rational heuristics expectations and behaviors in evolving economies with heterogeneous interacting agents we analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent based model populated by heterogeneous interacting firms agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change imperfect information coordination hurdles and structural breaks in these circumstances we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naive learning rules our results suggest that fast and frugal robust heuristics may not be a second best option but rather rational responses in complex and changing macroeconomic environments jel c63 d8 e32 e6 o4

progress along the path evolving issues in the measurement of genuine saving more than 10 years since a practical linkage between sustainable development and a measure of national wealth expanded to include natural and environmental resources was first posited the empirical estimation of adjusted net savings dubbed genuine saving has evolved considerably in this paper we take stock of both progress achieved and the challenges that remain we begin by recalling the key points made in pearce and atkinson 1993 ecol econ 8 103 which presented the first cross country estimates of savings rates adjusted to reflect depletion and degradation of the environment we then briefly summarise the evolution of the theoretical argument linking savings and sustainability however the main focus of this paper is an aspect that concerned david pearce greatly namely the evolution of the measurement of genuine savings we identify and consider the empirical evidence with regard to two particular measurement issues the valuation of exhaustible resources and environmental degradation common to the both issues are concerns about measuring changes in national wealth in real world economies

product innovation and firm growth evidence from the integrated circuit industry applied research on growth and innovation seems to suggest that successful innovations do not significantly enhance firm growth this paper tests the hypothesis that the level of observation at which applied research is typically conducted hampers identification of a significant association between innovation and sales growth rates exploiting a unique data set we find that product innovations commercialized in the immediate past positively affect the corporate revenue streams of semiconductor companies

technological innovation and the distribution of employment growth a firm level analysis this work studies the firm level relationship between different types of innovative activities and employment growth rates improving on previous investigations on the topic it combines a detailed analysis of the effects of product and process innovation on average employment growth with a broader outlook on the whole conditional employment growth distribution results show that product innovation especially in terms of good new to the entire market has a positive effect on employment growth this role is likely to be particularly relevant for both fast growing and shrinking firms process innovation appears instead to have less clear cut dynamics consistently with existing evidence among different types of process innovation the introduction of novel auxiliary processes appears to be more positively linked with employment growth

accounting for the decline in afdc caseloads welfare reform or the economy we use state level monthly panel data to assess the relative contributions of the macroeconomy and welfare reform in accounting for the 1993 96 decline in aid to families with dependent children afdc caseloads our results suggest that the decline in per capita afdc caseloads is attributable largely to the economic conditions in states and not to waivers from federal welfare policies nationwide we attribute 66 percent of the decline to the macroeconomy however we do find substantial heterogeneity in the impact and timing of alternative waivers on afdc caseloads states with waivers impacting parental responsibilities experienced greater caseload declines than states with waivers that made work more attractive overall our model predicts that had it not been for the influence of economic factors welfare reform would not have led to any decrease in aggregate caseloads

exploiting ergodicity in forecasts of corporate profitability abstract theory suggests that competition tends to equalize profit rates through the process of capital reallocation and numerous studies have confirmed that profit rates are indeed persistent and mean reverting recent empirical evidence further shows that fluctuations in the profitability of surviving corporations are well approximated by a stationary laplace distribution here we show that a parsimonious diffusion process of corporate profitability that accounts for all three features of the data achieves better out of sample forecasting performance across different time horizons than previously suggested time series and cross sectional models as a consequence of replicating the empirical distribution of profit rates the model prescribes a particular strength or speed for the mean reversion of all returns which leads to superior forecasts of individual time series when we exploit information from the cross sectional collection of firms the new model should appeal to managers analysts investors and other groups of corporate stakeholders who are interested in accurate forecasts of profitability to the extent that mean reversion in profitability is the source of predictable variation in earnings our approach can also be used in forecasts of earnings and is thus useful for firm valuation

persistence survival and growth a closer look at 20 years of fast growing firms in austria for survival persistence and growth hifs show a much higher persistence than hgfs the average growth rate after the high growth episode is quite modest for both hifs and hgfs policy implications of the ndings are discussed

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

a statistical equilibrium model of competitive firms abstract we find that the empirical density of firm profit rates measured as returns on assets is markedly non gaussian and reasonably well described by an exponential power or subbotin distribution we start from a statistical equilibrium model that leads to a stationary subbotin density in the presence of complex interactions among competitive heterogeneous firms to investigate the dynamics of firm profitability we construct a diffusion process that has the subbotin distribution as its stationary probability density this leads to a phenomenologically inspired interpretation of variations in the shape parameter of the subbotin distribution which essentially measures the competitive pressure in and across industries our findings have profound implications both for the previous literature on the persistence of profits as well as for understanding competition as a dynamic process our main formal finding is that firms idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin and that a ratio of these two effects ultimately determines the dispersion of the equilibrium distribution

an interdisciplinary model for macroeconomics macroeconomic modelling has been under intense scrutiny since the great financial crisis when serious shortcomings were exposed in the methodology used to understand the economy as a whole criticism has been levelled at the assumptions employed in the dominant models particularly that economic agents are homogeneous and optimizing and that the economy is equilibrating this paper seeks to explore an interdisciplinary approach to macroeconomic modelling with techniques drawn from other natural and social sciences specifically it discusses agent based modelling which is used across a wide range of disciplines as an example of such a technique agent based models are complementary to existing approaches and are suited to answering macroeconomic questions where complexity heterogeneity networks and heuristics play an important role

welfare payments and other economic determinants of female migration this article investigates the effects of welfare payments wages and unemployment on women s probability of interstate migration in the united states it also investigates if the income attraction of locations varies with recency of labor market experience welfare gains increase the probability of interstate migration welfare effects are largest for single mothers with small children and stronger among women with no recent labor market experience the welfare effects albeit small are larger than the wage effects the wage effects are weaker among women with no recent work experience ethnic specific analyses suggest differences in migration behavior among anglos african americans and puerto ricans

vertical organization of production and firm growth this paper empirically explores if different vertical organizational forms i e vertical integration versus dis integration give rise to unlike growth behaviors within the same industry an econometric analysis is conducted in a sample of around 500 italian machine tool mt builders for the period 1998 2007 implementing instrumental variables to control for the endogeneity of the organizational form in the relation ceteris paribus vertically integrated firms result to be characterized by a less dispersed distribution of growth rates than their dis integrated counterparts several concurring factors such as adjustment costs organizational slacks and a better management of fluctuations in the markets of intermediate and final products may explain the more a stablea growth profile of vertically integrated firms by means of analyzing how different organizational forms map into the distribution of output growth rates this work provides insight into the firm dynamics in a mature industry in which both vertically integrated and dis integrated firms coexist

wealth as a criterion for sustainable development in this article the authors define sustainable development as an economic programme along which social well being does not decline over time it can be shown that the requirement is equivalent to the maintenance of a comprehensive measure of wealth where an economy s wealth is defined to be the social worth of its entire array of capital assets including natural capital using data published by the world bank on the world s poorest regions countries which would be regarded as having performed well if judged on the basis of such indices as gnp per head or the human development index are found to have grown poorer a few alarmingly so

on the relationship between firm size and export intensity export marketing literature supports the view that firm size is positively related to export intensity although the empirical findings have been mixed a number of theoretical arguments are used to support this proposition i e international marketing economies of scale limited managerial and financial resources of small firms decisionmaker s risk perception based on a large survey of the italian manufacturing industry the article falsifies the proposition and challenges some widely held assumptions in export marketing literature

corporate growth and industrial structures some evidence from the italian manufacturing industry this work analyses the properties of corporate growth in a large longitudinal sample of italian manufacturing firms in particular it focuses on the statistical properties of growth rates and on the influence of proxies for relative efficiency upon relative growth in line with previous work the emergence of fat tails in growth rate distributions and the idiosyncratic nature of autocorrelation coefficients confirm the existence of a structure in the growth process richer than the one normally assumed by the gibrat law hypothesis and suggest the presence of firm specific drivers of growth at the same time there is a remarkable puzzle concerning the absence of any negative relationship between size and growth variance and only weak influences of relative efficiencies upon growth dynamics

how substitutable is natural capital one of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital this issue was raised early on in the debate on sustainability by pearce and has never really been resolved this paper is an empirical attempt to measure the degree of substitutability between different forms of capital a nested ces production function is used to allow flexibility in the estimated elasticities of substitution also within this specification natural resources and other inputs are combined in different levels of the function thus allowing for different levels of substitutability institutional and economic indicators are also incorporated in the production function estimated results show that the elasticities derived from functions involving land resources were generally around one or greater implying a fairly high degree of substitutability furthermore changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation no statistically significant relationship between income and any of the institutional indicators was found

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

does classical competition explain the statistical features of firm growth abstract we propose a statistical equilibrium model where the tendency for competition to equalize profit rates results in an exponential power or subbotin distribution the model supports and extends recent evidence on the laplace distribution of firm growth rates

implications of quantal response statistical equilibrium abstract this paper explores the foundations and properties of the quantal response statistical equilibrium qrse model developed by scharfenaker and foley 2017 the qrse model provides a behavioral foundation for the formation of aggregate economic outcomes in social systems characterized by negative feedbacks it can approximate a wide range of commonly encountered theoretical distributions that have been identified as economic statistical equilibrium and displays qualitatively similar behavior to the subbotin and asymmetric subbotin distributions that range from the laplace to the normal distribution in the limit asymmetry in the frequency distributions of economic outcomes can be understood as arising from the unfulfilled expectations of entropy constrained decision makers this paper demonstrates the logic of the qrse model in an application to us stock market data dating back to 1926 the model provides a parsimonious explanation for the distribution of rates of return on private equities as well as a behavioral foundation for asset price fluctuations

corporate growth and industrial dynamics evidence from french manufacturing this work explores basic properties of the size and growth rates distributions of firms at the aggregate and disaggregate levels using an extensive dataset on french manufacturing firms we investigate which properties of firm size distributions and growth dynamics characterize the aggregate dynamics and are at the same time robust under disaggregation our analysis is based on non linear robust regression methods which have never been applied before to this kind of data the growth rates distributions we observe are well described by a subbotin distribution with a shape parameter significantly lower than 1 suggesting a noticeable departure from the laplace behavior reported in previous works on italian and us data at the same time the variance of growth rates depends negatively on size and the relationship does not seem to be linear with larger firms possibly displaying lower variability in their growth dynamics at the disaggregate level we observe significant heterogeneity in the firm size distributions across sectors while the shape of the sectoral growth rates density displays a surprising degree of homogeneity

staying for benefits the effect of a health and family planning program on out migration patterns in bangladesh there is concern that benefit programs may alter out migration patterns we exploit the quasi random placement of a health and family planning program in bangladesh to examine changes in out migration patterns using individual level migration data from 1979 91 we find that the flow of out migration was approximately 15 percent lower for women and men in the treatment versus comparison area we find comparable changes in out migrant stock showing that effects persisted even after allowing for return migration our findings suggest that benefit programs can lead to longer run changes in population with consequences for program evaluation design and economic development

predicting new venture survival and growth does the fog lift this paper investigates whether new venture performance becomes easier to predict as the venture ages does the fog lift to address this question we primarily draw upon a theoretical framework initially formulated in a managerial context by levinthal adm sci q 36 3 397 420 1991 that sees new venture sales as a random walk but survival being determined by the stock of available resources proxied by size we derive theoretical predictions that are tested with a 10 year cohort of 6579 uk new ventures in the uk we observe that our ability to predict firm growth deteriorates in the years after entry in terms of the selection environment the fog seems to thicken however our survival predictions improve with time implying that the fog does lift

the medium term effect of r d on firm growth this study analyses the effect of r d expenditure on firm employment growth in the medium term using six cross sectional waves of an innovation survey conducted in the netherlands in all sectors the analysis is focused on firms having positive r d expenditure and investigates whether higher investments in r d in proportion to firm turnover translate into higher medium term growth rates comparisons with growth on a shorter term are conducted by following the firm size evolution since the r d investment for five consecutive years and allowing for firm exit at all time terms quantile regression techniques indicate that a higher r d has a positive effect on high growers and allows a higher number of firms to be high growers still once a firm invests in r d even if a higher investment makes the firm more likely to have a very good performance it does not make it less likely to have a bad one

importing the poor welfare magnetism and cross border welfare migration i test for welfare induced migration by comparing afdc participation in border counties to interior counties in the same state if migration costs are lower for border county residents border counties on the high benefit side of a state border should have higher welfare participation relative to the state s interior counties border counties on the low benefit side should have lower welfare participation relative to the state s interior counties the results obtained using county level data from 1970 90 indicate that having a neighbor with benefits that are 100 lower increases afdc expenditures in border counties by 4 0 6 8 percent relative to interior counties

the footprint of evolutionary processes of learning and selection upon the statistical properties of industrial dynamics evolutionary theories of economic change identify the processes of idiosyncratic learning by individual firms and of market selection as the two main drivers of the dynamics of industries are such processes able to account for the statistical regularities which industrial structures and dynamics display in this work we address this question by means of a simple multi firm model formalizing the mechanisms of learning and selection as such despite its simplicity the model is able to robustly reproduce an ensemble of empirical stylized facts including ample heterogeneity in productivity distributions persistent market turbulence and fat tailed distribution of growth rates

are output growth rate distributions fat tailed some evidence from oecd countries this work explores some distributional properties of aggregate output growth rate time series we show that in the majority of oecd countries output growth rate distributions are well approximated by symmetric exponential power densities with tails much fatter than those of a gaussian fat tails robustly emerge in output growth rates independently of i the way we measure aggregate output ii the family of densities employed in the estimation iii the length of time lags used to compute growth rates we also show that fat tails still characterize output growth rate distributions even after one washes away outliers autocorrelation and heteroscedasticity

breaking the waves a poisson regression approach to schumpeterian clustering of basic innovations the schumpeterian theory of long waves has given rise to an intense debate on the existence of clusters of basic innovations silverberg and lehnert have criticised the empirical part of this literature on several methodological accounts in this paper we propose the methodology of poisson regression as a logical way of incorporating this criticism we construct a new time series for basic innovations based on previously used time series and use this to test the hypothesis that basic innovations cluster in time we define the concept of clustering in various precise ways before undertaking the statistical tests the evidence we find supports only the weakest of our clustering hypotheses i e that the data display overdispersion we thus conclude that the authors who have argued that a long wave in economic life is driven by clusters of basic innovations have stretched the statistical evidence too far

why are distributions of firm growth rates tent shaped abstract recent empirical analyses on different datasets have revealed a common exponential behavior in the shape of the probability density of the corporate growth rates we present new evidence on this topic from the italian manufacturing industry and propose a very simple mechanism that under rather general assumptions provides a robust explanation for the observed regularities

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

growth processes of high growth firms as a four dimensional chicken and egg this article investigates whether high growth firms grow in different ways from other firms specifically we analyze how firms grow along several dimensions growth of sales employment assets and operating profits using structural vector autoregressions causal relations are identified by using information contained in the non gaussian growth rate distributions for most firms the growth process starts with employment growth which is then followed by sales growth then growth of operating profits and finally growth of assets in contrast high growth firms put more emphasis on growth of operating profits driving other dimensions of growth with employment growth occurring at the end

explaining the distribution of firm growth rates empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates we present clear cut evidence on this topic using disaggregated data we explain the observed regularities proposing a model in which firms ability to take up new business opportunities increases with the number of opportunities already exploited a theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity moreover using simulations we show that even in a small industry the agreement with asymptotic results is almost complete

do firms share the same functional form of their growth rate distribution a statistical test abstract we propose a hypothesis testing procedure to investigate whether the same growth rate distribution is shared by all the firms in a balanced panel or more generally whether they share the same functional form for this distribution without necessarily sharing the same parameters we apply the test to panels of us and european union publicly quoted manufacturing firms both at the sectoral and at the subsectoral naics level we consider the following null hypotheses about the growth rate distribution of the individual firms i an unknown shape common to all firms with all the firms sharing also the same parameters or with the firm variance related to its firm size through a scaling relationship and ii several functional shapes described by the subbotin family of distributions our empirical results indicate that firms do not have a common shape of the growth rate distribution at the sectorial naics level whereas firms may typically be described by the same shape of the distribution at the subsectorial level even if the specific shape may not be the same for different subsectors

validation in agent based models an investigation on the cats model abstract in this paper we deal with some validation experiments on the complex adaptive trivial system cats model proposed in gallegati et al gallegati m giulioni g palestrini a delli gatti d 2003a financial fragility patterns of firms entry and exit and aggregate dynamics journal of economic behavior and organization 51 79 97 gallegati m delli gatti d di guilmi c gaffeo e giulioni g palestrini a 2005 a new approach to business fluctuations heterogeneous interacting agents scaling laws and financial fragility journal of economic behavior and organization 56 489 512 in particular starting from a sample of italian firms included in the aida database we perform several ex post validation experiments over the simulation period 1996 2001 in the experiments the model parameters have been estimated using actual data and the initial set up consists of a sample of agents in 1996 the cats model is then simulated over the period 1996 2001 using alternative validation techniques the simulations results are ex post validated respect to the actual data

high growth firms introduction to the special section high growth firms hgfs have attracted considerable attention recently as academics and policymakers have increasingly recognized the highly skewed nature of many metrics of firm performance a small number of hgfs drives a disproportionately large amount of job creation while the average firm has a limited impact on the economy this article explores the reasons for this increased interest summarizes the existing literature and highlights the methodological considerations that constrain and bias research this special section draws attention to the importance of hgfs for future industrial performance explores their unusual growth trajectories and strategies and highlights the lack of persistence of high growth consequently while hgfs are important for understanding the economy and developing public policy they are unlikely to be useful vehicles for public policy given the difficulties involved in predicting which firms will grow the lack of persistence in high growth levels and the complex and often indirect relationship between firm capability high growth and macro economic performance

productivity market selection and corporate growth comparative evidence across us and europe this paper analyses the patterns of market selection in manufacturing industries of france germany uk and usa we first disentangle the contribution to industry level productivity growth of within firm productivity changes and between firm reallocation of shares the evidence corroborates the notion that within firm learning prevails over market selection forces with larger firms driving such innovation and learning processes second we address the strength of selection by exploring to what extent firm growth rates are shaped by relative productivity levels as compared to variation thereof our key finding is that although changes in relative efficiency have a greater impact on growth than relative efficiency levels there is an overall weak relationship between productivity and growth and therefore a weak power of selection forces in all countries the results hold across firms of different size but we also find that selection bites more on smes

wealth and sustainable development the role of david pearce green net national product was thought to be one way of measuring sustainable income however david pearce understood that a better measure of sustainable development was to look at what a generation is leaving in form of capital assets to later generations in this article his arguments and insights are highlighted against recent theoretical advances

faraway so close coupled climate and economic dynamics in an agent based integrated assessment model abstract in this work we develop an agent based model that offers an alternative to standard computable general equilibrium integrated assessment models iams the dystopian schumpeter meeting keynes dsk model is composed of heterogeneous firms belonging to capital good consumption good and energy sectors production and energy generation lead to greenhouse gas emissions which affect temperature dynamics climate damages are modelled at the individual level as stochastic shocks hitting workers labour productivity energy efficiency capital stock and inventories of firms in that aggregate damages emerge from the aggregation of losses suffered by heterogeneous interacting and boundedly rational agents the model is run focusing on a business as usual carbon intensive scenario consistent with a representative concentration pathway 8 5 we find that the dsk model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics simulation experiments show a substantial lack of isomorphism between the effects of micro and macro level shocks as it is typical in complex system models in particular different types of shocks have heterogeneous impact on output growth unemployment rate and the likelihood of economic crises pointing to the importance of the different economic channel affected by the shock overall we report much larger climate damages than those projected by standard iams under comparable scenarios suggesting possible shifts in the growth dynamics from a self sustained pattern to stagnation and high volatility and the need of urgent policy interventions

high growth firms in changing competitive environments the us pharmaceutical industry 1963 to 2002 firms across sectors and regions are highly skewed in their ability to engage with innovation and even more skewed in their ability to translate investments in innovation into higher growth recent attention has been placed on the importance of high growth firms hgf for innovation policy our paper explores under what conditions hgf matter for translating r d investments into economic growth and how this depends on firm specific and industry specific factors we use quantile regression techniques to study the r d growth relationship in hgf compared to low growth firms unlike previous studies we pay particular attention to whether this relationship depends on the particular period in the industry s life cycle we focus on the us pharmaceutical industry from 1963 to 2002 and find that the r d growth relationship is sensitive to the changing competitive environment over the industry s history which suggests that innovation policy must focus not only on firm attributes but also competitive structures

firm growth and laplace distribution the importance of large jumps abstract recent empirical studies have shown that firm growth rate distribution is not gaussian but closely follows a laplace distribution this robust feature of the growth rate distribution challenges existing models based on gibrat s model because it predicts a gaussian distribution first we analyze more than 100 000 japanese firms and empirically show that the laplace shape can be observed for the japanese firms then by using the theory of stochastic processes we theoretically show that the absence of jumps causes the discrepancy between gibrat s model and the laplace shape in particular based on the laplace shape and the law of proportionate effect we show that the firm growth process is a jump process in other words firm growth cannot be explained by the consequence of many small shocks but is determined by a few large jumps the widely observed laplace distribution reflects this jump property of firm growth dynamics

migration effects of welfare benefit reform this study tests for a migration response to the implementation of stricter rules for receiving welfare benefits means tested social assistance for individuals who lack sufficient work related income in the form of mandatory participation in activation programmes in stockholm town districts the results give no indications that activation programmes affect the moving choices of recipients of welfare benefits

evaluating projects and assessing sustainable development in imperfect economies we are interested in three related questions 1 how should accounting prices be estimated 2 how should we evaluate policy change in an imperfect economy 3 how can we check whether intergenerational well being will be sustained along a projected economic programme we do not presume that the economy is convex nor do we assume that the government optimizes on behalf of its citizens we show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained we also show that a comprehensive measure of wealth computed in terms of the accounting prices can be used as an index for problems 2 and 3 above the remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources transacted in a few well known economic institutions

engineering and econometric interpretations of energy capital complementarity comment in a recent paper in this review ernst berndt and david wood provide a useful clarification of gross and net complementarity pointing out that energy and capital can be gross substitutes in a production subfunction and yet net complements in the aggregate production function using this theoretical proposition they attempt to reconcile the econometric findings of energy capital complementarity with other studies finding energy capital substitutability their reconciliation rests on the finding that those studies finding energy capital substitutability considered only capital k labor l and energy e by omitting materials m one obtains only a gross elasticity the net elasticity which allows for the additional substitution between the kle aggregate and m can indicate energy capital complementarity in fact klem studies generally find energy and capital complementarity the purpose of this comment is to question whether the net and the gross elasticity distinction provides such a reconciliation among the econometric results i agree that this explanation tends to reduce the disparity between the original berndt wood elasticity estimate and griffin gregory yet three independent sources of evidence suggest that the omission of m is not a sufficient explanation and probably not even a major explanation for the disparity of findings first the difference between the gross elasticity in a kle submodel and the net elasticity in a klem model depends critically on the elasticity of substitution between m and kle let us adopt the berndt wood notation and consider their mathematical example which demonstrates the possibility of gross capital energy substitutability as in the griffin gregory study with net capital energy complementarity

gibrat s law redux think profitability instead of growth we argue that firm profitability can be conveniently characterized by one and the same diffusion process for all firms akin to gibrat s seminal idea of a common stochastic description for the dynamics of firm growth here we show that the diffusion of profit rates applies across all surviving corporations irrespective of their size or industry which is not true for growth rates the diffusion process is empirically consistent with both the cross sectional distribution of profit rates and the individual time series of corporate profit rates leading to the notion of a statistical equilibrium this has stark and unexpected implications for our understanding of individual destinies since the model and data suggest that idiosyncratic efforts have no impact on the aggregate distributional outcome instead idiosyncratic efforts merely affect the individual persistence of abnormal profits from the system wide norm put differently corporations have to participate in the same game and can merely choose the speed at which they play it but they cannot bend the rules

do labor tax rebates facilitate firm growth an empirical study on french establishments in the manufacturing industry 2004 2011 in order to reduce labor costs and stimulate job creation many governments implement a large set of devices mainly consisting in reduced rates of social contributions the evaluation of their effect is still controversial unlike previous research our purpose is to appraise to what extent firm growth reacts to a decrease in the cost of labor per employee we tackle this question using an unbalanced panel of french establishments operating in the manufacturing industry between 2004 and 2011 we run estimations using a 2 step estimator making it possible to estimate the impact of explanatory variables on job creation at any point of the distribution of establishments employment growth rate while also controlling for individual fixed effects component our results show that the effect of the decrease in the labor cost generated by tax rebates mainly benefits fast growing and large establishments indeed the change in the number of employees in other establishments is significantly less affected even though the effect remains positive by the reduction in social contributions this is particularly the case for smaller establishments as well as for those whose growth is stagnant or negative these results lead us to reconsider the relevance of large scale policies aiming at reducing labor costs in the same way for all establishments regardless of their size or financial health

does welfare policy affect residential choices an empirical investigation accounting for policy endogeneity abstract this paper studies how changes in welfare policy affect welfare recipients residential choices although several empirical studies have stressed that welfare policy may affect residential choices of welfare recipients few studies have simultaneously taken into account that residential choices of welfare recipients are also likely to affect welfare policy this paper utilizes a policy reform to address this policy endogeneity the results show that welfare policy exerts a substantial effect on residential choices of welfare recipients

latent submarket dynamics and industry evolution lessons from the us laser industry in its first 35 years the us laser industry was characterized by steady growth in output and the number of producers whereas subsequently the number of producers steadily declined despite continued growth in the industry s output a model of industry evolution that features the creation destruction and fusing of independent submarkets is developed to explain these two eras data on all laser producers are used to test various implications of the model concerning entry exit and innovation the findings suggest that the emergence of an integrative submarket can fundamentally alter an industry s market structure and the character of innovation which is applied to explain historical developments in the evolution of various innovative industries

is there a race to the bottom in the setting of welfare benefit levels evidence from a policy intervention abstract in this paper we investigate whether local governments react on the welfare benefit levels in neighboring jurisdictions when setting their own benefit levels we solve the simultaneity problem arising from the welfare game by utilizing a policy intervention more specifically we use a centrally geared exogenous placement of a highly welfare prone group refugees among swedish municipalities as an instrument the iv estimates indicate that there exists a race to the bottom and that the effect is economically as well as statistically significant if the neighboring municipalities decrease their welfare benefit level by 100 sek a municipality decreases its benefit level with approximately 41 sek this result is robust to several alternative model specifications

exploring the processes of firm growth evidence from a vector auto regression this article offers many new insights into the processes of firm growth by applying a vector autoregression model to longitudinal panel data on french manufacturing firms we observe the coevolution of key variables such as growth of employment sales gross operating surplus and labor productivity growth preliminary results suggest that employment growth is succeeded by the growth of sales which in turn is followed by growth of profits generally speaking however growth of profits is not followed by much employment growth or sales growth quantile regressions highlight some asymmetries between negative growth and fast growth firms

do immigrants and their children free ride more than natives the main goal of this paper is to analyze the differences between immigrant and native households in their volunteer contributions and private transfer behavior as well as their receipt of assistance from nongovernment sources in addition we examine how the immigrant native differences evolve over time as immigrant households accumulate us experience finally we examine the voluntary contribution behavior of second generation immigrants and children in immigrant households to gain insight into the long term impact of immigration we do not find evidence that immigrant households free ride more than native born households first immigrant households when compared to similar native born households are less likely to receive assistance from nongovernment sources second immigrant status has no statistically significant impact on monetary contributions toward public good provision we also find that the immigrant native differences in monetary and time contributions tend to diminish over time as immigrants acquire us experience finally we find no significant differences between the second generation of immigrants and third or higher generations of americans in their voluntary contributions of money and time we obtain similar results for children in immigrant households they are not significantly different from children in native households in their time contribution and in their enrollment in federal meal programs the results are robust to various income and wealth controls do immigrants and their children free ride more than natives

innovation and corporate growth in the evolution of the drug industry abstract this work studies the processes of growth of the worlds top 150 pharmaceutical firms on the grounds of an original database which also allows disaggregate analysis at the level of single therapeutical classes and chemical entities our findings show that the industry whose long term evolution is driven by innovation imitation and permanent creation of new markets displays i fat tails in the distribution of growth shocks present at all levels of aggregation with relatively rare big spurs of growth ii a significant autocorrelation of growth rates iii a fall of variance of growth rates with size entirely dependent on corporate diversification patterns in turn plausibly shaped by the competence scope of each firm and iv different lifecycles of diverse types of products and persistent forms of heterogeneity across firms in terms of innovative output which however do not not seem to affect comparative growth performances

reconciling quantile autoregressions of firm size and variance size scaling the aim of this paper is to understand what economic mechanisms may cause the law of proportionate effect to break down for fast growing and shrinking firms recent evidence has highlighted that the first order coefficients of quantile auto regression of firm size decline across quantiles our theoretical results show that negative variance size scaling is sufficient to yield a decline in quantile auto regression coefficients if firm log size is laplace distributed conditional on size one period ahead however it is sufficient only for declining auto regression coefficients for fast growing firms under asymmetric laplace conditional log size if skewness is decreasing with size in other words if the growth of large firms is less dispersed and more left skewed size is a disadvantage for the growth of fast growers but not necessarily an advantage for fast decliners thus size related determinants of negative growth skewness such as diseconomies of growth market power and managerial attention issues impact on how the lpe is violated using data on dutch manufacturing companies from the business register of enterprises observed between 1994 and 2004 our empirical estimates of quantile regression models confirm the evidence of declining quantile regression coefficients for small medium firms 20 199 employees mainly in the right most quantiles and for the same subsample we find that growth rates variance and skewness are decreasing with size the theoretical propositions of the paper are thus corroborated

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

inter firm rivalry and firm growth is there any evidence of direct competition between firms inter firm competition has received much attention in the theoretical literature but recent empirical work suggests that the growth rates of rival firms are uncorrelated and that firm growth can be taken as an essentially independent process we begin by investigating the correlations of the growth rates of competing firms i e the largest and second largest firms in the same industry and observe that surprisingly the growth of these firms can be taken as independent nevertheless peer effect regressions that take into account the simultaneous interdependence of growth rates of rival firms are able to identify significant negative effects of rivals growth on a firm s growth

limits to cba in uk and european environmental policy retrospects and future prospects this paper reviews the contemporary debate and the now long standing role of cba in uk and european environmental policy appraisal epa and looks forward to possible future applications the position taken is that despite its limitations cba still has an important part to play in epa however with the increasingly contested nature of environmental and related public policies and outcomes its role will become less prescriptive and its findings more constrained by social justice and ethical imperatives future cba is more likely to continue to flourish as a component in a wider policy analysis and decision support system whatever decision support system is eventually adopted its value will be judged on how well it aids real policymakers operating iteratively in the non linear real world political economy

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

making a difference how environmental economists can influence the policy process a case study of david w pearce can environmental economists influence policy if so how this paper addresses these two questions using the late david pearce s career as a case study influence can be exercised but pearce s career shows that certain conditions must be met the first is desire he wanted to influence policy and directed a high proportion of his efforts to doing so he focused particular attention on the power centres of his time the oecd world bank european commission un uk government his influence was aided by his status and location as a professor in a prestige university ucl in a major global city london his messages were consistent and clear theory is important and can be used to frame most environmental challenges as regards both explanation and solution externalities can be valued assessing benefits and costs of options is important market signals taxes etc and incentives generally are powerful shapers of behaviour stock of capital human built natural is a key measure of sustainability he communicated simply and clearly in words and phrases that ministers for finance and journalists could understand all of the broadsheet newspapers in england financial times guardian independent telegraph times were grist to pearce s mill of advocacy for environmental economics he provided the blueprint books that could be read on a commute and summaries to the media that they could fit into a 1 000 word piece he didn t seek out but neither did he shirk controversy he worked with various interest groups and politicians but never to the point were he was co opted he initiated and directed the msc in environmental and resource economics that created an ever widening and influential pool of advocates for his ideas finally he achieved a prodigious academic output that ensures a sort of immortality and provided the intellectual ballast the enabled his policy influence

the effect of immigration on public finances the impact of immigration on the public finances is an important influence on public opinion this study aims to provide a thorough conceptual survey pointing out the complexities of a full understanding and the relevance of indirect effects and covering both static perspectives and longer run dynamic issues it considers simple accounting approaches which are relatively neglectful of behavioural responses but also tries to bring out the complexities in the nature of the relationship between immigration and the public exchequer that come with more sophisticated modelling of its economic effects

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

financial constraints and firm dynamics this study analyzes the effect of financial constraints fcs on firm dynamics we measure fcs with an official credit rating which captures availability and cost of external resources we find that fcs undermine average firm growth induce anti correlation in growth patterns and reduce the dependence of growth volatility on size fcs are also associated with higher volatility and asymmetries in growth shock distributions preventing young fast growing firms especially from seizing attractive growth opportunities and further deteriorating the growth prospects of already slow growing firms particularly if old the sub diffusive nature of the growth process of constrained firms is compatible with the distinctive properties of their size distribution

the conditions for achieving environmentally sustainable development this paper is interested in the narrower interpretation the relationship between environmental quality and sustainable economic activity the latter is interpreted as that level of economic activity which leaves the environmental quality level intact with the policy objective corresponding to this notion being the maximization of net benefits of economic development subject to maintaining the services and quality of natural resources over time 3

welfare induced migration at state borders new evidence from micro data abstract this paper extends and synthesizes the various approaches used in the recent welfare migration literature to both offer the most comprehensive set of tests to date for welfare migration and to also determine the relative importance of short distance moves in welfare migration flows the current study follows on the finding of mckinnish mckinnish t importing the poor welfare magnetism and cross border welfare migration journal of human resources 2005 40 57 76 of welfare migration effects obtained by comparing welfare participation at state borders to state interiors this identification strategy is extended to micro data from the 1980 and 1990 decennial censuses and combined with the demographic comparisons used elsewhere in the welfare migration literature the signs and patterns of the estimates are consistent with the presence of welfare migration effects and the magnitudes of the estimates are consistent with the importance of short distance moves in welfare induced migration flows but most of the estimates are not statistically significant

welfare reform and the race to the bottom theory and evidence economists have argued that welfare migration leads to a race to the bottom in the choice of welfare benefits although a system of federal matching grants can remedy this problem the recent welfare reform law replaced the existing matching grant structure with block grants a policy change that appears undesirable to judge whether this critique of welfare reform is justified this paper evaluates the evidence in favor of a race to the bottom after explaining the theoretical effects of welfare migration the paper surveys the empirical evidence on the occurrence of such migration concluding that the evidence is mixed the discussion also considers recent empirical tests for strategic interaction which show that benefit levels in nearby states affect a given state s benefit choice the most plausible source of such interaction is a concern about welfare migration which leads policymakers to look at benefits in neighboring states when making their own choices judging that the evidence appears consistent with the existence of a race to the bottom the paper concludes that the demise of matching grants may be undesirable from a policy perspective

invariances and diversities in the evolution of manufacturing industries this work explores and compares some basic properties of corporate growth process at both aggregate manufacturing level and disaggregated sectoral levels using an extensive dataset on italian manufacturing firms we investigate which properties of firm growth dynamics are robust under disaggregation we compare the results obtained with three different definitions of firm size namely total sales number of employees and value added our analysis suggests that while different sectors are characterized by significant differences in firm size distributions in the degrees of concentration and in the autoregressive structure of the growth processes there are also regularities which hold across all of them such as the approximate unit root nature of the growth process and the power exponential shape of the growth rates density together these stylized facts suggest challenging puzzles on the drivers of corporate growth and the resulting industrial structures