marshall s scale economies using panel data this paper estimates plant level production functions for machinery and high tech industries that allow for scale externalities from other plants in the same industry locally and from the scale or diversity of local economic activity outside the own industry the paper finds that the count of other own industry plants representing a count of local information spillover sources has strong productivity effects in high tech but not machinery industries single plant firms both benefit more from and generate greater external benefits than corporate plants given their greater reliance on external environments on dynamic externalities high tech single plant firms benefit also from the scale of past own industry activity i find little evidence of economies from the diversity or scale of local economic activity outside the own industry

variable returns to agglomeration and the effect of road traffic congestion abstract this paper investigates the links between returns to urban density productivity and road traffic congestion a generalised translog production inverse input demand function is estimated to test for the existence of variable returns to agglomeration in manufacturing construction and service industries two separate measures of urban density in which proximity is represented by straight line distance or by generalised cost are constructed and included in the translog to identify the effect of road traffic congestion the results show that for some sectors of the economy diminishing returns to urban density can set in causing the magnitude of agglomeration elasticity to fall as effective densities increase the generalised cost based measure of agglomeration produces higher elasticities because it captures both time and distance dimensions of density a comparison of spatial variance in estimates indicates that road traffic congestion plays an important role in explaining diminishing returns for the most highly urbanised locations

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

agglomeration economies and industrial decentralization the wage productivity trade offs abstract this paper examines the industrial location trade offs between the productivity advantages of the metropolitan center and the lower land and the labor costs in outlying regions within the state of sao paulo brazil the results indicate that while plant productivity is enhanced by the considerable agglomeration economies existing within metropolitan sao paulo firms must pay for these benefits in high wages and land costs offsetting labor cost savings can be achieved by locating in outlying regions the evidence presented in this paper suggests that market forces may lead eventually to a spontaneous decentralization of industry

optimal management of an r d budget abstract this paper characterizes the optimal allocation of a budget between several stages of an r d project when intermediate stages are profitable the optimal allocation involves greater expenditures in early stages increasing the budget does not necessarily increase expenditures in every stage but does increase the budget that remains unspent at each stage a simple necessary and sufficient condition is given for the optimality of bold play the spending of all remaining budget on the current stage if profits are realized only after all stages are successfully completed decreasing returns in the innovation production function implies that the optimal strategy is to spread the budget evenly between the stages of the r d project

us metropolitan spatial structure and labour accessibility metropolitan areas vary widely in employment distribution and labour accessibility comparing four us metropolitan areas atlanta boston phoenix and washington dc it is found that atlanta and washington dc suffer from low labour accessibility compared with boston and phoenix moreover large suburban employment centres in atlanta and washington dc suffer from even lower accessibility than other employment centres within the same metropolitan areas or their counterparts in boston and phoenix their low labour accessibility is mainly explained by slower commuting speeds even though their residential and employment densities are modest congestion in these employment centres is severe enough to undermine accessibility the results raise questions about the effectiveness of creating large sub centres in metropolitan areas particularly creating auto oriented edge city style employment centres at highway nodes

agglomeration accessibility and productivity evidence for large metropolitan areas in the us this paper estimates the productivity gains from agglomeration economies for a sample of the largest metropolitan areas in the united states using measures of urban agglomeration based on employment density and employment accessibility the latter is a more accurate measure of economic proximity and allows testing for the spatial decay of agglomeration effects with increasing travel time we find that the productivity gains from urban agglomeration are consistent between measures with elasticity values between 0 07 and 0 10 the large majority of the productivity gains occur within the first 20 minutes and do not appear to exhibit significant nonlinearities

the use of inputs by the federal reserve system comment in a recent article in this review 1983 william shughart and robert tollison s t argue that an important motivation for expansion of the money supply is to finance the growth of the fed s bureaucracy specifically that the level of fed employment is a determinant of the nominal monetary base using a public choice framework they present a money supply equation which yields a positive and statistically significant relationship between the monetary base and the total employment of the federal reserve system while this conclusion is certainly interesting the analysis suffers from a number of important conceptual empirical and methodological problems shughart tollison point out that the revenue side of the federal reserve s budget is closely linked to its monetary policy operations through open market purchases of securities the fed generates a stream of interest payments because monitoring of this income stream is difficult and costly congress has elected to impose the constraint that excess revenues be returned to the treasury as a result the fed pays its current operating expenses out of this current interest income and then turns over the remainder to the treasury because the central bank cannot retain the profits it generates s t argue that the fed will exhibit a form of expense preference behavior in purchasing more amenities than are justified by costminimizing money production in particular by expanding fed employment in addition since expansionary monetary policy increases opportunities for this profit amenities tradeoff fed policies are likely to have a built in inflationary bias to test this hypothesis s t develop a regression model that estimates the monetary base as a function of fed employment real gnp a number of financial variables and linear and nonlinear time trend variables using annual time series data from 1915 to 1981 they find that the employment variable is a significant determinant of the money supply with their model explaining about 95 percent of the variation in the monetary base to check that employment causes monetary expansion and not the other way around s t employ the test of causality developed by c w j granger 1969 and christopher sims 1972 this test estimates two sided

declining city productivity and the growth of rural regions a test of alternative explanations prior to the 1970s the u s witnessed a net flow of migrants from its nonmetropolitan to its metropolitan region since then however a dramatic reversal of this long standing tendency for people to concentrate in metropolitan places has been observed nonmetropolitan places have gained migrants largely as the result of increased outmigration from metropolitan areas an open question has been to what extent the employment profile between metropolitan and nonmetropolitan places parallels that of population this paper introduces a data series compiled from county business patterns that is used to analyze the employment trends for the first time the analysis reveals that not only is total employment growing fastest in nonmetropolitan counties but it also appears that the turnaround in employment growth preceded the reversal in the rate of population increase manufacturing which had faster nonmetropolitan growth rates even during the 195os appears to have led in the development of nonmetropolitan counties this shift of manufacturing has attracted other sectors as well as people to nonmetropolitan places part of the recent growth of nonmetropolitan counties represented nothing more than a continuation of suburbanization or spillover of people and jobs which permitted one more outward bound into adjacent nonmetropolitan counties but there is more to nonmetropolitan development than simply metropolitan spillover nonmetropolitan counties far removed from metropolitan ones are also growing faster than metropolitan counties it is shown that this rural renaissance is part of a general deconcentration

disclosure of know how in research joint ventures abstract research joint ventures rjvs usually face technical uncertainty their expected cost typically depending on the know how disclosed by the partners however the partners have little incentive to share their know how when they are simultaneously competitors in other markets in this setting we show that sometimes profitable rjvs do not start when the disclosure of know how is not contractible and characterize the incentive contracts when they exist we also analyze rjvs as an alternative to licensing contracts for the transmission of know how finally we show that the eec s technology policy based on cost subsidies has negative consequences on firms incentives to share know how

concrete agglomeration benefits do roads improve urban connections or just attract more people cities with more roads are more productive however it can be unclear whether roads increase productivity directly through improved intra urban connections or indirectly by attracting more people our theory suggests that population responses may obscure the direct connectivity effects of roads indeed conditional on population size highway density does not affect productivity in a sample of us metropolitan areas however when exploiting exogenous variation in urban populations we find that highway density improves agglomeration benefits moving from the 50th to the 75th percentile of highway density increases the productivity to population elasticity from 2 to 4 moreover travel based measures outperform population size as a measure of agglomeration externalities

second best cost benefit analysis in monopolistic competition models of urban agglomeration abstract this paper examines the agglomeration benefits of a transportation improvement in a city by modeling the microstructure of urban agglomeration based on monopolistic competition of differentiated intermediate products properly extended to include variety distortion in addition to price distortion harberger s measure of excess burden yields the agglomeration benefits the agglomeration benefits are positive if increasing the variety is procompetitive however in the anticompetitive case we cannot exclude the possibility of negative additional benefits if there are multiple cities the net agglomeration benefits can be negative when other cities that experience a reduction in population have larger agglomeration economies

optimal policies in cities with congestion and agglomeration externalities congestion tolls labor subsidies and place based strategies abstract this paper develops a spatial general equilibrium model that accommodates both congestion and agglomeration externalities while firms and households land use decisions are endogenous across continuous space focusing on the interaction between externalities and land use patterns we examine the efficiencies of first best policies and second best pricing and place based strategies using numerical simulations a first best policy must combine both pigouvian congestion tolling pct and pigouvian labor subsidies pls instruments or design an optimal toll or subsidy internalizing agglomeration externalities or congestion externalities we also examine second best pricing policies if only one instrument is adopted congestion pricing policies alone e g a partial pct or a flat rate toll can improve social welfare only in heavy congestion cities and their welfare gains may be insignificant e g below 10 of the welfare improvement achieved by first best policies in contrast second best labor subsidy policies alone are a more effective alternative to first best policies as to place based policies the firm cluster zoning fcz regulation is more efficient than the urban growth boundary ugb policy ugbs only have small effects on the agglomeration economy but could worsen land market distortions via residential rent escalation effects these findings suggest that it is important to internalize business land use decisions and relax monocentricity assumptions in order to appreciate the interplay of both urban externalities since spatial adaptations to policy interventions can distort system efficiencies

cooperative and noncooperative r d in duopoly with spillovers comment claude d aspremont and alexis jacquemin 1988 employ a simple yet elegant symmetric duopoly model of r d and spillovers to compare several equilibrium concepts these concepts include 1 the two stage noncooperative solution 2 the two stage mixed game 3 the two stage fully cooperative solution 2 and 4 the social planner s optimum 3 for each of the cases stated above they computed the equilibrium levels of output q q1 q2 and r d xl x2 x and the required second order conditions they report i for large spillovers i e b 0 5 x x x and q q q q and ii for small spillovers i e 3 x 2x x and q q q q where x denotes a firm s r d level q denotes total industry output denotes the social optimum denotes the fully cooperative model the noncooperative two stage case and the mixed game 3 is the spillover parameter here we show that comparing the pure cooperative and the pure noncooperative solutions as defined by d aspremont and jacquemin is only meaningful when the noncooperative solution is stable that is when spillovers are not too small we find that for very small spillovers in our example this occurs when 3 0 17 the d aspremont jacquemin observation holds because the noncooperative model is unstable the importance of this result rests on the fact that even though the output reaction functions cross correctly when 3 0 17 the r d reaction functions do not when 0 17 0 41 stability obtains but r d levels are higher in the noncooperative case than the fully cooperative one for large spillovers the d aspremont jacquemin result is confirmed moreover we find that the introduction of spillovers in the case of the noncooperative model tends to promote stability in the case of the cooperative model however as the level of spillovers is increased an equilibrium ceases to exist

transport infrastructure investment implications for growth and productivity theory and evidence on the effects of public investment on growth and productivity are reviewed it is concluded that on average public capital has positive impacts on output and private investment partly offset by the effects of the taxation needed to finance it a possible future shortfall in public capital in the uk is highlighted the paper also reviews the contribution of transport infrastructure to productivity and considers implications for cost benefit analysis it is suggested that there is a case for greater uk investment in roads but ideally this should be implemented along with an efficient national road pricing scheme

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

traffic congestion accessibility to employment and housing prices a study of single family housing market in los angeles county this study mainly addresses two main questions 1 whether traffic congestion negatively affects single family house price by constraining accessibility to jobs 2 whether congestion effects and

r d cooperation and product market competition abstract i derive equilibria that is self enforcing agreements for firms that cooperate in improving their product and compete in marketing it i am particularly interested in the interaction between rd ii product improvement is a function of the effort by each firm iii firms cannot observe each other s effort iv firms market the product by simultaneously setting prices the analysis reveals some surprising results i find that in some cases although monopoly prices can be sustained in equilibrium optimal equilibria call for firms to set lower than monopoly prices in the short run thus providing the right incentives for investment in r d under a different set of assumptions i find that it is optimal to reduce r d effort below the efficient level as a means to sustain short run collusion in prices even though efficient r d effort could be achieved in equilibrium

agglomeration economies in urban manufacturing industries a case of japanese cities abstract the effects of urban agglomeration economies on productivities in two digit manufacturing industries is estimated using the cross section data of japanese cities in 1979 urbanization and localization economies which are major forms of urban agglomeration economies are explicitly separated the estimates of these economies vary considerably among industries light industries receive more productive advantages from urbanization economies than from localization economies but heavy industries experience these economies more from localization economies than from urbanization economies

the translog production function and variable returns to scale this paper examines existing methods of estimating the translog production function and provides a general framework that allows for variable returns to scale the model is based on the inverse input demand function and embeds a nonhomothetic production technology previous estimation methods are valid only for homogeneous technologies with fixed scale effects estimation results for u s manufacturing show that neither homotheticity and homogeneity nor constant returns to scale is a proper characterization of the underlying structure of production thereby vindicating the empirical relevance of the inverse demand framework that entails a nonhomothetic technology copyright 1992 by mit press

firm location and city size reduced productivity advantages as a factor in the decline of manufacturing in urban areas abstract this paper develops a model of firm location and city size that arrives at theoretical conclusions that differ from those of other authors comparative statics results suggest that changes in national wage levels and productivity levels create no determinate dis advantage for large cities relative to small ones as sites for manufacturing activity increased wage and reduced productivity premiums of large cities however result in unambiguous disadvantages statistical analysis indicates that the productivity advantages of large cities have declined in as many as eight two digit manufacturing industries that provide more than one third of metropolitan production worker employment

traffic congestion s economic impacts evidence from us metropolitan regions traffic congestion alleviation has long been a common core transport policy objective but it remains unclear under which conditions this universal byproduct of urban life also impedes the economy using panel data for 88 us metropolitan statistical areas this study estimates congestion s drag on employment growth 1993 to 2008 and productivity growth per worker 2001 to 2007 using instrumental variables results suggest that congestion slows job growth above thresholds of approximately 4 5 minutes of delay per one way auto commute and 11 000 average daily traffic adt per lane on average across the regional freeway network while higher adt per freeway lane appears to slow productivity growth there is no evidence of congestion induced travel delay impeding productivity growth results suggest that the strict policy focus on travel time savings may be misplaced and instead better outlooks for managing congestion s economic drag lie in prioritising the economically most important trips perhaps through road pricing or in providing alternative travel capacity to enable access despite congestion