time orientation and asset prices we analyze a general equilibrium asset pricing model where a small subset of the consumers investors have a short run urge to save that is their attitude toward consumption in the long run is a standard one f they do place zero weight on consumption far enough out in the future f but their short run effective rates of discount may be negative our model which is an elaboration on the framework proposed by faruk gul and wolfgang pesendorfer does not feature time inconsistencies thus we view consumers as fully rational but subject to specific internal frictions in the form of temptation and self control problems the model nests the mehra prescott model and we use it as a way of interpreting the wealth and asset pricing data some aspects of these data we argue can possibly be better understood using our model than the standard one r 2002 published by elsevier science b v

innovations prices and employment research firms are motivated by the prospect of monopoly rents that can be captured when a successful innovation is patented but those rents will be destroyed by the next innovation 1

appraising alternatives for allocating and cost recovery for irrigation water in egypt abstract alternative approaches to allocating and recovering costs for water on egyptian farms are proposed and evaluated in accordance with the societal objectives of allocative efficiency equity of income distribution and cost recovery a linear programming model of a study area in egypt s northern delta predicts farmers response to the proposed cost sharing instruments over a range of water supply conditions transactions costs for each charging instrument are estimated and incorporated into the allocative efficiency analysis flat land charges supplemented by water quotas in the event of increasing water scarcity best achieve societal objectives in the current and prospective egyptian situation volumetric charging instruments were judged to be somewhat less desirable due to higher tangible and intangible costs of implementation the results highlight the importance of transactions costs the degree of water scarcity and other governmental revenue raising policies in determining an appropriate charging mechanism

localized spillovers in the polish food industry the role of fdi in the development process jensen c 2004 localized spillovers in the polish food industry the role of fdi in the development process reg studies 38 535 550 the paper aims to investigate whether there are spillovers and agglomeration effects in the polish food industry this part of the research focuses on horizontal or inter industry types of spillovers assuming that they may be multidirectional and could be based on any kind of community related to geography industry affiliation and ownership in the transition countries that have opened up to foreign direct investment very recently ownership can be an important determinant of the firm s embeddedness in both local and global networks the study confirms the relevance of all three types of community factors bur raises concerns that foreign investors appear to share their own glocal networks while spillovers among domestic firms are confined to their own and also to highly localized producer communities an f test on the appropriateness of pooling confirms the idea t

peer effects in endogenous networks abstract this paper presents a model of strategic network formation with local complementarities in effort levels and positive local externalities results are obtained for a general class of payoff functions which subsumes the linear quadratic specification frequently used in theoretical and applied work we assume homogeneous agents and characterize equilibria for two sided and one sided link formation pairwise nash equilibrium networks are nested split graphs which are a strict subset of core periphery networks we highlight the relevance of the convexity of the value function for obtaining these structures more central agents are shown to exert more effort and obtain higher gross payoffs in equilibrium however net of linking cost central agents may obtain strictly lower net payoffs the curvature of the value function is also important for efficiency considerations these findings are relevant for many social and economic phenomena such as educational attainment criminal activity labor market participation and r d expenditures of firms

an econometric model of serial correlation and illiquidity in hedge fund returns the returns to hedge funds and other alternative investments are often highly serially correlated in sharp contrast to the returns of more traditional investment vehicles such as long only equity portfolios and mutual funds in this paper we explore several sources of such serial correlation and show that the most likely explanation is illiquidity exposure i e investments in securities that are not actively traded and for which market prices are not always readily available for portfolios of illiquid securities reported returns will tend to be smoother than true economic returns which will understate volatility and increase risk adjusted performance measures such as the sharpe ratio we propose an econometric model of illiquidity exposure and develop estimators for the smoothing prole as well as a smoothing adjusted sharpe ratio for a sample of 908 hedge funds drawn from the tass database we show that our estimated smoothing coecien ts vary considerably across hedge fund style categories and may be a useful proxy for quantifying illiquidity exposure

cournot competition and green innovation an inverted u relationship we examine the relationship between competition and innovation in an industry where production is polluting and r d aims to reduce emissions green innovation we present an n firm oligopoly where firms compete in quantities and decide their investment in green r d when environmental taxation is exogenous aggregate r d investment always increases with the number of firms in the industry next we analyse the case where the emission tax is set endogenously by a regulator committed or time consistent with the aim to maximise social welfare we show that an inverted u relationship exists between aggregate r d and industry size under reasonable conditions and is driven by the presence of r d spillovers

a monetary explanation of the equity premium term premium and risk free rate puzzles this paper develops and estimates a monetary model that offers an explanation of some puzzling features of observed returns on equities and default free bonds the key feature of the model is that some assets other than money play a special role in facilitating transactions which affects the rate of return that they offer the model is capable of producing a low risk free rate a high equity premium and an average positive relationship between maturity and term premium for default free bonds the model s implications for the joint distribution of asset returns velocity inflation money growth and consumption growth are also compared to the behavior of these variables in the u s economy

sources of productivity growth an empirical analysis with german sectoral data many theoretical analyses of the sources of economic growth focus on knowledge spillovers and scale economies to explain growth endogenously the contribution of this paper is to shed some light on these arguments by an empirical investigation based on a production function framework sectoral production functions are estimated with annual german data of 51 sectors from 1960 90 the estimates reveal that both a pure solow growth model and a solow model augmented with human capital cannot account for the observed productivity increases the model should be extended by allowing for inter industry spillovers and scale economies at the aggregate level as well as for scale economies associated with human capital at the sectoral level the business cycle affects observed productivity changes in the short run and in the long run

the degree of spillovers and the number of rivals for maximum effective r d abstract the amount of cost reduction or effective r d that results in a symmetric sequential nash equilibrium with quadratic payoffs and differentiated goods is shown to increase with spillovers in oligopolies with a few rivals and to achieve a maximum for spillovers that are not perfect in industries with many firms similar tendencies apply for consumer surplus profits and static welfare more rivals typically lead to reduced investments output and profitability while consumer surplus and welfare increase or at least do not decrease limited entry in markets with a few rivals may enhance innovative investments profitability and consumer surplus if only product differentiation and spillovers are sufficiently high and r d costs sufficiently low too many rivals will then again lead to reductions and a decrease in static welfare

firm heterogeneity imitation and the incentives for cost reducing r d effort i develop and test a model of strategic r d investments where innovating and non innovating firms compete on the basis of their ability to reduce costs and imitate rivals i find that a larger proportion of non innovating rivals stimulates cost reducing investments and attenuates the disincentive effect of imitation by innovators on firm level r d key model properties are verified by estimating the first order condition for the optimal choice of r d using the 1994 carnegie mellon survey of u s industrial r d results also suggest that r d and size are simultaneously determined with r d being proportional to size as predicted by the theoretical model

learning regime switches and equilibrium asset pricing dynamics abstract we examine the autocorrelation properties of equilibrium returns when the growth rate of dividends consumption or gnp follows a markov switching process in contrast to earlier studies we assume that the agent learns the current growth state using observed dividends and bayes rule for the model with switching in the mean growth rate we find that learning significantly alters the pattern of returns often generating positive rather than negative autocorrelation for the model calibrated to gnp with switching in the variance of the growth rate we show that learning induces negative autocorrelation

market failures and government failures a theoretical model of the common agricultural policy economic theory has tried to explain the characteristics of the common agricultural policy inductively on the basis of certain economic peculiarities of agriculture however by overlooking the so called government failures of the political system as an independent variable in explaining the common agricultural policy it is impossible to explain for example the strong agricultural lobbyism the deductive theoretical model of this article integrates economic as well as political actors in order to explain the characteristics of the common agricultural policy the proposed theoretical model is not tested but the criteria for such a test are presented

competitive pressure and the adoption of complementary innovations liberalization of the european automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints leading to a substantial increase in competitive pressure among dealers we estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation adoption strategies following the elimination of exclusive territories using french data we evaluate the existence of complementarities between the adoption of software applications and the scale of production firms view these innovations as substitutes and concentrate their effort in one type of software as they expand their scale of production results are robust to the existence of unobserved heterogeneity

ecological economic modeling in a pluralistic participatory society abstract this paper discusses the evolution of the role of the scientist and clarifies the demands on all scientists who wish to have their scientific results well represented in public debate this evolution is traced starting with the progressive movement in the late 1800s when the neutrality of scientists was taken for granted and the facts were believed to be sufficient to resolve most public policy questions to the current situation marked by the increasingly tentative nature of scientific inquiry disagreement among experts within a specific discipline and interdisciplinary conflict reflected in competing paradigms and interest groups given this perspective on scientific inquiry and modeling the process of convincing one s peers and the public at large is only partially separable in spite of symptoms of information overload rigorous analysis is a prerequisite to having anything persuasive to say to either group easy to understand explanations are dependent on not a short cut around such analysis the paper discusses some specific recommendations on how scientists can contribute to the pluralistic policy formulation process

methodology ideology and the economics of poticy why resource economists disagree it is evident that there is persistent disagreement among competent and articulate resource economists disagreement not only about the appropriate analytical and prescriptive response to particular constellations of policy issues but also about the uses and limitations of economics as a thought system in the policy arena this must be disquieting and disappointing to many among us who would regard the emergence of an integrated and cohesive as opposed to diverse and fractious resource economics as evidence of its maturation it is my purpose here to argue that the disagreements among us go deeper than mere disputes about priorities and tactics for doing resource economics where all participants share a common vision of what resource economics is and should be rather these disagreements extend beyond alternative conceptions of resource economics to fundamentally opposing methodologies i e conceptions of knowledge and how to get it while the proximate foci of disagreement will shift over time there is literally no good reason to expect an ultimate resolution of intradisciplinary conflict and convergence of viewpoints finally i argue that persistent disagreement is not only a fact of life it has its virtues

estimating the benefits of targeted r d subsidies we study the expected welfare effects of targeted r d subsi dies using project level data from finland we model the application and r d investment decisions of firms and the subsidy granting decision of the public agency in charge of the program our model and institutional environment allow us to identify different benefits and costs of the r d subsidy program we find that expected effects of subsidies are very het erogeneous and estimated application costs low on average the social rate of return on targeted subsidies is 30 to 50 but spillover effects of subsidies are smaller than effects on firm profits

internal r d expenditures and external technology sourcing abstract the paper examines the two way relationship between external r d activities and internal r d expenditures on a cross section of flemish r d active companies the analysis extends the classical explanatory variables like size diversification ownership structure and technological opportunities to include the impact of various external sourcing strategies r d cooperation and to a lesser extent r d contracted out are found to have a significant positive effect on internal r d but only if the companies have absorptive capacity in the form of a full time staffed r d department at the same time firms are found to be more frequently engaged in r d cooperation the more they spend on internal r d

r d determinants accounting for the differences between research and development the determinants of r d are an important topic of innovation studies the classical schumpeterian hypotheses about the influence of size and market power have been complemented with the role played by industry determinants such as demand pull technological opportunity and appropriability in determining r d investments however r d has always been considered as a whole even though research and development activities differ in many aspects we take advantage of a new panel database of innovative spanish firms pitec to distinguish between research and development efforts of firms we analyze the differentiated role played by traditional r d determinants in driving research and development results show that demand pull and appropriability have a higher effect on development while technological opportunity is more influential for research differences are statistically significant important in magnitude and robust to the use of different indicators for demand pull technological opportunity and appropriability and to several robustness checks

cost reducing and demand creating r d with spillovers this article analyzes r d policies when the returns to cost reducing and demand creating r d are imperfectly appropriable and market structure is endogenous we generalize previous characterizations of appropriability to permit the possibility that own and rival r d are imperfect substitutes we also describe how equilibrium expenditures on process and product r d as well as equilibrium market structure depend on technological opportunities and spillovers in contrast to previous work diminished appropriability does not necessarily reduce r d expenditures for example under some conditions an increase in the extent of process product spillovers will lead to an increase in product process r d we estimate several variants of the model by using manufacturing line of business data and data from a survey of r d executives

first order risk aversion and the equity premium puzzle abstract this paper integrates yaari s dual theory of choice under uncertainty into a multiperiod context and examines its implications for the equity premium puzzle an important property of these preferences is that of first order risk aversion which implies in our model that the risk premium for a small gamble is proportional to the standard deviation rather than the variance since the standard deviation of the growth rate in aggregate consumption is considerably larger than its variance the model can generate both a small risk free rate and a moderate equity premium