the effective tax rate and the pretax rate of return abstract this paper presents new estimates of the taxes paid on nonfinancial corporate capital on the pretax rate of return to capital and on the effective tax rate the basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century an explicit analysis indicates that after adjusting for different aspects of the business cycle pretax profitability was between one and 1 5 percentage points lower in the 1970s than in the 1960s the rate of profitability in the 1960s was also about one half of a percentage point greater than the profitability in the 7 years of the 1950s after the korean war changes in productivity growth in inflation in relative unit labor costs and in other variables are all associated with changes in profitability none of these variables however can explain the differences in profitability between the 1950s 1960s and 1970s looking at broad decade averages the effective tax rate and the pretax rate of return move in opposite directions lower pretax profits occuring when the tax rate is high there thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates

introduction to the symposium on growth fluctuations and sunspots confronting the data the papers in this symposium demonstrate the theoretical as well as the empirical plausibility of indeterminacy and of sunspots in equilibrium models with infinitely lived agents they depart from the standard competitive framework because of the presence of externalities or of monopolistic competition some focus on business fluctuations while others address long run growth the second part of the introduction presents a general unifying framework to identify the structure that is common to the papers of the symposium journal of economic literature classification numbers e00 e3 o40 c 1994 academic press inc

liquidity risk and occupational choices we explore which financial constraints matter the most in the choice of becoming an entrepreneur we consider a randomly assigned welfare program in rural mexico and show that cash transfers signi cantly increase entry into entrepreneurship we then exploit the cross household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received guided by a simple occupational choice model we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints

expectationally driven market volatility an experimental study abstract we study the existence and robustness of expectationally driven price volatility in experimental overlapping generation economies in the theoretical model under study there exist pure sunspot equilibria which can be learned if agents use some adaptive learning rules our data show the existence of expectationally driven cycles but only after subjects have been exposed to a sequence of real shocks and learned a real cycle in this sense we show evidence of path dependent price volatility journal of economic literature classification numbers c62 c92 f17 e32 e44

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

an equilibrium model of the business cycle with household production and fiscal policy the authors estimate a dynamic general equilibrium model of the u s economy that includes an explicit household production sector and stochastic fiscal variables they use their estimates to investigate two issues first the authors analyze how well the model accounts for aggregate fluctuations they find that household production has a significant impact and reject a nested specification in which changes in the home production technology do not matter for market variables second the authors study the effects of some simple fiscal policy experiments and show that the model generates different predictions for the effects of tax changes than similar models without home production copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

exploratory analysis of prospects for renewable energy private investment in the u s opportunities for private investments in renewable energies were explored using a stated preference investment allocation instrument allocation alternatives included conventional and renewable energy investments among renewable energy investments solar and wind energy were ranked the highest while grass and wood based technologies were at the bottom of the renewable energy list this ranking mirrors the allocation of investments in sustainable energy technologies in global markets results were analyzed using a two limit tobit model which suggests that certainty of investments a diversified portfolio and expectation on financial returns were the primary drivers behind funds allocated to renewable energy investments using cluster analysis twenty three percent of our sample of current and future investors was identified as individuals most willing to invest in renewable energies

why does household investment lead business investment over the business cycle household investment leads nonresidential business fixed investment over the u s business cycle because real business cycle theory has not been able to account for this observation it represents a potent challenge to the view that transitory productivity disturbances are the main source of aggregate fluctuations this paper reconciles rbc theory with the investment dynamics by extending the traditional home production model to make household capital complementary to business capital and labor in market production empirical evidence suggesting that household capital is a complementary input in market production is also presented

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

the lens of contract private ordering james buchanan 2001 p 29 avers that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics he further contends that this fundamental understanding is better realized by examining economics through the lens of contract rather than the lens of choice buchanan 1975 because the latter has been the reigning paradigm in economics during the 20th century lionel robbins 1932 melvin w reder 1999 the lens of contract is understandably less fully developed interest in contractual approaches has nevertheless been building up whence the gap between these two has been closing this paper sketches some of these developments with emphasis on private ordering

entrepreneurship developing countries and development economics new approaches and insights this paper provides an introduction to this special issue of small business economics dealing with the long postponed integration of entrepreneurship into the discipline of development economics and casting a formal light on the role of entrepreneurship in developing countries the paper departs from the premise that with more than a billion people living in absolute poverty it is of great practical importance to understand if and when entrepreneurship is a binding constraint on economic development and catching up in developing countries this in turn requires at least a deeper theoretical modeling of the entrepreneur in development economics this special edition contains a number of contributions emanating from the unu wider project on promoting entrepreneurial capacity which integrates the disciplines of entrepreneurship and development economics these contributions model and explore the role of the entrepreneur in key areas of concern for development economics such as structural change and economic growth income and wealth inequalities welfare poverty traps and market failures this introduction discusses and contextualizes these various contributions and their implications for further theoretical and empirical work

reward structures and the allocation of talent as relative rewards that different professions receive are a key factor in the allocation of talent what determines the reward structure of a society is an important question this paper develops an equilibrium model of the allocation of talent between productive and unproductive activities such as rent seeking the existence of rent seeking creates a negative externality on productive agents and implies that relative rewards are endogenously determined the same externality can also lead to the existence of multiple equilibria each with different reward structures in a dynamic setting allocations of past generations as well as expectations of future allocations influence current rewards and the society may get trapped in a rent seeking steady state equilibrium the paper also discusses how the non pecuniary reward structure can be influenced by equilibrium selection and a historical example that suggests the presence of a causal link from the allocation of talent to non pecuniary rewards

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

housing dynamics over the business cycle housing construction measured by housing starts leads gdp in a number of countries measured as residential investment the lead is observed only in the united states and canada elsewhere residential investment is coincident variants of existing theory however predict housing construction lagging gdp in all countries in the sample nominal interest rates are low ahead of gdp peaks introducing long term nominal mortgages and an estimated process for nominal interest rates into a standard model aligns the theory with observations on starts as mortgages transmit nominal rates into real housing costs longer time to build makes residential investment cyclically coincident abstract from author

capital goods measured tfp and growth the case of spain the effect of investing in equipment and or structures on tfp and long run growth is investigated here we argue that economies can grow in spite of stagnant tfp if the investment rate is inefficiently high we study the case of spain where real gdp per worker grew at 2 74 percent annually and tfp was stagnant during 1996 2007 we show that low spanish tfp is due to low istc and an inefficiently high investment in residential structures we quantify the effect of the housing boom of the 2000s the total cost of subsidies to residential structures in terms of tfp and income growth

incomplete contracts and the theory of the firm what have we learned over the past 25 years incomplete contracts and the theory of the firm what have we learned over the past 25 years

a macroeconomic model of price swings in the housing market this paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions we establish theoretically that reductions in mortgage rates always have a positive effect on prices whereas the relaxation of loan to value constraints has ambiguous effects a quantitative version of the model under perfect foresight accounts for about one half of the observed price increase in the united states in the 2000s when we include shocks to expectations about housing finance conditions the model s ability to match house values improves significantly the framework reconciles the observed disconnect between house prices and rents since in general equilibrium financial shocks can decrease rents and increase prices

relative prices complementarities and comovement among components of aggregate expenditures abstract recent work suggests that the standard real business cycle framework has difficulty accounting for co movement among aggregate expenditure components when they are disaggregated even slightly to include business and household investment in addition relative prices of these goods have displayed substantial variation over the post war period this paper reports that incorporating a source of empirically plausible relative price variability makes the framework s implications for comovement even worse compounding the comovement problem the possibility that complementarities in the production of household and business capital may help account for observed co movement is considered the results suggest that complementarities improved the framework s empirical performance

current real business cycle theories and aggregate labor market fluctuations hours worked and the return to working are weakly correlated traditionally the ability to account for this fact has been a litmus test for macroeconomic models existing real business cycle models fail this test dramatically we modify prototypical real business cycle models by allowing government consumption shocks to influence labor market dynamics this modification can in principle bring the models into closer conformity with the data our empirical results indicate that it does

external effects in u s procyclical productivity abstract in this paper we highlight a new dimension of the aggregate procyclical productivity phenomenon we show that estimates of the degree of returns to scale are larger for manufacturing as a whole than for two digit industries since this difference must be due to factors that are only internalized at the most aggregate level we term it an external effect this result rules out explanations based on own input variation such as true increasing returns and unmeasured factor utilization tied to own activity as the sole explanations for aggregate procyclical productivity we explore several potential explanations of this external effect

risk shocks and housing supply a quantitative analysis this paper analyzes the role of stochastic uncertainty in a multi sector housing model with financial frictions we include time varying uncertainty i e risk shocks in the technology shocks that affect housing production and provide estimates of the time series properties of risk shocks by using firm level productivity data the analysis demonstrates that risk shocks to the housing production sector are a quantitatively important impulse mechanism for understanding housing price movements specifically the model can match the volatility of housing prices observed in the data it is also demonstrated that adjustment costs are important in replicating the contemporaneous correlation of housing prices with gdp and residential investment critically bankruptcy costs act as an endogenous markup factor in housing prices and are an important determinant of house price volatility however in comparison to housing demand shocks risk shocks have low explanatory power for real quantities

macroeconomic implications of agglomeration cities exist because of the productivity gains that arise from clustering production and workers a process called agglomeration how important is agglomeration for aggregate growth this paper constructs a dynamic stochastic general equilibrium model of cities and uses it to estimate the effect of local agglomeration on aggregate growth we combine aggregate time series and city level panel data to estimate the model s parameters via generalized method of moments the estimates imply a statistically and economically significant impact of local agglomeration on the growth rate of per capita consumption raising it by about 10

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

public private entanglement entrepreneurship in lebanon s hybrid political order while the literature is clear that political influence and clientelism characterises the investment decisions of entrepreneurs and the performance of their firms when governance is weak it is less understood how governance systems and entrepreneurs interact particularly when governance is of a hybrid nature we address this issue in this paper by studying how entrepreneurs obtain access to electricity in lebanon showing that the hybrid political order imposes a high cost on electricity we furthermore find that a hybrid political order channels entrepreneurial talent into lobbying and bribery the key constraint that emerges from the hybrid political order in this case is the corrupt organisation of governance of the electricity sector this results in higher prices because bribes for contracts have to be earned back in entrenchment of oligopolies because contracts often come with political protection

micro entrepreneurship and subjective well being evidence from rural bangladesh abstract microcredit has long been hailed as a powerful tool to promote livelihoods and reduce poverty through entrepreneurship however its impacts on people s subjective well being remain underexplored we present a unified theoretical framework for analyzing the effect of microcredit enabled entrepreneurship on overall life satisfaction a key manifestation of subjective well being empirically we apply an instrumental variable approach to a unique census like household survey conducted in three villages of bangladesh in 2013 in spite of having no direct effects we find that microcredit borrowing has an indirect negative effect on overall life satisfaction through increased worry on a positive note we find that female micro borrowers experience an increase in satisfaction with financial security and achievement in life we also provide evidence that micro borrowers with higher levels of assets experience an increase in satisfaction with financial security

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

monopolistic competition business cycles and the composition of aggregate demand abstract we develop a dynamic general equilibrium model with monopolistically competitive firms and endogenous markups and show the possibility of equilibria with persistent fluctuations driven by self fulfilling revisions of expectations for some parameter values such fluctuations are characterized by time series properties similar to those observed in u s postwar business cycles in contrast with the existing literature our results do not rely on the presence of increasing returns or nominal rigidities a key ingredient of the model is the link between markups and the composition of aggregate demand some econometric evidence on the latter is also reported journal of economic literature classification number d43 d58 e32

a critical assessment of the incomplete contracts theory for private participation in public services the case of the water sector in ghana this paper provides a critical analysis of the recent developments in the incomplete contracts theory and its conclusions for privatisation of public services drawing on a case study of management contract for urban water services in ghana and highlighting the flaws in the theory the article argues that contractual incompleteness does not provide a uniform guidance on efficient forms of ownership we argue that methodological individualism utilised in the theory is particularly ineffective for its application to public services where direct or indirect contractual role of the state cannot be eliminated the sterility of the theory with respect to political institutional and distributional context of public service delivery is identified as an important weakness copyright oxford university press

deep recessions fast recoveries and financial crises evidence from the american record do steep recoveries follow deep recessions does it matter if a credit crunch or banking panic accompanies the recession moreover does it matter if the recession is associated with a housing bust we look at the american historical experience in an attempt to answer these questions the answers depend on the definition of a financial crisis and on how much of the recovery is considered but in general recessions associated with financial crises are generally followed by rapid recoveries we find three exceptions to this pattern the recovery from the great contraction in the 1930s the recovery after the recession of the early 1990s and the present recovery the present recovery is strikingly more tepid than the 1990s one factor we consider that may explain some of the slowness of this recovery is the moribund nature of residential investment a variable that is usually a key predictor of recessions and recoveries

customer and supplier driven externalities the purpose of this paper is to provide empirical evidence helpful for distinguishing different types of externalities we pursue this by extending the productionfunction framework of robert e hall 1990 and caballero and lyons 1990 1992 to exploit two key dimensions of the data disaggregate input output relationships and differences between estimates emphasizing time series versus cross sectional aspects of the data we obtain three main results first from the within estimates using annual data which emphasize the time series properties common across sectors we find a strong reduced form relationship between industry productivity and the activity level input growth of customers in sharp contrast supplier activity levels are insignificant the second result derives from between estimates which emphasize the cross sectional dimension of the data here we find the opposite is true there is a strong reduced form relationship between industry productivity and the activity level of suppliers but no relationship with customer activity levels we interpret the first two results as suggesting that over shorter horizons the linkage between an industry and its customers is pivotal in the transmission of external effects while in the long run external effects are mostly related to intermediate goods linkages the third result concerns the transition from short to long run we find that as the number of periods over which the variables are averaged is incrementally increased from one year toward the full sample period 27 years the significance of customers versus suppliers smoothly reverses itself the remainder of the paper is organized in four sections section i presents the core model and the econometric methods for disentangling the external effects section ii describes the data and estimation section iii presents the main results and our conclusions are presented in section iv

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

housing and the business cycle revisited abstract i present a multisectoral dsge model with housing real frictions and variable capital utilization that generates aggregate and sectoral co movements due to uncorrelated sector specific shocks major advances are the robust positive correlations of residential investment with house prices and business investment in addition business investment is lagging other economic activities the key improvements are adjustment costs to business investment i identify the parameters of the exogenous shock processes business adjustment costs and variable capital utilization with bayesian estimation the results confirm those obtained from earlier work in this field

entrepreneurship and advancing national level economic efficiency we explore the channels under which entrepreneurship fosters productivity by disentangling its impact on national level economic efficiency and find that more entrepreneurship in aggregate is not always good for economic growth and most importantly identifying the form and activity of entrepreneurship is critical for policy makers to better manage changes in their economies our national level results also suggest that the new product entrepreneurship and to a lesser extent improvement driven opportunity entrepreneurship both significantly contribute to the improvement of national level efficiency however both measures would benefit from further development and it seems a higher coincidence of both is more likely to advance a nation s economic efficiency

housing dynamics over the business cycle housing dynamics over the business cycle over the u s business cycle fluctuations in residential investment are well known to systematically lead gdp these dynamics are documented here to be specific to the u s and canada in other developed economies residential investment is broadly coincident with gdp nonresidential investment has the opposite dynamics being coincident with or lagging gdp these observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment including mortgages and interest rate dynamics aligns the theory more closely with u s observations longer time to build in housing construction makes residential investment coincident with output

distributive justice corruption and entrepreneurial behavior this article introduces equity theory to the economic growth literature to examine whether a relationship exists between perceptions of distributive justice and the productivity of entrepreneurial behavior using survey responses from 317 entrepreneurs in india we find that productive entrepreneurship is positively related to distributive justice perceptions but negatively related to perceptions that corruption is pervasive in contrast nonproductive forms of entrepreneurship are negatively related to distributive justice but positively related to corruption unexpectedly the findings also show that corruption mediates the relationship between distributive justice and legal entrepreneurial behavior while distributive justice mediates the relationship between corruption and illegal entrepreneurial behavior we conclude with a discussion of the study s findings and their implications for entrepreneurship and economic growth

predator or prey parasitic enterprises in economic development abstract in many developing and transition economies mafia like activities are rampant extortion and other forms of predation lower profitability in private businesses and distort investment incentives incorporated in a model of industrialization bimodal club convergence may result economies may get stuck in a predators club characterized by a vicious cycle of poverty and predation societies with a low flow of new entrepreneurs are especially vulnerable to predation and never get out of this club poor societies with a high flow of new entrepreneurs however may grow out of the trap and join the rich producers club

surfeiting the appetite may sicken entrepreneurship and happiness do the presence and nature of entrepreneurship impact on national happiness and are nations with happy citizens better for entrepreneurs to start new businesses to provide tentative answers we survey the literature on entrepreneurship and subjective well being and use various data sources to uncover the first evidence of the relationship between entrepreneurship and happiness at the country level we find that opportunity motivated entrepreneurship may contribute to a nation s happiness but only to a certain point at which the effects of happiness begin to decline moreover our results suggest that a nation s happiness affects early stage opportunity driven entrepreneurial activity

entrepreneurship and human development a capability approach abstract we provide a formal model of entrepreneurship in human development the framework is provided by the capabilities approach ca hence we extend not only the conceptualisation of entrepreneurship in development but the reach of the ca into entrepreneurship from a ca view entrepreneurship is not only a production factor or a means to an end as is often taken to be the case by economists but also an end in itself entrepreneurship can be a human functioning and can contribute towards expanding the set of human capabilities through being both a resource and a process our model shows however that entrepreneurship is not automatically a functioning where it is a necessity it stops being a valued functioning the model also shows that even when entrepreneurship is valued entrepreneurs may often not match their ideas with suitable opportunities policy implications are discussed

introduction to special issue of small business economics on female entrepreneurship in developed and developing economies research into entrepreneurship has for many years been interested in the differences in rate of participation and performance by female entrepreneurs the motivation for considering female entrepreneurship in both developing and developed countries arises from our increasing understanding of the significance of the role of women in creating running and growing businesses as a fundamental driver for economic growth this special issue examines the reasons for differences in gender participation across levels of development using empirical studies

grit and self employment a multi country study blending the literatures on grit and self employment we propose the role of grit in separating the self employed from the employed based on a sample of 13 210 respondents from nine countries our results indicate that not only is grit related to self employment but also grit is more strongly related to self employment for risk takers females and younger individuals the findings are robust controlling for several individual characteristics and alternate specifications and have implications for the broader literature on self employment

cognition and incomplete contracts thinking about contingencies designing covenants and seeing through their implications is costly parties to a contract accordingly use heuristics and leave it incomplete the paper develops a model of limited cognition and examines its consequences for contractual design

intermediate inputs and sectoral comovement in the business cycle abstract the post war us business cycle is characterized by positive comovement of employment and output across sectors it has been argued that multi sector growth models are inconsistent with this observation when changes in relative productivities are the main source of fluctuations we suggest that the input output structure of an economy in particular the pervasive use of intermediate inputs can induce positive comovement in sectoral employment and output following changes in relative productivities we calibrate a model of the us economy for the durable and nondurable goods producing sectors and show that sectoral employment and output move together if intermediate inputs are used in production the model is also consistent with the observation that the relative price of nondurable goods is procyclical

energy price shocks and the macroeconomy the role of consumer durables so far the literature on dynamic stochastic general equilibrium models with energy price shocks uses energy on the production side only in these models energy shocks are responsible for only a negligible share of output fluctuations we study the robustness of this finding by explicitly modeling private consumption of energy at the household level in addition to energy use at the firm level to account for total energy use in the economy additionally we distinguish between investment in consumer durables and investment in capital goods the model economy is calibrated to match total energy use and durable goods consumption as observed in the u s data simulation results indicate that despite higher total energy use this economy has an even smaller proportion of output fluctuations attributable to energy price shocks productivity shocks continue to be the primary force behind business cycle fluctuations the driving force behind our results is that the household now has the flexibility to rebalance its investment portfolio specifically the energy price hike is absorbed by reducing durable goods investment more than investment in capital goods thereby cushioning the hit to future production at the expense of current consumption hence our model better matches the consumption volatility observed in the data jel classification e32 q43

home production meets time to build an innovation in this paper is to introduce a time to build technology for the production of market capital into a model with home production our main finding is that the two anomalies that have plagued all household production models the positive correlation between business and household investment and household investment s leading business investment over the business cycle are resolved when time to build is added

the theory of the firm as governance structure from choice to contract the propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists one reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why the prevalence of the science of choice approach to economics has also been an obstacle as developed herein the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract this paper examines economic organization from a science of contract perspective with special emphasis on the theory of the firm

a critical assessment of transaction cost theory and governance of public services with special reference to water and sanitation this is a pre copyedited author produced version of an article accepted for publication in cambridge journal of economics following peer review the version of record hulya dagdeviren and simon a robertson a critical assessment of transaction cost theory and governance of public services with special reference to water and sanitation cambridge journal of economics vol 40 6 1707 1724 january 2016 is available online at https doi org 10 1093 cje bev079

the cyclical behavior of household and business investment in a cash in advance economy abstract this paper focuses on a monetary explanation of two business cycle regularities i business and household investment are positively correlated and procyclical and ii business investment tends to lag household investment over the cycle our general equilibrium framework is essentially a standard cash in advance economy where households purchase both non durable and durable consumption goods and businesses accumulate productive capital financial intermediaries provide interest bearing deposits to households and loanable funds to finance business investment it is shown that the adaptation of particular interest rate rules by the monetary authority provides a mechanism to capture both the timing and direction of business and household investment the results are then discussed within the context of recent limited participation models which emphasize the liquidity effects of monetary shocks

lending constraints real estate prices and business cycles in emerging economies abstract we investigate a small open economy with constraints in both the domestic and the international credit market the informational opaqueness of the domestic market hinders foreign lenders activity so that entrepreneurs face looser borrowing constraints vis a vis domestic financiers however limited capitalization constrains domestic lenders calibrating the model to data from argentina we find that the interaction between lending and borrowing constraints is a channel through which real interest rate shocks generate fluctuations in output real estate prices and consumption external financial liberalization increases volatility and affects welfare more than domestic liberalization but also mitigates the destabilizing impact of domestic deregulation

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

home production with endogenous growth abstract benhabib et al 1991 and greenwood and hercowitz 1991 demonstrate that general equilibrium beckerian home production models that incorporate separate technology shocks to the home and market production functions are able to explain either the comovements in employment across consumption and investment sectors of the economy or the comovement in output across market and home investment sectors but not both simultaneously this paper demonstrates that these comovements can be resolved by introducing endogenous growth into the model while retaining only a single technology shock to market production the additional margin for allocating time between formal training and market activities is sufficient to bring about the observed positive comovements in employment and output across sectors

household borrowing constraints and residential investment dynamics abstract it is well known that residential investment leads output in the us economy the main contribution of our paper is to highlight the role of household borrowing constraints in accounting for this fact we study the role of home equity loans used to boost consumption as a channel that affects residential investment we consider a multi agent model where some home owning households face borrowing constraints that reflect home equity loans or refinancing constraints we show that the severity of the households borrowing constraints in an economy can generate this stylized fact of us residential investment dynamics interestingly the model correctly predicts coincident residential investment dynamics in countries with less severe borrowing constraints this prediction is borne out when the model is calibrated to french data

entrepreneurs creativity and firm innovation the moderating role of entrepreneurial self efficacy there are several studies in entrepreneurship investigating determinants of innovation outcomes in smes although entrepreneurs entrepreneurial creativity is often seen as a prerequisite previous research indicates it is not an exclusive determinant of innovation we use theoretical logics of social cognitive theory and innovation theory to develop a conceptual model of entrepreneur s creativity self efficacy and innovation outcomes the model is then tested on a large sample of small and medium firms from two distinct economies the united states and slovenia empirical findings partially support the proposed moderation effects of entrepreneurial self efficacy but with the same variations between countries the implications of these results in relation to entrepreneurship theory and practice are discussed