trade by incorporating international debt by far the predominant source of ldc external financing today the model provides a richer and more realistic framework than static models with no financial markets or models emphasizing international trade in equities the approach is applied to a small developing country with a comparative advantage in a risky commodity to illustrate explicitly the relation between intertemporal substitution in consumption and diversification in production

incomplete markets labor supply and capital accumulation we explore the accumulation of capital in the presence of limited insurance against idiosyncratic shocks borrowing constraints and endogenous labor supply in the exogenous labor supply case e g aiyagari 1994 huggett 1997 the presence of limited insurance increases the demand for savings for precautionary reasons as a consequence capital and output are higher under incomplete markets we show that if labor hours are endogenous labor supply is likely to be lower under incomplete markets because those agents who experience a high shock to productivity are ex post richer and they work fewer hours in some cases this wealth effect can overcome the aggregate precautionary savings and give rise to lower savings and output under incomplete

financial integration and growth in a risky world abstract we revisit the debate on the benefits of financial integration in a two country neoclassical growth model with aggregate uncertainty the framework accounts simultaneously for gains from a more efficient capital allocation and gains from risk sharing together with their interaction global numerical methods allow for meaningful welfare comparisons gains from integration are quantitatively small even for riskier and capital scarce emerging economies these countries import capital for efficiency reasons before exporting it for self insurance leading to capital flows and growth reversals along the transition this opens the door to richer empirical implications than previously considered in the literature

research and development cash flow agency and governance uk large companies this paper investigates the determinants of r d expenditure using a sample of uk listed companies with the highest spend from 2000 to 2005 we investigate the effect of corporate governance and ownership on r d using panel data the results provide some evidence that more governance tends to depress r d activity a finding that is robust to whether a composite or disaggregated index of governance is used one innovation of the paper is that we treat agency and finance effects interactively the ownership stake of the ceo appears to be supportive for r d

equilibrium asset prices with undiversifiable labor income risk abstract in a two period lucas tree economy in which ex ante identical but ex post dissimilar agents face undiversifiable labor income risk calibrating a wrong representative agent model results in overstating the equilibrium riskfree rate and in understating the equilibrium equity premium if the utility function exhibits decreasing absolute risk aversion and decreasing absolute prudence these behavioral assumptions provide as a consequence a theoretical rationale for the often advanced conjecture that nontraded risk contributes to the solution of the riskfree rate and equity premium puzzles

consumption liquidity constraints and asset accumulation in the presence of random income fluctuations recent empirical research flavin 1981 hagashi 1982 has rejected the certainty equivalent formulation of permanent income hypothesis hall 1978 these findings are often attributed to households inability to borrow completely against expected future labor income this paper is a theoretical investigation of optimal consumption behavior under risk aversion random income fluctuations and borrowing restrictions our principle objective is to establish the existence and to investigate the properties of the stationary probability distribution which characterizes the asymptotic behavior of consumption under these conditions this abstract was borrowed from another version of this item

differences in the rates of return to r d for european and us young leading r d firms this paper examines the sources of europe s lagging business r d performance relative to the us particularly the role played by missing young leading innovators in high technology intensive sectors in europe it investigates through econometric analysis differences in the rates of return to r d of european and us large r d firms it finds that while in the us young firms succeed in realizing significantly higher rates of return to r d as compared to their older counterparts including in high tech sectors european firms fail to generate significant rates of return even if they are yollies and even if they are in high tech sectors these findings can at least partly explain why europe has less r d intensive young leading innovators in high technology intensive sectors

consumption and investment under constraints abstract we study the problem of an investor who is endowed with a deterministic level of initial capital and must use this endowment to consume and invest in a financial market the investor is constrained to consume at a minimum rate throughout the period and has to maintain his wealth over a lower bound at all times both these minimal requirements may be stochastic an example of such an investor would be an investment firm with cash flow commitments and subject to regulatory capital constraints in addition the investor s portfolio choices are limited to a convex constraint set this accounts for prohibitions on short selling and incompleteness of the market using the space of associated risk neutral measures we construct portfolio policies to support target consumption investment plans we also consider a utility maximization problem for the investor and provide a related dual minimization problem over the space of measures the solution of this dual problem provides a price system under which the investor can solve for his optimal consumption investment policy in general however we are not assured of existence due to the fact that the investor s minimal requirements may themselves be beyond the span of the constrained portfolios

the effects of financial development in the short and long run theory and evidence from india abstract although many view financial access as a means of reducing poverty or increasing growth empirical studies have produced contradictory results one problem is that most studies cover only a short time frame and do not consider dynamic effects i show that introducing credit in a general model of intertemporal consumption creates a boom in consumption and reduces poverty initially but eventually reduces mean consumption because credit substitutes for precautionary wealth using new consistent consumption data that cover a much longer time period than most studies my empirical findings show that increased access to bank branches in rural india increased consumption initially and reduced poverty but consumption later fell and poverty rose the long term effect is still positive however suggesting that credit may have a beneficial role beyond consumption smoothing

duality and liquidity constraints under uncertainty a dual approach to the problem of maximizing lifetime utility subject to liquidity constraints in discrete time leads to a dual dynamic programming formulation which links commodity and asset demand theory under uncertainty with frisch demand theory we establish the existence of a threshold level of wealth that characterizes constrained behavior we explore the power of the dual approach for empirical work

employment and technological innovation evidence from u k manufacturing firms this article uses british firm level panel data on actual innovative activity drawn from different statistical sources to identify the effect of technical change on jobs previous work tends to find positive associations of proxies for technical change and employment but such studies suffer from various statistical drawbacks in this study even when one controls for fixed effects dynamics and endogeneity innovations have a positive and significant effect on employment which persists over several years there seems to be little direct role for spillover effects from industry innovations or any role for industry wages or union power

unemployment and liquidity constraints summary we present a dynamic framework for the interaction between borrowing liquidity constraints and deviations of actual hours from desired hours both measured by discrete valued indicators and estimate it as a system of dynamic binary and ordered probit models with panel data from the panel study of income dynamics we analyze a household s propensity to be liquidity constrained by means of a dynamic binary probit model we analyze qualitative aspects of the conditions of employment namely whether the household head is involuntarily overemployed voluntarily employed or involuntarily underemployed or unemployed by means of a dynamic ordered probit model we focus on the possible interaction between the two types of constraints we estimate these models jointly using maximum simulated likelihood where we allow for individual random effects along with an autoregressive process for the general error term in each equation a novel feature of our method is that it allows for the random effects to be correlated with regressors in a time invariant fashion our results provide strong support for the basic theory of constrained behavior and the interaction between liquidity constraints and exogenous constraints on labor supply copyright 2007 john wiley sons ltd

does europe perform too little corporate r d a comparison of eu and non eu corporate r d performance this paper examines whether there are differences in private r d investment performance between the eu and the us and if so why the study is based on data from the 2008 eu industrial r d investment scoreboard the investigation assesses the effects of several very distinct factors that can determine the relative size of the overall r d intensities of the two economies these are the influence of sector composition structural effect vis a vis the intensity of r d in each sector intrinsic effect and the company demographics the paper finds that the lower overall corporate r d intensity for the eu is the result of sector specialisation structural effect the us has a stronger sectoral specialisation in the high r d intensity especially ict related sectors than does the eu and also has a much larger population of r d investing firms within these sectors since aggregate r d indicators are so closely dependent on industrial structures many of the debates and claims about differences in comparative r d performance are in effect about industrial structure rather than sector r d performance these have complex policy implications that are discussed in the closing section

when do borrowing constraints bind some new results on the income fluctuation problem abstract the empirical failure of the permanent income hypothesis has prompted researchers to investigate models in which consumers are liquidity constrained as shown in deaton econometrica 59 5 1991 1221 liquidity constrained consumers might choose to exhaust their borrowing capacity from time to time yet due to technical limitations the conditions under which this behavior arises have not been investigated the present paper extends the class of solvable models in a way that allows this issue to be dealt with it turns out that under the loosest sustainable borrowing constraint the agent might systematically avoid exhausting his borrowing capacity

the transatlantic productivity gap a survey of the main causes abstract during the last 2 decades europe s economy experienced a productivity slowdown whereas the united states us economy exhibited a marked acceleration the result is that since the early 1990s the relative productivity levels between the two regions have continuously diverged leading to a transatlantic productivity gap much of the explanation for this is the strong performance of the us in the so called new economy or knowledge economy and in particular the underinvestment in r d and as a result productivity and innovation has been at the forefront in the european policy agenda however various explanations for the us european union transatlantic productivity gap suggest that the picture is rather more complex than simply the effects on or the result of particular technology driven sectors