distinguished lecture on economics in government lessons from past productivity booms the u s economy has been enjoying substantially faster productivity growth for the past eight years than it did over the preceding two decades from 1995 to 2003 labor productivity rose at an average annual rate of about 3 percent up from an average annual rate of around 1 5 percent between 1973 and 1995 in both 2002 and 2003 output per hour increased more than 4 percent the significance of the improvement since 1995 can hardly be overstated even after one takes into account the possibility that the increases of the past two years in part reflect cyclical influences and thus overstate the underlying trend if productivity were to continue to rise at an average annual rate of 3 percent the standard of living in the united states would double roughly every 24 years if on the other hand productivity growth were to revert to an average annual pace of 1 5 percent a doubling in the standard of living would occur every 47 years a number of observers argue that the present era of robust trend productivity growth will soon come to an end others contend that the potential gains to productivity from the technological advances associated with the computer revolu

budget processes and commitment to fiscal discipline abstract we present a framework of investigation into the political economy of the budget process our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion empirical evidence supports that proposition the choice of rules depends on the political environment as well as the dominant source of uncertainty in the budget process

did bank distress stifle innovation during the great depression we find a negative relationship between bank distress and the level quality and trajectory of firm level innovation during the great depression particularly for r d firms operating in capital intensive industries however we also show that because a sufficient number of r d intensive firms were located in counties with lower levels of bank distress or were operating in less capital intensive industries the negative effects were mitigated in aggregate although depression era bank distress was associated with the stifling of innovation our results also help to explain why technological development was still robust following one of the largest shocks in the history of the u s banking system

technological diffusion and asset prices in this paper we demonstrate that the gradual diffusion of technology causes the stock market to exhibit a cyclical behavior more importantly we attribute sharp declines and increases in the stock market such as the ones that occurred in the early 1970s and mid 1990s in the united states to expected rapid technological diffusion

a positive theory of social security based on reputation we construct a general equilibrium model in which a pay as you go social security system can be adopted and sustained as a political and economic equilibrium we alalyze the welfare implictions of this system and compare general equilibrium welfare measure to the commonly used notion of actuarial fairness

feature it diffusion and industry and labour market dynamics the emergence and rapid diffusion of information and communication technology is the most radical technological transformation of the last couple of decades and has had an enormous economic impact this bundle of four articles contains research that discusses major economic implications of the diffusion of it they focus on two main implications of it i networks and industry dynamics and ii it and workplace organisation the two sets of two articles contribute both original theoretical insights and new empirical results to these themes

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

when does it take a nixon to go to china substantial policy changes like market oriented reforms by populist parties and steps towards peace by hawks are sometimes implemented by unlikely parties to account for such episodes this paper develops a framework in which incumbent politicians have better information about the state of the world than voters the incumbent is unable to credibly transmit all this information since voters are also imperfectly informed about his ideology the paper identifies conditions under which an incumbent party s electoral prospects increase the more atypical the policy it proposes popular support for a policy or its credibility depends on the policymaker policy pair copyright 1998 by american economic association

an empirical equilibrium job search model with search on the job and heterogeneous workers and firms in this article we present and estimate a synthesis of previous equilibrium search models allowing for continuous distributions of workers opportunity costs of employment as well as firms productivities the model allows for on the job search and we assume that job offer arrival rates for workers are independent of their labor market state we derive the theoretical implications of these assumptions we provide simulations and we develop a semiparametric estimation procedure that we apply to a dataset of individual labor market histories

information decisions and productivity on board computers and capacity utilization in trucking productivity reflects not only how efficiently inputs are transformed into outputs but also how well information is applied to resource allocation decisions this paper examines how information technology has affected capacity utilization in the trucking industry estimates for 1997 indicate that advanced on board computers obcs have increased capacity utilization among adopting trucks by 13 percent these increases are higher than for 1992 suggesting lags in the returns to adoption and are highly skewed across hauls the 1997 estimates imply that obcs have enabled 3 percent higher capacity utilization in the industry which translates to billions of dollars of annual benefits jel d24 l92 o33 o47

the aging population and the size of the welfare state data for the united states and countries in western europe indicate a negative correlation between the dependency ratio and labor tax rates and the generosity of social transfers after other factors that influence the size of the welfare state are controlled for this occurs despite the increased political clout of the dependent population implied by the aging of the population this paper develops an overlapping generations model of intra and intergenerational transfers including old age social security and human capital formation that addresses this seeming puzzle we show that with democratic voting an increase in the dependency ratio can lead to lower taxes or less generous social transfers

do deployment policies pick technologies by not picking applications a simulation of investment decisions in technologies with multiple applications abstract the role of deployment policies that aim to foster technological change has grown considerably especially in the fields of energy and climate however recent research has shown that the adoption of deployment policies carries the potential of locking in the technology that is most cost effective at the point of policy introduction but may be inefficient in the long term the present paper contributes to the emerging literature on the role of deployment policies in creating path dependency and eventually technology lock in while previous studies focused on the relationship between lock in and the technology specificity of deployment policies this paper introduces a new factor the existence of multiple applications for a technology we argue that this factor is highly relevant for technological lock in and should be considered by policy makers to support our argument we simulate the competition among four stationary battery technologies across energy system applications in an investment simulation model this simulation shows that the degree of competition among technologies differs strongly across applications which corresponds with a highly varying lock in probability hence selecting applications in deployment policies very likely corresponds to selecting technologies we discuss the implications of these results for both policy makers and for the academic debate on deployment policies and technological lock in as well as on technology assessment and governance more generally based on the notion that policies can have different technology specificity levels we develop the idea of the application specificity of policies and provide examples of currently enacted deployment policies that vary in terms of their technology and application specificity

stabilization of emissions of co 2 a computable general equilibrium assessment a multisector computable general equilibrium model is used to study economic development perspectives in norway if carbon dioxide emissions were stabilized the effects discussed include impacts on main macroeconomic indicators and economic growth sectoral allocation of production and effects on the market for energy the impact of pollutants other than carbon dioxide on emissions is assessed along with the related impact on noneconomic welfare the results indicate that carbon dioxide emissions might be stabilized in norway without dramatically reducing economic growth sectoral allocation effects are much larger a substantial reduction in emissions to air other than carbon dioxide is found yielding considerable gains in noneconomic welfare copyright 1992 by the editors of the scandinavian journal of economics

electrification and energy productivity abstract energy productivity is crucial for sustainable development we use cointegration analyses to investigate the effect of electricity on energy productivity in swedish industry from 1930 to 1990 electricity augmented energy productivity in those industrial branches that used electricity for multiple purposes this productivity effect goes beyond book keeping effects i e it is not only the result of electricity being produced in one sector taking the energy transformation losses and consumed in another receiving the benefits

technological change and the stock market tobin s average q has usually been well above 1 but fell below 1 during 1974 1984 our model explains this pattern and reconciles it with unchanging aggregate investment the stock market value in the numerator of q reflects ownership of physical capital and knowledge but the denominator measures just physical capital therefore q is usually above 1 periodic arrivals of important new technologies such as the microprocessor in the 1970 s suddenly render old knowledge and capital obsolete causing the stock market to drop national accounts measures of physical capital miss this rapid obsolescence then q appears to drop below 1 jel e44 o3 o41

embodied technological change learning by doing and the productivity slowdown the productivity slowdown faced by the us economy since the first oil shock has been associated with a rise in the decline rate of the relative price of equipment and a reduction in the rate of disembodied technical change we build up a growth model in which learning by doing is the engine of both embodied and disembodied technological progress a change in the relative efficiency of learning by doing from the consumption to the investment sector is shown to imply a technological reassignment consistent with the above mentioned evidence this result derives from the interaction between the obsolescence costs inherent to embodiment and the learning by doing engine

computer mediated transactions every now and then a set of technologies becomes available that sets off a period of combinatorial innovation think of standardized mechanical parts in the 1800s the gasoline engine in the early 1900s electronics in the 1920s integrated circuits in the 1970s and the internet in the last decade or so the component parts of these technologies can be combined and recombined by innovators to create new devices and applications since these innovators are working in parallel with similar components it is common to see simultaneous invention there are many well known examples such as the electric light the airplane the automobile and the telephone many scholars have described such periods of innovation using terms such as recombinant growth general purpose technologies cumulative synthesis and clusters of innovation the internet and the web are wonderful examples of combinatorial innovation in the last 15 years we have seen a huge proliferation of web applications all built from a basic set of component technologies the internet itself was a rather unlikely innovation i like to describe it as a lab experiment that got loose since the internet arose from the research community rather than the private sector it had no obvious business model other public computer networks such as aol compuserve and minitel generally used a subscription models but were centrally controlled and offered little scope for innovation at the user level the internet won out over these alternatives precisely because it offered a flexible set of component technologies which encouraged combinatorial innovation

the solow productivity paradox what do computers do to productivity 1 you don t see computers everywhere in a meaningful economic sense computers and information processing equipment are a relatively small share of gdp and of the capital stock 2 you only thinkyou see computers everywhere government hedonic price indexes for computers fall too fast according to this position and therefore measured real computer output growth is also too fast 3 you may not see computers everywhere but in the industrial sectors where you most see them output is poorly measured examples are finance and insurance which are heavy users of information technology and where even the concept of output is poorly specified 4 whether or not you see computers everywhere some of what they do is not counted in economic statistics examples are consumption on the job convenience better user interface and so forth 5 you don t see computers in the productivity statistics yet but wait a bit and you will this is the analogy with the diffusion of electricity the idea that the productivity implications of a new technology are only visible witlh a long lag 6 you see computers everywhere but in the productivity statistics because computers are not as productive as you think here there are many anecdotes such as failed computer system design projects but there are also assertions from computer science that computer and software design has taken a wrong turn 7 there is no paradox some economists are counting innovations and new products on an arithmetic scale when they should count on a logarithmic scale

a general equilibrium assessment of rebound effects in this paper we use a general equilibrium model applied to a national economy norway to explore the potential for energy efficiency improvements to trigger economic forces that offset potential savings from using more efficient technologies rebound effects two types of energy efficiency improvements electricity and oil are introduced into various sectors of the economy our results suggest significant and surprising differences across sectors concerning both energy use and consequences for the build up of greenhouse gases rebound effects are found to be quite significant for manufacturing sectors since long term consumption of energy undergoes minor reductions or increases in response to efficiency improvements in other sectors rebound effects appear to be weak or almost absent

spatial growth and industry age between 1970 and 2000 employment growth across u s counties exhibited very different patterns in manufacturing and services whereas manufacturing employment growth was negatively related to initial manufacturing employment across the entire distribution of counties service employment growth was positively related to initial service employment for intermediate sized counties this paper presents a theory to rationalize these facts local sectoral growth is driven by technological diffusion across space and depends on the age of the sector the theory correctly predicts the relation between county employment growth and initial county employment in manufacturing at the turn of the 20th century

computers skills and wages computer technology is most prominently used by skilled high wage workers this suggests that computer use requires skills to take full advantage of the possibilities which are particularly present among relatively skilled workers this article develops a simple technology adoption model showing that the decision to adopt computer technology depends on i the tasks to be performed ii the level of skill or education and iii the level of wages applying this model to british data it is shown that the effect of wages and particular tasks on computer adoption is larger than the effect of skills on adoption the estimates suggest that in britain computer use is likely to be a matter of cost efficiency and not so much of workers skills

the myth of the biotech revolution an assessment of technological clinical and organisational change abstract this paper argues that despite being widely promoted by academics and consultants the empirical evidence does not support the existence of a biotech revolution nor does the data support the widely held expectations that biotechnology is having a revolutionary impact on healthcare or economic development the revolutionary model is therefore a misleading basis for policy making as it over estimates the speed and extent of any changes in productivity or the quality of therapeutics instead the evidence suggests biotechnology is following a well established incremental pattern of technological change and creative accumulation that builds upon rather than disrupts previous drug development heuristics

the growth of network computing quality adjusted price changes for network servers in this paper we investigate the evolution of quality adjusted prices for servers motivated by two facts first the productivity acceleration in the us economy since the mid 1990s is closely linked to spread of information technology of which networked computing is a large component second the growth of network computing itself has been fostered by the rapid growth in the quality and quantity of the network server market like pakes 2003 analysis of the pc market we show that our preferred version of the hedonic price index complete hybrid fell much more rapidly than the standard matched model price index the hedonic index fell on average by about 30 per annum compared to 17 p a for the matched model this difference is mainly due to the selection bias in the standard matched model price index due to the exit of obsolete models which would have had the fastest price falls

the economic impact of canadian university r d abstract canadian university research expenditures and those of graduate students produce a gross static economic impact upon the canadian gross domestic product gdp which considerably overestimates the net static impact of university research moreover the net static impact because it keeps constant the economic structure and the productivity of factors of production does not account for the principal beneficial impact of university research the building of human capital and the transfer of knowledge technology all of this leads to an increase in productivity and thus in the size of the gdp this effect is called the dynamic impact this article besides comparing succinctly the gross impact with the net static impact develops a practical method to measure the dynamic impact of university research in a way this method provides another benchmark besides the peer review to judge the relevance of university r d

the place of entrepreneurship in the economics that might have been it is a familiar observation that entrepreneurship is not easily accommodated within the framework of neoclassical economic theory drawing inspiration from an ancient critique of neoclassicism by veblen q j econ 12 4 373 397 1898 this paper attributes the difficulty to the tension between normative accounts of decision making as in mainstream theory and ideas of causation that are standard in the sciences normative theories naturally privilege the conjectured future over the experienced past in the quest for explanatory factors evolutionary theories elucidate instead the mechanisms of cumulative causation veblen that perpetually produce the present from the past entrepreneurship of the innovative schumpeterian kind seizes opportunities that emerge in complex evolving contexts of technological and institutional change a theory that gives due weight to cumulative causation sheds greater light on these processes than prevailing mainstream theory can and that is a key advantage of an evolutionary theory

computerisation and wage dispersion an analytical reinterpretation the rich countries have recently seen a dramatic rise in income inequality all the more surprising because the long term trend had been toward equality this paper examines one of the leading explanations computerisation in the workplace i offer a theory of computers impact on white collar work which goes far toward explaining the timing form and locus of recent labour market changes the theory looks at the bureaucratic and organisational applications of computers that have been first largest and most influential they have two effects on firms demand for labour at different skill levels

what happens when agent t gets a computer the labor market impact of cost efficient computer adoption this paper offers a model of how computer technology has changed the labor market demonstrating that wage differentials between computer users and non users are consistent with computers first being introduced in high wage jobs following cost efficiency furthermore skill upgrading occurs following a reemphasis on non routine tasks after adoption the model also reveals that neither differences in computer skills nor complementary skills are needed to explain wage differentials between users and non users skill upgrading and the changing organization and intensity of work finally the predicted effects on the wage structure are consistent with empirical evidence

technical change and earnings in british establishments recent empirical studies point to higher wages enjoyed by workers in environments where new technologies are intensively used an examination of the 1984 and 1990 establishment based wirs reveals similar patterns this paper argues that endogeneity bias is endemic in these results controlling for this endogeneity bias suggests that the estimated impact of new technologies on wages is seriously upward biased it is more likely that the earnings technology correlation is driven by the impact of higher earnings on technical change rather than vice versa

blade runner economics will innovation lead the economic recovery according to schumpeterian theories economic expansions are associated with the introduction of successful new products processes and services while depressions are linked to stagnant periods with few innovations can the economic crisis set in motion in 2008 be explained by the inability to innovate and upgrade production and conversely will an economic recovery require a new stream of innovations drawing on the debate which emerged after the 1970s economic crisis this discussion paper tries to assess whether it is likely that the next long term expansion will be linked to a new stream of innovations while most evidence suggests that icts continue to provide the back bone of economic activities there is the prospect that biotechnology will eventually start to fulfil the promise envisaged over 30 years ago in the film blade runner

the benefit of crises for economic reforms when expenditures consistently outrun revenue the resulting inflation may have the effect of convincing the public and government that taxes must be raised to finance public investment in the advanced industrial countries income taxation and big spurts in taxation generally have become possible only under the impact of major emergency and crisis mostly in wartime in a number of developing countries in

the dynamo and the computer an historical perspective on the modern productivity paradox the dynamo and the computer an historical perspective on the modern productivity paradox author s paul a david source the american economic review vol 80 no 2 papers and proceedings of the hundred and second annual meeting of the american economic association may 1990 pp 355 361 published by american economic association stable url http www jstor org stable 2006600 accessed 08 12 2010 01 40

the ict electronics question structural change and the rebound effect abstract ict and related electronic appliances consumed 4 of global electrical energy in 2007 growing to 4 7 in 2012 with projections of continued increase in coming decades this is despite an average annual increase in energy efficiency of about 30 in ict electronics throughout the last 5 decades mainstream studies of energy related rebound effects have yet to produce a conceptual framework that adequately encapsulates a unique feature of ict electronics its tendency to induce changes in social practice and socio technical structures this study attempts to fill this gap surveying rebound effect literature it builds on studies which explore transformational change caused by energy efficiency increases it identifies structural changes in business education the military and households caused by energy efficiency increases in ict electronics which lead to a proliferation of ict electronic devices and consequently increased energy consumption it shows the cause and effect logic between energy efficiency and energy consumption in ict electronics and tentatively estimates rebound effects ranging between 115 and 161 in eight diverse empirical examples the history of ict electronics shows that energy efficiency increases inevitably lead to increases in energy consumption hence firm controls on co 2 e emission allowances may offer the best hope of curbing energy consumption and co 2 e emissions in this sector

the short run price performance dynamics of microcomputer technologies abstract models of technology growth are often conceived in terms of long run trends in performance and price because in general short run parameter stability and even the form of the growth function have proved elusive yet short run growth models are arguably more useful for managers and research scientists because the majority of their decisions are concerned with discretionary spending and operations rather than longer run strategic plans and investments our research explores short run growth in microcomputer technologies by specifying growth models and parameter estimates for six commercially important computer technologies over short time periods with weekly data observations were acquired in a homogeneous market limited to a collection time frame of less than two years data was collected at granular weekly intervals with concurrent tests to determine whether parameters were stable over successively longer intervals conversely candidate growth models from longer strategic planning horizons were tested to determine whether they scaled down to operational planning horizons we found that an exponential model of performance to price growth is supported over short time horizons in all but one microcomputer technology nonvolatile ram the exponential model and technology specific parameter estimates that are valid over short horizons were found to accurately scale up to longer planning horizons we expect our results to contribute to more accurate price performance forecasting at the corporate and product level better decision making concerning inventory management capacity utilization lead and lag times in supply chain operations and efficiency of logistics

a reconsideration of hedonic price indexes with an application to pc s this paper compares hedonic to matched model indexes matched model indexes are averages of the price changes of goods that remain on sampled stores shelves since goods that disappear tend to have falling market values matched model indexes select from the right tail of price changes the bls can construct hedonic indexes that correct for this selection and are justified by standard arguments in an empirical study of pc s hedonics produce sharp price declines while matched model indexes are near zero also though there are modifications to hedonics that seem desirable they are not those in current use

an analysis of the stability and growth pact we use a stylised model to analyse the stability and growth pact for countries that have formed the european monetary union emu in our model shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully therefore while governments have no incentive to sign a stability pact in the absence of a monetary union they do so with monetary union to restrain this externality with uncertainty a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy with differences in initial conditions conflicts of interest arise we study the nash bargaining solution

animal spirits as an engine of boom busts and throttle of productivity growth abstract the news shock literature interprets empirical news shock identifications as signals about future productivity under this view changes in productivity cause changes in expectations i investigate an alternative interpretation whereby changes in expectations cause changes in productivity i present a model where firms adopt the technology of a deterministic frontier and where self fulfilling expectational shocks unleash a frenzy of adoption through which firms increase productivity consistent with the news evidence stock prices and aggregate activity boom yet tfp increases with a lag simulations using i i d expectational shocks yield moments consistent with the data and qualitatively capture both high frequency boom busts and lower frequency fluctuations finally estimating a beaudry portier style vecm on the simulated model output to identify a news shock recovers impulse response functions largely consistent with the beaudry and portier 2006 results

gpt driven endogenous growth seven years after helpman s 1998 book on general purpose technologies gpts there is a dearth of subsequent models early models employed technically complex dynamic optimising techniques which limited further development we present a model in which sustained growth is driven by a succession of gpts that is technically simpler than the early models yet captures stylised facts that were omitted from them ours has diminishing returns to inputs and endogenous incremental technological changes from r d interrupted by the occasional introduction of new gpts gpts are themselves developed endogenously with payoffs that are subject to uncertainty in magnitude and timing

trend breaks long run restrictions and contractionary technology improvements abstract structural vector autoregressions with long run restrictions are extraordinarily sensitive to low frequency correlations recent literature finds that the estimated effects of technology shocks are sensitive to how one treats hours per capita however after allowing for statistically and economically significant trend breaks in productivity results are much less sensitive hours fall when technology improves the issue is that the common high low high pattern of productivity growth and hours i e the low frequency correlation inevitably leads to a positive estimated response the trend breaks control for this correlation this example suggests a practical need for care in using long run restrictions

innovation and growth through local and global interaction this paper investigates the research and development activity of heterogeneous and rationally bounded firms the latter conduct this activity through in house research and by collecting information originating in other firms spillovers thus research and development activity owes both to independent searching and to interaction diffusing information we study the conditions under which this idiosyncratic effort yields effects that have either local system wise negligible impacts or cumulate to generate significant aggregate ones in the latter case global effects feed back upon the incentive to innovate and therefore on the strength of local interaction as well as on autonomous research efforts it is these dynamic forces that we model we compare cases in which significant aggregate effects do emerge with cases in which they do not and study their outcome on innovation directed investment and on long term growth

the division of labour worker organisation and technological change the model developed in this article explains differences in the division of labour across firms as a result of computer technology adoption changes in the division of labour result from reduced production time and improved communication possibilities the first shifts the division of labour towards generic structures while the latter enhances specialisation our estimates for a sample of dutch establishments in the period 1990 6 suggest that productivity gains have been the main determinant for shifts in the division of labour these productivity gains induced skill upgrading while in firms gaining from improved communication possibilities specialisation increased and skill requirements have fallen the rapid spread of computer technology has led to substantial changes in the division of labour and a shift in the demand for labour in favour of skilled workers mostly these changes have been accompanied by flatter organisational structures larger autonomy for workers or workgroups the application of innovative human resource management practices and so on there are also less typical examples where computerisation is associated with increased specialisation e g the rapid increase of call centres scripting of communication with clients and stricter procedures although the empirical relationship between information and communication technology ict adoption and organisational change has been well documented disagreement remains about the reasons why computerisation provides firms with incentives to change the structure of their organisation and the skill requirements of their workforce

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

oligopolistic competition it use for product differentiation and the productivity paradox abstract empirical studies suggest that the huge investment in information technologies it of the past two decades has led to no significant increase in productivity this phenomenon is known as the productivity paradox it has been argued that the paradox might result from oligopolistic competition because of strategic interaction each individual firm might find it profitable to invest in cost reducing it but total investment might then be excessive from the industry s point of view i confirm this view and strengthen it by allowing it investment to be also devoted to product differentiation which makes the productivity paradox more likely the emergence of web based electronic commerce provides an illustration of the forces identified in the model

good booms bad booms credit booms usually precede financial crises however some credit booms end in a crisis bad booms and others do not good booms we document that while all booms start with an increase of total factor productivity tfp and labor productivity lp such growth falls much faster subsequently for bad booms we then develop a simple framework to explain this firms finance investment opportunities with short term collateralized debt if agents do not produce information about the collateral quality a credit boom develops accommodatingfirms with lower quality projects and increasing the incentives of lenders to acquire information about the collateral eventually triggering a crisis when the average quality of investment opportunities also grows the credit boom may not end in a crisis because the gradual adoption of low quality projects is not strong enough to induce information about collateral finally we also test the main predictions of the model

new technologies wages and worker selection we study the effect of new technologies nt on wages and employment using a unique panel that matches data on individuals and on their firms as in the united states we show that computer users are better paid than nonusers 15 20 more but these workers were already better compensated before the introduction of the nts total returns to computer use amount to 2 measurement errors do not affect our estimates furthermore computer users are protected from job losses as long as bad business conditions do not last too long this result holds even after controlling for possible selection biases

computers obsolescence and productivity this paper develops a new technique for measuring the effect of computer usage on u s productivity growth standard national income and product accounts nipa measures of the computer capital stock which are constructed by weighting past investments according to a schedule for economic depreciation the rate at which capital loses value as it ages are shown to be inappropriate for growth accounting because they do not capture the effect of a unit of computer capital on productivity this is due to technological obsolescence machines that are still productive are retired because they are no longer near the technological frontier and anticipation of retirement affects economic depreciation using a model that incorporates obsolescence alternative stocks are developed that imply a larger computer usage effect this effect together with the direct effect of increased productivity in the computer producing sector accounted for the improvement in u s productivity growth over 1996 1998 relative to the

on the relation between organisational practices and new technologies the role of time based competition this article studies some aspects of organisation choice while explicitly accounting for the fact that firms compete on the product market firms compete by introducing drastic innovations while organisation choice results from a tradeoff between productive efficiency and reactivity we show that the adoption of information technologies and the choice of reactive organisations are complements via an industry level equilibrium effect this view contrasts with the existing literature which emphasises the existence of similar complementarities at the firm level consistently with our model we find that industry level rather than firm level diffusion of information technologies explains firms organisational practices

political intergenerational risk sharing abstract in a stochastic two period olg model featuring an aggregate shock to the economy ex ante optimality requires intergenerational risk sharing we compare the level of intergenerational risk sharing chosen by a benevolent government and by an office seeking politician in our political system the transfer of resources across generations is determined as a markov equilibrium of a probabilistic voting game low realized returns on the risky asset induce politicians to compensate the old through a payg system this political system typically generates an intergenerational risk sharing scheme that is i larger ii more persistent and iii less responsive to the realization of the shock than the social optimum this is because the current politician anticipates her transfers to the elderly to be compensated by future politicians through offsetting transfers and hence overspends

does unmeasured ability explain the higher wages of new technology workers abstract we study the impact on new technologies nt on wages using a unique data set that matches data on individuals and on their firms in his important article on the same topic krueger 1993 did not give a definitive answer to the following question if workers who use nt are better paid is it because they are abler or because nt increases their productivity we try to provide a precise answer to this question comparing cross section estimates firm effect estimates and person effect estimates we show that computer based new technologies are used by abler workers these workers appear to become more productive when they get more experienced with these nt in terms of wage differentials the introduction of computer based nt contributes to the increase but less than supposed before each year experience with computer based nt adds around 1 to the wage of workers using such techniques

a future for carbon taxes abstract carbon taxes have been frequently advocated as a cost effective instrument for reducing emissions however in the practice of environmental policies only six countries have implemented taxes based on the carbon content of the energy products in this paper we evaluate carbon taxes with regard to their competitiveness distributional and environmental impacts the evidence shows that carbon taxes may be an interesting policy option and that their main negative impacts may be compensated through the design of the tax and the use of the generated fiscal revenues

legal political and institutional constraints on the financial crisis policy response as the financial crisis manifested itself and peaked in 2007 and 2008 the response of us policymakers and regulators was shaped in important ways by legal and political constraints policymakers lacked certain legal authorities that would have been useful for addressing the crisis notably to use public capital to stabilize the banking sector or to deal with the failure of large financial firms such as insurance companies and investment banks that were outside the scope of bank regulators authority to resolve deposit taking commercial banks legal constraints were keenly felt at the us department of the treasury where i served as a senior official from december 2006 to january 2009 treasury had virtually no emergency economic authority at the onset of the crisis in 2007 with the exception of the treasury s exchange stabilization fund which was intended for use in exchange rate interventions as the systemic risks of the financial crisis became apparent the initial policy response largely fell to the federal reserve which had the authority to act under emergency circumstances there will inevitably be another financial crisis and the response will be shaped by both the lessons learned from recent history and the statutory and political changes in the wake of the crisis the paper thus concludes by discussing changes in constraints since the crisis with a focus on two developments 1 the political reality that there will not in the near future be another wide ranging grant of fiscal authority as was given with the troubled asset relief program and 2 the new legal authorities provided in the wall street reform and consumer protection act of 2010 commonly known as the dodd frank law

the future of social security we analyze the effect of the projected demographic transition on the political support for social security and equilibrium outcomes embedding a probabilistic voting setup of electoral competition in the standard olg model with capital accumulation we find that intergenerational transfers arise in the absence of altruism commitment or trigger strategies closed form solutions predict population ageing to lead to higher social security tax rates a rising share of pensions in gdp but eventually lower social security benefits per retiree the response of equilibrium tax rates to demographic shocks reduces old age consumption risk calibrated to match features of the u s economy the model suggests that in response to the projected demographic transition social security tax rates will gradually increase to 16 other policies that distort labor supply will become less important labor supply therefore will rise in contrast with frequently voiced fears

growth deceleration and transaction costs a note abstract the basic hypothesis of this essay is that the bureaucratic nature of the planned economies of east europe meant that they were more vulnerable to the rising transaction costs associated with economic development than market economics if true this suggests that these nations revealed a greater deceleration of economic growth than in the market economies of the west empirical evidence is provided to demonstrated that such a phenomenon did in fact occur

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

interactive innovation in financial and business services the vanguard of the service revolution abstract the concept of the reverse product cycle as a theoretical model of innovation in services is developed further in this paper using the vanguard sector of financial and business services as a case study example of how innovation operates as an interactive process the parallels between the emerging service revolution and the nineteenth century industrial revolution are explored in order to identify the key characteristics of the vanguard sectors in each technological revolution the particular nature of the new techno economic paradigm based on information technology is then identified leading to a discussion of the unique conjunction of factors favouring financial and business services as the vanguard sector of the service revolution the central part of the paper then offers an elaboration of the reverse product cycle model stressing the interactive nature of the innovation process as it reflects the prevailing technological opportunities market conditions and industry structures within the adopting sector the example of retail banking is used to illustrate how the innovation cycle proceeds from increases in efficiency through improvements in service quality to the generation of new network service products there is then a discussion of the question of the optimal industry structure for innovation suggestion that in the reverse product cycle large corporations are likely to dominate the early stage of incremental process innovations whereas later in the cycle there is an important role for small entrepreneurial firms to advance more radical process and product innovations the concluding section summarises six major characteristics of the service revolution and suggests how it may proceed from its first to its second phase as the focus of innovation shifts from the vanguard sector of financial and business services to a much broader range of higher level knowledge based services many of which are currently delivered by the public sector

origins and pathways of innovation in the third industrial revolution this study examines the factors that shaped the long term evolution of the ict industry in sweden 1950 2013 using a new historical microdatabase on actual innovation output the driving forces and technological interdependencies in the third industrial revolution are chronicled the results of this study support some stylized facts about technological interdependencies in general purpose technologies a closely knitted set of industries have provided positive and negative driving forces for the development of ict innovations the historical evolution of gpts can in this perspective be described as a sequence of development blocks

the new stability and growth pact a first assessment abstract the paper proposes a theoretical model of fiscal policy offering new insights on some of the key policy trade offs involved in the recent reform of the stability and growth pact as suggested by the proponents of the reform greater room for case specific economic judgment in the implementation of the pact may improve welfare in our model these gains occur because the consolidation path implied by the implementation of the pact does not discourage high quality measures in practice however the difficulty to extract true policy intent from budget figures may hinder the qualitative assessment of fiscal policy hence reforming a rules based fiscal framework with a view to enhance its economic rationale would also require closer monitoring a better grasp of the policies underlying the budget and ultimately stricter enforcement in that sense recent reforms are at best unhelpful

secular stagnation a supply side view secular stagnation on the supply side takes the form of a slow 1 6 percent annual growth rate of us potential real gdp roughly half the 3 1 percent annual growth rate of actual real gdp realized from 1972 to 2004 this slowdown stems from a sharp decline in the growth rate of aggregate hours of work and of output per hour this paper attributes the productivity growth decline to diminishing returns in the digital revolution that had its peak effect business hardware software and best practices in the late 1990s but has resulted in little change in those methods over the past decade

do crises induce reform a critical review of conception methodology and empirical evidence of the crisis hypothesis the notion that economic crises induce the adoption of reform ranks among the most widely accepted concepts in the political economics literature however the underlying mechanism of the so called crisis hypothesis has yet to be fully understood this paper provides a comprehensive survey of the relevant empirical evidence to date and scrutinizes the operationalization of the hypothesis key concepts crisis reform and the political mediation of reform during crises we argue that the social perception of both crises and the subsequent cost of reform requires consideration of how these concepts are operationalized as a product of the broader economic and institutional environment social perceptions largely determine the manner in which the political mediation of reform during crises works present day methodological approaches fail to adequately reflect social perceptions and consequently compromise the determination of what constitutes both crisis and the cost of reform in the context of the crisis hypothesis most notably the identification of crises by fixed thresholds constructed around macroeconomic variables impedes the interpretation of the hypothesis underlying mechanism a fuller treatment of social perception within the operationalization of the hypothesis key concepts can enhance our understanding of how economic crises influence political dynamics in bringing about reform

skill biased technological change and wage inequality evidence from a plant retooling1 one of the most popular explanations for the increased wage inequality that has occurred since the late 1970s is that technological change has resulted in a downward shift in the demand for low skill workers this pattern is also alleged to account for the growth in racial inequality in wages over the same period this article reports on a case study of the retooling of a food processing plant a unique longitudinal multimethod design reveals the nature of the technological change the changes in job requirements and the mechanisms by which the changes affect the wage distribution for hourly production workers this research finds that indeed the retooling resulted in greater wage dispersion and that the changes have also been associated with greater racial inequality in wages however contrary to the claims of advocates of the skill bias hypothesis organizational and human resources factors strongly mediated the impact of the changing technology absent these high road organizational choices th

norwegian emissions of co2 1987 1994 a study of some effects of the co2 tax several countries have introduced taxes on fossil fuels with the aim of reducing atmospheric emissions partly because of local environmental goals so2 nox and partly to participate in a global effort to reduce emissions of greenhouse gases many macroeconomic studies based on both global and national models have been made of how emissions can be reduced with the help of taxes and the consequent reduction in gdp following the introduction of such taxes norway has had a co2 tax for five years thereby providing a unique opportunity to evaluate the effects of this tax on emissions the paper provides a counterfactual analysis of energy consumption and emissions if no co2 taxes had been introduced compared with the actual situation in which such taxes exist the effect of a co2 tax on oil consumption and thus co2 emissions is studied on the basis of partial economic models for various sectors of the norwegian economy the study indicates that the co2 tax has had an impact on co2 emissions in norway

collective invention during the british industrial revolution the case of the cornish pumping engine in this paper we argue that together with individual inventors and firms what robert c allen 1983 has termed as collective invention settings that is settings in which rival firms freely release each other pertinent technical information were also a crucial source of innovation in the industrial revolution period until now this has been very little considered in the literature this paper focuses on one of these cases the cornish mining district in cornwall during the early nineteenth century a notable collective invention setting gradually emerged this case is particularly remarkable because it was capable of generating a continuous and sustained flow of improvements in steam pumping technology which in the end greatly contributed to improve the thermodynamic efficiency of the steam engine in this paper we study in detail the specific economic circumstances that led to the formation of this collective invention setting and we analyses its consequences for the rate of technological innovation

business groups and the natural state abstract recent revisionist accounts of corporate governance in both business history and finance are challenging the tradition narrative associated with berle and means 1932 and chandler 1977 in which the american model of diffuse ownership and coherent diversification is both an inevitable outcome of economic development and perhaps a normative standard for the world to follow this essay is an attempt to rethink that narrative in light of the continued significance of the pyramidal business group as a governance structure around the world i argue that business groups arise in response both to inadequacies in arm s length markets and to the needs of what north et al 2009 call the natural state in this view the quality of markets and the demands of the state are tightly interconnected phenomena such a perspective explains the emergence of business groups in developing countries as well as their persistence even in wealthy and sophisticated polities apart from the u s and the u k in the end moreover i endorse the view that the much discussed and oft misunderstood exceptionalism of the u s in corporate governance arises not only from the sophistication of american markets but also importantly from government policies toward corporate taxation and securities regulation policies that arose from the unique public choice problem posed by the differential effect on the u s of the collapse of globalization during the middle years of the twentieth century

growth cycles and market crashes abstract market booms are often followed by dramatic falls to explain this requires an asymmetry in the underlying shocks a straightforward model of technological progress generates asymmetries that are also the source of growth cycles assuming a representative consumer we show that the stock market generally rises punctuated by occasional dramatic falls with high risk aversion bad news causes dramatic increases in prices bad news does not correspond to a contraction of existing production possibilities but to a slowdown in its expansion this economy provides a model of endogenous growth cycles in which recoveries and recessions are dictated by the adoption of innovations journal of economic literature classification numbers o40 g12 o41 o30

volatility and slow technology diffusion abstract i study the effects of uncertainty on technology adoption and thereby on volatility and growth i present an analytically tractable model in which i uncertainty about the returns to adoption delays technology diffusion and ii the mean and volatility of output growth are jointly determined in equilibrium i then test the key predictions of the model by studying the introduction of three major information and communication technologies icts computers internet and cell phones i find that countries with more volatile growth rates of real gdp per capita have higher time adoption lags and lower average growth as predicted by the model

does innovation cause stock market runups evidence from the great crash this article examines the stock market s changing valuation of corporate patentable assets between 1910 and 1939 it shows that the value of knowl edge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions innovation was an important driver of the late 1920s stock market runup and the great crash did not reflect a significant revaluation of knowledge capital relative to physical capital although substantial quantities of influential patents were accumulated during the post crash recovery high technology firms did not earn significant excess returns over low technology firms for most of the 1930s

the returns to computer use revisited have pencils changed the wage structure too are the large measured wage differentials for on the job computer use a true return to computer skills or do they just reflect that higher wage workers use computers on their jobs we examine this issue with three large cross sectional surveys from germany first we confirm that the estimated wage differential associated with computer use in germany is very similar to the u s differential second we also measure large differentials for on the job use of calculators telephones pens or pencils or for those who work while sitting down we argue that these findings cast some doubt on the literal interpretation of the computer use wage differential as reflecting true returns to computer use or skill

the diffusion of computers and the distribution of wages abstract when the costs are decreasing workers adopt technology at the point where the costs equal the increased productivity output per worker increases immediately while productivity benefits increase only gradually if costs continue to fall as a result workers in computer adopting labor market groups experience an immediate fall in wages due to increased supply on the other hand adopting workers experience wage increases with some delay this model explains why increased computer use does not immediately lead to higher wage inequality more specifically the results of the model are shown to be consistent with the question why within group wage inequality among skilled workers as a result of computer technology adoption in the united states increased in the 1970s while between group wage inequality and within group wage inequality among the unskilled did not start to increase until the 1980s the model also predicts that the more compressed german wage structure leads to a lagged diffusion of computer technology along with smaller changes in wage inequality our empirical analysis suggests that this is consistent with the actual developments in germany since the 1980s finally the theoretical predictions seem to be of the right magnitude to explain the empirical quantities observed in the data

economic growth and the transition from traditional to modern energy in sweden we examine the role of substitution from traditional to modern energy carriers and of differential rates of innovation in the use of each of these in economic growth in sweden from 1850 to 1950 we use a simple growth model with a nested ces production function and exogenous factor augmenting technological change and carry out a counterfactual simulation based on the econometric results even though the rate of technical change was higher for modern energy innovation in the use of traditional energy carriers contributed more to growth between 1850 and 1890 since the cost share of traditional energy was so much larger than that of modern energy in that period however after 1890 we find that modern energy contributed much more to economic growth than traditional energy but increasingly labor augmenting technological change became the most important single driver of growth

revolutionary effects of new information technologies in markets with imperfect information and heterogeneity the information technology affects the rate at which agents meet which affects the distribution of production technologies across firms multiple equilibria may arise because the reservation utility and the lowest production technology in use affect each other the adoption of novel information technologies may then entail a revolution in the sense of a move from an inefficient to equilibrium inefficient production technologies are swiftly moved even in sectors where the new information technology has only recently been introduced the results apply to consumer products labour intermediates and institutions royal economic society 2006

path dependence and the korean keyboard abstract this paper recounts the evolution of the korean keyboard as a case in which the disadvantages of the inherited standard turn into a nonissue with the advancement of auxiliary technologies the persistence of an inherited standard when a superior alternative is available is usually regarded as market failure however if the transition costs to the new standard are such that the net gains from the transition are insufficient the situation is unfortunate but not market failure the situation may change over time if the net gain from the alternative standard increases or transition costs to new alternative decrease or both the situation turns into one in which entrepreneurs can profit by making the transition where appropriate an institutional reform may lower transition costs substantially this paper suggests an additional possibility of technological changes that make the transition unnecessary in the case of the korean keyboard changes in auxiliary technologies have rendered the disadvantages of the inherited standard innocuous the case provides a cautionary tale against the temptation to drastically alter a seemingly hopelessly inferior inherited standard the lesson of the korean keyboard applies to japanese and chinese keyboards with even greater force

a positive theory of social security in many countries social security accounts for a large fraction of the government budget why is this so given that at any point in time the number of recipients of social security benefits is smaller than the number of contributors in the overlapping generations model studied in this paper all individuals currently alive vote on social security in every period in equilibrium the size of social security is larger the greater is the proportion of elderly people in the population and the greater is the inequality of pre tax income within each generation both predictions of the theory are supported by the empirical evidence in cross country data

striving for a large market evidence from a general purpose technology in action several scholars have tried to focus on growth accounting of specific examples of general purpose technologies gpts but what are the factors that might make a general purpose technology succeed or fail once the invention has been triggered this paper is a preliminary answer to this question and attempts to study gpts from an ex ante perspective trying to understand what is the behaviour and performance of the producer firms and what the factors are that can favour or hamper their diffusion in the application sectors the paper follows a historical perspective on a control technology introduced in the last few decades by a silicon valley start up company

cleaning house the impact of information technology monitoring on employee theft and productivity this paper examines how firm investments in technology based employee monitoring impact both misconduct and productivity we use unique and detailed theft and sales data from 392 restaurant locations from five firms that adopt a theft monitoring information technology it product we use difference in differences models with staggered adoption dates to estimate the treatment effect of it monitoring on theft and productivity we find significant treatment effects in reduced theft and improved productivity that appear to be primarily driven by changed worker behavior rather than worker turnover we examine four mechanisms that may drive this productivity result economic and cognitive multitasking fairness based motivation and perceived increases of general oversight the observed productivity results represent substantial financial benefits to both firms and the legitimate tip based earnings of workers our results suggest that employee misconduct is not solely a function of individual differences in ethics or morality but can also be influenced by managerial policies that can benefit both firms and employees this paper was accepted by serguei netessine operations management

analyzing the relationships between information technology inputs substitution and national characteristics based on ces stochastic frontier production models abstract this research examines four interrelated issues at the country level the value of information technology it inputs substitution and complement the complementarity phenomenon created by it and national characteristics and the productivity paradox jointly and critically from a global perspective using the so called productive efficiency as the performance measure to that end we develop the three factor constant elasticity of substitution ces stochastic production frontier model and apply it to a set of panel data from 15 countries over the period 1993 2003 along with the traditional two factor ces models within the one and two equation frameworks in the two equation setting six national characteristics are selected as the contributing factors of the productive efficiency the findings include i the value of it as measured by the productive efficiency is duly recognized ii the productivity paradox is found to be absent from the production process in a majority of developed and developing countries considered rejecting the existing argument that the paradox exists only in developing economies but does not exist in developed countries however the developed countries have used it capital in their production systems more productively efficiently than the developing nations iii traditional capital non it capital traditional labor and it capital are not pairwise substitutable contrary to the notion that they are pairwise substitutable at the firm level iv constant returns to scale as commonly assumed are not supported by the data v different national characteristics affect a country s output represented by gross domestic product or gdp and its productive efficiency differently and vi the complementarity phenomenon is observed in most of the countries developed and developing under study

computing productivity firm level evidence we explore the effect of computerization on productivity and output growth using data from 527 large us firms over 1987 1994 we find that computerization makes a contribution to measured productivity and output growth in the short term using one year differences that is consistent with normal returns to computer investments however the productivity and output contributions associated with computerization are up to five times greater over long periods using five to seven year differences the results suggest that the observed contribution of computerization is accompanied by relatively large and time consuming investments in complementary inputs such as organizational capital that may be omitted in conventional calculations of productivity the large long run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s

the sufficiency strategy would rich world frugality lower environmental impact abstract one alleged weapon against unsustainable environmental impact is for the wealthy to consume less this sufficiency strategy is to complement the efficiency strategy of lowering ratios of resource inputs to economic outputs the former would reduce the affluence factor in i pat the latter the technology factor that the latter strategy suffers from a consumption rebound is widely recognized this paper identifies a similar rebound when the affluence factor is autonomously lowered the lower initial demand lowers prices which in turn stimulates new demand by others the strategy moreover addresses only the rich raising questions of its theoretical maximum efficacy its proponents usually conflate frugality with the north south dichotomy and intra generational with inter generational equity moreover there are difficulties with the supporting arguments that frugality is good for one s own sake as well as for the environment and that the rich should lead the way to living more lightly personal behaviour change is furthermore not a substitute for international political efforts finally since all changes in right side factors of the i pat equation change other right side factors such indirect attacks on impact should be abandoned in favor of supply and emissions quotas