a two sector endogenous growth model with habit formation abstract in this paper we study an endogenous growth model with physical and human capital in which consumption habits enter the utility function multiplicatively we show that although the utility function with multiplicative habits is nonconcave and unbounded an interior optimal growth path still exists it is uniquely determined and it converges to a balanced growth path we also find that habit formation in consumption lowers the convergence speed of the optimal path toward the balanced growth path

new technology adoption in us telecommunications the role of competitive pressures and firm level inducements in this study we examine the reasons for the differential adoption levels of a new technology that of electronic switching across firms in the us telecommunications industry using theoretical postulates from the market structure inducements approach to firm behavior and the behavioral theory of the firm we propose that the incentives to adopt a new technology are positively related to the competitive pressures faced by a firm in its micro market negatively related to past levels of performance and positively related to slack availability our sample consists of 40 of the largest firms in the industry we use firm level data collected for the years 1973 1978 1981 1984 and 1987 and the results indicate strong support for our proposition our findings show that in general market effects via the mechanism of competitive pressures generated are strong in explaining inter firm variations in levels of technology adoption in the period since moves to deregulate the industry began however the firm level effects are equally strong if not stronger in explaining such variations both in the period leading up to the commencement of deregulatory moves and also immediately thereafter

an empirical analysis of wage dispersion and efficiency wages the main purpose of this study is to examine inter industry wage differentials in sweden after controlling for individual and job characteristics the results indicate that these differentials are substantial the ranking of the differentials was stable over time while the dispersion of wage premiums fell by 50 per cent during the period 1968 81 a period of strong efforts to reduce wage dispersion in sweden the relation between industry wage premiums and a number of industry characteristics is also examined along with new evidence which is in line with the shirking model hypothesis on the relation between wages and worker control

deregulation technology imports and in house r d efforts an analysis of the indian experience abstract this paper analyses the effects of the deregulation policy introduced in india in the mid 1980s on the relationship between technology imports and in house r d efforts using appropriate statistical techniques it examines the interactions between policy regime economic environment and the determinants of inter industry variation in technology imports in indian manufacturing in doing so it introduces r d efforts as one of the main determinants literature suggests that there is simultaneity in the relationship between technology imports and r d efforts to tackle this problem lagged r d expenditure intensity is adopted as a proxy for in house r d efforts the empirical results reveal that technology imports were only weakly related with the past in house r d efforts in the protective regime deregulation promoted complementarity between technology imports and r d efforts significantly the results also suggest that after deregulation the impact of product differentiation demand conditions and technology related factors increased significantly in determining the inter industry patterns of technology imports thus unlike in a regulated regime where technology imports are viewed important for filling gaps in domestic technological capabilities in a deregulated regime technology upgradation seems to be the major role of technology imports

is the asymptotic speed of convergence a good proxy for the transitional growth path this paper compares transitional dynamics in two alternative r d non scale growth models one with endogenous human capital and the other without we show that focusing only on the asymptotic speed of convergence to discriminate between the two models performance can be misleading our analysis suggests that a careful study of the entire adjustment paths predicted by alternative growth models starting far away from the balanced growth path is required in order to successfully discriminate among them

business group affiliation and firm search behavior in india responsiveness and focus of attention this paper investigates the effects of organizational form on problemistic search we contrast how indian firms affiliated with business groups and unaffiliated firms evaluate performance and react by adjusting their internal technology search and external market search we propose that compared with unaffiliated firms business group affiliated bg affiliated firms are more externally oriented in setting aspiration levels and more likely to respond to low performance in the market domain we find support for an external orientation of bg affiliated firms and find that group affiliation determines the responsiveness to performance feedback in different search domains the findings suggest a need to add considerations of organizational form and governance to the theory of organizational search

a behavioral theory of r d expenditures and innovations evidence from shipbuilding i base an integrated model of innovation development and launch on the behavioral theory of the firm this model specifies that research and development expenses are increased when low performance causes problemistic search and when excess resources cause slack search innovations generated by search are launched if low performance gives managers high risk tolerance using data from shipbuilding firms i show that high performance reduces r d intensity and innovation launches and high slack increases r d intensity as predicted

income ranking and convergence with physical and human capital and income inequality this paper presents an overlapping generations model with physical and human capital and income inequality it shows that inequality impedes output growth by directly harming capital accumulation and indirectly raising the ratio of physical to human capital the convergence speed of output growth equals the lower of the convergence speeds of the relative capital ratio and inequality and varies with initial states among economies with the same balanced growth rate but different initial income levels the ranking of income can switch in favor of those starting from low inequality and a low ratio of physical to human capital particularly if the growth rate converges slowly c 2004 elsevier b v all rights reserved

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

does schooling cause growth a number of economists find that growth and schooling are highly correlated across countries a model is examined in which the ability to build on the human capital of one s elders plays an important role in linking growth to schooling the model is calibrated to quantify the strength of the effect of schooling on growth by using evidence from the labor literature on mincerian returns to education the upshot is that the impact of schooling on growth explains less than one third of the empirical cross country relationship the ability of reverse causality to explain this empirical relationship is also investigated

socioeconomic background and the returns to schooling in two low income economies in the united kingdom the increment to income yielded by an additional year of schooling declines as the occupational status of the worker s father rises in this note the relationship between family background and the returns to schooling is measured in kenya and tanzania in contrast to the united kingdom a positive relationship is documented several explanations for this marked difference between a high income economy and two low income economies are suggested copyright 1987 by the review of economic studies limited

long run versus short run planning horizons and the rangeland stocking rate decision reduced future forage production diminished range condition and reduced animal performance have been major factors considered when setting rangeland stocking rates the relative economic importance of diminished current period animal performance versus intertemporal forage production impacts was investigated using a dynamic optimal control model the model is applied to yearling stocker production in eastern colorado results indicate that intertemporal grazing impacts to forage production are not that important reduced weight gain during the current period drives the economic stocking rate decision further ranchers have no economic incentive as profit maximizers to continually overgraze the range

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

keep searching and you ll find what do we know about variety creation through firms search activities for innovation this article critically reviews and synthesizes the contributions found in theoretical and empirical studies of firm level innovation search processes it explores the advantages and disadvantages of local and non local search discusses organizational responses and identifies potential exogenous triggers for different kinds of search it argues that the initial focus on local search was a consequence in part of the attention in evolutionary economics to path dependent behavior but that as localized behavior was increasingly accepted as the standard mode studies began to question whether local search was the best solution in all cases more recently the literature has focused on the trade offs being created by firms having to balance local and non local search we account also for the apparent variety paradox in the stylized fact that organizations within the same industry tend to follow different search strategies but end up with very similar technological profiles in fast growing technologies the article concludes by highlighting what we have learnt from the literature and suggesting some new avenues for research

how misleading is linearization evaluating the dynamics of the neoclassical growth model this paper investigates the reliability of employing linearization to evaluate the dynamic adjustments to changes in productive government spending in a ramsey growth model if government expenditure is introduced as a flow and the dynamic adjustment is fast linearization may yield a reasonably good approximation to the true dynamics even for fairly large policy shocks if government expenditure assumes the form of a stock leading to more sluggish adjustment linearization may yield misleading predictions these errors occur at the beginning of the transition and weigh heavily in welfare calculations the implications for temporary shocks and the speed of convergence are also considered

a failure inducement model of research and development expenditure abstract empirical evidence for the schumpeterian suggestion of a positive relationship between profitability and innovative effort is slim in fact the opposite is often suggested an alternative failure inducement hypothesis argues that firms make innovative efforts when performance falls below a minimum threshold resulting in a negative relationship between profitability and r d expenditures data on r d expenditures in italian industry in the early 1980s a period of severe economic crisis show that both hypotheses are relevant for firms whose profits are well above or well below average respectively

investment and the behavioral theory of the firm evidence from shipbuilding investment in production assets is a strategic decision that results from organizational search and risk taking the behavioral theory of the firm predicts that performance below the aspiration level and slack resources initiate organizational search risk theory predicts that performance below the aspiration level increases risk tolerance this paper integrates these theories to form a theory of problem and slack driven strategic change and applies it to the growth of production assets the predictions are tested by analyzing the growth of production assets in the japanese shipbuilding industry yielding clear evidence that high performance causes low asset growth but no effect of slack copyright 2003 oxford university press

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

economic growth and the structure of long term development this volume collects some of the papers presented at the 82nd round table conference of the international economic association that was organised in collaboration with fondazione eni enrico mattei the book considers different approaches to the analysis of economic growth and it is organised in five parts par i is devoted to empirical evidence part ii contains six papers which present a series of models based on different approaches but with special emphasis on endogenous growth and on schumpeterian models of growth and fluctuations part iii of the book is devoted to the impact of international trade on economic development part iv examines the effects of economic development on the natural environment the final part of the book part v contains the concluding evaluations contributors p aghion r aversi d ben david g bertola o castellino f donati g dosi w easterly s fabiani c freeman r goodwin j helliwell e helpman p howitt r king m landesmann r levine s lombardini k g maler w d nordhaus l l pasinetti s rebelo a sen l soete r m solow m syrquin b verspagen s zervos

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

transitional dynamics in an r d based growth model with imitation comparing its predictions to the data abstract employing cross country data this paper evaluates the transitional dynamics predictions of a non scale growth model of endogenous technology innovation and imitation we show that unlike the neoclassical growth framework the transitional dynamics of the rd 1995 quartely journal of economics 110 641 680 with the importance of technology transfer

stochastic modeling of short term cattle operations rangeland productivity is influenced primarily by fluctuating rainfall precipitation which together with market price volatility determine the major sources of variability in profitability of rangeland cattle production much research in range science has dealt with long term planning based on annual management models cotner sharp burt stevens and godfrey karp and pope and fisher among others short run decisions such as stocking rate stocking density over a length of grazing season and optimal forage at the beginning end of the grazing season have been considered static through time this study emphasizes short run decisionmaking strategies to better understand complex cattle and forage management decisions within a grazing season dynamic programming dp is used to test the certainty equivalence ce property of these intertemporal decisions to allocate scarce resources under fluctuating conditions involved in cattle production the objectives of this study are threefold a to develop a model of forage livestock dynamics b to evaluate the effect of price fluctuations on cattle and forage management policies principally stocking density and c to incorporate risk into a sequential decision making process such as a yearling operation to test the ce property our study is focused on testing ce and its applications for risk management using a forward recursive dp process

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

the speed of convergence and alternative government financing abstract in this paper we are concerned with the speed of convergence in the sidrauski monetary optimizing model sidrauski am econ rev 57 1967 534 in which the steady state capital stock is not influenced by a change in public spending the paper studies how different the speed of convergence to the steady state is affected by a change in government spending under the various ways of financing in exploring the transitional adjustment to the public policy shock it will be convenient to focus upon the degree of relative risk averse

robustness tests of the augmented solow model this paper demonstrates some techniques for testing the robustness of cross section and panel data regressions and applies them to the influential augmented solow growth model the paper focuses on robust estimation and analysis of sensitivity to measurement error in particular it is shown that estimated technology parameters and convergence rates are highly sensitive to measurement error 1998 john wiley sons ltd

human capital and industrialization evidence from the age of enlightenment while human capital is a strong predictor of economic development today its importance for the industrial revolution is typically assessed as minor to resolve this puzzling contrast we differentiate average human capital worker skills from upper tail knowledge both theoretically and empirically we build a simple two sector model where worker skills raise the productivity in both agriculture and manufacturing and scientific knowledge affects the entrepreneurial ability to keep up with a rapidly advancing technological frontier the model predicts that the local presence of knowledge elites is unimportant in the pre industrial era but drives growth thereafter worker skills in contrast are not crucial for growth to measure the historical presence of knowledge elites we use city level subscriptions to the famous encyclopedie in mid 18th century france we show that subscriber density is a strong predictor of city growth after 1750 but not before the onset of french industrialization alternative measures of development confirm this pattern soldier height and industrial activity are strongly associated with subscriber density after but not before 1750 literacy on the other hand does not predict growth finally by joining data on british patents with a large french firm survey from 1837 we provide evidence for the mechanism upper tail knowledge raised the productivity in innovative industrial technology

the relationship between federal contract r d and company r d according to recent estimates federal budget outlays for research and development rd this component will rise 28 percent and absorb 70 percent of all federal r d spending in 1984 compared to under 50 percent in 1980 since work corresponding to about one half of the dollar value of the federal r d program is generally performed by private industrial firms under contract with federal agencies the rapid increase in federal r d outlays will presumably be reflected in a similar increase in the value of commitments by industrial firms to perform government r d one of the most important economic questions posed by the large prospective increase in resources allocated to federal contract r d concerns its consequences for the economy s rate of technical progress of productivity growth in the next section i argue that the ultimate impact on productivity depends on how company decisions to finance r d are affected by the availability of federal contract r d funds i then provide a brief review and critique of previous studies of the relationship between companyand federalfinanced r d performed in industry and present new estimates which differ from existing ones with respect to both methodology and implications these estimates are consistent with the hypothesis that increases in federal r d activity tend to be associated with significant reductions in companyfinanced r d a number of studies have attempted to determine the ceteris paribus effects of company and federal r d on the rate of productivity growth p by estimating variants of the equation

the influence of local search and performance heuristics on new design introduction in a new product market abstract this study develops and tests three sets of predictions concerning new design introduction during the initial period of ferment in a new product market we root our predictions most directly in the evolutionary economic concepts of local search and performance heuristics first we argue that new entrants will introduce most designs that are new to a product market during an initial period of ferment second we argue that local search will lead most product market incumbents that introduce second or subsequent designs after their entry to introduce designs that are similar to those incorporated in their existing products third we argue that firms selling products based on designs that are losing aggregate share in the market will be likely to introduce products based on new designs while firms losing market share to firms that are selling the same design are unlikely to introduce new designs our empirical analysis examines the magnetic resonance imaging mri subfield of the diagnostic imaging equipment industry between 1980 and 1986 a period that begins with the introduction of the first mri design and ends with the emergence of widely accepted design characteristics the results support the argument that local search and performance heuristics along with other market factors and business characteristics influence design introduction during a period of ferment

the effects of r d tax credits and allowances in canada abstract in canada as in many other countries that have adopted r d tax credits and allowances there has been considerable controversy over their effectiveness in increasing company financed research and development this study seems to be one of the first systematic attempts to estimate the effects of canada s r d tax credits and allowances the results present a very consistent picture the survey results the econometric results and some simple calculations based on rough measures of the price elasticity of demand for r d all suggest that the special research allowance increased r d expenditures by about 1 percent and that the investment tax credit increased them by about 2 percent these increases seem to be appreciably less than the revenue losses to the government

a new database on human capital stock in developing and industrial countries sources methodology and results abstract the paper describes the techniques and data adopted for the construction of a new series of estimates of the stock of education in 85 countries over 28 years 1960 1987 the series are built from enrollment data using the perpetual inventory method adjusted for mortality estimates are corrected for grade repetition among school goers and country specific drop out rates for primary and secondary students enrollment data series used start as far back as 1930 for most countries and even earlier for others this reduces the need for backward extrapolation of enrollments to provide the initial estimates of the investment inventory

origins and pathways of innovation in the third industrial revolution this study examines the factors that shaped the long term evolution of the ict industry in sweden 1950 2013 using a new historical microdatabase on actual innovation output the driving forces and technological interdependencies in the third industrial revolution are chronicled the results of this study support some stylized facts about technological interdependencies in general purpose technologies a closely knitted set of industries have provided positive and negative driving forces for the development of ict innovations the historical evolution of gpts can in this perspective be described as a sequence of development blocks

the influence of demand and supply side pressures on the quantity and quality of inventive activity 1984 the influence of demand and supply side pressures on the quantity and quality of inventive activity applied economics vol 16 no 1 pp 131 146

european central bank footprints on inflation forecast uncertainty the finding of the paper shows the relative effectiveness of the one size fits all policy of the european central bank the paper provides strong evidence in favor of this by testing whether the monetary policy effects footprints found in inflation uncertainty converge to a common level these footprints are measured as the fraction of the estimated policy induced reduction in this uncertainty the testing was conducted by applying a bootstrap type test in a regression of the rate of growth of these fractions on their initial values computed for 16 euro area countries jel c33 e52 e58

determinants of firms backward and forward looking r d search behavior this study develops and operationalizes a behavioral forward looking search model by incorporating prospect theory organizational risk literature and the logic of the behavioral theory of the firm with recognition of the bounded rationality of decision makers and the goal directed rule based nature of organizations this model suggests that a comparison between firms performance expectation and performance target translates the cognitive representation of the firms future into their subsequent actions by examining the research and development r d expenditures of u s manufacturing firms from 1980 to 2001 this study explores how performance aspirations expectations and slack affect decision making about firms r d search investments the findings show that both performance feedback and performance prospect are important determinants of firms search behavior after controlling for firm industry and time effects in addition backward and forward looking determinants have interactive effects on search behavior firms problem driven search activity further increases when firms feel unlikely to achieve the performance target for another year in contrast search intensity is reduced when firms expect to improve their performance from an underperforming situation to an outperforming situation the findings suggest that future research on performance feedback and experiential learning should also consider the effect of forward looking prospects on firm behavior

assessing the effect of public subsidies on firm r d investment a survey this survey examines the empirical literature on the relationship between public r d subsidies and private r d investment over the past five decades the survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues we aim to provide further explanations of the possible causes of that heterogeneity in particular we emphasise a set of issues that in our view are critical to understanding the potential effect of public r d subsidies on private r d spending special attention is paid to the dynamic aspects and composition of firm r d the constraints faced by the firm such as financial constraints and the amount and source of public subsidies none of these issues have been investigated in depth we formulate a set of research assumptions to guide future empirical research in this field

induced adoption and externalities in the regional diffusion of information technology antonelli c 1990 induced adoption and externalities in the regional diffusion of information technology reg studies 24 31 40 information technology can be considered as a set of complex radical innovations which continues to evolve and has a major impact both within the plant and the office in such a context its regional diffusion is likely to be determined by relevant externalities together with the effects of a wage induced process of localized technological change and adoption data on the territorial distribution of fax machines and modems show that the levels of diffusion of information technology in italy is highly uneven favouring central regions endowed with higher levels of fixed and human capital and consequently income the econometric analysis confirms that diffusion levels of both fax and modems across provinces are significantly associated with the level of wages as is to be expected from the induced adoption hypothesis and from the existence of external factors such as the presence

education growth and income inequality estimates of the effect of education on gdp the social return have been hard to reconcile with micro evidence on the private return to schooling we present a simple explanation combining two ideas imperfect substitution and endogenous skill biased technological progress and use cross country panel data on inequality and gdp to test these ideas a one year increase in the level of education reduces the private return by 2 percentage points consistent with katz murphy s 1992 elasticity of substitution we find no evidence for reversal of this initial effect as in acemoglu 2002 in the short run the social return equals the private return

the transitional dynamics of fiscal policy long run capital accumulation and growth this paper analyzes the effects of fiscal policies in a non scale growing economy with public and private capital the equilibrium dynamics are characterized and we contrast the dynamic effects of government expenditure on investment and expenditure on consumption under four alternative modes of tax financing most of our attention focuses on the numerical simulations of a calibrated economy the results emphasize the lengthy transition periods which implies that policies have sizeable level effects leading to substantial welfare effects even though long run growth rates are unaffected the paper highlights the intertemporal dimensions of fiscal policy and the tradeoffs these involve for economic performance especially growth and welfare

the medium run effects of educational expansion evidence from a large school construction program in indonesia this paper studies the medium run consequences of an increase in the rate of accumulation of human capital in a developing country from 1974 to 1978 the indonesian government built over 61 000 primary schools the school construction program led to an increase in education among individuals who were young enough to attend primary school after 1974 but not among the older cohorts 2sls estimates suggest that an increase of 10 percentage points in the proportion of primary school graduates in the labor force reduced the wages of the older cohorts by 3 8 10 and increased their formal labor force participation by 4 7 i propose a two sector model as a framework to interpret these findings the results suggest that physical capital did not adjust to the faster increase in human capital

taxation and income distribution dynamics in a neoclassical growth model we examine how changes in tax policies affect the dynamics of the distributions of wealth and income in a ramsey model in which agents differ in their initial capital endowment the endogeneity of the labor supply plays a crucial role in determining inequality as tax changes that affect hours of work will affect the distribution of wealth and income reinforcing or offsetting the direct redistributive impact of taxes our results indicate that tax policies that reduce the labor supply are associated with lower output but also with a more equal distribution of after tax income we illustrate these effects by examining the impact of recent tax changes observed in the us and in european economies

demand side vs supply side technology policies hidden treatment and new empirical evidence on the policy mix this paper provides new empirical evidence about the impact of various technological policies upon firms innovative behaviour we take into consideration the role of policies for innovative activities and we focus on their interaction while supply side policies such as r d subsidies and tax credits have been both extensively discussed in the literature and empirically investigated the analysis of innovative public procurement is a growing trend in the literature which still lacks robust empirical evidence in this paper we replicate the existing results on supply side policies surmise fresh empirical evidence on the outcome of innovative public procurement and address the issue of possible interaction among the various tools when controlling for the interaction with other policies supply side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools the preliminary evidence suggests that technology policies exert the highest impact when different policies interact

ambiguity monetary policy and trend inflation allowing for ambiguity or knightian uncertainty about the behavior of the policymaker helps explain the evolution of trend inflation in the us in a simple new keynesian model without resorting to exogenous changes in the inflation target using blue chip survey data to gauge the degree of private sector confidence our model helps reconcile the difference between target inflation and the inflation trend measured in the data we also show how in the presence of ambiguity it is optimal for policymakers to lean against the private sectors pessimistic expectations

how does labor mobility affect income convergence abstract labor mobility is introduced into the neoclassical growth model for a small open economy with capital intensity below its steady state level outmigration directly contributes to faster income convergence but also creates a disincentive for gross capital investment at low relative income levels the latter disincentive effect tends to dominate so that labor mobility can actually slow the speed of income convergence

growth or stagnation the role of public education abstract this paper presents a political economic theory of growth and human capital accumulation where individuals of different ages disagree over the resource commitment to public education in the context of an overlapping generations model with two period lived agents population growth implies that the equilibrium quantity of public education reflects the preferences of youth and is therefore forward looking despite forward looking behavior it is shown that sufficiently rapid population growth can trigger economic stagnation in the political economic equilibrium the model therefore offers a novel explanation for observed negative correlations between population growth measures and economic growth

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded