measuring the spillovers from technical advance mainframe computers in financial services measuring the social gains from recent technological advances is difficult because there are no output indexes from some important adopters measurement methods that infer the willingness to pay of theadopting industries from the derived demand curve for a new technologyovercome this difficulty the derived demand for high speed computersfor use in banks finance and insurance is shown to imply a very largesocial gain to computerization that is not captured by computer manufacturers copyright 1986 by american economic association

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

general equilibrium effects of the u s generalized system of preferences this paper presents results from a general equilibrium computational model of the production employment trade and price effects of the united states scheme of the generalized system of preferences gsp the u s gsp introduced in 1976 provides for the suspension of import duties on u s imports of many industrial and semi industrial products from selected less developed trade partners this program was developed under the auspices of the united nations conference on trade and development unctad with the intention of stimulating industrialization and to encourage economic diversification of its beneficiaries through export growth previous studies of the gsp of the u s have employed the vinerian customs union framework focusing on trade creation and diversion baldwin and murray 3 using ex ante partial equilibrium analysis estimated that u s imports from beneficiary developing countries increased by 236 4 million based on trade in 1971 of this only 19 3 was the result of trade diversion sapir and lundberg 19 employing an ex post gravity model estimated trade creation to be 658 3 million and trade diversion to be 270 4 million based on 1979 trade both studies conclude that trade creation exceeds trade diversion so that the

a computational analysis of japan s generalized system of preferences abstract in this paper we employ a general equilibrium computational model of world trade to evaluate the generalized system of preferences gsp of japan we conclude that the japanese gsp is strongly trade creating because preferential treatment is offered primarily on products for which japan is a major world exporter however tariff concessions result in a deterioration in japan s terms of trade which lowers welfare in japan and improves the welfare of japan s major trading partners among the ldcs the gain from preferential treatment accrues primarily to the asian nics hong kong south korea singapore and taiwan

creative destruction and firm specific performance heterogeneity traditional u s industries with higher firm specific stock return and fundamentals performance heterogeneity use information technology it more intensively and post faster productivity growth in the late 20 th century we argue that this mechanically reflects a wave of schumpeter s 1912 creative destruction disrupting a wide swath of industries with successful it adopters unpredictably undermining established firms this validates endogenous growth theory models of creative destruction e g aghion and howitt 1992 and suggests intensified creative destruction as explaining findings associating greater firm specific performance variation with higher per capita gdps economy growth rates accounting standards financial system development and property right protection

computers and productivity are aggregation effects important this paper examines the empirical implications of aggregation bias when measuring the productive impact of computers to isolate two specific aggregation problems relating to aggregation in variables and aggregation in relations we compare various production function estimates across a range of specifications econometric estimators and data levels the results show that both sources of bias are important especially as one moves from the sector to the economy level and when the elasticity of all types of non computer capital are incorrectly restricted to be equal in terms of computers however the estimated elasticity is surprisingly stable between industry and sector regressions and does not appear to be biased by the incorporation of a restrictive measure of non computer capital the data consistently show that computers have a large impact on output

the impact of high tech capital on productivity evidence from australia i introduction the bulk of the empirical research on the relationship between high tech capital investment and productivity has been based on data for the united states given the relatively large size of the high tech capital sector in the u s economy it is likely that the united states is a special case most economies resemble australia s in being net importers of high tech capital not producing high tech capital was often cited as a weakness in these economies relative to the united states however since the end of the late 1990s tech boom there has been a reappraisal of whether the production or the use of high tech capital is most beneficial hence to shed light on this debate the main purpose of this paper is to empirically examine the relationship between high tech capital use and the multifactor productivity mfp of 10 industries in the australian market sector using annual data for 1966 2002 alternative specifications of production functions are considered and estimated alternative measures of high tech capital are included with combinations of computers software and electronics capital in the first production function high tech capital is allowed to be more or less productive than other capital to determine whether there is a relationship between high tech capital and mfp it is also possible to test whether there are excess returns to high tech capital for robustness testing purposes a second production function is specified with high tech capital as a separate input into production other potential sources of mfp growth such as public capital research and development stocks and microeconomic reform are also included in the production functions we find evidence of a positive relationship between high tech capital and mfp in the market sector there is less evidence however of excess returns to high tech capital which suggests that current investment levels are not inadequate the results by industry suggest that the benefits of investing in high tech capital are not distributed evenly across the economy with only some industries experiencing a positive relationship between high tech capital and mfp the structure of this article is as follows in section ii the theoretical contribution of high tech capital to mfp and the evidence to date is reviewed in section iii the methodology is outlined in section iv data sources and trends are described in section v the results are presented and interpreted and section vi concludes ii the impact of high tech capital on output and productivity the theory and evidence the impact of investment in high tech capital has been the subject of debate between new economy sceptics and optimists for several years it is widely accepted that mfp has increased substantially in u s high tech producing industries in which the rate of technological change has been phenomenal over the past 40 years several publications have found a quantifiable contribution by computer producing industries to u s output growth 1 however australia is not generally regarded as a producer of computers data from the organisation for economic co operation and development oecd 1998 indicate that the high tech share of australian manufacturing value added was 4 5 in 1995 compared to 15 8 in the united states therefore the substantial u s economy wide mfp improvements specifically associated with its computer producing industry are unlikely to be replicated in the australian economy over the past 30 years there has been rapid accumulation of high tech capital in many countries australia was the third most intensive user of high tech capital in the oecd in 1995 behind the united states and new zealand simon and wardrop 2002 find that this rapid accumulation of high tech capital may have substantially contributed to australia s economic growth during the 1990s this accumulation has been driven by technological change in high tech producing industries lowering the price of high tech capital

information technology and growth the rapid diffusion of information technology it is a direct consequence of the swift decline in the price of computer related equipment which has led to a vast and continuing substitution of it equipment for other forms of capital and labor this substitution generates substantial returns for the economic agents who undertake it investments and restructure their activities in order to increase the role of it there is little evidence however that substitution is accompanied by technical change as this term is used by economists while this appears highly paradoxical to technologists who think of substitution of a more it intensive mode of production for a less itintensive mode as a change in technology it is entirely consistent with the economic framework developed by robert m solow 1957 what do economists mean by technical change and how could this exclude the substitution of a more it intensive production process for one that is less it intensive substitution represents movement along a given production function while technical change corresponds to a shift in the production function substitution takes place if the introduction of computer intensive equipment produces benefits that are fully captured or internalized by the users of it and their suppliers technical change occurs only if more

contributions of weather and fuel mix to recent declines in us energy and carbon intensity a recent 1996 2000 acceleration of declines in energy andcarbon intensity in the u s remains largely unexplained this study usesdivisia decomposition and regression to test two candidate explanations fuel mix and weather the divisia method demonstrates that fuel mix doesnot explain the declines in carbon intensity the fuel mix both overalland for electricity generation became slightly more carbon intensiveover the study period though the slight trend reversed before the end ofthe period a regression based correction to the divisia indices accounting for variation in heating and cooling degree days indicatesthat warmer weather accounts for about 30 percent ofthe total declines this leaves declines of more than 2 percent per year and an accelerationof more than 1 percent over previous decade remaining to beexplained

the solow productivity paradox what do computers do to productivity 1 you don t see computers everywhere in a meaningful economic sense computers and information processing equipment are a relatively small share of gdp and of the capital stock 2 you only thinkyou see computers everywhere government hedonic price indexes for computers fall too fast according to this position and therefore measured real computer output growth is also too fast 3 you may not see computers everywhere but in the industrial sectors where you most see them output is poorly measured examples are finance and insurance which are heavy users of information technology and where even the concept of output is poorly specified 4 whether or not you see computers everywhere some of what they do is not counted in economic statistics examples are consumption on the job convenience better user interface and so forth 5 you don t see computers in the productivity statistics yet but wait a bit and you will this is the analogy with the diffusion of electricity the idea that the productivity implications of a new technology are only visible witlh a long lag 6 you see computers everywhere but in the productivity statistics because computers are not as productive as you think here there are many anecdotes such as failed computer system design projects but there are also assertions from computer science that computer and software design has taken a wrong turn 7 there is no paradox some economists are counting innovations and new products on an arithmetic scale when they should count on a logarithmic scale

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

the impact of the international coffee agreement on producing countries the main objective of this article is to analyze the impact of the international coffee agreement s export system on the world coffee market focusing on increases in real export revenues transfer benefits and reductions in income variability risk benefits in each exporting country over the recent period of operation of the international coffee agreement s export quota system the authors find that the quota system had a stabilizing effect on world coffee prices the quotas reduced real export revenues for most small exporting countries but large producers gained most small countries gained however in terms of risk reduction if a brief suspension of the quota occurs from time to time caused for example by adverse weather which results in a shortfall in world supply the quota system works like a buffer stock scheme on average producing countries as a whole lose transfer benefits but gain risk benefits

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

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

volatility accounting a production perspective on increased economic stability this paper examines the declining volatility of u s output growth from a production perspective at the aggregate level increased output stability reflects decreased volatility in both labor productivity growth and hours growth as well as a significant decline in the covariance the decline in output volatility can also be traced to less volatile labor input and total factor productivity growth and the smaller covariance between them at the industry level the decline in volatility appears widespread with about 80 of component industries showing smaller contributions to aggregate output volatility after 1984 although most of the aggregate decline reflects smaller covariances between industries there is also strong evidence of a decline in the correlation between hours and labor productivity growth across industries the paper concludes with a discussion of potential explanations jel e0 e3

3 3 theory of customs unions abstract four recent models those of berglas corden meade and riezman which have extended the theory of customs union to 3 3 dimensions are reviewed the reasons for both apparent and real differences among the welfare propositions from these models are explained some new extensions are derived the main conclusions are that the family of 3 3 models introduce several effects which cannot be present in 3 2 models and that the distinctions among the models are due mostly to diverse assumptions concerning the trilateral pattern of trade which are not readily apparent

computers obsolescence and productivity this paper develops a new technique for measuring the effect of computer usage on u s productivity growth standard national income and product accounts nipa measures of the computer capital stock which are constructed by weighting past investments according to a schedule for economic depreciation the rate at which capital loses value as it ages are shown to be inappropriate for growth accounting because they do not capture the effect of a unit of computer capital on productivity this is due to technological obsolescence machines that are still productive are retired because they are no longer near the technological frontier and anticipation of retirement affects economic depreciation using a model that incorporates obsolescence alternative stocks are developed that imply a larger computer usage effect this effect together with the direct effect of increased productivity in the computer producing sector accounted for the improvement in u s productivity growth over 1996 1998 relative to the

computers productivity and input substitution i introduction the last two decades has been a puzzling time for many productivity analysts while computer prices fell at extraordinary rates and firms invested hundreds of billions of dollars in new computer equipment aggregate productivity growth remained sluggish this computer productivity paradox has generated a large literature that examines the economic impact of the computer revolution 1 this paper offers a simple solution to the computer productivity paradox by making careful distinction between computers as an output from one sector and an input to other sectors data for 35 manufacturing and service sectors for 1947 1991 show that sectoral differences are crucial in understanding the impact of computers aggregate analysis is inappropriate since it obscures basic distinctions between a shifting production function in the computer producing sector multi factor productivity growth and movements along production functions in the computer using sectors substitution and capital accumulation once these differences are isolated the growth impact of computers is readily observable the computer producing sector experienced fundamental technological progress and now produces cheaper better computers the sectoral data show this as rapid multi factor productivity mfp growth for 1973 1991 although aggregate mfp growth remains below historic averages the computer producing sector has clearly done its part mfp growth in this sector is many times the economy average and has contributed over one third of aggregate mfp growth for 19811991 the sectoral detail shows that the slowdown in aggregate productivity would have been much more severe were it not for such large mfp gains in the computer producing sector for the other sectors of the economy computers affect growth in a more traditional although less glamorous way when the price of real computing power fell so dramatically in the 1970s and 1980s firms responded by substituting away from relatively expensive labor and non computer capital and investing heavily in cheap computers for these sectors the computer revolution affects output growth not by raising mfp but by inducing firms to accumulate computers at extraordinary rates real computer services for example grew in excess of 20 per year in 14 out of 35 sectors for 1973 1991 although virtually all sectors are rapidly accumulating computer equipment computers remain small in levels in 1991 for example computer investment was only 10 of private fixed investment so the growth contribution of computers remains small relative to sectoral aggregates of labor and non computer capital the rapid rates of accumulation however are clearly making computers a more important source of growth across sectors with this heavy investment also came the wide spread expectation that computers would fundamentally alter the way firms operate and lead to higher mfp the reality has been very different as the most computer intensive sectors show steep declines in mfp growth after 1973 with three quarters of all computers concentrated in three service sectors trade fire and other services however this finding must be interpreted with caution as griliches 1994 notes output in these sectors is largely unmeasurable and thus mfp growth will be understated nonetheless it is quite reasonable that even computer using sectors where output is easier to measure show no mfp gains computer investment creates a capital input that enters the production function like any other purchased input since constant quality deflators embody productivity improvements in investment the direct impact is seen through the rapid capital accumulation only if the adoption of computers leads to production externalities or spillovers would computer investment also increase mfp growth the data however show no evidence of this ii computers and growth the national statistics most clearly show the computer revolution in the investment data

governance and growth in sub saharan africa real income per head in much of sub saharan africa grew rapidly in the 1960s but faltered following the first opec oil price shock in 1973 74 and then stagnated or fell from the late 1970s to the early 1990s africa also saw a broad wave of authoritarian rule sweep the continent in the 1960s and early 1970s since 1990 however the african political landscape has experienced significant changes many in the direction of greater pluralism and democracy moreover where civil strife has been avoided africa has seen a broad tendency towards rapid growth for several years after 1995 this sequence of events suggests that political economy may offer useful perspectives on africa s growth record over the last several decades we begin with a summary of africa s growth patterns and the evolution of african political regimes we then examine models of authoritarian rule for insights into the conditions under which elites may sacrifice the general interest to extract rents and retain power or in which leaders may find ways of making growth enhancing policy politically acceptable it would be premature to conclude that africa s political reforms of the 1990s have helped to generate economic progress however we do believe that the increase in political pluralism in combination with greater unity among african aid donors bodes well for a continuation of africa s growth recovery

chinese industrial reform accomplishments prospects and implications why has china grown so fast when conditions thought to be necessary for growth were absent nowhere is this dissonance greater than in china s industrial sector which has recorded big gains in output employment and exports in the absence of privatization effective bankruptcy legislation and other policy innovations widely seen as prerequisites for successful reform this essay reviews the accomplishments of chinese industry since the start of reform in 1978 focusing on the internal dynamics of the development process considers the future of partial reform and discusses the implications of china s industrial reform experience

u s economic growth at the industry level the u s economy has expanded rapidly in recent years with total factor productivity the source of growth most closely identified with technological gains rising sharply since the mid 1990 s see e g bureau of labor statistics 1999 william gullickson and michael j harper 1999 mun s ho et al 1999 daniel e sichel 1999 this strong aggregate performance and the well documented explosion of investment in computers and other high tech equipment have led many to believe that the united states has experienced a permanent technology led growth revival it is essential however to disaggregate estimates of economic growth to the industry level to understand the new trends in the u s economy productivity growth the ability to produce more outputs from the same inputs differs widely among industries for the economy as a whole negative productivity growth in one industry can offset positive productivity growth in another and jorgenson 1990 shows that a measure of productivity based solely on aggregate data is valid only under very stringent conditions we avoid the limitations of an aggregate measure of productivity by decomposing u s growth across industries for the period 1958 1996 by breaking down the u s economy into 37 industries 35 private industries private households and general government we identify the contribution of each industry to aggregate productivity growth this enables us to isolate the underlying sources of gains in productivity and provides a better understanding of the forces driving the u s economy economy wide productivity from an aggregate production function increased 0 45 percent per year during 1958 1996 while methodology developed by evsey domar 1961 for aggregating over industries yields an aggregate estimate of 0 48 percent over the same period however industry productivity growth ranged from 1 98 percent in electronic and electric equipment to 20 52 percent in government enterprises highlighting fundamental differences in technology and productivity growth across industries these results show that the aggregate production function provides a reasonable estimate of productivity trends over long periods but also masks important differences among industries

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

aid intensity in africa abstract aid to sub saharan africa ssa is falling rapidly after reaching historically high levels in the early 1990s we provide a critical review of aid data and place the resource intensity of current flows in crosscountry and intertemporal perspective aid to ssa is not unusually high given the structural characteristics of african countries but it rose more rapidly than predicted until the mid 1990s we introduce the concept of transactions intensity and show that by some measures the management costs accompanying each dollar of aid to africa are comparatively high

level of development and the us generalised system of preferences malaysia and mexico in this article we examine the effects of the united states generalised system of preferences gsp on the exports of mexico and malaysia mexico and malaysia were selected because we hypothesised that differences in industrialisation between them would highlight possible problems connected with the competitive need provisions of the us gsp programme our findings are generally consistent with other gsp studies that covered different countries commodities and time periods and employed various empirical models however our results for mexico do not lend support to the recently advanced proposition that high income ldcs are the primary beneficiaries of the us gsp

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

trade preferences for developing countries a survey of results empirical studies of the trade and development effects of the major preferential trading schemes between the industrialised countries and the developing countries are surveyed most studies find the agreements to be trade creating improving welfare for the donor though general equilibrium analysis indicates that terms of trade deterioration offsets efficiency gains there is some evidence that trade preferences stimulate ldc exports of preferred products but total exports are not significantly affected due to limited product coverage the existing literature does not provide evidence on the degree of infant industry protection or on economic diversification of the beneficiaries