classical and variance bounds tests of the production smoothing hypothesis in this paper we test the controversial production smoothing role of inventories by applying both classical econometric techniques and variance bounds tests we use seasonally unadjusted data measured in physical units for five industries the model used is a version of the familiar holt et al 1960 inventory model we also use the data on one industry disaggregated at the district level to investigate potential bias which may arise from aggregation overall the empirical evidence suggests production smoothing in the great majority of the industries examined

temporal aggregation and estimation of inventory functions abstract in this paper we extend the analysis of the effects of aggregation on the estimated speed of adjustment in inventory models into two directions first we try to find out if lovell s 1993 conclusions regarding the effects of aggregation on the speed of adjustment hold a when real firm data rather than experimental data are used b when the model is modified or when models other than the flexible accelerator are used secondly we examine whether temporal aggregation also leads to underestimation when disaggregated nonseasonally adjusted data are used the evidence we provide gives strong support to mundlak s and zellner s conjectures cited in christiano and eichenbaum 1987 that temporal aggregation leads to downward bias in the estimated speed of adjustment

investments and public finance in a green low carbon economy abstract the paper evaluates the impacts on investments and public finance of a transition to a green low carbon economy induced by carbon taxation four global tax scenarios are examined using the integrated assessment model witch taxes are levied on all greenhouse gases ghgs and lead to global ghg concentrations equal to 680 560 500 and 460 ppm co 2 eq in 2100 investments in the power sector increase with respect to the reference scenario only with the two highest taxes investments in energy related r d increase in all tax scenarios but they are a small fraction of gdp investments in oil upstream decline in all scenarios as a result total investments decline with respect to the reference scenario carbon tax revenues are high in absolute terms and as share of gdp with high carbon taxes tax revenues follow a carbon laffer curve the model assumes that tax revenues are flawlessly recycled lump sum into the economy in all scenarios the power sector becomes a net recipient of subsidies to support the absorption of ghgs in some regions with high carbon taxes subsidies to ghg removal are higher than tax revenues at the end of the century

simulating the inventory cycle abstract simulations of the inventory cycle utilizing a model based on 84 interacting firms in 21 industries reveals that the ratio of the variance of sales to the variance of output is an unreliable indicator of how seriously firms attempt to smooth production or whether such efforts in the aggregate even out economic fluctuations it is also shown that the two slow estimates of the speed of adjustment reported in many econometric studies of united states data may result in part from aggregation bias rather than from limitations of the flexible accelerator model itself

seasonality aggregation and the testing of the production smoothing hypothesis one of the leading hypotheses concerning the dynamics of production over time is the production smoothing hypothesis given a planning horizon which spans a number of production periods the firm need not produce in each period an amount equal to expected sales rather resorting to inventory accumulation and liquidation the firm may follow a production plan temporally smoother than the path of demand if firms faced with convex cost functions chose to smooth the rate of output in order to minimize costs one would expect to observe that the rate of output would vary less than the rate of sales with variations in inventory stocks absorbing some of the fluctuations in sales recently work on the testing of the production smoothing hypothesis has cast doubt on its empirical validity the evidence presented by alan blinder seems to indicate that the variance of production exceeds that of sales in seven out of eight two digit retail industries 1981 and in eighteen out of twenty two digit manufacturing industries 1983 and 1986 the purpose of this paper then is to examine the validity of such tests when seasonally adjusted aggregated data are used the evidence presented show that the relative size of the variances of the seasonally adjusted production and sales does not provide valid tests of the production smoothing hypothesis in addition aggregating over firms where the seasonal patterns differ may also distort tests of production smoothing blinder realized that the use of seasonally adjusted data may not provide an adequate test of the hypothesis stating had they been available i would have preferred to use data that were not seasonally adjusted since the production smoothing model presumably applies to seasonal fluctuations in sales however such data are not available 1983 fn 19 in this paper i focus on the cement industry because the unadjusted disaggregated data are available for the direct testing of the conjecture that aggregate seasonally adjusted data mask production smoothing phenomenon aggregate monthly data on five other industries will also be examined

does the time shape of inventory data hold clues on inventory behaviour abstract this paper tries to show that there may be a serious problem in the way inventory data are observed and processed inventory cycles may be asymmetric and the asymmetries may switch directions over the business cycle that is inventory holdings may follow a strongly non linear time path that cannot be represented by periodic observations that are appropriate for stationary processes it may lead to a cumulative error with passage of time in the difference between the actual inventory levels and the data we think monitor them it has been shown that temporal aggregation leads to a downward bias in the estimated speed of adjustment of the flexible accelerator model 1 2 assuming this model correctly describes inventory behaviour and that the objective is to recover the model in the data this evidence raises the question why is there this estimation bias could it be that the bias results from ignoring the time shape of the data if this is true more frequent observations could reduce that bias this paper tries to show that the time shape of inventory data may have a significant effect on what we observe with periodic readings

sales and consumer lock in this paper examines the dynamically consistent price path for a new product monopolist unable to commit to future prices when consumers must incur setup costs of adopting the product the authors find that setup costs give rise to a price path with introductory sales along the path periods of high prices during which only locked in or captive customers buy the product alternate with sales low price periods during which new customers adopt the product as the stock of captive customers increases over time sales become less frequent after the customer base reaches some critical level no further sales take place they show that the monopolist may hold a sleeping patient in which initial sales of the product are postponed to avoid locking into a high pricing strategy that ignores new customers copyright 1989 by the london school of economics and political science

the speed of adjustment and production smoothing bayesian estimation abstract the models used for empirical studies of inventory behavior typically include the lagged stock of inventories as a result of the partial adjustment assumption and also exhibit serial correlation in the residuals some researchers suggested that the very low speed of adjustment of the actual inventories to their desired levels and also the lack of empirical support for the production smoothing hypothesis may be the results of applying inappropriate estimation methods to the data recently a bayesian estimator that applies to models containing both lagged dependent variables and autocorrelated disturbances was developed in this paper we examine the empirical evidence on the speed of adjustment of inventories to their desired levels and the degree to which firms smooth production by applying this new estimation method to monthly industry data the results show that the low speeds of adjustment reported in the literature as well as the low degree or lack of production smoothing also reported in the literature may indeed be artifacts of the estimation procedures used

patent protection in the shadow of infringement simulation estimations of patent value empirical estimates of the private value of patent protection are derived for four technology areas computers textiles combustion engines and pharmaceuticals using new patent data for west germany 1953 1988 patentees must pay renewal fees to keep their patents in force as well as legal expenses in order to enforce them a dynamic stochastic discrete choice model of optimal renewal decisions is developed incorporating both learning and depreciation as well as the potential need to prosecute infringement the evolution of the distribution of returns over the life of a group of patents is calculated for each technology using a minimum distance simulation estimator results indicate that the aggregate value of protection generated per year is on the order of 10 of related r d expenditure

an adaptive dynamic model of production and inventories abstract four decades ago franco modigliani and owen sauerlender 1955 proposed a variable coefficients production smoothing model of the firm s decisions the firm holds initial sales anticipation at the beginning of the year but is able during the course of the year to continuously revise the sales anticipation for the remainder of the year based on the information that becomes available to it similarly the firm makes production plans at the beginning of the year but is permitted to continuously adjust the plans for the remaining seasons in light of the additional information available in the course of the year the m s 1955 model is a variable coefficients model the relationship between production and sales varies by season they attempted to estimate it for each season separately and reported some limited results of their model using the portland cement data the monthly data were aggregated to quarterly and also to the industry level as the anticipation data were for that level of aggregation they reported results on estimating the model using first quarter data and some preliminary results on the fit to the second quarter data our focus in this paper is on the production and inventory model itself and not on the utility of anticipation data we can therefore use the monthly data and avoid potential biases resulting from temporal aggregation christiano and eichenbaum 1987 ghali 1996 we apply the model to the same industry m s studied portland cement we use data dissaggregated to the production district level we also investigate the appropriateness of pooling monthly data into quarterly by testing for the equality of the estimated monthly coefficients over quarters

do patents slow down technological progress abstract this paper challenges the widely held view in the industrial organization literature that patents always speed up technological progress we introduce a model of an innovating firm with uncertain property right to its innovation the impact of a commitment to an r d project is to create future options for patenting and market introduction each decision undertaken will change the conditions in which the innovator operates it is shown that an increase in patent protection reduces the elasticity of the option value of the program with respect to the value of the project raising the threshold value of market introduction and enhancing the ability of the innovator to wait thus while the effect of patent is to raise the rents on and thereby the potential amount of innovations it also tends to slow down market introduction

invention and innovation under alternative market structures the case of natural resources this paper examines the interactions between market structure and resource allocation over time when there is endogenous technical progress the structures considered are a planned economy pure monopoly and competition with patent rights in an efficient allocation the date of invention coincides with the date of innovation the date at which technology is used this is also true with a pure monopoly but monopoly retards technical progress relative to the efficient level competition for patents rights to a new technology results in excessively rapid technical progress if the resource endowment of the economy is sufficiently large also competition may lead to sleeping patents where invention strictly precedes the date of innovation

a critical analysis of the 2014 ipcc report on capital cost of mitigation and of renewable energy abstract the report by the ipcc working group 3 on mitigation has been widely reported as showing that a 430 480 ppm emissions target can be achieved at a low investment cost in relation to gdp however there are several reasons why the report cannot be regarded as having established these claims mainly to do with the very few sources referred to on the crucial cost issues the problems evident in those sources and difficulties encountered when investment sums allocated to various sectors are examined an exploration of the possible investment required by the renewable energy sector indicates that the costs associated with achieving desired emissions targets would be very high this strengthens the case that effective policies for dealing with climate and other global problems cannot be achieved unless there is transition from consumer societies committed to affluence and growth

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

the massetti et al criticisms of trainer s critique of the 2014 ipcc report on renewable energy a reply by trainer abstract the criticism massetti et al 2017 make is essentially that my analysis of the 2014 ipcc report trainer 2017 is mistaken because it confuses the macroeconomic or reduction in gdp cost of mitigation which is focal in chapter 6 with the investment or capital cost which is considered in chapter 16 this claim is stated but no space is given to showing what the confusion is supposed to be or to explaining how it invalidates my analysis the following brief notes make clear that these two issues were not confused in my analysis and that the comments from massetti et al do not cast doubt on my critique of the ipcc report

the economics of product patents this paper develops a model of product patents in which the patent changes the nature of market entry behavior rather than preventing entry entirely the model incorporates three levels of action namely the innovator s patenting decision the potential entrant s location decision and possible court action the analysis demonstrates how the characteristics of the patents system and the enforcement framework can influence rivals variety choices and thus the market equilibrium it also considers how the system can in principle be adjusted to improve social welfare copyright 1990 by american economic association

estimates of the value of patent rights in european countries during the post 1950 period this paper examines the distribution of the values of patent rights in the united kingdom france and germany during the post 1950 period these values are inferred from the behavior of patentees with respect to payment of renewal fees on their patents a simple economic model of renewal decisions is combined with data on the proportion of patents renewed at alternative ages and the renewal fee schedules to produce estimates of the distribution and the total value of patent rights in these countries moreover the data indicate that there have been changes in the value distribution and we follow these changes over the period the empirical results of particular interest concern the total value of patent rights and the relationship between changes in it and changes in the quantity of patents the skew in the distribution of patent values and the rate of obsolescence on the returns to patents

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

more on the speed of adjustment in inventory models when empirical stock adjustment models of manufacturers inventories of finished goods are estimated there appear to be two local minima in the sum of squared residuals functions at one local minimum the estimated adjustment speed is typically quite high at the other it is typically quite low furthermore finding two sets of estimates that fit the data almost equally well does not appear to be a quirk of this particular application rather it stems from a fundamental identification problem that afflicts partial adjustment models of all kinds in the specific context of manufacturers inventories of finished goods the estimation procedure employed by maccini and rossana seems to pick out the solution with rapid adjustment and high serial correlation in the disturbances whereas the solution with slow adjustment and little serial correlation is more often the global minimum this abstract was borrowed from another version of this item

patents as options some estimates of the value of holding european patent stocks in many countries holders of patents must pay an annual renewal fee in order to keep their patents in force this paper uses data on the proportion of patents renewed and the renewal fees faced by post world war ii cohorts of patents in france the united kingdom and germany in conjunction with a model of patent holders renewal decisions to estimate the returns earned from holding patents in these countries since patents are often applied for at a nearly stage in the innovation process the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce formally then the paper presents and solves a discrete choice optimal stochastic control model derives the implications of the model on aggregate behaviour and then estimates the parameters of the model from aggregate data the estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans and calculations of both the annual returns earned from holding the patents still in force or the patent stocks in the alternative countries and the distribution of the discounted value of returns earned from holding the patents in a cohort this abstract was borrowed from another version of this item

investments in and macroeconomic costs of climate mitigation in the working group iii contribution to the fifth assessment report of the ipcc abstract trainer 2017 criticizes cost estimates of climate change mitigation presented in the working group iii report to the ipcc and is concerned by lack of transparency and dubious practices in summarizing the literature this commentary shows that this critique is based on several mistakes trainer 2017 mixes evidence on investment changes and evidence on macroeconomic costs which are discussed in two different parts of the report because they are different indicators of the economic impact of climate mitigation policy this commentary also argues that when the report was prepared evidence on investments in mitigation technologies was limited but methodologically sound and transparently reported contrary to what suggested by trainer 2017