equivariant general equilibrium theory abstract the main purpose of this paper is to investigate the properties of a version of the general equilibrium model where symmetry considerations are explicitely taken into account this version called the equivariant model is shown to be a natural framework to study sunspot equilibria the problem of sunspot equilibria can then be viewed as one of symmetry breaking existence of asymmetric or sunspot equilibria is addressed through the dual approach of price income equilibrium analysis that splits the problem of breaking symmetries into two separate easier problems

the ethiopian commodity exchange and spatial price dispersion abstract in this article we study the impact of an institutional intervention on market efficiency in ethiopia more specifically we analyze to what extent the ethiopian commodity exchange ecx in combination with regional warehouses have contributed to a reduction in price spreads between regional markets our hypothesis is that warehouses connected to the ecx reduce the dispersion between export prices and local retail prices in different coffee growing areas as well as the dispersion between export prices and local retail prices in different coffee growing areas by doing so the ecx has the potential to improve the market efficiency to identify the causal effect we combine retail price data with information on the gradual rollout of warehouses connected to the ecx from 2007 to 2012 our results suggest that when two markets both have access to an operating warehouse the average price spread is 0 86 1 78 etb lower than it is for markets where at least one part lacks warehouse access this is a substantial reduction considering that the average price spread over the full period is 3 33 etb the main results are robust to various econometric specifications and our analysis thus suggests that local warehouses connected to the ecx have indeed improved market efficiency

smuggling and price disparity abstract this paper proposes a model of smuggling consistent with the coexistence of smuggling legal trade and price disparity defined as a domestic price which exceeds is less than the return from legal export import these phenomena have been found to characterize indonesian smuggling a framework is presented in which legal trade is used to cloak smuggling activity with the implication that the greater the volume of legal trade the less the costs of smuggling this model is then used to explain the observation noted above and to show that smuggling may be welfare increasing vis a vis the non smuggling situation and that even if the suppression of smuggling is costless tax revenue maximization may require a positive level of smuggling in addition the model is applied to coffee and rubber exports from indonesia

supply response in ethiopia accounting for technical inefficiency few empirical studies of supply response using the profit function have accounted for technical inefficiency using farm level panel data from ethiopia this study examines the effect of incorporating technical inefficiency in estimating the supply response of peasant farmers two systems of output supply and input demand equations are estimated and compared the conventional model in which technical efficiency is assumed and another in which technical inefficiency is explicitly incorporated the model with technical inefficiency is preferred on grounds of theoretical consistency and improved estimates although model comparison tests are not conclusive incorporation of inefficiency generally increases the magnitudes and the statistical significance of own price elasticities substantially so in the case of fertilizer and fertilizer intensive crops and alters the priority attached to nonprice factors an important result is that only the specification with inefficiency reveals a significant effect of access to extension services on output only this specification finds that output increases with household size which one expects as the farms in the sample are largely subsistence and producing for own consumption furthermore the results demonstrate that farmers response to incentives is considerably restricted by inefficiency suggesting that the traditional model would overstate response by excluding the efficiency variable

markets under price controls in partial and general equilibrium abstract when parallel markets arise in the face of price or other controls two aspects of agents behavior become crucial in analyzing market outcomes first sellers risk will rise with increases in illegal sales but may also fall with increases in legal sales if the latter is true the parallel market price will induce higher output second if consumers can be given access to the price controlled good without incurring search queuing and other transaction costs due to rationing production of the controlled good will be higher these effects are demonstrated in both partial and general equilibrium

is there a principle for defining industries this paper presents a criterion for dividing observable firms into industries the previous literature has failed to recognize how important is the lack of a principle for forming industries not only does the lack of an industry criterion lead to bad antitrust decisions but it brings into question the logic behind applying standard economic analyses to observable groups of sellers economic theory traditionally has constructed models of markets composed of sellers of a homogeneous commodity in the application of theories to observable sellers whose production processes and products are rarely precisely identical the easy and convenient assumption that all sellers are identical is violated one of the lacks of the theoretical literature is that it has given no guidance on how to put existing producers together to form the markets and industries to which economic modellers make reference instead applied economists have tended to follow the pragmatic advice that violations of assumptions do not matter so long as the firms behave approximately as if the assumptions of the model were satisfied 8 logic requires however that this as if methodology be applied only to firms which have been selected independently of the model being used for example to find the bounds of a competitive industry by finding the group of firms whose behavior is predicted by the competitive model and then to justify the use of the model on the grounds that the model predicts well is tautological the logic of analyzing industry behavior in contradiction to the assumptions of the model is defensible only if there exists a procedure for forming an industry that is independent of the criterion used to select the model to analyze it this paper provides such a procedure the industry bounding procedure outlined in this paper may be one of many and others may be found in the future which have more desirable properties than the one presented here the main contribution of this paper is to demonstrate that there is at least one definition which can be used to divide existing firms into industries and that the industry so defined is unique for each firm the lack of a criterion for defining industries is especially noticeable in antitrust analyses where the question posed is whether a particular firm is a monopoly not whether it behaves as if it were one the current procedure in such cases is ad hoc in the true sense of the term every situation is taken as unique and while the economic witness will sometimes apologize about measurement problems a list of industry members is produced for use in court in what stigler has called an impudent exercise in economic gerrymandering 20 8

money interest rates and exchange rates with endogenously segmented markets we analyze the effects of money injections on interest rates and exchange rates when agents must pay a baumol tobin style fixed cost to exchange bonds and money asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money infrequently when the government injects money through an open market operation only those agents that are currently trading absorb these injections through their impact on these agents consumption these money injections affect real interest rates and real exchange rates the model generates the observed negative relation between expected inflation and real interest rates as well as persistent liquidity effects in interest rates and volatile and persistent exchange rates

black markets illegality information and rents abstract the analysis of black markets typically treats illegality only in reduced form as an additional cost per transaction we argue that this misses the essential feature of black markets that the risk of detection depends upon the dissemination of information because the cost of information is increased traders will change marketing technology from advertising to sequential approaches to potential customers the trader s decision problem is his offer price as he raises it he must expect to make more approaches per sale and thereby increase detection risk this behavior is important because of its implications at the market level the optimal offer price will be set at a level at which excess demand persists would be consumers are not always able to bid themselves into supplies hence black markets are not sufficient to eliminate the shortages which arise from price controls in an earlier paper the authors established that peasant supply response to crop prices would be perverse in the presence of shortages black markets therefore need not restore normal responses the paper includes evidence from rural tanzania

the type agent core for exchange economies with asymmetric information abstract the type agent core is a new solution concept for exchange economies with asymmetric information it coincides with the set of subgame perfect equilibrium outcomes of a simple competitive screening game uninformed intermediaries help the agents to cooperate in an attempt to make some profit the paper extends the work of perez castrillo cooperative outcomes through non cooperative games games econ behav 7 1994 428 440 to exchange economies with non transferable utility and asymmetric information the type agent core is a subset of wilson s coarse core wilson information efficiency and the core of an economy econometrica 46 1978 807 816 it is never empty even though it may be a strict subset of wilson s fine core in addition it converges towards the set of constrained market equilibria as the economy is replicated

the origins and dynamics of production networks in silicon valley abstract computer systems firms in silicon valley are responding to rising costs of product development shorter product cycles and rapid technological change by focusing and building partnerships with suppliers both within and outside of the region well known firms like hewlett packard and apple computers and lesser known ones like silicon graphics and pyramid technology are organized to combine the components and sub systems made by specialist suppliers into new computer systems as these firms collaborate to both define and manufacture new systems they are institutionalizing their capacity to learn from one another three cases a contract manufacturer a silicon foundry and the joint development of a microprocessor illustrate how inter firm networks help account for the sustained technological dynamism of the regional economy

peasant supply response in rationed economies abstract when peasants do not have reliable access to goods on the black market government price controls may result in rationing of peasants demand for consumer goods we show that supply response is then perverse and that the economy may collapse as exports fall and rural shortages intensify such a crisis may initially be disguised as peasants sell export goods to build up money stocks we consider the policy options for governments facing such problems

contribution of new technology based firms to the strengthening of technological capabilities in intermediate economies this paper argues that the main contribution of new technology based firms ntbfs is their technological dynamism which invests them with two major roles a challenging role implicit in their creation whereby they break with the inertia of existing organisations and a more long standing technology transfer role acting as a source of new technologies which they acquire and deliver by several means the performance of these roles can be particularly valuable in less advanced economies contributing to a strengthening of the indigenous capabilities in new technologies empirical research on a sample of portuguese ntbfs has shown that these firms have indeed performed an important function by accessing new technological knowledge both from local public research and from more advanced countries which they further developed turned into marketable applications and commercialised but the conditions found in an intermediate economy such as portugal present ntbfs with particular problems the limited number of knowledgeable users prepared to adopt their products and the firms difficulty to reach other type of clients can be a major obstacle to their development therefore if the country is to profit from ntbfs challenging behaviour and technological competences their acquisition and diffusion efforts should be backed and complemented by demand oriented policies

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

new firms and rural industrialization in east anglia gould a and keeble d 1984 new firms and rural industrialization in east anglia reg studies 18 189 201 the paper analyses key aspects of the formation of new independent manufacturing firms in east anglia between 1971 and 1981 special attention is paid to trends in formation rates over time to the spatial bias of new firm origins towards both rural areas and the cambridge region and to the location character and impact of high technology new firms original findings include the contention that spatial variations chiefly reflect variation in the occupational structure of the resident workforce together with industrial mix plant size and previous industrial immigration some implications for government policy to new firms are discussed

the structure of sunspot equilibria the role of multiplicity this paper examines the structure of sunspot equilibria in a standard two period exchange economy with real assets we show that for a generic choice of utility functions and endowments there exists an open set of real asset structures whose payoffs are independent of sunspots such that the economy with this asset structure has a regular sunspot equilibrium an important implication of our result is that the multiplicity of non sunspot equilibria is not necessary for the existence of sunspot equilibria our technique is general and can be applied to show the existence of sunspot equilibria in other frameworks this paper analyses the structure of sunspot equilibria in a standard two period competitive exchange economy with more than one consumption good in each period and a real asset which pays a bundle of commodities there is no uncertainty except for sunspots we show that for an open and dense subset of the set of utility functions and endowments there exists an open set of real asset structures with payoffs independent of sunspots such that the resulting economy with an asset structure in this set has a regular sunspot equilibrium we also show that this result is tight in the space of utility functions endowments and asset structures there is in fact an open set of economies for which sunspot equilibria do not exist moreover our argument provides a systematic method which allows us to find generically all the sunspot equilibria of a given economy thus it can be used as a tool for studying the global structure of the set of sunspot equilibria not just the existence of a sunspot equilibrium the dependence of the existence of sunspot equilibria on the particular specification of the payoff of the asset provides an interesting contrast with the fact that the set of equilibrium allocations of the underlying certainty economy does not depend on the asset structure recall that when markets are complete preferences and endowments completely determine the set of competitive equilibria in our setting markets are complete in the underlying certainty economy so if payoffs change the price of the asset will change accordingly but there is no effect on the equilibrium consumption of the certainty economy thus the fundamentals of the certainty economy are the distribution of endowments and preferences among consumers and our result implies that the existence of sunspot

growth pattern of academic entrepreneurial firms abstract academic entrepreneurship the creation of new business ventures by university professors technicians or students is increasingly being promoted by university based innovation centers and university business offices it is seen as an efficient university industry technology transfer mechanism and in some cases may contribute to university revenue whereas most entrepreneurs leave the university at time of start up others keep their academic postings as full time or part time professors part time entrepreneurship may be interesting from a university point of view because i it keeps in the laboratory a creative individual ii it may provide through part time academic positions for a more efficient use of university resources and iii it encourages more contacts between faculty students and the business world however manufacturing firms led by part time entrepreneurs do not seem to be as aggressive and growth oriented as independent firms the university professor interested in the successful transposition of an idea an invention to the commercial sector may therefore have to do it through licensing or resign from the university to devote all his time and energy to the development manufacturing and commercialization process and the university interested in investing in a new academic firm created to exploit commercially an invention made in its own laboratories should beware of keeping the academic entrepreneur on staff or if he stays on staff of involving him with the management of the new company these are the main conclusions of a study of the evolution from 1980 1981 to 1984 1985 of 38 young firms originally created by entrepreneurs while at various universities in several canadian provinces the results supported by the observation of a small control group of 8 canadian hightechnology companies bring out a dichotomy for firms offering technical services the continued this project were made by colleen bigelow and branko peterman their help was greatly appreciated academic posting of the firm s creator does not appear to overly affect its operations and growth however manufacturing firms completely independent from the university tend to g row faster other results support the negative correlation that seems to exist between the growth rate of sales and closeness to academic life as measured for example by the use of university laboratories and equipment whether they are still closely connected to a university or not the entrepreneurs in our sample do note many potential positive benefits from continuing contacts with the academic world it is possible that the negative correlation between growth and university links observed in the sample results more from the individual characteristics of the entrepreneurs than from a negative influence by the university as venture capitalists have long noticed one of the main determinants of growth and success is the entrepreneur himself the entrepreneurs staying close to the university and using university services may be less aggressive and less risk oriented than the others

peasant household behaviour with missing markets some paradoxes explained a model of peasant household behavior under varying degrees of household specific food and labor market failures is constructed to show that these structural features can explain several well known patterns of peasant response which have often been attributed to peculiar motives presumed specific to peasants the model explains sluggish response to cash crops prices and high instability in perceived food and labor scarcities the key role of manufactured consumer goods prices in stimulating peasants effort in cash crops production the effectiveness of taxation as opposed to incentives in stimulating cash crops production and the key role of technological change in food production to enhance cash crop production results are obtained analytically in the case of one market failure and by numerical simulation with more than one

equilibrium analysis of the infinite horizon model with smooth discounted utility functions abstract the equilibrium set and the natural projection are studied within the setup of the pure exchange infinite horizon model with a finite number of infinitely lived agents utility functions belonging to the smooth discounted variety and individual endowments being variable we show that the equilibrium set has convex fibers which implies arc connectedness and more generally contractibility we also show that the sets of regular equilibria and of regular economies are open and dense for the product topology therefore it is generically true that the equilibria of infinite horizon economies with smooth discounted utility functions can be approximated by those of finite horizon truncated economies

market participation and sunspot equilibria we investigate the structure of competitive equilibria in an exchange economy parametrized by i endowments and ii restrictions on market participation for arbitrary regular endowments if few consumers are restricted there are no sunspot equilibria if endowments are allowed to vary while restrictions on market participation are fixed there is a generic set of preferences such that sunspot equilibria exist for a non empty subset of endowments our analysis extends to the general case of an arbitrary number of restricted consumers the results of cass and shell for the polar cases in which either i no consumers are restricted or ii all consumers are restricted

price level volatility a simple model of money taxes and sunspots abstract we investigate sunspot equilibria in a static one commodity model with taxes and transfers denominated in money units volatility in this economy is purely monetary since the only uncertainty is about the price level we construct simple robust examples of sunspot equilibria that are not mere randomizations over certainty equilibria we also identify the source of these sses equilibrium in the securities market is determined as if there were no restricted consumers and the unrestricted consumers face intrinsic uncertainty perfect securities markets eliminate allocation uncertainty but they exacerbate price level volatility journal of economic literature classification numbers d50 d52 d84 e31 e62

multiplicity of equilibria a pure exchange general equilibrium model is considered and the equilibrium set is studied it is shown for all total endowments and an open and dense set of preferences that if there arel 2 commodities andm 2 consumers then there exists a set of distributions of endowments with nonempty interior such that the associated economies have at leastl 1 min l m equilibria forl min l m even and at leastl 2 min l m equilibria forl min l m odd journal of economic literature classification number d51

pareto optima welfare weights and smooth equilibrium analysis abstract the first part of this paper deals with the parameterization of the set of pareto optima by utility levels and by the welfare weights in the second part the parameterization by the welfare weights is used to establish properties of the negishi equation system associated with the finite general equilibrium model this approach yields proofs of the regularity of the no trade equilibria and of the existence of equilibria by a degree argument that are new the formulation and the proof of these properties within the setup of the negishi equation system plays a crucial role in extending these properties to the infinite horizon model with discounted utility functions

general equilibrium with parallel markets for goods and foreign exchange theory and application to ghana abstract this paper presents a simple model of a distorted economy with parallel markets which is motivated by the ghanaian experience the model has simultaneous illegal trade in goods and foreign exchange markets its general equilibrium determines the black market foreign exchange rate and the price of consumer goods after determining some comparative statics the predictions are tested on ghanaian monthly data from 1982 1983 the empirical results are shown to be consistent with those from the theoretical model

on the stability of nonsunspot equilibria abstract this paper analyzes the stability of the pareto efficient nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in the following two polar cases 1 all consumers are unconstrained 2 all consumers are fully constrained furthermore the stable certainty equilibria with small trade vectors define nonsunspot equilibria that are also stable independently of the constraint levels instability can develop only at intermediate constraint levels and for nonsunspot equilibria that feature sufficiently large trade vectors

income portfolios in rural ethiopia and tanzania choices and constraints the article analyses the different income portfolios of households using survey data from rural ethiopia and rural tanzania it suggests that the different portfolios held by households cannot be e

agricultural trade liberalization price changes and environmental effects many analyses of agricultural trade liberalization have been undertaken but few have considered the effects on the environment for the developed countries reducing the degree of protection would result in less intensive production therefore environmental stress would be reduced a reduction of trade barriers in industrial countries would result in higher world prices and in a somewhat lower world price variability assuming initially no policy changes for developing countries the question is how the liberalization would affect the environment higher prices in developing countries increase the level of production by intensifying production particularly in the commercial sector and by an area expansion both result in negative environmental effects these could be partly offset by an increase in hired labor in the commercial sector which might reduce pressure at the frontier and on marginal lands as well as by the income effect these off setting effects may be small however the direction of the overall environmental effects cannot be determined unambiguously without empirical examination at the global level the beneficial economic effects of agricultural trade liberalization probably outweigh the expected negative environmental effects in developing countries but this cannot be unambiguously established without valuation

atomistic and systemic approaches to research on new technology based firms a literature study the dominating view of new technology based firms is that these firms are driven by a heroic entrepreneur who pursues aggressive growth new technology based firms are expected to sooner or later develop tangible products with which new market niches are created and existing ones penetrated often the only perceived economic impact of new technology based firms is one delivered through rapid organic growth

networks and innovation in a modular system lessons from the microcomputer and stereo component industries in this paper we examine theoretically and through case studies the phenomenon of the modular system which we distinguish from a product conceived of as a prepackaged entity or appliance we argue that such systems offer benefits on both the demand side and the supply side supply side benefits include the potential for autonomous innovation which is driven by the division of labor and provides the opportunity for rapid trial and error learning demand side benefits include the ability to fine tune the product to consumer needs and therefore blanket the product space more completely both of our case studies suggest that innovation in a modular system can lead to vertical and horizontal disintegration as firms can often best appropriate the rents of innovation by opening their technology to an outside network of competing and cooperating firms we conclude by speculating on the increased importance of modular systems in the future since flexible manufacturing and rising incomes are likely to increase the driving requisites of modular systems low economies of scale in assembly and sophisticated consumer tastes

smuggling and supply response coffee in ethiopia abstract during the 1980s substantial smuggling of coffee has been taking place in ethiopia the recent devaluation has raised hopes that substantial quantities of coffee will flow back to the official channels in this study data on the incentives to supply to the different channels are collated a model of official supplies is formulated which nests an empirical test between the smuggling models by bhagwati and hansen 1973 and by pitt 1981 the econometric results favor the latter and show a small but significant effect of the premium in the black market and a positive total supply response relative to the main competing crop chat the results imply that the increases in export earnings from the devaluation will be quite limited

economic reform growth and the poor evidence from rural ethiopia abstract a new decomposition of poverty changes is developed to analyse the determinants of poverty changes during a period of economic reform 1989 1995 in villages in ethiopia poverty fell substantially but with diverse experiences across villages shocks mattered but the main factors driving consumption changes were relative prices changes resulting in changes in the returns to land labour human capital and location the experience of the poor is mixed one group of the poor in 1989 with relatively good land and location outperformed all other households while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty

an analysis of short run response of export and domestic agriculture in sub saharan africa abstract short run responses of export and domestic shares of total agricultural output to changes in stocks of domestic savings sav development assistance oda private foreign commercial capital pfx and other variables is investigated a profit function approach is used time series data for 19 sub saharan african countries are pooled into three panels using similarities in changes in economic policy regime statistical evidence suggests that for the panel of countries that were undertaking liberalized economic reforms the slope coefficients of some of the variables in the models have changed significantly between 1970 1980 and 1981 1993 for the 1981 1993 period the impacts of oda pfx and sav on export and domestic shares were different for this panel the effect of increases in agricultural labor was different across the three panels there is also evidence that productivity growth in the export agriculture sub sector is negative in all the groups it is recommended that to halt the decline in export share of agricultural output in the group of countries that have undertaken substantial improvements in economic policy environment efforts must be made to reduce the negative impact of domestic savings and agricultural labor while at the same time working to reduce the bias of development assistance against food security