the disaggregated technology production function a new model of university and corporate research abstract technology and the process that produces it research and development r d are typically characterized as homogeneous entities in reality the typical industrial technology is composed of three elements a generic technology base supporting infratechnologies and proprietary market applications innovations the first two have public good characteristics and therefore explicitly modeling them is essential for public policy purposes the fundamental relationships among these elements require a technology production function that captures the supporting roles of the public good elements in creating proprietary applied technology these critical quasi public technology goods are supplied to a significant extent by exogenous external sources central corporate research labs government labs and increasingly universities the expanding university role beyond basic research complicates the structure and functioning of the national r d establishment and increases the need for a more accurate model of technological change to better inform r d policy moreover in assessing the resulting applied technology s impact on economic growth both the general and partial equilibrium literatures enter the technology variable into a production function with the common production assets physical capital and labor such models obscure an important distinction between technology and these production assets namely the fact that technology is primarily a demand shifting asset as such its role is correctly specified only when combined with the other major demand shifting asset marketing allocations to these two assets vary across competing firms implying a spatial model of competition while still providing traceability to the exogenous sources of public good technology elements such as universities

firm optimism and pessimism abstract this paper explores the question of whether firms have systematic expectation biases using microdata from the west german manufacturing subset of the ifo business climate survey we infer quarterly production growth rates at the firm level we then combine this information with production growth expectations over a quarterly horizon to construct quantitative firm specific expectation errors our findings show that at most one third of our firms systematically over or underpredict their production growth one quarter ahead our findings further show that larger and exporting firms tend to have more realistic expectations while firms with higher leverage are more prone to expectations that are biased towards optimism

the brevity and violence of contractions and expansions abstract early studies of business cycles argued that contractions in economic activity were briefer shorter and more violent rapid than expansions this paper systematically investigates this claim and in the process discovers a robust new business cycle fact contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output the difference arises because employment typically lags output around peaks but they coincide in their troughs we discuss the performance of existing business cycle models in accounting for this fact and conclude that none can fully account for it we then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively

basic research and productivity increase in manufacturing additional evi dence in a recent paper in this review edwin mansfield illustrated empirically using a sample of ten petroleum and six chemical firms that firm rates of productivity change are related to the amount of companyfinanced basic research performed certeris paribus in this note additional evidence is presented which is supportive of mansfield s findings this analysis is based on a sample of fifty one major manufacturing firms active in r d it is unique in that the impacts of company financeda nd governmentfinancedb asic researche xpendituresa re consideredd eterminantso f productivityg rowth the following model was estimated

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

traders expectations in asset markets experimental evidence we elicit traders predictions of future price trajectories in repeated experimental markets for a 15 period lived asset we find that individuals beliefs about prices are adaptive and primarily based on past trends in the current and previous markets in which they have participated most traders do not anticipate market downturns the first time they participate in a market and when experienced they typically overestimate the time remaining before market peaks and downturns occur when prices deviate from fundamental values belief data are informative to an observer in predicting the direction of future price movements and the timing of market peaks

can firms see into the future survey evidence from germany abstract this paper presents new evidence on the expectation formation process of firms from a survey of the german manufacturing sector first firms become too optimistic after their business has improved consistent with the over extrapolation of their experience second firms extrapolate improvements in their business more than deteriorations third firms are more optimistic pessimistic than usual during business cycle peaks troughs suggesting that they do not anticipate reversals fourth the german reunification provided a positive exogenous shock to the business of west german products the industries most positively affected by the shock initially over extrapolated the past downward trend just as much as the less affected industries and thus failed to anticipate the reversal fifth more overoptimistic firms subsequently report larger inventories and lower profits suggesting that expectation errors entail opportunity costs sixth older and larger firms show a smaller extrapolation bias indicating that time and resources can alleviate the extrapolation bias seventh firms that expect their business to improve tend to also expect their prices to increase suggesting that firms mostly try to forecast demand shocks as opposed to supply shocks overall these observations suggest that firms have a limited ability to anticipate changes in their activity and extrapolate their experience too much

information rigidity and the expectations formation process a simple framework and new facts we propose a new approach to test the full information rational expectations hypothesis which can identify whether rejections of the null arise from irrationality or limited information this approach quantifies the economic significance of departures from the null by quantifying the underlying degree of information rigidity applying this approach to u s and international data of professional forecasters and other agents yields pervasive evidence consistent with models of imperfect information furthermore the proposed approach sheds new light on policies such as inflation targeting and those leading to the great moderation affecting expectations finally we document evidence of state dependence in the expectations formation process

academic research and industrial innovation the purpose of this study is to estimate the extent to which technological innovations in various industries have been based on recent academic research and the time lags between the investment in recent academic research projects and the industrial utilization of their findings because no attempt to my knowledge has been made to estimate the social rate of return from academic research we also make some rough and tentative estimates of this sort while the results are subject to many limitations discussed below they should be of interest to public policy makers concerned with science and technology as well as to

can households see into the future survey evidence from the netherlands abstract this paper presents new evidence on the expectation formation process from a dutch household survey households become too optimistic about their future income after their income has improved consistent with the overextrapolation of their experience we show that this effect of experience is persistent and that households overextrapolate income losses more than income gains furthermore older households overextrapolate more suggesting that they did not learn over time to form more accurate expectations finally we study the relationship between expectation errors and consumption we find that more overoptimistic households intend to consume more and subsequently report higher consumption even though they do not consume as much as they intended to these results suggest that overextrapolation hurts consumers and amplifies business cycles

expectations and bubbles in asset pricing experiments abstract we present results on expectation formation in a controlled experimental environment in each period subjects are asked to predict the next price of a risky asset the realized market price is derived from an unknown market equilibrium equation with feedback from individual forecasts in most experiments prices deviate from the benchmark fundamental and bubbles emerge endogenously these bubbles are inconsistent with rational expectations and seem to be driven by trend chasing behavior or positive feedback expectations of the participants we also analyze individual predictions of participants and find that participants within a group tend to coordinate on a common prediction strategy

what goes up must come down experimental evidence on intuitive forecasting do laboratory subjects correctly perceive the dynamics of a mean reverting time series in our experiment subjects re ceive historical data and make forecasts at dif ferent horizons the time series process that we use features short run momentum and long run partial mean reversion half of the subjects see a version of this process in which the momentum and partial mean reversion un fold over 10 periods fast while the other subjects see a version with dynamics that un fold over 50 periods slow typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process

inattentive professional forecasters abstract using the ecb survey of professional forecasters to characterize expectations at the micro level we emphasize two new facts forecasters i fail to systematically update their forecasts and ii disagree even when updating it is moreover found that forecasters have predictable forecast errors these facts are qualitatively supportive of recent models of inattention and suggest a setup where agents imperfectly process information due to both sticky information a la mankiw reis and noisy information a la sims however building and estimating such an expectation model we find that it cannot quantitatively replicate the error and disagreement observed in the data

what can survey forecasts tell us about information rigidities a lot we derive common and conflicting predictions from models in which agents face information constraints and then assess their validity using surveys of consumers firms central bankers and professional forecasters we document that mean forecasts fail to completely adjust on impact to shocks leading to statistically and economically significant deviations from the null of full information the dynamics of forecast errors after shocks are consistent with the predictions of models with information rigidities the conditional responses of forecast errors and disagreement among agents can also be used to differentiate between some of the most prominent models of information rigidities

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

the functions of technology infrastructure in a competitive economy abstract governments of industrialized nations play varied but important roles in providing the diverse technology infrastructure that supports a modern competitive economy an understanding of the structure and impacts of these roles as well as efficiency differences among alternative implementation schemes is particularly important at this time as competing industrialized nations are revamping their technology infrastructures in response to major shifts in thescope as well as the content of their growth strategies these shifts in scope can be described as evolutionary changes from single stage to multi stage strategies in that several modes of technology based competition are simultaneously pursued that is whereas an economy may have focused on innovation manufacturing high volume or niche markets etc most if not all of these must be pursued together in the future in order to diversify risk and achieve economies of scope effective implementation of the more complex multi stage growth strategy requires a consensus model of the appropriate functions for infrastructure and its institutions such a consensus model is necessary to efficiently guide strategic planning in both industry and government in particular a conceptual basis is needed for defining the critical interfaces between the government and industry roles including effective long range planning communication and cooperation the required technology infrastructure policy model is derived from a microeconomic model of the typical technology based industry existing national strategies have demonstrated the importance of efficiency at the production and market development stages as well as at the r d stage but the trend is towards promoting simultaneous efficiency at all these stages that is the model and the derived infrastructure functions must cover all stages and interfaces in the technology and related product life cycles

the dynamics of technological innovation the case of the pharmaceutical industry abstract this paper examines the mechanisms and dynamics of the process of innovation in companies and sectors of the chemical industry it is based on analysis of science and technology output indicators namely patents and innovations evaluated in terms of originality and in the case of innovations in terms of market success as well radical innovation ri is identified as the kingpin for the evolution of technologies in both the micro and macro economic context not only because it provides a model for imitation but also because it turns out to be more profitable for the innovating companies than incremental innovation at the micro economic level this paper examines the significance of diverse driving forces which lead a company to the launching of projects aiming at ri measures the length of commitment to such projects and describes the dynamic effects generated by the introduction of a successful ri and how they affect the company s subsequent r d and market orientation at the macro economic level this paper identifies the stages of youth growth maturity and decline of the subsectors of the chemical industry examines the distribution of ri and market successful innovations over the development of a sector describes the influence of market demand and capital investment on technological advance and compares the development of national chemical industries the paper concludes with an account of the dynamics of technological innovation in the chemical industry over the period 1930 1985 which is based on the empirical findings of the previous sections

biases in macroeconomic forecasts irrationality or asymmetric loss empirical studies using survey data on expectations have frequently observed that forecasts are biased and have concluded that agents are not rational we establish that existing rationality tests are not robust to even small deviations from symmetric loss and hence have little ability to tell whether the forecaster is irrational or the loss function is asymmetric we quantify the exact trade off between forecast inefficiency and asymmetric loss leading to identical outcomes of standard rationality tests and explore new and more general methods for testing forecast rationality jointly with flexible families of loss functions that embed quadratic loss as a special case an empirical application to survey data on forecasts of nominal output growth demonstrates the empirical significance of our results and finds that rejections of rationality may largely have been driven by the assumption of symmetric loss

imitation costs and patents an empirical study it has long been recognised that the costs of imitating new products have an important effect on the incentives for innovation in a market economy as arrow i962 and others have pointed out if firms can imitate an innovation at a cost that is substantially below the cost to the innovator of developing the innovation there may be little or no incentive for the innovator to carry out the innovation in their discussions of the innovation process economists frequently have called attention to the major role played by the costs of imitation but there has been little or no attempt to measure these costs to test various hypotheses concerning the factors influencing them or to estimate their effects in this paper we report some findings of what seems to be the first study of this topic in addition we present data regarding the effects of patents on imitation costs and on the rate of innovation

natural office vacancy rates some additional estimates excerpt in our recent paper shilling et al 2 we examined the rent adjustment process for 17 u s office markets and provided the first estimates of the natural vacancy rates in his comment voith 3 argues that our specification of the rent vacancy relationship is biased since we introduced an interaction term to capture the effect of risks associated with higher vacancy levels he suggests that an alternative specification would be to enter a vacancy squared term to capture this risk effect

why are governmental r d and private r d complements it is well known that government r d and private r d have a complementary relationship however no previous study has provided an explanation for why that complementary relationship exists this paper argues that infratechnology is the critical link between governmental and private r d and that the observed complementarity is the result of technical complementarity at the production level between funding infratechnology and knowledge sharing a theoritical framework based on this argument is developed and examined empirically for supporting evidence evidence of technical complementary is found as well as evidence that governmental r d stimulates the sharing of knowledge

price adjustment process for rental office space abstract this paper analyzes the price adjustment process for rental office space in 17 cities across the united states over the time period 1960 to 1975 the results confirm much of what economic theory suggests landlords react to fluctuations in demand by building up or drawing down inventories of unlet or vacant office space other things equal higher levels of vacant office space mean that landlords lower their rents and reduce the difference between desired and actual vacancies empirical evidence is also presented on the normal vacancy rate across different cities

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