learning by doing vs learning from others in a principal agent model abstract we introduce learning in a principal agent model of output sharing under moral hazard we use social evolutionary learning to represent social learning and reinforcement experience weighted attraction ewa and individual evolutionary learning iel to represent individual learning learning in the principal agent model is difficult due to the stochastic environment the discontinuity in payoffs at the optimal contract and the incorrect evaluation of foregone payoffs for iel and ewa social learning is much more successful in adapting to the optimal contract than standard individual learning algorithms a modified iel using realized payoffs evaluation performs better but still falls short of social learning

teacher quality in educational production tracking decay and student achievement growing concerns over the inadequate achievement of u s students have led to proposals to reward good teachers and penalize or fire bad ones the leading method for assessing teacher quality is value added modeling vam which decomposes students test scores into components attributed to student heterogeneity and to teacher quality implicit in the vam approach are strong assumptions about the nature of the educational production function and the assignment of students to classrooms in this paper i develop falsification tests for three widely used vam specifications based on the idea that future teachers cannot influence students past achievement in da ta from north carolina each of the vams exclusion restrictions are dramatically viola ted in particular these models indicate large effects of 5th grade teachers on 4th grade t est score gains i also find that conventional measures of individual teachers value added fade out very quickly and are at best weakly related to long run effects i discuss implic ations for the use of vams as personnel tools

regional policy and the productive efficiency of japanese industries otsuka a and goto m regional policy and the productive efficiency of japanese industries regional studies this paper examines the impacts of agglomeration economies and fiscal transfer on productive efficiency in japanese regional industries two popular methodologies are applied stochastic frontier analysis sfa and data envelopment analysis dea to measure productive efficiency the empirical findings are summarized as follows 1 agglomeration economies improve productive efficiency 2 fiscal transfer negatively influences productive efficiency 3 those two findings are observed for aggregated manufacturing and non manufacturing industries and for sectors in manufacturing industries and 4 the importance of agglomeration economies for regional industries has increased in recent years based on these results this paper discusses effective regional policy for japan

measuring the impacts of teachers i evaluating bias in teacher value added estimates are teachers impacts on students test scores value added a good measure of their quality one reason this question has sparked debate is disagreement about whether value added va measures provide unbiased estimates of teachers causal impacts on student achievement we test for bias in va using previously unobserved parent characteristics and a quasi experimental design based on changes in teaching sta using school district and tax records for more than one million children we nd that va models which control for a student s prior test scores exhibit little bias in forecasting teachers impacts on student achievement although teachers have substantial impacts

learning by doing and the introduction of new goods a dynamic general equilibrium model is developed in which goods are valued according to the characteristics they contain the set of goods produced in any period is endogenously determined and learning by doing is the force behind sustained growth it is shown that the set of produced goods changes in a systematic way over time with goods of higher quality entering each period and those of lower quality dropping out the model is then used to study the effect of introducing a traditional sector in which there is no learning

a structuralist perspective on the role of technology in economic growth and development abstract this paper presents an integrated view of what is termed a structuralist perspective to economic growth and development that stands in contrast to the mainstream orthodox or neoclassical view in the structuralist view structural changes are causes of growth rather than outcomes of a process of capital accumulation and of rising per capita incomes moreover the growth process may be punctuated by periods of discrete shifts in resource allocation creative destruction and growth acceleration rather than being smooth throughout structural changes need not be automatic they require a skill specific infrastructure of new capabilities which when established generate new comparative advantages market failures may be pervasive due to problems of human capital accumulation critical mass and discrete choice among alternative growth paths thus in addition to creating a favorable environment for business and assuring through macroeconomic policy adequate investment successful growth may require an adequate industrial and technological policy particularly at nodes of structural change the paper surveys the structuralist insights appearing in the literature starting with the early postwar economic development literature and including recently developed formal models it also proposes a kinked or scalloped aggregate production function as a simple tool for structuralist analysis

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

managerial skills acquisition and the theory of economic development micro level studies suggest managerial skills play a key role in the adoption of modern technologies in this paper we model the interactive process between on the job managerial skill acquisition and the adoption of modern technology we use the model to illustrate why some countries develop managerial skills quickly and adopt best practice technologies while others stay backwards the model also explains why managers will not migrate from rich countries to poor countries as would be needed to generate convergence finally we show why standard growth accounting exercises will incorrectly attribute a large proportion of managerial skills contribution to tfp and we quantify the importance of this bias aq2

what have we learned about policy and growth from cross country regressions economists have been seeking to comprehend why some countries are rich and others poor for well over 200 years a better understanding of the national policies associated with long run growth would both contribute to our ability to explain cross country differences in per capita incomes and provide a basis for making policy recommendations that could lead to improvements in human welfare recently economists have used cross country regressions to search for empirical linkages between longrun growth and indicators of national policies e g roger kormendi and philip meguire 1985 robert j barro 1991 the large cross country growth literature has identified various fiscal monetary trade exchange rate and financial policy indicators that are significantly correlated with longrun growth yet levine and david renelt 1992 show that many of these findings are fragile to small alterations in the conditioning information set that is small changes in the right hand side variables produce different conclusions regarding the relationship between individual policies and growth in this paper we take stock of what the profession has learned from cross country regression studies of policy and long run growth i limitations

the sophistication of exports a new trade measure summary trade data are often classified by product characteristics we propose a new classification sophistication as a means of distinguishing between products we construct a sophistication index based on the income levels of exporting economies sophistication captures a range of factors including technology ease of product fragmentation natural resource availability and marketing we calculate sophistication scores at the 3 and 4 digit levels and test how far the index relates to existing technological classifications of products we use the index to examine trade patterns and illustrate how it can be applied in the analysis of export performance of individual economies

linking economic complexity institutions and income inequality summary a country s mix of products predicts its subsequent pattern of diversification and economic growth but does this product mix also predict income inequality here we combine methods from econometrics network science and economic complexity to show that countries exporting complex products as measured by the economic complexity index have lower levels of income inequality than countries exporting simpler products using multivariate regression analysis we show that economic complexity is a significant and negative predictor of income inequality and that this relationship is robust to controlling for aggregate measures of income institutions export concentration and human capital moreover we introduce a measure that associates a product to a level of income inequality equal to the average gini of the countries exporting that product weighted by the share the product represents in that country s export basket we use this measure together with the network of related products or product space to illustrate how the development of new products is associated with changes in income inequality these findings show that economic complexity captures information about an economy s level of development that is relevant to the ways an economy generates and distributes its income moreover these findings suggest that a country s productive structure may limit its range of income inequality finally we make our results available through an online resource that allows for its users to visualize the structural transformation of over 150 countries and their associated changes in income inequality during 1963 2008

the role of trade in structural transformation abstract low agriculture productivity is considered a key obstacle to economic development for many countries international trade in agricultural goods can help overcome this barrier and facilitate structural transformation because it allows countries to import part of their food needs this article quantifies the role of trade in this context through the examples of south korea during the last 50 years and great britain in the 19th century to do the analysis i calibrate and simulate a two sector neoclassical growth model to match the data and perform the policy experiments i find that agricultural imports played a crucial role in the early transformation of great britain while in south korea trade also had a positive impact on its structural transformation but it could have played a much larger role if the country had not introduced agricultural protection policies

the precious bane abstract are natural resources harmful to growth we address this question using a two sector endogenous growth model in which human capital is the engine of growth by increasing the rewards to unskilled labor natural resources make schooling more expensive as long as the intertemporal elasticity of consumption substitution is not too high this slows down human capital accumulation and growth the presence of production spillovers from human capital however implies that a planner could react to a resource boom by increasing human capital accumulation even though the decentralized solution yields the exact opposite the paper also shows that as the production complementarity between natural resources and unskilled labor declines the growth effects of natural resources become increasingly sensitive to whether or not there is free trade in goods the empirical evidence lends support to the main channel natural resources to human capital to growth that is suggested in the paper

reviving growth in the arab world abstract why has growth in the arab world been so disappointing stagnating since 1985 the little growth that does exist is volatile and unstable and the region has lagged behind both the gains of other developing countries and the region s own pre 1985 performance this article attempts to encourage the revitalization of growth in the arab world by addressing the following two questions why has growth been so low specifically in comparison to the high performers of east asia and why has it been so erratic and unstable i estimate two growth models of the determinants of long term growth and the persistence of growth using global panel data drawn from more than 70 countries i conclude by describing two strategies and one development constraint important in explaining the growth process specific to the arab world

does the worldwide shift of fdi from manufacturing to services accelerate economic growth a gmm estimation study abstract we examine the effect of manufacturing and service fdi foreign direct investment on their own sector growth the spillover to the other sectors and the overall economy in host countries we identify significant sectoral and inter industry spillover effects with various data classifications and types of fdi flows evidence reveals that growth effect of manufacturing fdi operates by stimulating activity in its own manufacturing sector and is prevalent in latin america caribbean in europe central asia middle to low income countries and economies with large industry share a surge of service fdi is likely to spur growth in service industries but hurt activity in manufacturing industries financial service fdi enhances growth in south east asia and the pacific high income countries and service based economies by stimulating activity in both manufacturing and service sectors however nonfinancial service fdi drains resources and hurts manufacturing industry in the same group of countries we conclude that a shift from manufacturing to service fdi is likely to lead to deindustrialization in certain regions and types of economies if this shift is spearheaded by nonfinancial fdi

energy gdp relationship revisited an example from gcc countries using panel causality abstract this work investigates the causality relationship between gross domestic product gdp and energy consumption in the six countries of the gulf cooperation council gcc recently developed panel cointegration and causality techniques are used to uncover the direction of energy gdp causality in the gcc empirical results indicate a unidirectional causality running from gdp to energy consumption evidence shows no support for the hypothesis that energy consumption is the source of gdp growth in the gcc countries such results suggest that energy conservation policies may be adopted without much concern about their adverse effects on the growth of gcc economies

the learning curve in a competitive industry we consider the learning curve in an industry with free entry and exit and price taking firms a unique equilibrium exists if the fixed cost is positive although equilibrium profits are zero mature firms earn rents on their learning and if costs are convex no firm can profitably enter after the date the industry begins under some cost and demand conditions however firms may have to exit the market despite their experience gained earlier furthermore identical firms facing the same prices may produce different quantities the market outcome is always socially efficient even if it dictates that firms exit after learning finally actual and optimal industry concentration does not always increase in the intensity of learning

fiscal policy expenditure composition and growth in low income countries abstract this paper assesses the effects of fiscal consolidation and expenditure composition on economic growth in a sample of 39 low income countries during the 1990s the paper finds that strong budgetary positions are generally associated with higher economic growth in both the short and long terms the composition of public outlays also matters countries where spending is concentrated on wages tend to have lower growth while those that allocate higher shares to capital and nonwage goods and services enjoy faster output expansion finally initial fiscal conditions also have a bearing on the nexus between fiscal deficits and growth

learning matching and growth we examine an endogenous growth model in which market frictions are an integral part of the economic environment workers invest in education when young which raises their productivity onice employed the level of schooling also acts as a key determinant of the rate of economic growth by influencing workers ability to accumulate additional human capital on the job once schooling is completed workers search for employment the division of the surplus between vacancies and searching workers is characterized as is the optimal level of education the economy may display multiple steady state growth paths

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

subjective and objective evaluations of teacher effectiveness research on the impact of teachers on student achievement e g jonah e rockoff 2004 steven g rivkin hanushek and john kain 2005 has established two stylized facts 1 teacher effectiveness varies widely and 2 outside of experience qualifications that determine a teacher s certification and salary bear little relation to outcomes this provides motivation to understand how to identify effective and ineffective teachers particularly early in their careers studies that examine how student achievement data can predict teachers impacts on student outcomes in the future e g robert gordon thomas j kane and douglas o staiger 2006 dan goldhaber and michael hansen 2010 conclude that using such data to selectively retain teachers could yield large benefits however value added measures of effectiveness are noisy and can be biased if some teachers are persistently given students that are difficult to teach in ways that are hard to observe thus using other information may achieve more stability and accuracy in teacher evaluations there is also a literature on subjective teaching evaluations i e evaluations by the school principal or evaluations based on classroom observation protocols or rubrics which also finds significant relationships between evaluations and achievement gains however these studies typically investigate how evaluations predict the exam performance of current not

using performance on the job to inform teacher tenure decisions the notion that some high stakes need to be attached to direct measures of teachers class room performance as a control for quality in the work force is an idea gaining traction in public education one such proposal prescribes low ering the barriers to entry into teaching while simultaneously being more selective about which teachers are retained when they become eligible for tenure robert gordon thomas j kane and douglas o staiger 2006 eric a hanushek 2009

protection of property rights and growth as political equilibria abstract this paper presents a survey of the literature on property rights and economic growth different theoretical mechanisms that relate property rights to economic development are discussed lack of protection of property rights can result in slow economic growth through different channels expropriation of private wealth corruption of civil servants excessive taxation and barriers to adoption of new technologies the origins of property rights are also considered different theories are illustrated but more attention is paid to the social conflict view and its success and limitations the second part of the paper illustrates relevant empirical works on property rights and growth

agglomeration and trade some additional perspectives the form of agglomeration economies those internal to the firm as well as those external to it is reviewed consideration is next given to recent changes in the regional state economies of the us midwest as part of an effort to explore the evolving nature of agglomeration economies particular attention is paid to the changing relationship between the establishment and the firm and to radical developments that have affected the transportation sector the impact of these changes on the nature of interstate trade and on the structure of the metropolitan economy are then examined there follows a discussion of how agglomeration economies are being supplemented and perhaps replaced by less spatially constrained advantages finally certain of the more important implications of these various trends are discussed

information technology and the changing workplace in canada firm level evidence recent advances in information and communication technology ict have had dramatic effects on both individual and workplace performance use of computers and the internet as general purpose technologies has spread rapidly across all sectors of the economy transforming business organization increasing competition and fostering innovation understanding the influence of ict on the dynamics of the workplace requires information on both demand and supply sides of the labor market but it is only recently that the study of both sides of the market has become feasible using linked employer employee data in this article we investigate the effects of new technology on firm productivity using the rich canadian workplace and employee survey for the period 1999 2003 we apply a mixed regression model which includes both firm and employee characteristics as well as their interactions with computer use our model allows us to control for unobserved heterogeneity at higher levels along many dimensions our findings indicate that computer use by employees has a positive and significant effect on the productivity of firms that the effect has not lost its momentum and that spillover effects are not significant moreover human capital enhances the effect of computer use on productivity but organizational changes do not interact with computer use in our sample period copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

compulsory licensing evidence from the trading with the enemy act compulsory licensing allows firms in developing countries to produce foreign owned inventions without the consent of foreign patent owners this paper uses an exogenous event of compulsory licensing after world war i under the trading with the enemy act to examine the effects of compulsory licensing on domestic invention difference indifferences analyses of nearly 130 000 chemical inventions suggest that compulsory licensing increased domestic invention by 20 percent jel d45 l24 n42 031 034 compulsory licensing allows firms in developing countries to produce foreign inventions without the consent of foreign patent owners 1 countries such as brazil thailand and india have used the policy to procure life saving drugs for millions of patients and are proposing it as a means to access foreign technologies to combat climate change 2 opponents of compulsory licensing however fear that the policy may reduce access to critical innovations that are invented abroad as it weakens incentives for foreign firms to transfer new technologies into developing countries for example the us pharmaceutical company merck criticized brazil s licensing of its hiv drug efavirenz as an expropriation of intellectual property which will hurt patients who require new life saving therapies http www ip watch org

human capital accumulation and endogenous public expenditures in this paper we present an overlapping generations model where individuals accu mulate human capital through formal schooling we model the role of the public sector in schooling as one of collecting taxes from households and providing inputs to the learning technology public expenditures on schools are determined endogenously under plausible restrictions our model s predictions qualitatively match the observations on schooling pub lic expenditures on education and student teacher ratios jel classification el 3 e62 accumulation de capital humain et depenses publiques endogenes dans ce memoire les auteurs presentent un modele de generations qui se chevauchent ofu les individus accumulent du capital humain via l education formelle le r6le du secteur public dans l education est defini comme celui de collecteur d imp6ts aupres des menages et de fournisseur d intrants dans la technologie d apprentissage les depenses publiques en education sont determinees de maniere endogene a partir de restrictions plausibles les predictions du modele s arriment qualitativement aux observations sur le monde scolaire aux depenses publiques en educa tion et aux ratios 6leves enseignants

budget deficits and interest rates a fresh perspective we extend the literature on budget deficits and interest rates in three ways we examine both advanced and emerging economies and for the first time a large emerging market panel explore interactions to explain some of the heterogeneity in the literature and apply system gmm there is overall a highly significant positive effect of budget deficits on interest rates but the effect depends on interaction terms and is only significant under one of several conditions deficits are high mostly domestically financed or interact with high domestic debt financial openness is low interest rates are liberalized or financial depth is low

divestiture of nippon telegraph and telephone this article discusses whether the japanese government should break up ntt nippon telegraph telephone in 1995 as the u s federal government compelled at t american telephone telegram to break itself into toll and local telephone companies in 1984 the divestiture of ntt has long been a major industrial policy issue in japan since the common carrier was privatized in 1985 the governmental decision to divest it may influence not only the japanese telecommunications infrastructure but also the global telecommunications and information industries in the world where many common carriers are now facing an environmental change from regulation to competition a unique feature of this study is that it employs eight different estimation techniques to obtain a cost function of ntt so that this research avoids a methodological bias occurring in many empirical studies this study confirms that ntt has maintained cost subadditivity but it has failed to establish the status of a natural monopoly in the observed time period however it also finds that the ntt divestiture will not produce a price reducing benefit to japanese telecommunications consumers this research result will serve as empirical evidence for guiding the governmental review of this large scale industrial policy issue in japan

economic growth financial evolution and the long run behavior of velocity a general equilibrium model is presented in which buyers and sellers find it increasingly difficult to make private credit arrangements as economic activity spreads into new markets hence the demand for money increases as the structure of production and trade becomes more complex at the same time however financial innovations allow agents to economize on their cash balances together these effects of technological progress account for two empirical regularities the u shaped pattern in velocity and the ever increasing share of productive resources devoted to the private financial sector that are associated with the process of real economic growth

returns to scale productive efficiency and optimal firm size evidence from taiwan s firm data by using taiwan s census firm data this paper estimates and tests the variable returns to scale hypothesis for aggregate manufacturing and two digit industries an efficiency measure is constructed to further examine the size efficiency relations among two digit industries analysis indicates that increasing returns exist at the aggregate manufacturing level and its magnitude is higher for exporting firms than for non exporting firms moreover trade is beneficial only for small firms however the property of increasing returns diminishes for most of the industries at the two digit level particularly for the exporting firms this sharp comparison between aggregate and two digit level results suggests that trade is conducive to productivity and provides an indication of the specific form of technology spillovers among firms and across industries further investigation of the relationship between productive efficiency and firm size renders the result that optimal firm size is small for exporting firms i

the myth of post reform income stagnation evidence from brazil and mexico economic policies are often judged by a handful of statistics some of which may be biased during periods of change we estimate the income growth implied by the evolution of food demand and durable good ownership in post reform brazil and mexico and find that changes in consumption patterns are inconsistent with official estimates of near stagnant incomes that is attributed to biases in the price deflator the estimated unmeasured income gains are higher for poorer households implying marked reductions in real inequality these findings challenge the conventional wisdom that post reform income growth was low and did not benefit the poor

finite lifetimes and growth abstract in this paper we study the long run growth property of overlapping generations models it is shown that in one sector models with convex technologies the asymptotic growth rate must be zero this results because the young do not have sufficient income to purchase a large capital stock thus a policy of income redistribution to the young can generate growth even if financed by income taxation additionaly it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth

agglomeration economies as manifested in technical efficiency at the firm level abstract this paper makes an attempt to assess the significance of agglomeration economies in the case of two indian industries electrical machinery and cotton and cotton textiles using firm level data an efficiency index based on a statistical stochastic frontier model is generated to examine its relationship with external scale variable s a positive association between technical efficiency and city size is evident although after a certain threshold level city size works more as diseconomies than economies of scale undue emphasis on industrial dispersal may therefore lead to suboptimal utilisation of resources

the production life cycle tasks in production have different dynamics in comparison with individual products we build a general equilibrium model where three forces offshoring learning and wage interact to determine how production fragmentation evolves over time we show that the production process follows a life cycle its fragmentation emerges deepens and converges our model is stylized and versatile which can be used to tractably characterize the loci of global output productivity welfare and value added distribution as production fragmentation progresses this article is protected by copyright all rights reserved

the rise of mass consumption societies this paper studies mechanisms behind the rise of mass consumption societies the development process depicted follows the flying geese pattern in which a series of industries take off one after another as productivity improves in these industries each consumer good becomes affordable to an increasingly large number of households which constantly expand the range of goods they consume this in turn generates larger markets for consumer goods which leads to further improvement in productivity for such virtuous cycles of productivity gains and expanding markets to occur income distribution should be neither too equal nor too unequal with too much equality the economy stagnates in a poverty trap with too much inequality the development stops prematurely

the catalyst model of development lessons from bangladesh s success with garment exports abstract this paper identifies on a preliminary basis the major elements that have contributed to bangladesh s resounding success with garment exports the lessons to be learned from bangladesh s success with garment exports as they apply to the search for a workable development strategy in low income developing countries with very unfavorable initial conditions are profound enough to warrant further in depth research designed to generalize the preliminary findings the paper sketches a catalyst model of development based on the experience of bangladesh s success with garment exports the model can be considered as a foreword to as well as a hypothesis for this future research first the catalyst model of development is a model for initiating development in an outward oriented direction based on the pioneering efforts of foreign and local catalysts second the catalyst model of development is a model for transmitting throughout the entire economy the development initiated by catalysts third the catalyst model of development is a model for sequencing realistic policy reforms starting from equal footing export incentives i e equal footing with foreign competitors parallel to the increasing industrial competence gained through world market competition initiated and transmitted throughout the economy by the catalysts

endowment structures industrial dynamics and economic growth this paper develops a dynamic general equilibrium model to explore industrial evolution and economic growth in a closed developing economy the authors show that industries will endogenously upgrade toward the more capital intensive ones as the capital endowment becomes more abundant the model features a continuous inverse v shaped pattern of industrial evolution driven by capital accumulation as the capital endowment reaches a certain threshold a new industry appears prospers then declines and finally disappears while the industry is declining a more capital intensive industry appears and booms ad infinitum explicit solutions are obtained to fully characterize the whole dynamics of perpetual structural change and economic growth implications for industrial policies are discussed

the size of human capital externalities cross country evidence human capital accumulation is usually held to generate positive externalities however the empirical evidence on human capital externalities has been scarce and inconclusive the missing evidence appears to be caused by misleading comparisons between private and social rates of return by incorrect interpretations of regression coefficients or by an inappropriate level of aggregation our own estimates point to relatively robust empirical evidence for a human capital externality that is about twice as large as a benchmark estimate which is derived from a standard parameterization of a simple growth model we ponder a possible causal link from human capital to social capital in the context of alternative views of long run development and argue that the grand transition view paldam 2002 is compatible with the existence of a large human capital externality

learning by drilling interfirm learning and relationship persistence in the texas oilpatch author s kellogg ryan m abstract production in many industries such as construction and heavy manufacturing relies on inputs from both lead firms and contractors these firms joint productivity often hinges on their ability to share information and coordinate activities suggesting that they have strong incentives to learn about each other s personnel procedures and expertise this learning differs from standard learning by doing in that it is relationship specific its benefits are not appropriable outside the relationship in which the learning takes place in this paper i empirically examine the importance of relationship specific learning using high frequency data from oil and gas drilling i find that the joint productivity of a lead firm and its drilling contractor is enhanced significantly as they accumulate experience working together this result is robust to other relationship specificities i also find that firms appear to recognize the benefits of joint experience controlling for other specificities lead firms are more likely to work with contractors with which they have substantial prior experience than those with which they have worked relatively little

effects of the preference for environmental quality on the export competition between china and oecd countries this study examines how importers preferences for environmentally friendly products influence the effect of china s export growth on the exports of oecd countries to third markets the effect of china s export growth is systematically investigated using the theoretical gravity model which assumes that importers environmental preferences are heterogeneous among countries a new measure is also proposed to represent importers revealed preferences for environmental quality across countries panel data consisting of observations for 30 oecd exporting countries and 60 importing countries over the 2000 10 period confirm that the crowding out effect of china s export growth on the exports of oecd countries observed in markets for consumption goods and the dampening effect observed in markets for intermediate goods are becoming weaker as the importer preference for environmental quality becomes stronger

increasing returns in infinite horizon economies this paper shows that in a general equilibrium model with an infiniite holizonl in whichi productionl may exhibit increasing returns to scale or non conivexities marginal cost pricing equilibria exist anid are essential that is stable witlh respect to small perturbationis of the economily as in many important models of mairket imperfections marginal cost pricinig equilibria need not be pareto optimal in the presence of noni convexities so the systematic approaches to equilibrium analysis in infinite dimenisionial commodity spaces which rely crucially oln the first welfare theorem cainnot be used instead this paper introduces leray schauder degree theory the extension of degree theor y to banacih and locally convex spaces as the natural methodology for showinlg that equilibria exist and for anialyzing qualitative features of equilibria such as local uniqueness or essentiality

the academic and labor market returns of university professors this paper estimates the impact of college teaching on students academic achievement and labor market outcomes using administrative data from bocconi university italy matched with italian tax records the estimation exploits the random allocation of students to teachers in a fixed sequence of compulsory courses we find that good teaching matters more for the labor market than for academic performance moreover the professors who are best at improving the academic achievement of their best students are also the ones who boost their earnings the most on the contrary for low ability students the academic and labor market returns of teachers are largely uncorrelated we also find that professors who are good at teaching high ability students are often not the best teachers for the least able ones these findings can be rationalized in a model where teaching is a multi dimensional activity with each dimension having differential returns on the students academic outcomes and labor market success

catch up in turn in a multi country international trade model with learning by doing and invention abstract we consider how the world income distribution evolves over time when both learning by doing and invention are the engines of economic growth and when countries interact with each other through international trade the main findings are i catch up is possible ii in the three country model transitional dynamics are much richer than in the two country model in particular catch up may occur in turn there may be a first stage in which the middle income country grows fastest closing the gap with the richest country but increasing the income difference with the poorest followed by a second stage where the poorest country catches up

the economics of product variety a survey demand for variety may arise from a taste for diversity in individual consumption and or from diversity in tastes even when each consumer chooses a single variant the full degree of variety potentially demanded will not in general be supplied because scale economies even to a small degree mean that the potential welfare or revenue gain from greater variety must be balanced against the lower unit production costs with fewer variants the economics of product variety consists essentially in analysing the effect of this balance in different situations and comparing the degree of product variety for different market structures with each other and with the optimum the survey commences with the work on market structures with single product firms generalized monopolistic competition tracing modern developments in both the chamberlinian and hotelling traditions the latter has been particularly fruitful due to the expansion of the original locational ideas into virtual spaces in product characteristics the emphasis in recent work on product variety has been on multiproduct firms in both monopolistic and oligopolistic structures including strategic market preemption although most work has been in a full information context there have been advances in product variety under imperfect information either by consumers to properties of the firms products or firms as to consumers demands

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

how much bang for the buck mexico and dollarization two arguments advanced in favor of mexico abandoning the peso and adopting the u s dollar are to lower exchange rate volatility and inflation we are not able to identify an independent link between economic growth and either the exogenous component of exchange rate volatility or the exogenous component of inflation exchange rate volatility generally reflects other factors rather than representing an independent growth determinant the findings are consistent with theoretical predictions that inflation influences growth by affecting financial development however we present suggestive evidence that legal reforms offer greater financial development dividends for mexico than adopting the dollar two of the main arguments advanced in favor of mexico abandoning the peso and adopting the u s dollar are 1 to lower inflation and inflation uncertainty and 2 to reduce exchange rate volatility from 1960 tol995 mexico s annual inflation rate averaged about 24 5 percent while inflation in the united states averaged 5 5 percent in addition mexico has experienced severe exchange rate fluctuations against the dollar especially in the last fifteen years supporters of complete dollarization believe that reducing the rate of inflation which moves very closely with the volatility of inflation toward u s levels and eliminating exchange rate variability vis a vis the u s dollar will enhance the business climate and thereby promote economic performance if lower inflation rates and less exchange rate variability boost growth then this strengthens the case for dollarization if however inflation and exchange rate variability do not exert large impacts on economic activity then the arguments in favor of dollarization must be sought elsewhere besides inflation and exchange rate volatility policymakers must contemplate an array of factors in deciding on dollarization dollarization would eliminate discretionary monetary policy and limit lender of last resort facilities during financial sec

bayesian learning in an infant industry model abstract most analyses of the infant industry argument assume that production early on benefits subsequent production in deterministic fashion this paper presents an alternative framework for evaluating the infant industry argument that focuses on imperfect information as a barrier to entry initial entrants provide information of social value by reducing uncertainty for potential followers about the suitability of local conditions in contrast to earlier work i show that factors that increase the informational barrier to entry may lower the optimal subsidy to the infant industry and that the standard test of the success of infant industry policy is not always valid 1997 elsevier science b v

productivity change and decomposition analysis of japanese regional economies this study examines the productivity growth and its four components for japanese regional economies by analyzing 47 prefectures for the period 1995 2012 the productivity changes are measured by th

self discovery in a development strategy for el salvador we study the causes of low growth in el salvador a country with an impressive record of political macroeconomic and structural reform we apply a growth diagnostic methodology and conclude that market failures in the process of self discovering the country s productive potential is a main obstacle to investment and growth we propose a set of policies to tackle this constraint

endogenous growth in multisector ramsey models in this paper i give sufficient conditions for the existence of endogenously growing optimal paths in a general multisector ramsey model of optimal capital accumulation the key assumption involves the existence of a positive vector of capital stocks which admits strictly positive consumption and expansibility in inverse proportion to the utility discount factor if the technology set contains the ray through such a point in addition to standard convexity and interiority assumptions then optimal paths grow without bound from any strictly positive initial stocks the result unifies a number of existing models in the growth theory literature within both capital theory and macroeconomics there has been a resurgence of interest in models of capital accumulation which display endogenous growth models without time dependent technologies which nonetheless have the property that the optimal or equilibrium paths of capital and consumption which they generate grow without bound it is thus surprising that little work has been done in establishing conditions which guarantee this property a recent exception is jones and manuelli 1990 working in a variant of the standard one sector ramsey model of optimal growth earlier gale and sutherland 1968 also proved a growth result for an undiscounted one sector ramsey model by and large though this research program has been carried out in a series of particular examples with little suggestion of a general framework for achieving endogenous growth this essay attempts to fill that gap at least for models which may be cast in the convex ramsey optimal growth framework 2 the results below provide sufficient conditions for the existence of endogenously growing optimal paths in a convex multisector ramsey model of optimal capital accumulation thus unifying a number of particular examples in the growth literature as well as providing simple conditions for guaranteeing growth in more complex models by way of motivation consider the simplest of all endogenous growth models the one sector linear model or a k model used by rebelo 1991 there is a single all purpose consumption investment good an infinitely lived representative con

the macroeconomics of dr strangelove the cold war has ended and president george bush has declared the beginning of a 4 new world order this new world order has so far been characterized by the intensification of regional disputes civil strife and civil war its implications for arms proliferation and arms control are still unclear this paper considers both superpower conflict and the transition to international cooperation in the context of a model that emphasizes intergenerational linkages specifically we explore the weapons accumulation decisions of two adversarial countries in the context of a deterrence conflict initiation game embedded in an overlapping generations model the demographic structure of the overlapping generations model allows the analysis of both between and withincountry intergenerational external effects caused by past weapons accumulation decisions while the two country setting permits consideration of international external effects caused by the adversary country s current weapons accumulation decision we analyze the noncooperative equilibrium and then consider the effects of a regime change characterized by international cooperation but where the intergenerational externali

investment as a process of search this paper analyzes optimal capital accumulation in the face of structural uncertainty in which the firm does not fully know its own profit function and can discover it only through further investment it is shown that under structural uncertainty capital accumulation is gradual even when adjustment costs are linear and not convex it is further shown that structural uncertainty creates an incentive to market research the paper also presents an example of structural uncertainty in which an additional price uncertainty has a negative effect on investment contrary to the standard models

globalization and the skilled city abstract the location of economic activity both across and within countries has undergone dramatic shifts over the last five decades three key trends stand out first cross country inequality has declined as many developing countries have grown rapidly second economic geography within countries has instead grown more unequal in both the developed and the developing world third within country spatial disparities have grown mainly because of the disproportionate success of skilled cities in this paper i develop a model that jointly explains these patterns as a consequence of deepening international economic integration my model explains the faster population and output growth of skilled cities as well as their tendency to increase their initial skill advantage consistent with the evidence my theory predicts a non monotonic path of urban growth in developed countries the model predicts a future shift in worldwide urban hierarchies as some developing world cities overtake unskilled cities in industrialized countries along global supply chains

r d in a model of search and growth just how important a determinant of economic growth is the efficacy with which markets are organized it is clear that in order to answer this question it is necessary to have both a well articulated theory of economic growth and a precise notion of what it means for one market to be better organized than another the newly developed theory of endogenous growth pioneered by among others paul m romer 1986 robert e lucas 1988 nancy stokey 1988 and gene grossman and elhanan helpman 1991 has equipped economists with a rigorous microeconomic foundation of the growth process since its original inception research in this area has bifurcated one strand of work has continued to emphasize the importance of capital accumulation both physical and human in environments in which agents are competitive price takers the other strand has a distinctly neo schumpeterian flavor in which firms are price setters and purposive innovative activity leads to technological advancement but what of the role played by market organization the growth literature has remained relatively silent on this issue the reason is that the canonical growth model is one in which trade either competitive or monopolisticly competitive is coordinated by the walrasian auctioneer given that ex hypothesi trade is frictionless it is meaningless to use this framework to discuss issues pertaining to improvements in market organization however beginning with the seminal contributions of peter diamond 1982 dale t mortensen 1982 and christopher pissarides 1985 economists have begun to construct models that dispense with the auctioneer s coordinating function in this setting it is possible to make precise the notion of an improvement in market efficacy since search and bargaining frictions are explicitly incorporated as an integral part of the trading environment yet it is only very recently that this literature has begun to explore the consequences for perpetual economic growth

learning by doing and the choice of technology the role of patience if agents learn by doing and are myopic less advanced firms might adopt new technologies while more advanced firms would stick with the old technology this kind of overtaking can also occur if agents are forward looking and have high discount rates however overtaking never occurs if agents are sufficiently patient a finite discount rate increases the set of states at which agents adopt new technologies so more patient agents tend to upgrade their technology more frequently journal of economic literature classification numbers d92 o14 o33

learning by doing changes in industrial structure and trade patterns and economic growth in a small open economy abstract this paper presents a simple dynamic model which allows for changes in both industrial structure and trade patterns during the process of economic growth learning by doing in the producer service sector is the source of endogenous growth interesting interdependences between economic growth and the structure of the economy are obtained economic growth is accompanied by changes in industrial structure and comparative advantage while changes in industrial composition of the manufacturing sector accelerate economic growth furthermore this paper analyzes the relationship between economic growth and the endowment structure and the effects of two types of technology transfers on economic growth

economic analysis of foreign education and students abroad abstract the role of knowledge accumulation in economic growth has been well discussed in the literature by assuming the possibility of knowledge import by study abroad this paper presents a growth model of knowledge creation and import this paper also derives testable implications in three aspects of foreign education the choice of host countries by foreign students the number of students abroad from one origin country and the growth effect of foreign education in all these aspects empirical observations agree well with the predictions of the model

teacher accountability reforms and the supply and quality of new teachers abstract in recent years states have sought to increase accountability for public school teachers by implementing a package of reforms centered on high stakes evaluation systems we examine the effect of these reforms on the supply and quality of new teachers leveraging variation across states and time we find that accountability reforms reduced the number of newly licensed teacher candidates and increased the likelihood of unfilled teaching positions particularly in hard to staff schools evidence also suggests that reforms increased the quality of newly hired teachers by reducing the likelihood new teachers attended unselective undergraduate institutions decreases in job security satisfaction and autonomy are likely mechanisms for these effects

export sophistication and economic growth evidence from china we consider the effect of export sophistication on economic performance by appealing to regional variation within one single country china over the 1997 2009 period we find evidence in support of hausmann hwang and rodrik 2007 in that regions specializing in more sophisticated goods subsequently grow faster we find substantial variation in export sophistication at the province and prefecture level controlling for the level of development and that this sophistication in turn drives growth our results suggest that these gains are limited to the ordinary export activities undertaken by domestic firms no direct gains result from either processing trade activities or foreign firms even though these are the main contributors to the global upgrading of china s exports as such the extent of assembly trade and foreign entities should be distinguished in order to measure the true movement in a country s technology and the contribution of exports to economic growth

production experiences and market structure in r d competition abstract in the rd and ii the likelihood of persistent leadership increases with the value of being the winner and the value of being a loser but decreases with expected waiting time of r d innovation and the flow of monopoly profits however destructive innovations may still occur even when production experiences are allowed to play an important role in the r d competition

does aid for trade diversify the export structure of recipient countries the importance of aid for trade as a tool for facilitating trade economic growth and social development has received attention since the concept was introduced in 2005 while one of the main targets of aid for trade is export diversification reflecting the fact that the exports of many developing countries are concentrated in a small range of items there have not been many efforts to measure the effect of aid for trade on export structure this study therefore attempts to trace the relationship between aid for trade and 133 aid recipients export structure between 1996 and 2013 using the herfindahl hirschman index to measure the degree of export concentration the findings suggest that total aid for trade has reduced the concentration level in the short run in the long run on the other hand aid for trade has had no significant effect on export structure of recipient countries only aid for building productive capacity which is one of the three categories of aid for trade contributes to lower concentration yet this change is not caused by an increase in export diversity but by the redistribution of shares of existing products of a similar sophistication level

the dynamics of teacher quality abstract an extensive literature finds that while teachers vary considerably in initial quality there are limited teacher quality dynamics except for the first few years of teaching teacher quality does not improve over the course of a teacher s career this study evaluates the importance of various modeling restrictions to the key findings of this literature using data covering all 5th grade public school teachers from the state of north carolina i replicate the findings of the previous literature using their restrictive experience assumptions however using an unrestricted experience model i find that for mathematics achievement there are high returns to later career teaching experience about twice as much dispersion in initial teacher quality as previously estimated and a pattern of negative selection where high quality teachers are more likely to exit

optimal price skimming by a monopolist facing rational consumers this paper considers the intertemporal pricing problem for a monopolist marketing a new product the key feature differentiating this paper from the extant management science literature on intertemporal pricing is the assumption that consumers are intertemporal utility maximizers a subgame perfect nash equilibrium pricing policy is characterized and shown to involve intertemporal price discrimination we compare this policy to the optimal policy for a monopolist facing myopic consumers and find that for any given state prices are always lower with rational consumers than with myopic consumers for plausible parameter values the assumption of consumer rationality can be shown to lead to large differences in optimal prices moreover if a monopolist facing rational consumers implements the optimal myopic consumer pricing policy profits can be significantly less than if the monopolist follows the equilibrium pricing policy for rational consumers

current account deficits in africa stylized facts and basic determinants abstract this article analyzes the behavior of current account deficits in africa the findings are that deficits are i not very persistent ii positively linked with domestic growth iii strongly linked with public and private savings suggesting that fiscal consolidation in imf supported programs may be relatively effective iv linked with aid flows so as to close the external gap and v linked with currency depreciation and the terms of trade

a goal programming constrained regression review of the bell system breakup the recently implemented court decision to break up bell american telephone telegraph co to accord with u s anti trust laws represents a highly significant policy decision which is proving to be influential in other countries as well as the u s the telecommunication industry is of such size and importance that even relatively small economies that might be lost with bell s breakup as a natural monopoly could involve substantial welfare losses to consumers and producers studies commissioned by the u s justice department that approached this topic by econometric methods reported that the evidence failed to support the contention that bell was a natural monopoly here a goal programming constrained regression as developed in the management science literature uses the same functional form and the same data but nevertheless reverses the main findings of the econometric studies in every one of the 20 years covered this kind of difference in results obtained by two different methods of analysis poi

variety complexity and economic development abstract we propose a combinatorial model of economic development an economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products with an increasing complexity taking into account that economies abandon the least complex products as they develop over time we show that variety first increases and then decreases in the course of economic development this is consistent with the empirical pattern known as the hump our results question the common association of variety with complexity we further discuss the implications of our model for future research

has latin america s post reform growth been disappointing after years of poor economic performance many latin american countries undertook ambitious programs of macroeconomic stabilization and structural reform in recent years this change in policy created high expectations for the region and some observers have questioned whether actual growth outcomes have lived up to these expectations the authors offer evidence that the response of economic growth to reforms in latin america has not been disappointing because of their significant policy changes and despite a global slowdown latin america did well to return to its historic growth rate of 2 percent per capita in 1990 93 latin america has responded to changes in policy variables as would have been predicted by the experience of other times and places those earlier experiences are summarized by a panel regression spanning many countries and multi year periods from 1960 to 1993 to get consistent estimates of the parameters linking growth and policy variables the authors use a dynamic panel methodology that both controls for unobserved time and country specific effects and accounts for the likely internal dynamism of the explanatory variables

price elasticity in import demand equations considering product quality estimates for the brazilian economy 1996 2013 abstract recent empirical studies argue that traditional trade models ignore product quality usually leading to bias in price elasticities which prevents the correct evaluation of trade determinants and the development of trade policies this article quantifies the effect of quality on brazilian imports for that we estimate import demand equations including a proxy for the quality of imported goods according to pooled data panel results show that price affects the demand for brazilian imports more than quality unlike literature results in developed countries introducing the quality proxy increased the price coefficient this occurred more significantly in estimates for the manufacturing sector supporting the hypothesis of elasticities bias when estimation does not consider product differentiation

product and process innovation in the product life cycle estimates for u s manufacturing industries many theoretical analyses of international trade focus on the effects and endogenous determination of product innovation technology transfer and product obsolescence despite these theoretical innovations few direct tests of the empirical power of product cycle models have been conducted although a number of studies have examined general relationships between trade and innovation usually measured by expenditures on research and development rd and then estimate these predictions using data for eleven two digit manufacturing industries in the united states during the period from 1974 to 1988 the distinction between productand process oriented technological change is important because it yields predictions that aid in assessing the power of the product cycle models most empirical studies aggregate productand process oriented technological change with the notable exceptions of the studies of productivity growth by link 22 and terlecky 31

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

on endogenizing long run growth this assessment of recent theoretical work on endogenous growth identifies three different engines of long run growth i the asymptotic average product of capital is positive ii labor productivity increases as an external effect of capital accumulation iii there are feedback effects on the cost of accumulating knowledge or innovating a general model encompassing all three is considered and then used to review different proposed determinants of long run growth rates the contribution of endogenous growth theory has been to create a framework in which to explain why economic institutions and policies can have long run effects on growth rates

regional determinants of technical efficiency evidence from the greek economy abstractthis paper emphasizes the role of regional determinants in the technical efficiency of the greek economy we employ a regional production function which is simultaneously estimated with an inefficiency equation the results underline the considerable and growing core periphery disparities in technical efficiency they show the significant efficiency enhancing impact of intra regional market access and its dispersion they also demonstrate that interregional market access specialization sectoral concentration and human capital exert a positive but varying influence on the efficiency of greek regions

changing trade structure and its implications for growth there is a long tradition in the development literature that what a country exports matters for its growth prospects recent work has refocused on this issue by attempting to produce numerical scores for different types of product to identify the complexity or sophistication of a country s export basket based on the insight that the type of product an economy exports can have important implications for its economic performance and that goods exported predominantly by rich countries will have different characteristics from those exported by poor countries lall et al 2006 put forward a means of classifying commodities based on the income levels of a product s main exporters at around the same time hausmann et al 2006 following a similar approach put forward a slightly different form of product classification and rodrik 2006 applied this specifically to an analysis of china this paper highlights the difference between the approaches and its implications for the analysis of china which appears less special using the approach of lall et al it argues that the classification of products at a disaggregate level is a helpful starting point for assessing issues of trade competitiveness and that further work using either or both forms of classification is justified

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

what drives private saving around the world the authors investigate the policy and non policy factors behind saving disparities using a large panel data set and an encompassing approach including several relevant determinants of private saving they extend the literature in several dimensions by 1 using the largest data set on aggregate saving assembled to date 2 using panel instrumental variable techniques to correct for endogeneity and heterogeneity 3 performing robustness checks on changes in estimation procedures data samples and model specification their main empirical findings a private saving rates show considerable inertia are highly serially correlated even after controlling for other relevant factors b private sector rates rise with the level and growth rate of real per capita income so policies that spur development are in indirect but effective way to raise private saving rates c predictions of the life cycle hypothesis are supported in that dependency ratios generally have a negative effect on private saving rates d the precautionary motive for saving is supported by the finding that inflation conventionally taken as a summary measure of macroeconomic volatility has a positive impact on private saving holding other facts constant e fiscal policy is a moderately effective tool for raising national saving f the direct effect of financial liberalization are largely detrimental to private saving rates greater availability of credit reduces the private saving rate financial depth and higher real interest rates do not increase saving