econometric estimation of foresight tax policy and investment in the united states we develop a method for measuring the foresight agents have we first dichotomize an agent s information at current date t into knowledge up to date t 1 f and expectations after t 1 f we then form a residual based test statistic that allows us to compare prediction errors for econometric models based on different values of f we illustrate the method examining investment around tax reforms to measure the foresight firms have about tax policy in this illustration current investment appears to reflect currently available information but little foresight other than foresight of enacted policy changes

interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

wages and productivity growth in a dynamic monopoly abstract this paper studies the intertemporal problem of a monopolistic firm that engages in productivity enhancing innovations to reduce labor costs the optimal innovation policy is not monotone and the rate of productivity growth is the highest when the firm s size is in some intermediate range as long as its initial productivity is not too low the firm eventually reaches a steady state where the rate of productivity growth is identical to the rate of wage growth productivity dependent wage differentials do not affect productivity growth in the steady state they increase however the firm s long run equilibrium cost level

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

the structure of canadian inter industry r d spillovers and the rates of return to r d this paper estimates the effects of interindustry r d spillovers on the production cost of nine major canadian industries production costs in all nine are affected by spillovers and six industries are influenced by at least two different source industries rates of return to r d capital for each industry are also estimated private rates of return on r d are at least two and a half times those on physical capital rates of return on r d inclusive of spillovers are also computed for industries that are major sources of spillover the spillover inclusive returns are at least twice the private returns copyright 1989 by blackwell publishing ltd

trade in intermediates and the colonial pattern of trade this paper builds up a model of trade in intermediate goods and uses it to analyze certain fea tures of the colonial pattern of trade different parts of an interme diate good are traded between two nations and the intermediate good i s then used to make two country specific products the author discuss es the effects of technical progress in different sections of the pro ductive spectrum on factoral terms of trade and allocation of resourc es in each country in a three country two good colonial world it i s shown that immiserization can occur even with given commodity terms of trade copyright 1987 by the review of economic studies limited

the specification of dynamics in cost function and factor demand estimation this paper concerns the problem of properly specifying the dynamic structure of models of industry costs and factor demands the paper compares three common frameworks long run costs with all factors assumed in equilibrium full static equilibrium short run costs with variable factors in short run equilibrium partial static equilibrium followed by computation of long run costs and short run costs including internal capital adjustment costs partial dynamic equilibrium the approach of the paper is to estimate a capital labor fuel electricity model for six oecd countries g7 less italy for the 1960 1989 period using the three different dynamic specifications we obtain substantially different results in terms of factor demand cross price effects and technical change the implication is that proper dynamic specification is critical the partial dynamic equilibrium model appears to behave most consistently across the cross section copyright 1993 by mit press

problems with identifying adjustment costs from regressions of investment on q abstract most econometricians evaluate investment q regressions by using the coefficients to estimate adjustment costs however these coefficients do not uniquely identify average adjustment costs or speeds nor do they appear in the expression for marginal adjustment costs in terms of observables

financial portfolio management through the goal programming model current state of the art abstract since markowitz 1952 formulated the portfolio selection problem many researchers have developed models aggregating simultaneously several conflicting attributes such as the return on investment risk and liquidity the portfolio manager generally seeks the best combination of stocks assets that meets his her investment objectives the goal programming gp model is widely applied to finance and portfolio management the aim of this paper is to present the different variants of the gp model that have been applied to the financial portfolio selection problem from the 1970s to nowadays

asymmetric adjustment costs in simple general equilibrium models abstract this paper demonstrates that the introduction of asymmetric adjustment costs in a simple general equilibrium framework establishes a meaningful link between factor price determination and output determination breaking the analytically convenient dichotomy of the heckscher ohlin samuelson model the possibility of trade between seemingly similar countries that differ in their adjustment technologies is visited

factor demand models with nonlinear short run fluctuations abstract this paper considers asymmetric costs of adjustment that propagate nonlinear shortrun fluctuations in stochastic factor demand systems the model endogenously generates asymmetric cyclical demand for capital and labour between peaks and troughs of the business cycle the empirical analysis of the model is based on quarterly time series data of the dutch manufacturing sector for the period 1971 i 1984 iv and annual time series data of the u k manufacturing sector for the period 1955 1986 i find important differences of adjustment speed of capital and labour inputs between expansionary and contractionary phases of the business cycle

portfolio rebalancing and the turn of the year effect this paper finds that for the 1935 1986 period the market s risk return relation does not have a january seasonal the findings differ from those of other studies due to the use of value weighted rather than equally weighted portfolios inferences are sensitive to the weighting procedure because of the small firm return patterns in january in particular even in those januaries for which the market return is negative small firm returns are positive and they are more positive the higher is beta this is consistent with the portfolio rebalancing explanation of the turn of the year effect since at least 1926 the average return on small firms in january has been unusually high a phenomenon known as the turn of the year effect in this paper we present new evidence regarding the risk return characteristics of small firms in january we find that for small firms there is a positively sloped riskreturn relation in both up and down markets this pattern is difficult to reconcile with the belief that the high return on small firms in january is equilibrium compensation for risk bearing we show how these patterns in small firms returns have led others to conclude that the market s risk return relation has a january seasonal in particular rozeff and kinney 21 and tinic and west 22 23 among others using equally weighted portfolios formed on the basis of historical betas have found a steeper slope for the capm s risk return relation in january than in other months we demonstrate that this pattern exists only for small firms consequently statistical inferences about the risk return relation are heavily dependent upon whether equally weighted or value weighted portfolio returns are used in the estimation we show that for 1935 86 when monthly cross sectional regressions are estimated using value weighted portfolio returns there is no more of a statistically significant difference in the estimated return to risk bearing in january than in the other eleven months of the year the notion that there is a january seasonal in the capm s risk return relation for the us has rapidly become accepted knowledge for example corhay hawawini and michel 6 accept this conclusion and investigate whether other

why do investment euler equations fail this article isolates sources of misspecification in neoclassical investment euler equations without ad hoc alterations of the basic model first allowing for nonlinear marginal investment adjustment costs improves model performance slightly some further improvement results from isolating firms whose optimality conditions hold even in the presence of fixed costs of adjustment or costly reversibility finally i identify which instruments contribute to model failure via standard gmm based tests and also via the empirical likelihood estimator of imbens which allows testing overidentifying restrictions individually both methods show that financial instruments contribute to rejection of the overidentifying restrictions for all firms however only the empirical likelihood estimator shows that they are a source of failure for firms that attain an interior optimum

vertical specialization in a ricardian model with a continuum of stages of production the traditional models of the pure theory of international trade have mainly discussed specialization in final goods that is the entire vertical processing of a good is done in the country that specializes in that good thus if a country specializes in the production of clothing the raw materials needed for the production of clothing are also produced in that country vertical specialization 1 on the other hand means that the countries specialize along the vertical productive spectrum of a good one country may produce yarn and export it while the other country may produce clothing with imported yarn the traded goods under vertical specialization are final goods as well as raw materials a good typically has many stages along its vertical spectrum and a country can specialize at any one of those stages the question that immediately arises is what determines the particular stage at which the vertical spectrum is broken so that each country can specialize in one part to put it differently if a country is seen to be specializing in the production of yarn there must be some reason why it does not specialize in raw cotton the purpose of this paper is to answer that question in section i a very simple model is described with two countries and one final good and it is shown how the stage of specialization can be determined as an endogenous variable section ii discusses the price system and the gains from trade while section iii briefly discusses how the model can be extended to incorporate two final goods

compositional change aggregation and dynamic factor demand estimates on a panel of manufacturing firms most empirical research on investment and dynamic factor demand has used aggregated data the large number of authors who have cited this as a source of problems strongly suggests possible benefits from analyzing individual firm data this paper presents an analysis of a panel dataset of us manufacturing firms several models based on cost minimization and a three factor cobb douglas technology are developed the differences concern whether the technology varies across two digit sic industries the presence of fixed adjustment lags and the determinants of adjustment costs identification relies on the rational expectations hypothesis and estimation on non linear 3sls the estimates indicate that versions with the adjustment lag perform better than others conditional elasticities reveal that factor demand responds rapidly to anticipated changes in output and factor prices a finding consistent with other recent work it appears that the factor demand of large firms is more price sensitive and less sensitive to output than small firms consistent with recent work on credit market imperfections comparison of the results based on the pooled and the industry varying technologies indicate that the use of aggregate data is indeed a source of problems

intellectual property rights and developing country agriculture abstract theoretical studies indicate that the welfare of the developing countries might either be improved or damaged by the strengthening of their own intellectual property rights net gains through their agricultural sectors will be positive if the payoff from new innovations is sufficiently different as compared to the technology exporting countries scattered evidence supports the hypotheses that agricultural r d is responsive to iprs in developing countries but there is also evidence that developed country technology is sufficiently appropriate for developing countries as to offer substantial free rider gains however without iprs it seems unlikely that the agricultural productivity rates in developing countries can begin to catch up with those in developed country agriculture

firm size and r d intensity a re examination using data from the federal trade commission s line of business program and survey measures of technological opportunity and appropriability conditions this paper finds that overall firm size has a very small statistically insignificant effect on business unit r d intensity when either fixed industry effects or measured industry characteristics are taken into account business unit size has no effect on the r d intensity of business units that perform r d but it affects the probability of conducting r d business unit and firm size jointly explain less than one per cent of the variance in r d industry effects explain nearly half the variance two sets of well known hypotheses are associated with the later work of joseph schumpeter the first concerns the effects of market concentration on research and development investment and on innovative performance the second bears on the effects of firm size on r d and innovation in a recent paper levin cohen and mowery 1985 we re examined the first set of hypotheses simple regressions at the line of business level replicated the established findings that both r d intensity and innovative performance first increase and then decrease as industrial concentration rises the effect of concentration however was sharply attenuated when we controlled for interindustry differences in technological opportunity and in the appropriability of returns from new technology our results suggested that it is probably unwarranted to conclude that market concentration favors r d investment and innovation in this paper we investigate the schumpeterian hypothesis that large size is conducive to r d investment this relationship has been studied at least as intensively as the link between concentration and r d but our approach is novel in two respects first using data collected by the federal trade

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

taxes incentives and production the case of turkey abstract this paper investigates the effectiveness of investment incentives and corporate income taxes in influencing production and investment decisions in the turkish electrical machinery non electrical machinery and transportation equipment industries three tax instruments are considered the corporate income tax cit the investment tax allowance ita and the capital cost allowance cca the results show that since there are significant capital adjustment costs it is important to distinguish between the short intermediate and long run effects associated with the tax instruments production decisions are relatively more responsive to changes in the ita rate compared to changes in either the cca or cit rates in each of the runs however the ita and cca rates are equally cost effective in stimulating investment and superior to the cit the cca and ita rates generate investment expenditures of 1 5 to 2 5 times the loss in government revenue thus targeted instruments outperform the general cit instrument in addition although the incentive to invest is enhanced there is little effect on output and employment therefore these tax incentives essentially after production techniques

a model of trade in intermediate goods abstract the purpose of this paper is to show in a two country two good stationary state model where one of the goods is produced by an austrian flow input point output technology that the country with the higher rate of interest specializes in the early stages of production these countries can be roughly identified with the less developed nations where lower wage rates and higher capital costs lead to a comparative advantage in the early stages of the productive spectrum

public investment and industry incentives in life science research life science research has shifted rapidly from the public to the private sector raising questions about government s remaining role we shed light on the issue by employing a dynamic investment response model to examine the public s impact on industry life science research effort and success we find that government expenditures in both basic biological research and agricultural and medical science create substantial spillovers for private firms the spillovers are unfortunately partly nullified by government competition for scarce research inputs yet even after accounting for such competition public investment has been strongly complementary to private investment indeed opportunities created through public research are the principal source of growth in industry life sciences copyright 2007 oxford university press

r d support programs in developing countries the turkish experience in this study the determinants of private r d investment are examined at the level of firms in the turkish manufacturing industry we focus our attention on the effect of public r d support programs our findings indicate that public r d support significantly and positively affects private r d investment there seems to be even an acceleration effect on firm financed r d expenditures smaller r d performers benefit more from r d support and perform more r d in addition technology transfer from abroad and domestic r d activity show up as complementary processes given the scarcity of studies on r d support in technologically weaker economies our hope is that the less developed countries can exploit these findings in constructing socially beneficial technology policies

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

estimation of the internal adjustment costs model using longitudinal establishment data this paper develops estimates of the internal costs measured in terms of foregone current output associated with the introduction of new plant and equipment into manufacturing establishments using the census bureau s longitudinal establishment data file a very large and rich source of production and investment data our estimates provide strong support for the internal adjustment costs hypothesis they indicate that one dollar increases in expansion and replacement investment cause on the average 35and 21 cent reductions respectively in current output the internal cost of adjusting to equipment appears to be higher than the cost of adjusting to plant

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

accommodating diverse institutional investment objectives and constraints using non linear goal programming abstract institutional portfolio managers face a diverse mix of conflicting investment objectives and constraints such as risk and retum goals institutional liability considerations fund management legal restrictions institutional cash flow requirments and protfolio management performance targets this paper argues that lexicographic goal programming can be used to keep track of an institution s complex investment goals and will provide a best possible solution for the institution s portfolio selection problem three examples illustrate the applicability of non linear goal programming to institutions differing investment requirements

the intertemporal dimension of neoclassical production theory abstract the aim of this survey paper is to provide a guide to the literature on optimal dynamic factor demands to the non specialist reader interested in applied work we start with the distinction between variable and quasi fixed factors of production and use these to characterize the firm s temporary equilibrium we then review the optimal intertemporal behaviour of the firm using the notion of adjustment costs as a means to solve the firm s optimization problem this process gives rise to a system of interrelated dynamic factor demands in a flexible accelerator format theoretical difficulties and empirical limitations of this model are discussed this fact leads us to review the theory of intertemporal duality we next analyze the issue of expectations in this class of dynamic models a section reviewing the empirical work on dynamic factor demands follows after which we offer some concluding remarks

the three faces of factor intensities abstract in this paper we suggest that factor intensities have more than one face and care must be taken in the comparisons chosen among other things we illustrate that in the multi country multi commodity case a capital abundant country s export can easily be more labor intensive than its import competing sector

quasi fixed inputs in u s and japanese manufacturing a generalized leontief restricted cost function approach in this paper a generalized leontief variable cost function is develope d which permits analytical derivation of steady state levels of quasi fixed inputs and capacity output and does not require specification of a numeraire input this framework is then used to evaluate the fa ctor demand patterns of japanese and u s manufacturing based on bot h one quasi fixed capital input and two quasi fixed capital and la bor input specifications and both static and dynamic optimization t he findings provide evidence of considerable flexibility of demand re sponses in japan which may have contributed to japan s relatively st rong economic performance in the volatile 1970s copyright 1988 by mit press

product line expansion and resource cannibalization abstract diversification research argues that new products are more successful when they leverage a firm s intangible resources which may support multiple activities without engendering rivalry for their use however numerous complementary resources may also be needed to exploit a firm s intangibles if these resources are in limited supply or if it takes time to acquire and assimilate additional resource capacity then new products may impose costs on existing products by cannibalizing the services of firm resources our analysis of product introductions within the pharmaceutical industry provides evidence of resource cannibalization and suggests that product market experience helps offset some of these costs

complementarity between import competition and import promotion abstract growth in the import competing output is usually accompanied by a decline in the volume of imports of the product this result may change when we consider intermediate goods we develop a multi sector general equilibrium model to show that larger local output of an intermediate good may also imply larger imports of the same journal of economic literature classification numbers f1 f11 f13

r d production structure and rates of return in the u s japanese and german manufacturing sectors a non separable dynamic factor demand model abstract the focus of this paper is an analysis of the production structure the demand for factor inputs and the rates of return in the manufacturing sector of three major industrialized countries the united states japan and germany the analysis is based on a dynamic factor demand model with two variable inputs labor and materials and two quasi fixed inputs capital and rd also for all countries the speed of adjustment for capital is found to be higher than that for r d

expectations and factor demand this paper develops and estimates a model of interrelated factor demand with rational expectations in the presence of internal adjustment costs invariant technological parameters are distinguished from the firm s adjustment parameters which change when the exogenous processes faced by the firm change the capital demand equation is derived by solving the euler equations which stem from minimization of the present value of costs future exogenous variables are supplied from solutions of arima equations the model is tested on postwar quarterly data for u s manufacturing a regime change in the process for energy prices is simulated as is a temporary suspension of the investment tax credit

optimal investment strategies with investor liabilities this paper examines the portfolio problem from the viewpoint of an investor who faces a set of liabilities we show that optimum choices can be made from a set of spanning portfolios which include cash flow matching portfolios index funds and actively managed portfolios the optimal composition of each and the optimum mix among the portfolios are presented in terms of criteria which are computationally simple and have an appealing economic interpretation

the impact of r d investment on productivity new evidence using linked r d lrd data the impact of r d investment on productivity new evidence using linked r d lrd data this paper uses confidential census longitudinal microdata to examine the association between r d and productivity for the period 1972 1985 these data allow for significant improvements in measurement and model specification yielding more precise estimates of the returns to r d our results confirm the findings of existing studies 1 positive returns to r d investment 2 higher returns to company financed research 3 a productivity premium on basic research these results are robust to adjustments for influential outliers also our evidence suggests that the return to company financed r d is an increasing function of firm size i introduction robert solow s studies in the late 1950s dramatically changed perceptions of the sources of economic growth until this time the commonly held view was that improvements in economic welfare were achieved primarily through the use of more inputs in particular capital input however solow 1957 reported that only 10 percent of the twofold rise in u s per capita output during the years 1909 1949 was due to growth in the capital labor ratio the remainder was attributed to more efficient use of inputs or technological change solow also established a framework for estimating technological change a productivity residual or a measure of changes in output that could not be explained by changes in input use the solow residual in modified form has become virtually synonymous with the measurement of total factor productivity tfp growth jorgenson and griliches 1967 demonstrated that under the assumptions of constant returns to scale and competitive factor pricing changes in total factor productivity measure shifts in a production function rather than treat technological change as exogenous or manna from heaven many economists have explored its determinants r d investment is generally regarded as having a strong impact on productivity growth empirical analysis of the r d productivity connection has often been based on estimation of reduced form equations derived from the r d capital stock model griliches 1979 which extends the solow model to include the stock of technical knowledge or knowledge capital as a factor of production in addition to the standard factors of production physical capital labor intermediate materials and energy if the rate of depreciation of knowledge capital is assumed to be negligible tfp growth dtfp is a function of the intensity of r d investment rdint which is usually measured as the ratio of r d expenditure to sales 1 dtf p sub t alpha beta rdin t sub t u sub t where u sub t is a classical disturbance term the coefficient on r d intensity beta is interpreted as both the marginal product of knowledge capital and the rate of return to r d investment 1 estimates of beta at the company or line of business level are interpreted as measures of the private rate of return to r d or those that accrue to the firm or its investors due to incomplete appropriability or other factors this return may not equal the social return to this activity most empirical studies especially those based on aggregate and sectoral data have found evidence of a strong positive correlation between tfp growth and r d investment however results using firm level data have been mixed the finding that these two variables are uncorrelated is cause for concern because it implies that firms may not be able to earn significant returns on their investment in r d making them less likely to undertake this investment in the future even if it is socially desirable for them to do so we believe that it is important to reestimate this relationship because it is highly likely that existing firm level studies have been based on measures of tfp that are crude imprecise and unrepresentative

firm heterogeneity internal finance and credit rationing this paper assesses the role of internal net worth holding constant investment opportunities in the allocation of credit in the presence of asymmetric information in the capital market the authors consider an economy in which both symmetric information and information intensive entrepreneurs seek funds from the capital market and they develop a simple general equilibrium model of credit allocation their emphasis is on shocks to borrower net worth depending on levels of net worth the symmetric information allocation a credit collapse or intermediate allocations are possible the model yields predictions corresponding to accelerator effects on investment and output as well as real effects of collateral redistributions copyright 1990 by royal economic society

investment gestation lags the difference between time to build and delivery lags the timing of investment and capital stock accumulation can differ as a result of time to build and or delivery lags in this paper simple calibration methods are used to illustrate the differences in these sources of gestation lags

patent rights and trade analysis of biological products medicinals and botanicals and pharmaceuticals this article analyzes the effects of foreign patent rights on u s bilateral exports the empirical analysis covers three highly disaggregated drug industries over three decades we estimate bilateral trade equations for each industry using cross country data on the strength of national patent rights the findings show that strong foreign patent rights enhance the market power of u s drug exporters across countries with weak imitative abilities alternatively strong foreign patent rights stimulate the market expansion of u s drug exports across countries with strong imitative abilities these effects are larger in magnitude during the 1980 90s relative to the 1970s copyright 2002 oxford university press

input measurement and productivity growth in japanese and u s manufacturing in their article in this review j r norsworthy and david h malmquist 1983 have presented interesting comparisons of productivity growth in the japanese and u s manufacturing sectors their paper starts with the discussion of whether the conventional value added or gnp measurement of output is an appropriate framework for productivity analysis some confusion frequently arises as to whether a production function should be structured on the basis of gross output or value added output separability is a pivotal concept in the analysis of production structures especially in relation to the existence of a real value added aggregate it is well known that there are two types of separability which pertain to the existence of a real value added function weak local separability and strong partial separability the practical advantage of distinguishing these two different forms of separability is that the double deflation method in conventional gnp accounting is justified only when strong partial separability holds using the approximate separability tests of michael denny and melvyn fuss 1977 norsworthy and malmquist have shown that a value added aggregate does not exist in either u s or japanese manufacturing and they conclude that the appropriate output measure for joint investigation of both countries for purposes of productivity analysis is gross output p 953 the purpose of this comment is to indicate some deficiencies in norsworthy and malmquist s analysis in particular it will be demonstrated that the conditions for weak local and strong partial separability in norsworthy and malmquist s paper are incorrectly formulated and as a consequence their findings may not be used as conclusive evidence that a gross output measure is an appropriate basis for the analysis of capital labor substitutability and productivity growth in japan and the united states

estimating distributed lags in short panels with an application to the specification of depreciation patterns and capital stock constructs this paper considers the problem of estimating distributed lags in short panels though the n time series contained in a panel may allow for relatively precise estimates of identified lag coefficients identification requires restrictions on the contribution of the unobserved pre sample x s to the current values of y and the shortness of panels focuses attention on this matter we investigate two such restrictions the first constrains the relationship between the presample and insample x s while the second constrains the lag distribution itself an example which investigates empirically how to construct capital stocks for the analysis of rates of return closes the paper

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

estimation of the depreciation rate of physical and r d capital in the u s total manufacturing sector i introduction numerous studies on production and cost the sources of productivity and endogenous growth have recognized the pivotal role of the physical capital stock studies at various levels of aggregation over assets and industries have emphasized the crucial role of investment in plant and equipment in the growth of demand and productive capacity it is clearly recognized by economists and policymakers that knowledge capital approximated by rd 1986 to measure the depreciation rates of the stock of rd 1980 in the literature on dynamic demand models such an approach was first adopted by epstein and denny 1980 and more recently by kollintzas and choi 1985 for a single capital good and on a theoretical level in bernstein and nadiri 1987a 1987b the paper is organized as follows the specification of the model is presented in section ii section iii is devoted to a discussion of the data and to the presentation of the parameter estimates of the model in section iv we present the empirical results for the depreciation rates for physical and r d capital and compare them with those reported in the literature we compare the physical capital stock estimates generated by our model with the official capital stock estimates produced by u s department of commerce bureau of economic analysis in this section we also present our estimates of the decomposition of gross investment into replacement and expansion investment for both physical and r d capital these decompositions are important from the vantage point of public policy analysis

plant variety protection in developing countries a report from the field the establishment of intellectual property rights iprs for plant varieties has caused considerable controversy but there is relatively little empirical evidence on performance and options in developing countries this paper summarizes the results of a recent five country study concentrating on the conduct of plant variety protection pvp regimes it examines pvp in the context of other mechanisms that provide incentives for plant breeding it discusses the principal options available to developing countries and examines the ability of pvp to offer protection from competing firms and from on farm seed saving it also looks at the administrative and management requirements of pvp regimes although the paper does not discuss patent protection for biotechnology it examines the ipr requirements for the introduction of transgenic varieties developing countries need to establish an appropriate pvp system but pvp should be seen as part of a broader strategy for seed system development

intellectual capital in a q theory of ag biotech mergers tobin s q theory of investment has been linked to firm merger activity by jovanovic and rousseau jr they showed that firms with higher q values that is the ratio of market to book values tend to be the ones buying other firms and not the ones being acquired market values should theoretically equal book values a firm s assets as they appear on the balance sheet equal to their cost less accumulated depreciation in reality book value often differs from market value especially in knowledge intensive industries indicating the premium above measurable assets that shareholders are willing to pay for a company s unique combination of market position tangible and intangible capital goodwill and other favorable characteristics firms with greater q values are in a position to acquire more capital possibly through mergers and acquisitions to make further use of their advantages this article extends the jr analysis to consider the role of intellectual capital in merger activity we analyze the connection between intangible capital and the q theory of mergers in the agricultural biotechnology ag biotech industry this industry underwent significant technological change beginning in the late 1980s as new biotechnology techniques were integrated with plant breeding and other agricultural practices the number of patent applications in the field grew from less than a 100 a year in the late 1980s to more than 500 applications per year by the mid 1990s bennett et al along with this technological change

finance capital in dynamic factor demand models the lagged partial adjusment money demand function has been studied theoretically and empirically for the aggregate economy this paper focuses on a sectoral analysis of two partial adjustment functions one for optimal money demand and another for optimal loans demand the two partial adjustment equations are derived employing a representive firm approach a dynamic factor demand model with internal costs of adjustment is utilized to generate euler equations for the demand for money and short term business loans these euler equations parallel the aggregate partial adjustment money demand equations typically employed in applied monetary research the significant difference between the ad hocderivation and the microtheoretic derivation employed here is that desired money and loan holdings are found by solving the euler equations these particular definition of desired money and loan holding are model consistent and depend upon the predetermined and exogeneous variables of the model empirical analysis ge

an interest rate risk management model for commercial banks abstract this paper develops a goal programming model to assist a commercial bank in managing its exposure to interest rate risk the bank s objective is to immunize its equity position against innovations in interest rates while maximizing its market value to accomplish this task a duration gap framework is developed that does not require interest rate forecasts as decision variables the model includes assets liabilities and off balance sheet derivative securities the focus is on a protective put strategy that uses options on interest rate futures but to provide contrast a short interest rate futures position is examined as well application of the model to an illustrative environment indicates that for larger interest rate changes the option strategy provides better protection against interest rate risk than the short futures position

simple tests of distributional effects on macroeconomic equations the presence of distributional effects in macroeconomic equations is shown to coincide with nonlinearity in micro behavioral relationships parameters estimated with aggregate data as in representative agent models contain distributional biases that are not measurable using aggregate data alone tests for distributional effects and other measures of the extent of aggregation problems are derived using distributional data observed over time significant distributional effects are noted for a model of annual aggregate u s commodity expenditure data a static model that accommodates individual heterogeneity is found to be statistically equivalent to a simply dynamic model that accommodates first order autocorrelation

the own wage elasticity of labor demand a meta regression analysis firms labor demand responses to wage changes are of key interest in empirical research and policy analysis however despite extensive research estimates of labor demand elasticities remain subject to considerable heterogeneity in this paper we conduct a comprehensive meta regression analysis to re assess the empirical literature on labor demand elasticities building on 942 elasticity estimates from 105 different studies we identify sources of variation in the absolute value of this elasticity heterogeneity due to the theoretical and empirical specification of the labor demand model different datasets used or sectors and countries considered explains more than 80 of the variation in the estimates we further find substantial evidence for the presence of publication selection bias as estimates of the own wage elasticity of labor demand are upwardly inflated

foreign capital and protectionism in terms of a simple model it is shown that the growth in the export processing zone through an influx of foreign owned capital reduces welfare for an economy importing capital intensive goods and following a protectionary policy similarly it follows that growth in the export processing zone should benefit economies importing labor intensive goods

wages and productivity growth in a competitive industry abstract we describe the evolution of productivity growth in a competitive industry with free entry and exit the exogenous wage rate determines the firms engagement in labor productivity enhancing process innovation there is a unique steady state of the industry dynamics which is globally asymptotically stable in the steady state the number of active firms their unit labor cost and supply depend on the growth rate but not on the level of the wage rate in addition to providing comparative statics of the steady state the paper characterizes the industry s adjustment path

transitional dynamics in two sector models of endogenous growth the steady state and transitional dynamics of two sector models of endogenous growth are analyzed in this paper we describe necessary conditions for endogenous growth the conditions allow us to reduce the dynamics of the solution to a system with one state like and two control like variables we analyze the determinants of the long run growth rate we use the time elimination method to analyze the transitional dynamics of the models we find that there are transitions in real time if the point in time production possibility frontier is strictly concave which occurs for example if the two production functions are different or if there are decreasing point in time returns in any of the sectors we also show that if the models have a transition in real time the models are globally saddle path stable we find that the wealth or consumption smoothing effect tends to dominate the substitution or real wage effect so that the transition from relatively low levels of physical capital is carried over through high work effort rather than high savings we develop some empirical implications we show that the models predict conditional convergence in that in a cross section the growth rate is predicted to be negatively related to initial income but only after some measure of human capital is held constant thus the models are consistent with existing empirical cross country evidence authors

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

econometric estimation of foresight tax policy and investment in the u s we develop a method for measuring the foresight agents have we first dichotomize an agent s information at current date t into knowledge up to date t 1 f and expectations after t 1 f we then form a residual based test statistic that allows us to compare prediction errors for econometric models based on different values of f we illustrate the method examining investment around tax reforms to measure the foresight firms have about tax policy in this illustration current investment appears to reflect currently available information but little foresight other than foresight of enacted policy changes

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

a simple production model in trade and its applications abstract in a simple production model some counter intuitive results are derived a increase in the relative price of good might reduce its production and reduce the absolute return to the specific factor exclusively used in this sector b uniform technical progress in two sectors might lead to a contraction in one of those sectors later other applications of such a structure are discussed

should export share requirements be implemented under quota protection in this paper the authors develop a model to analyze the effects of export share requirements when a quota is in place they show that when foreign capital is located in specific economic activity zones identified with the importable sector an increase in export share requirements reduces welfare owing to the price induced higher payments to foreign capital

a reconsideration of the welfare economics of a free trade zone abstract this paper presents a model of a free trade zone which incorporates the fact that such zones are often established by government subsidies designed to promote non traditional exports in our model the condition is derived under which the establishment of a free trade zone can increase welfare regardless of the relative factor intensity of a zone based industry however the relative factor intensity of a free trade zone plays a crucial role in determining the change in welfare following economic growth and foreign investment

investment under uncertain market conditions this paper studies the responsiveness of firm investment to shocks in the input factor and output prices the market conditions by using stock market information on excess returns the q theory of investment is modified to allow for heterogeneous capital ex post inflexible technology and irreversible investment a structural model linking the excess returns to a firm s equity to the firm s investment history and the evolution of the market conditions is estimated using a panel of u s manufacturing firms the estimates of the cost of adjusting tile capital stock are economically sensible they imply a high degree of sensitivity of investment to fundamental variables that affect the profitability of capital such as the market conditions and the purchase price of capital copyright 1995 by mit press

adjustment costs production functions and capital labour substitution in greek manufacturing 1958 80 treating adjustment costs as part of the decision maker s objective function a differential system of factor demand equations is derived and estimated jointly with a ces production function using data for greek manufacturing estimates of production function parameters and adjustment cost functions are thus obtained the results show that the elasticity of substitution between capital and labour is slightly higher than one increasing or constant returns to scale exist for most manufacturing branches there is considerable technical progress of around 4 adjustment cost due to investment and employement changes are responsible for an annual loss of 8 54 of output whereas labour seems to be used inefficiently in greek manufacturing

portfolio selection and asset pricing three parameter framework idiosyncratic security risks are modelled as following a joint spherical distribution characterized by a mean vector and a generalized covariance matrix skewness is generated by a single factor for the whole economy but upon which different securities have different loadings this results in three fund separation two funds to span the spherical risk and one more fund to span the additional skewness risk a three parameter normative portfolio analysis that allows short sales restrictions is developed in addition a three parameter capital asset pricing model is provided

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

price margins and capital adjustment canadian mill products and pulp and paper industries abstract the purpose of this paper is to estimate a model incorporating non competitive behaviour in product and factor markets in addition capital accumulation is subject to adjustment costs so that firms are not constrained to be in long run equilibrium the model is applied to two major canadian manufacturing industries pulp and paper and mill products the results show for both industries in each of three product markets and the wood input market that there is competitive behaviour in addition the industries are not in long run equilibrium as marginal adjustment costs cause marginal profit to exceed the rental rate on capital with the industries exhibiting short run competitive behaviour in product and factor markets new estimates are derived for scale economies and rates of technological change unlike the results from other studies both industries exhibit small scale economies and positive rates of technological change

skilled unskilled wage inequality and urban unemployment i introduction an extensive body of literature has looked at possible effects of trade liberalization on the labor market in the north the effects on the labor market in the south have not drawn as much attention conventional wisdom associated with the stolper samuelson theorem predicts a gradual reduction of skilled unskilled wage inequality in the south however recent studies on latin american countries exhibit conflicting patterns wood 1997 summarizes the empirical findings citing a series of articles by robbins 1995a 1995b 1996a 1996b that convincingly demonstrate that latin america has experienced an increasing wage gap between the skilled and the unskilled following a more open trade and investment regime while globalization induced changes in production patterns and the consequent increase in the demand for skilled labor relative to unskilled labor has often been cited as the root cause of wage inequality there has been no general agreement over the possible source of such increased demand for skilled labor the debate among economists on this has followed two broad paths one relying on technological changes and the other on trade and investment while technological change may have played a key role in the widening wage gap in the industrialized countries there is strong evidence robbins 1994a 1994b 1995a 1995b 1996a 1996b robbins and zveglich 1995 wood 1997 indicating the dominant influence of trade and investment on wage inequality in the developing economies the implications of a more open trade and investment regime need to be analyzed in terms of frameworks that explicitly take into account the structural features of labor markets in the south one of the key structural differences between the north and the south is that the south experiences a pronounced rural urban migration in the presence of urban unemployment basu 1997 ray 1998 the goal of our paper was to capture this feature within the structure of a simple general equilibrium model in an effort to understand the effect of fragmentation on the skilled unskilled wage differential and employment in the south the rest of the paper is organized as follows the next section places this paper in the context of the relevant literature section iii describes the general equilibrium model with the possibility of fragmentation and unemployment section iv compares and contrasts the impact of trade and endowment on the skilled unskilled wage gap and employment with and without fragmentation section v concludes ii context the motivation of this paper stems from our view that the southern experience does not necessarily contradict conventional wisdom as has been claimed in wood 1997 but points to the need for parsimonious yet meaningful modifications of the structure of general equilibrium models from which the wisdom is derived to properly reflect the salient structural features of the south on the one hand production fragmentation has become an important facet of globalization in modern times 1 sharp declines in transportation and communication costs have encouraged this process of slicing the value chain that is evident in international trade data this has been sustained by various regional integration agreements that have reduced the barriers to international trade and investment as well as important technical innovations in telecommunications and information technology that have facilitated the coordination of international production networks this advanced stage in the international division of the chain of production has brought a fundamental change in the nature of international trade as goods increasingly cross multiple national borders while they are in process several authors such as jones kierzkowski and lurong 2005 wan 2005 long 2005 jones and kierzkowski 1998 jones and marjit 2001 arndt 1998 feenstra 1998 harris 1998 hummels rapoport and yi 1998 feenstra and hanson 1996b and dixit and grossman 1982 have analyzed the role of fragmentation in world trade

dynamic factor demands under rational expectations we model the industrial demands for structures equipment and blue and white collar labor in a manner consistent with rational expectations and stochastic dynamic optimization in the presence of adjustment costs but allowing generality of functional form we represent the technology by a translog input requirement function that specifies the amount of blue collar labor needed to produce an output level given quantities of three quasi fixed factors nonproduction workers equipment and structures a complete description of the production structure is obtained by simultaneously estimating the input requirement function and three stochastic euler equations we find adjustment costs are small in total but large on the margin and differ considerably across factors

the status and prospects for genetically modified crops in europe abstract despite the rapid expansion in the global area planted with genetically modified gm crops there has been resistance to this technology in europe this article considers why molecular technologies used to produce gm crops are reviewed and crops currently and soon to become available listed it is argued that the prospects for gm crops depend on 1 consumer acceptance which depends on the perception of the benefits gm crops offer and on confidence in the legislative framework and regulatory procedures designed to identify and quantify any potential disadvantages 2 further technological advances which might reduce any adverse consequences of and enhance the benefits from gm crops 3 patent law which underpins incentives for private investment and largely determines the development of market structure and 4 the relative profitability of gm crops vis a vis conventionally bred varieties which will be a key determinant of the area planted importantly regulations which increase consumer confidence may also raise the costs of planting gm crops and therefore will act to reduce the area planted

the nics global accumulation and uneven development implications of a simple three region model abstract this paper develops a simple three region model of the global economy along structuralist lines with the north newly industrializing countries nics and the rest of the south the north produces an investment cum consumption good while the nics and the south produce two different consumption goods the north grows with excess capacity along kalecki keynes lines the nics are modeled along marxian lines with a given rate of exploitation and the south along lewis lines with a given subsistence wage the short run and long run dynamics and equilibrium properties of the model are analyzed it is shown that parametric shifts which result in a relative growth of nic capital as compared to the north and the south in the long run usually result in uneven north south development

labor and investment demand at the firm level a comparison of french german and u s manufacturing 1970 79 we investigate how labor and investment demand at the firm level gross as well as net and replacement investment separately differs in french german and u s manufacturing and has changed since the 1974 75 crisis we use three consistent panel data samples of large firms for 1970 79 and rely on simple models of the accelerator profits type we find that the accelarator effects and the profits effects did not vary much between 1970 73 and 1976 79 and were quite comparable in the three countries the former being of a more permanent nature and the latter more transitory to a large extent these effects account for the important changes and differences in labor and investment demand between the two subperiods and across the three countries

assessing the implications of intellectual property rights on plant and animal agriculture many readers over their careers will have shared my experience of initiating some really innovative work only to learn that it had been done and done better thirty years earlier that is one key attraction of research on intellectual property rights iprs for plants and animals they are in the main very recent so whatever one does cannot have a direct antecedent indeed to date little economic research has been completed on the implications of expanding ipr protection for living agricultural inputs protection in the united states for asexually propagated plants has been available since 1930 1990 in canada for sexually propagated plants for over twenty five years and for patented plants for a dozen years see below however only in the last year has significant acreage of patented bioengineered plants some 2 5 million in total been planted with higher levels going in the ground in the united states and canada as this paper is being drafted those crops are primarily herbicide resistant beans canola and corn bt producing corn cotton and potatoes and virus resistant squash james and krattiger only one livestock application to my knowledge has been patented a pig in australia with a controllable growth hormone but as yet it is not a commercial product what has been explored extensively in the literature are expressed concerns about iprs on farm structure ethics university industry relationships information exchange and related matters see e g kloppenburg nor is the debate limited to the united states or developed countries the international enhancement of

a goal programming model for bank assets and liabilities management abstract assets and liabilities management is one of the most important issues in bank strategic planning in the past this problem has often been addressed through conventional mathematical programming i e linear programming however bank management typically involves several conflicting goals such as the maximisation of returns minimisation of risk expansion of deposits and loans etc the complexity of this problem can be captured more adequately by multiobjective mathematical programming this paper discusses the construction and application at the commercial bank of greece of a goal programming model that takes into account the essential institutional financial legal and bank policy considerations

do markets differ much this essay reports the results of a crosssection study of differences in accounting profitability that sheds light on some basic controversies in industrial economics most previous cross section studies in this field have been concerned with testing hypotheses about structural coefficients in models meant to apply to essentially all markets as we have learned more about the difficulties of constructing such general models and of performing tests on their structural parameters properly structural cross section analysis has fallen out of fashion in contrast to most of the cross section literature the analysis reported here is fundamentally descriptive it does not attempt directly to estimate or to test hypotheses about structural parameters i hope to show by example that one can perform illuminating analysis of cross section data without a host of controversial maintained hypotheses cross section data can yield interesting stylized facts to guide both general theorizing and empirical analysis of specific industries even if they cannot easily support full blown structural estimation one can view the sort of search for stylized facts conducted here as either a replacement for or an input to interindustry structural estimation depending on one s feeling about the long run potential of that research approach this study also departs from much of the cross section literature by being fundamentally concerned with the importance of various effects not just with coefficient signs and t statistics in particular this essay provides estimates of the relative importance of firm market and market share differences in the determination of business unit divisional profitability in u s manufacturing using 1975 data from the line of business program of the u s federal trade commission ftc i find support neither for the existence of firm effects nor for the importance of market share effects moreover while industry effects apparently exist and are important they appear to be negatively correlated with seller concentration in these data section i relates firm market and share effects to current issues and controversies in industrial economics and thus supplies the motivation for our empirical analysis the remainder of the essay treats the data and

beyond demand and supply curves in macroeconomics this paper surveys recent issues in macroeconomics from the viewpoint of dynamic economic theory the need to look beyond demand and supply curves and the insights that come from doing so are emphasized examples of issues in debt management and fiscal policy are analyzed

adjustment costs and factor demands in canadian manufacturing industries the question of whether regional disparities in canada could arise as a result of nonconstant returns to scale and non identical production functions is examined this is accomplished by estimating and comparing the decision rules for factor demands across canadian regions the decision rules are based on a flexible and dynamic production technology which allows for the presence of internal adjustment costs do not impose constant returns to scale or require hours and workers to have the same output elasticities the model is estimated for four separate canadian regions ontario quebec the western and eastern provinces on annual data ranging from 1965 to 1985