technological regimes schumpeterian patterns of innovation and firm level productivity growth the paper investigates the relationships between technological regimes and firm level productivity performance and it explores how such a relationship differs in different schumpeterian patterns of innovation the analysis makes use of a rich dataset containing data on innovation and other economic characteristics of a large representative sample of norwegian firms in manufacturing and service industries for the period 1998 2004 first we decompose tfp growth into technical progress and efficiency changes by means of data envelopment analysis we then estimate an empirical model that relates these two productivity components to the characteristics of technological regimes and a set of other firm specific factors the results indicate that 1 tfp growth has mainly been achieved through technical progress while technical efficiency has on average decreased 2 the characteristics of technological regimes are important determinants of firm level productivity growth but their impacts on technical progress are different from the effects on efficiency change 3 the estimated model works differently in the two schumpeterian regimes technical progress has been more dynamic in schumpeter mark ii industries while efficiency change has been more important in schumpeter mark i markets

does right or left matter cabinets credibility and fiscal adjustments abstract this paper tests the widely held assumption that left wing cabinets favor higher public spending and examines whether cabinet ideology affects the persistence of major fiscal adjustments in a panel of large fiscal adjustments in oecd countries during the last 40 years we find evidence that left wing and right wing cabinets are partisan the left tends to reduce the deficit by raising tax revenues while the right relies mostly on spending cuts our testable hypothesis is that cabinets can signal commitment by undertaking fiscal adjustments in ways that are not favored by their constituencies in other words the left gains credibility when it cuts spending while the right becomes more credible when it increases tax revenues probit estimates of the determinants of persistence in fiscal adjustments confirm that spending cuts by the left and tax increases by the right are associated with persistent adjustments the effect is significant for cuts in public spending public consumption wage or nonwage increases in total revenues direct taxes on businesses and other taxes we test for the role of several other determinants of persistence confirming that coalition and majority cabinets are associated with less persistence while periods of high or rising levels of indebtedness favor persistence the estimates of the impact of ideology and other variables on gdp and its components show that it is the size of the spending cut rather than cabinet ideology that is most important

new firm startups technology and macroeconomic fluctuations new firm startup activity is examined within a framework pooling a cross section of 117 industries over six time periods between 1976 and 1986 a model is introduced relating startup activity both to elements of the business cycle in particular the macroeconomic growth rate the cost of capital and the unemployment rate and to industry specific characteristics especially the technological conditions underlying the industry the pooled cross section regression results suggest that macroeconomic fluctuations as well as industry specific elements contribute to startup activity while new firm startups respond positively to macroeconomic growth they are promoted by a low cost of capital and high unemployment rate a somewhat surprising result is that new firm startups are not apparently deterred in capital intensive industries and where r d expenditures play an important role the empirical results suggest that new firms may be able to overcome their inherent size and experience disadvantages in such markets through exploiting university research and pursuing innovative activity

the effectiveness of fiscal and monetary policy responses to twin crises we study how effective fiscal and monetary policy responses are during a twin crisis using the dataset provided by laeven and valencia 2008 we identify 57 episodes of twin crises following the methods proposed in baldacci et al 2009 and hutchison et al 2010 we construct the variables measuring the duration and output cost of a twin crisis we find that fiscal policy does not seem to be associated with the shortening of a twin crisis regarding monetary policy we find that monetary tightening is associated with the lengthening of a twin crisis duration consistent with the result in hutchison et al 2010 dealing with a sudden stop crisis in addition our results show that while a mild monetary expansion is effective in reducing a twin crisis duration over expansionary monetary policy loses its effectiveness

the impact of government debt expenditure and taxes on aggregate investment and productivity growth in this paper we evaluate empirically the impact of fiscal policy on two key determinants of long term growth i e private investment and productivity growth we mostly focus on a panel of 20 oecd economies from 1970 to 2009 although we also present some estimates based on data for 80 developing economies our findings suggest that high public debt adversely affects both aggregate investment spending and productivity growth through distortions related to the size of the public sector we also find weak evidence of some non linear effects on productivity with government debt becoming more detrimental in advanced economies when above 85 90 of gdp

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

technological regimes and schumpeterian patterns of innovation this paper proposes that the specific pattern of innovative activities in an industry can be explained as the outcome of different technological learning regimes a technological regime is defined by the particular combination of technological opportunities appropriability of innovations cumulativeness of technical advances and properties of the knowledge base building upon the distinction between schumpeter mark i and schumpeter mark ii industries this paper provides empirical estimates of the relationships between indicators of the schumpeterian patterns of innovation concentration of innovative activities stability in the hierarchy of innovators and importance of new innovators and indicators of the variables defining technological regimes

effects of fiscal contractions the importance of preceding exchange rate movements we examine the importance of exchange rate and money supply movements for the macroeconomic outcome of fiscal contractions and find i contractions associated with a favorable macroeconomic outcome have been preceded by significantly higher real depreciations as compared to contractions associated with a less favorable macroeconomic outcome and ii contractions preceded by real depreciations improve expectations about future income and generate higher private consumption growth we discuss policy implications for countries both outside and inside the emu

fiscal adjustments and their effects during the transition to the emu the transition phase to emu hasbeen accompanied by considerable monetaryand fiscal consolidation efforts in the eu this paper analyses this consolidationprocess and its effects on economicactivity in the eu it is tested to what extent fiscal retrenchment efforts havedepressed or stimulated private spending inthe case of the latter non keynesian effectsdominate the traditional keynesianexpenditure effects of government spending taxation and transfer payments

tales of fiscal adjustment fiscal adjustments why they can be expansionary this paper examines the evidence on fiscal adjustments in oecd countries from the early 1960s to today the results shed light on the recently observed phenomenon of fiscal tightening that produces non keynesian expansionary effects one interpretation is that a serious fiscal tightening increases demand wealth rises when future tax burdens decline and when interest rates decline credibility is restored and inflation or default risks abate both consumption and investment rise for this effect to produce an expansion the tightening must be sizeable and occur after a period of stress when the budget is quickly deteriorating and public debt is building up another interpretation emphasizes the supply side typically a fiscal consolidation based on tax increases is short lived to be long lasting it must include cuts in public employment transfers and government wages to be politically possible such a policy must be supported by trade unions these measures result in more efficient labour markets and boost the supply side based both on statistical evidence and on a detailed analysis of ten cases of major fiscal adjustment this article provides cautious support to the supply side view without denying a more limited role for the demand side channel alberto alesina and silvia ardagna

fiscal stimulus in times of high debt reconsidering multipliers and twin deficits we investigate the impact of fiscal stimuli at different levels of the government debt to gdp ratio for a sample of 17 european countries from 1970 to 2010 this is implemented in an interacted panel var framework in which all coefficient parameters are allowed to change continuously with the debt to gdp ratio we find that responses to government spending shocks exhibit strong nonlinear behavior while the overall cumulative effect of a spending shock on real gdp is positive and significant at moderate debt to gdp ratios this effect turns negative as the ratio increases the total cumulative effect on the trade balance as a share of gdp is negative at first but switches sign at higher levels of debt consequently depending on the degree of public indebtedness our results accommodate long run fiscal multipliers that are greater and smaller than one or even negative as well as twin deficit and twin divergence behavior within one sample and time period from a policy perspective these results lend additional support to increased prudence at high public debt ratios because the effectiveness of fiscal stimuli to boost economic activity or resolve external imbalances may not be guaranteed

keynes and the confidence faeries budgetary constraints were never the primary object of policy for john maynard keynes they were constraints not objectives however keynes identified the psychological channels through which budgetary discipline and other policy conventions might influence investment he even accepted that in rare circumstances the psychological factors might overwhelm direct policy interventions unfortunately the polarisation of the current debate means traditional keynesians are unlikely to search out this aspect of his work and the confidence faeries are unlikely to read any of keynes s work this article draws attention to this aspect of his work

cities under stress this paper studies the effect of terrorist attacks on the internal structure of cities we develop an urban framework with capital structures suitable for the study of this question and analyze the long and short term implications of this type of events in the long run the analysis shows that a terrorist attack will affect urban structure only modestly relative to the potentially large decrease in the level of economic activity in the city land rents will not decline at all locations in the short run agglomeration forces will amplify the effect of the original destruction and will reduce urban economic activity temporarily

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

technology and the dynamics of industrial structures an empirical mapping of dutch manufacturing this paper explores the empirical link between on the one hand innovation and on the other hand industrial structure and dynamics in the netherlands we use the concept of technological regimes as the guiding framework to interpret this relationship the data are drawn from the production statistics and the business register of manufacturing firms in the netherlands and the second community innovation survey a classification of technological regimes that refines pavitt s taxonomy is applied to the data our analysis is aimed at identifying the variables that are best able to discriminate between technological regimes for our dutch case we find that a mix of innovation related and market structure related variables account for most variability and broad differences across regimes dynamic market structure variables account for an additional share of variability and finer differences across regimes overall we conclude that the concept of technological regimes provides a useful framework that helps to shed further light on the relationship between innovation and market structure

r d appropriability opportunity and market structure new evidence on some schumpeterian hypotheses one of the largest bodies of literature in the field of industrial organization is devoted to the interpretation and testing of several hypotheses advanced by joseph schumpeter 1950 concerning innovation and industrial market structure one set of hypotheses focuses on the role of firm size as a determinant of r d spending and the rate of technological advance another set focuses on the effect of market concentration on r d and technological advance in this paper we reexamine the latter set of hypotheses at the industry level using new data on r d appropriability and technological opportunity collected by levin et al 1984 in a survey of r d executives in 130 industries

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

investment effects of departures from governmental present value budget balance the paper investigates whether departures from government borrowing constraints affect the relationship between fiscal policy innovations and changes in the investment level break points or apparent departures from present value budget balance are then identified next the investment deficit relationship is examined prior to and following identified break points in an effort to detect potential changes in behaviour the investment deficit relationship is quantified by examining posterior coverage bounds of impulse response functions britain appears to undergo such a break around 1973 data from this country suggest that significantly more crowding out occurred following the identified breaks in contrast data from other comparison countries that do not appear to have experienced breaks indicate stable investment deficit relationships

innovation strategies as a source of persistent innovation an important topic in the recent literature on firms innovation is the question of whether and to what extent firms which innovate once have a higher probability of innovating again in subsequent periods this phenomenon is called the persistence of innovation although the literature has established that innovation persistence is indeed important from an empirical point of view relatively little attention has been paid to identifying the reasons why this is the case in this article we contribute to the literature by proposing that differences in innovation strategies across firms are an important driving force behind innovation persistence we analyses this issue using a panel database constructed from r d and community innovation surveys in norway empirical measures of five innovation strategies are identified by means of an inductive method ad hoc supplier based market driven r d intensive and science based a dynamic random effects probit model is used to estimate whether and to what extent these innovation strategies are a source of persistent innovation the results support the idea that the differences in innovation strategies across firms are an important determinant of the firms probability to repeatedly innovate more concretely we found that firms pursuing the strategies market driven r d intensive and science based were more likely to be persistent innovators we also distinguish the effects of strategy differences on the persistence of product and process innovation in all firms and within high tech versus low tech firms

organizational innovation and its effects organizational innovation its persistence its relationship with technological innovation and their influence on firm performance remain under researched these issues are investigated using an integrated firm level data set obtained from two recent waves of the norwegian community innovation survey cis 3 and 4 and firms financial accounts a heckman two step estimation to ensure against potential sample selection bias was used to demonstrate that between 1999 and 2004 a number of norwegian firms were persistent in organizational innovation and this persistence raised the positive effects of organizational innovation on their performance the results also reveal that many firms undertook and benefited from different types of organizational innovation and such benefits were increased by the combinative effect of organizational and technological innovation the study also found that older and larger firms are more inclined to attempt organizational change while smaller firms are more able to benefit copyright 2012 the author 2012 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

foreign competition domestic knowledge base and innovation activities evidence from chinese high tech industries using panel data analysis for a sample of chinese high technology industries from 1998 to 2008 this study examines how industry characteristics affect industry innovation activities differing from existing studies our research considers the impact of foreign competition on innovation activities at industry level in a large emerging economy the results indicate that the intensity of competition from foreign invested enterprises fies and domestic skill intensity affect industry buy and make activities foreign competition is positively associated with the intensity of buy activity but negatively affects the intensity of make activity further the findings show that domestic skill intensity weakens the impact of foreign competitive pressure on innovation activities our empirical evidence has important policy implications

schumpeterian competition technological regimes and learning through knowledge spillover abstract this paper builds upon winter 1984 in which the author discusses two views of schumpeter on competition specifically technological regimes and the role of knowledge spillovers for innovation are examined an agent based simulation model is formulated which captures the relevant aspect of competition between firms in an innovative industry results of the simulation runs indicate that at first the technological development in terms of process and product innovations is better in an industry that is characterized by schumpeter mark ii conditions but the improved technological development is connected with higher prices and profits which could be interpreted as a trade off between static and dynamic efficiency second in both scenarios market and industry concentration rises over time showing a strong separation between successful firms and those lagging behind in technological terms and third surprisingly firms in a schumpeter mark i regime seem to be more technologically specialized furthermore this article proves that a replication of simulation models is possible and useful

fiscal consolidation under fixed exchange rates abstract we present the fixed exchange rate version of the obstfeld and rogoff model and analyze the international transmission of fiscal policy shocks the welfare effects of an unanticipated contraction in government expenditure in the home country are shown to depend crucially on the way in which world money stock is set if home authorities alone are responsible for pegging the exchange rate a fiscal adjustment leads to a decrease in the real interest rate stimulates private consumption and limits the contraction in world output compared with a situation in which a cooperative scheme is implemented the model is then used to propose a new interpretation of recent events in the eu countries that have enacted restrictive fiscal policies while pegging their currencies to the dm

changes in concentration turbulence and the dynamics of market shares most previous studies of the dynamics of industry structure by emphasizing changes in concentration conceal much of the nature of underlying competitive processes here we employ a stochastic fir

macroeconomic effects of fiscal adjustment a tale of two approaches abstract we investigate the short term effects of fiscal adjustment on economic activity in 20 oecd countries from 1970 to 2009 we compare two approaches the traditional approach based on changes in cyclically adjusted primary balance capb and the narrative approach based on historical records proponents of the latter argue that it captures discretionary fiscal adjustment more accurately than the traditional approach we propose a new definition of capb that takes account of fluctuations in asset prices and reflects idiosyncratic features of fiscal policy in individual countries using this new definition we find that fiscal adjustments always have contractionary effects on economic activity in the short term we find no evidence of expansionary non keynesian fiscal adjustments spending based fiscal adjustments lead to smaller output losses than tax based fiscal adjustment these results are in line with the literature using the narrative approach suggesting that the capb when correctly specified can be used as a measure of fiscal adjustments

the fiscal state dependent effects of capital income tax cuts abstract using the post wwii data of u s federal corporate income tax changes within a smooth transition var this paper finds that the output effect of capital income tax cuts is government debt dependent it is less expansionary when debt is high than when it is low to explore the mechanisms that can drive this fiscal state dependent tax effect the paper uses a dsge model with regime switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment as government debt increases to a sufficiently high level the probability of future fiscal adjustments starts rising and the expansionary effects of a capital income tax cut can diminish substantially whether the expected adjustments are through a policy reversal or a consumption tax increase also a capital income tax cut need not always have large revenue feedback effects as suggested in the literature

fiscal stabilizations when do they work and why abstract this paper studies the determinants and channels through which fiscal contractions influence the dynamics of the debt to gdp ratio and gdp growth using data from a panel of oecd countries the paper shows that the success of fiscal adjustments in decreasing the debt to gdp ratio depends on the size of the fiscal contraction and less on its composition the rate of growth of output matters too but higher gdp growth does not drive the success of a fiscal stabilization in contrast whether a fiscal adjustment is expansionary depends largely on the composition of the fiscal maneuvre in particular stabilizations implemented by cutting public spending lead to higher gdp growth rates the effects of the composition on growth work mostly through the labor market rather than through agents expectations of future fiscal policy finally the evidence suggests that successful and expansionary fiscal contractions are not the result of accompanying expansionary monetary policy or exchange rate devaluations

fiscal policy profits and investment this paper evaluates the effects of fiscal policy on investment using a panel of oecd countries we find a sizeable negative effect of public spending and in particular of its wage component on profits and on business investment this result is consistent with different theoretical models in which government employment creates wage pressure for the private sector various types of taxes also have negative effects on profits but interestingly the effects of government spending on investment are larger than those of taxes our results can explain the so called non keynesian i e expansionary effects of fiscal adjustments jel e22 e62

fiscal crises and aggregate demand can high public debt reverse the effects of fiscal policy abstract this paper shows how the power of fiscal policy to affect consumption can vary depending on the level of public debt at moderate levels of debt fiscal policy has the traditional keynesian effects current generations of consumers discount future taxes because they may not be alive when taxes are raised or there will be a larger population available to pay the taxes but when debt reaches extreme values current generations of consumers know there is a high probability that they will have to pay extra taxes a fiscal deficit can have a contractionary effect in these situations

sovereign default risk and state dependent twin deficits abstract this paper analyzes the impact of the government debt to gdp ratio on the correlation of the fiscal balance and the current account above a government debt to gdp ratio of 90 percent the correlation of the two balances decreases by 0 16 in a sample of 12 euro area countries and by 0 17 for greece ireland portugal and spain this paper develops a small open economy model with defaultable government debt and riskless international capital markets to explain the empirical evidence of a state dependent change in the correlation in the model high public debt to gdp ratios raise sovereign risk premia as the default probability increases leading to higher uncertainty about future taxes in this case precautionary savings of households increase and partially compensate current account deficits that result from fiscal deficits the increase in households saving reduces the correlation of the two balances by the same magnitude as documented in the data the model calibrated to greece matches further business cycle moments and the empirical default frequency

variation in the fiscal multiplier with the method of financing evidence across industrial countries government spending has often varied with the business cycle to stimulate the economy and to revive economic conditions however the state of public finances has often necessitated higher borrowing to finance widening fiscal deficits indeed recent austerity packages around the globe have crystalized the importance of fiscal consolidation against the backdrop of rising public debt to shed light on recent debates regarding fiscal multipliers the article estimates variation in these multipliers with the method of financing using annual data for a sample of industrial countries there is a large variation in the effects of expansionary and contractinary government spending shocks on economic variables within and across countries the significant effects of negative government spending shocks fiscal contraction appear more prevalent than those of expansionary shocks on real output growth price inflation and nominal wage inflation consistent with theory s predictions the fiscal multiplier is more lik

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

cross country evidence on determinants of fiscal policy effectiveness the role of trade and capital flows this article studies the determinants of size differentials between fiscal multipliers in countries around the world both advanced and developing economies we introduce variables not considered b

fiscal stimulus with spending reversals abstract the short run effects of fiscal policy depend not only on current tax and spending choices but also on expectations about future policy adjustment while general equilibrium models typically restrict medium term adjustment to taxation we highlight the importance of government spending dynamics first we provide time series evidence for the united states suggesting that an exogenous increase in government spending prompts a rise in public debt followed over time by a reduction in spending below trend second we show how expected spending reversals alter the short run impact of fiscal policy in a new keynesian model bringing it closer in line with the evidence

technological regimes and industrial dynamics the evidence from dutch manufacturing previous empirical research has shown that the observed inter sectoral variety in the rates and form of organizations of innovations is related is related to the differences in the underlying technological regimes further theoretical models of industry dynamics suggest a similar relationship between the structural and dynamic properties of the firm population of an industry and its underlying technological regime using productivity differences between entrants and incumbents as a proxy for the technological regime of an industry this paper on the grounds of longitudinal firm level database on the dutch manufacturing sector shows that differences between industries with regard to their structural and dynamic properties are strongly related to their underlying technological regimes

inflationary consequences of anticipated macroeconomic policies budget deficits implying an unbounded present value of government debt are infeasible and hence induce expectations of a future policy change we study how expectations of a policy switch whose timing or mix between expenditure cuts tax increases or increases in money growth rates may be uncertain affect economic dynamics before the switch takes place we are especially concerned with the correlation between changes in the deficit and inflation of particular interest is our finding that timing uncertainty may induce fluctuations in the rate of inflation that seem to be unrelated to the budget deficit at a time when the budget deficit is responsible for inflation

fiscal adjustments and economic performing a comparative study the empirical relationship among fiscal contractions permanent improvement in public finances and short run economic performance is examined using a sample of 14 european countries over the last three decades the actual experience of policy making has taught that only the adjustments that relied heavily on primary expenditure cuts and were implemented over a relatively long time span were able to achieve a long lasting reduction of public liabilities indeed during these consolidations tax increase amounted to a small fraction of the total adjustment furthermore though they unfolded over a longer period with respect to the unsuccessful ones the overall budget cut was not larger as regards the macroeconomic impact successful episodes tended to be associated with improved economic performance during the adjustment period and in the following two years the economies experienced strong consumption and investment growth reduced unemployment better international competitiveness and falling interest

terror fear and behaviour in the jerusalem housing market this paper tests the hypothesis that fear is a central factor in understanding human behaviour in the face of terror this claim is addressed in the context of behaviour in the jerusalem housing market over the terror stricken years in the city 1999 2004 using a unique data source and the tools of spatial data analysis the paper provides support for this hypothesis in three respects first patterns of terror in the city are shown to be increasingly deconcentrated over the period studied secondly the types of terror having the sharpest effect on residential property prices are those most associated with randomness thirdly the effect of terror is less on purchasing prices than on rental prices the former represent revealed long term behaviour less affected by fear and the latter short term behaviour more likely to be influenced by such disutility the paper concludes with some of the policy implications arising from these findings

uncertain fiscal consolidations the paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain drawing on the evidence in alesina and ardagna 2010 we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts we find that the composition of the fiscal consolidation its duration the monetary policy stance the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and or successful in stabilizing government debt

nonlinearities and the sustainability of the government s intertemporal budget constraint i introduction fiscal policy sustainability is an important issue for european union eu countries which are subject to some forms of monitoring of their public finances the european stability and growth pact esgp constrains the fiscal policy of member states by limiting their autonomy in creating excessive deficits 1 this because fiscal disequilibria in one state create negative externalities for the other member countries and in the case of european monetary union emu countries can endanger the overall credibility of the euro currency on the other hand given the common monetary policy the correction of idiosyncratic shocks is assigned to the fiscal instrument alone imposing further pressure on the fiscal policy of member countries while the issue of sustainability of the public finances of the eu emu countries has received an increasing attention less attention has been paid to the issue of how the sustainability is achieved that is how budgetary authorities adjust fiscal policies to achieve maintain a sustainable path of public debt focusing on this adjustment by applying linear and nonlinear error correction models is the main purpose of this paper our empirical analysis is based on italy which provides an interesting case as it joined the emu in 1999 in spite of a stock of public debt of around 113 of nominal gdp against the 60 level required by the maastricht treaty and whose public accounts are often under scrutiny for struggling to comply with the esgp 2 as well as for subsequent downgradings of its sovereign debt by the main credit rating agencies 3 in this paper we address three main relevant policy questions first are the italian public finances sustainable second is the process of fiscal adjustment equally shared by changes in revenues and changes in government spending third does fiscal adjustment vary with the sign and magnitude of disequilibria and or with the state of the economy these are important questions for policy making purposes although our methodology is only applied to italy we feel our work should be of definite interest to other european countries and beyond bearing in mind that italy enjoys membership of the g7 economies and accounts for around 17 of eurozone s gdp a better understanding of how its public finances operate in practice is extremely important for monitoring the fiscal health of eurozone countries and minimizing at an early stage possible threats to eurozone s stability as well as limiting any spill over effects to the rest of the world further loans from the european financial stability facility 4 efsf can only meet the approval of policymakers if they feel confident they have a deep understanding of how individual member states pursue their own fiscal policies toward sustainability verifiability and credibility of sustainable fiscal policies would also condition the availability of the european stability mechanism consisting in a permanent bail out fund for eurozone member states bofinger et al 2010 that is expected to become operational from 2013 at the expiry of the efsf at the same time proposals for independent monitoring of public finances of member states as well as stricter sanctions such as the temporary suspension of voting rights for eurozone members that break the region s rules on public finances are put forward by the european central bank trichet 2010 all these recent policy developments confirm the importance of our research in providing a comprehensive framework for empirically testing the sustainability of fiscal policy our proposed approach provides a number of interesting findings the italian government s intertemporal budget constraint ibc is formally respected in spite of the high levels of public debt nevertheless the burden of correcting budgetary disequilibria is entirely carried out via changes in the average tax rate rather than changes in government spending or policy mixes

the political economy of fiscal consolidations in the context of recent research in political economy this paper addresses the policy problem of fiscal consolidation in terms of three types of issues i the macroeconomic effects of alternative strategies to consolidate ii the institutional setups conducive to a consolidation and iii the best strategy for implementing a consolidation in order to maximize its political feasibility one methodological feature of this survey is an emphasis on policy feasibility one methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation

public debt and growth heterogeneity and non linearity we study the long run relationship between public debt and growth in a large panel of countries our analysis builds on theoretical arguments and data considerations in modelling the debt growth relationship as heterogeneous across countries we investigate the debt growth nexus adopting linear and non linear specifications employing novel methods and diagnostics from the time series literature adapted for use in the panel we find some support for a negative relationship between public debt and long run growth across countries but no evidence for a similar let alone common debt threshold within countries

schumpeterian patterns of innovation are technology specific this paper examines the patterns of innovative activities at the technological and country levels using patent data for 49 technological classes in six countries usa japan germany france united kingdom and italy it is shown that the patterns of innovative activities differ systematically across technological classes but are remarkably similar across countries for each technological class in particular two groups of technological classes are identified schumpeter mark i and schumpeter mark ii in these two groups innovative activities are structured and organized in different ways the first represents a widening pattern concentration of innovative activities is low innovators are of small economic size stability in the ranking of innovators is low and entry of new innovators is high the second represents a deepening pattern concentration of innovative activities is higher than in the first group innovators are of larger economic size stability in the ranking of innovators is greater and entry is lower the former group comprises mechanical technologies and traditional sectors while the latter includes chemicals and electronics this result suggests that technology related factors such as technological regimes defined in terms of conditions of opportunity appropriability cumulativeness and properties of the knowledge base play a major role in determining the specific pattern of innovative activities of a technological class across countries within these constraints country specific factors introduce differences across countries in the pattern of innovative activities for a specific technological class finally the relationships between the specific features of the patterns of innovative activities and international technological specialization are examined technological advantages appear in general to be linked to higher degrees of asymmetries among innovators higher stability of the ranking of innovators smaller economic size of the innovating firms and lower entry rates of new innovators these relationships however are different in the two groups of technological classes in schumpeter mark i widening technological classes international technological specialization is associated with relatively higher degrees of asymmetries among innovators and entry of new innovators as well as smaller firm size while in schumpeter ii deepening technological classes international technological specialization is linked to the existence of a stable but competitive core of persistent innovators

terrorism insurance subsidies and social welfare a model of the effects of terrorism risk on building construction suggests that subsidy of terrorism insurance can increase social welfare such a subsidy program should cover a fixed level of risk per location

trigger points and budget cuts explaining the effects of fiscal austerity we propose and solve an optimizing model which explains counterintuitive effects of fiscal policy in terms of expectations if government spending follows an upward trending stochastic process which the public believes may fall sharply when it reaches specific trigger points then optimizing consumption behavior and simple budget constraint arithmetic imply a nonlinear relationship between private consumption and government spending this theoretical relation is consistent with the experience of several countries jel e62 e21 textbook aggregate demand models suggest simple relationships between the government budget and economic activity a cut in the government deficit for example depressing consumption and output though such models heavily influence the design of stabilization policies their micro foundations are unclear and their sharp predictions are not always consistent with reality in many countries large cuts in government spending carried out as part of stabilization programs have led to expansions rather than contractions in economic activity the absence of simple relationships be