on the indeterminacy of capital accumulation paths abstract in neoclassical optimal growth models the stability of the accumulation paths depends on the discount parameter we prove that for discount factors small enough the policy function which describes an optimal path can be of any type the result is achieved using the notion of concavity we adopt a constructive approach given any twice differentiable map we show how to construct an optimal growth problem which produces that map as the optimal policy function a consequence is that chaos can appear in these models we also provide bounds on the values of the discount parameter for which indeterminacy is possible

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

the impact of trade liberalisation on exports imports and the balance of payments of developing countries this paper uses panel data and times series cross section analysis to estimate the effect of trade liberalisation on export growth import growth the balance of trade and the balance of payments for a sample of 22 developing countries that have adopted trade liberalisation policies since the mid 1970s we find that liberalisation stimulated export growth but raised import growth by more leading to a worsening of the balance of trade and payments to the extent that this has constrained the growth of output and living standards the findings have important implications for the sequencing and degree of liberalisation

self selection and monitoring in dynamic incentive problems with incomplete contracts a dynamic trading problem is examined in which a monopsonistic employer tries to hire workers whose productivities and reservation wages are private information the employer can only observe an employee s quality indirectly by monitoring a non verifiable measure of on the job performance the employer makes contract offers which employees can accept or reject once a contract has been accepted it is impossible for the employer to exchange messages with individual employees on the unique stationary equilibrium path for the contracting game the employer chooses between two mutually exclusive outcomes in the market outcome the employer offers long term contracts and information is conveyed entirely through self selection and delayed production in the monitoring outcome the employer offers short term contracts and contract renegotiation is conditioned by an employee s past performance a simple characterization theorem is provided which illustrates the often surprising effects of improvements in information in this setting for example an employer who is initially offering short term contracts to exploit performance information may stop monitoring and shift to market screening when the monitoring technology becomes more informative

market structure and schumpeterian growth abstract we present a discrete time version of a schumpeterian growth model a natural r d analogue to constant returns to scale implies a poisson production function with diminishing marginal product surprisingly the industry demand for r d inputs does not depend on the number of firms in the r d sector if bertrand competition ensues following ties in contrast demand is higher if ties result in collusion in general equilibrium bertrand competition leads to random switching between monopoly and competitive production under collusion production is always at the monopoly level but there is faster growth numerical simulations suggest that this leads to higher welfare

spectral and persistence properties of cyclical growth abstract this article investigates the cyclical properties of an endogenous growth model an explicit solution is derived which permits the full characterization of the cyclical as well as the long run properties of the model using spectral autocorrelation and impulse response functions we show that introducing endogenous growth overcomes some of the main shortcomings of rbc models in particular the model can generate positive autocorrelation of output growth when endogenous growth dominates the dynamics moreover the model exhibits the hump shaped pattern of impulse response functions of the trend reverting component of output

innovation timing games a general framework with applications abstract we offer a new algorithm for analyzing innovation timing games its main advantage over the traditional approach is that it applies to problems that had previously been intractable we use the algorithm to examine two classical innovation problems we find that the competition takes the form of a waiting game with a second mover advantage either for any level of r d costs process innovation or for high r d costs product innovation moreover both models predict that the second mover advantage is monotonically increasing in the costs of r d

cointegration error correction mechanism and trade liberalization the case of the spanish imports of manufactures this paper discusses the way that the effects of a tariff cut process on trade flows should be analysed when the variables are nonstationary using cointegration techniques and the error correction mechanism it is possible to establish the different types of structural break that might appear in the behaviour of a trade flow as a consequence of the trade liberalization process both in the short and in the long run in order to illustrate the results the evolution of the spanish imports of manufacturers after spain s entry into the european community is analysed

innovation in a generalized timing game we examine innovation as a market entry timing game with complete information and observable actions we characterize all pure strategy subgame perfect equilibria for the two player symmetric model allowing both the leader s and the follower s payoff functions to be multi peaked non monotonic and discontinuous we provide sufficient conditions for when the equilibria can be pareto ranked and when the equilibrium is unique economic applications discussed include process and product innovation and the timing of the sale of an asset

the effects of trade liberalization on imports in selected developing countries abstract this paper analyses the impact of the reduction of tariff and nontariff barriers on the imports of 22 selected developing countries utilizing dynamic panel data techniques domestic income and relative prices are found to be significant determinants of import growth in addition the results indicate that import duties reduce import growth but the effect varies according to the region and the type of trade policy regime existing in the country the results also show that the elimination of trade policy distortions has a strong positive impact on import growth finally it is found that income and price elasticities are higher as a result of trade policy reform

import demand and non tariff barriers the impact of trade liberalization abstract prediction of import response following liberalization measures is a particularly arduous task when extensive quantitative restrictions on imports are present quotas affect the responsiveness of imports to real exchange rates tariffs and activity levels and the combined effects of quotas and other variables are hard to gauge when data are only available for the constrained regime in this paper we show that theoretical results cannot unambiguously sign the effect of quotas on import responsiveness we also estimate on moroccan data import demand equations that take explicit account of the presence of quotas the results suggest that quantity restrictions had a significant impact not only on the level of imports but on their sensitivity to income and price variations as well by estimating the demand for foreign goods under rationing we are also able to predict the behavior of imports in response to the elimination of tariff and non tariff barriers to trade

equilibrium vertical differentiation in a bertrand model with capacity precommitment both quality differentiation and capacity commitment have been shown to relax price competition however their joint influence on the outcome of price competition has not yet been assessed in this article we consider a three stage game in which firms choose quality then commit to capacity and finally compete in price when the cost of quality is negligible we show that firms do not differentiate their products in a subgame perfect equilibrium in other words capacity precommitment completely eliminates the incentive to differentiate by quality

a comment on a model of vertical product differentiation in a duopoly model with vertical differentiation if the firms do not cover the market the lower quality firm chooses a quality level exactly 4 7 of that of the higher quality firm and chooses a price that is 2 7 of the price of the higher quality firm copyright 1992 by blackwell publishing ltd

social efficiency of bubbles in the grossman and helpman endogenous growth model abstract using a particular specification of the expectation process i show that a weak but permanent over evaluation of financial assets may exist in the grossman and helpman 1991 innovation and growth in the global economy mit press cambridge ma endogenous growth model with horizontal produce differentiation and that the resulting competitive equilibrium is socially optimal

low quality leadership in a vertically differentiated duopoly with cournot competition abstract we model a vertically differentiated duopoly with quantity setting firms as an extended game in which firms noncooperatively choose the timing of moves at the quality stage to show that at the subgame perfect equilibrium sequential play obtains with the low quality firm taking the leader s role

is schumpeterian creative destruction a plausible source of endogenous real business cycle shocks abstract this paper examines the link between growth and business cycles by incorporating schumpeterian growth into an otherwise standard real business cycle rbc model we ask whether schumpeter s creative destruction process can generate realistic business cycles we solve the model generate artificial time series and compare statistical properties of these series with their historical counterparts in our approach the trend component is included in our artificial series just as it is in the data hence we are not tied to any particular filtering method for our comparisons we find that schumpeterian fluctuations alone can generate time series that match key moments from u s data we also find however that a model with both schumpeterian and standard rbc shocks performs better

a simple model of schumpeterian growth with complex dynamics abstract in this paper we develop a schumpeterian discrete time model of endogenous growth with an explicit market for the resource used for innovation creating investment and study its global dynamics we show among others that the level of investment may fluctuate chaotically for a compact range of model parameters as a consequence of the explicit intermediation and market imperfections temporary monopoly power following an innovation underlying the growth process

endogenous growth cycles current explanations why a growing economy necessarily goes through periods of high and low growth predict countercyclical r d investment as this is very controversial from an empirical perspective a stochastic poisson model of endogenous growth cycles is presented where the determinants of the cyclical behaviour of r d investment are analytically studied providing an explicit expression for the expected length of a cycle shows that high frequency fluctuations can indeed be understood by this approach it is also shown how small technological improvements translate into large aggregate fluctuations

time cost substitutability earlycutting threat and innovation timing with time cost substitutability a potential imitator could threat to earlycut the innovator by increasing experimental intensity the earlycutting threat or uncertainty about the potential imitator s experimental cost advantage usually drives down the new product s quality but advances its launching date

the economic determinants of technology shocks in a real business cycle model abstract creative destruction due to new technologies causes both long run growth and short run business fluctuations new technologies push the economy on a higher productivity level but also imply partial obsolescence of old production units obsolescence induces an adjustment period during which growth rates gradually fall at some endogenously determined point research for the next technology starts once the new technology is discovered a technology shock occurs and the next cycle starts this is shown in a continuous time rbc model with risk averse agents where savings can be used for financing deterministic capital accumulation and stochastic r d for new technologies

repeated insurance contracts and moral hazard abstract an attempt is made to account for the frequently observed phenomenon of insurance companies offering discounts to clients who possess a favorable record of past claims we argue that such discounts provide a mechanism which enables both insurer and insured to counteract the inefficiency which arises from moral hazard

liquidity and real activity in a simple open economy model abstract this paper analyzes the ability of an open economy version of lucas s 1990 liquidity model to account for properties of international data the focus is on the model s ability to account for exchange rate dynamics and measured effects of monetary policy shocks on exchange rates interest rates and real activities across countries the model generates a prediction that a positive domestic monetary innovation is associated with nominal and real currency depreciations however the model s predictions with respect to nominal and real exchange rate volatilities are low

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

a multisectoral general equilibrium model of schumpeterian growth and fluctuations abstract this paper builds a dynamic multisectoral general equilibrium model of schumpeterian growth and fluctuations based on the endogenous introduction of new products the set of technological opportunities determines the degree of product quality upgrading and consists of breakthroughs and improvements the latter exhibiting diminishing returns if the degree of diminishing returns to technological improvements is low then there is no steady state equilibrium but cycles of breakthroughs and improvements we analyze two symmetric stable patterns of innovation which generate endogenous cycles and growth there is a negative correlation between the duration of each cycle and the long run growth trend