profits and poverty certification s troubled link for nicaragua s organic and fairtrade coffee producers abstract governments donors and ngos have promoted environmental and social certification schemes for coffee producers as certified market channels are assumed to offer higher prices and better incomes additionally it is presumed that these certifications contribute to poverty reduction of smallholders yet gross margins profits and poverty levels of certified smallholder coffee producers have not yet been quantitatively analyzed applying random sampling techniques our quantitative household survey of 327 randomly selected members of conventional organic and organic fairtrade certified cooperatives in nicaragua is complemented by over a hundred qualitative in depth interviews the results show that although farm gate prices of certified coffees are higher than of conventional coffees the profitability of certified coffee production and its subsequent effect on poverty levels is not clear cut per capita net coffee incomes are insufficient to cover basic needs of all coffee producing households certified producers are more often found below the absolute poverty line than conventional producers over a period of ten years our analysis shows that organic and organic fairtrade farmers have become poorer relative to conventional producers we conclude that coffee yield levels profitability and efficiency need to be increased because prices for certified coffee cannot compensate for low productivity land or labor constraints

a neoclassical model of the balance of payments this paper analyses the transitory and long run effects of devaluation and tariffs as well as the effects of alterations in the domestic money supply and the terms of trade for a small country on fixed exchange rates these issues are investigated in a self contained dynamic optimization model of the sort popularized by brock 1974 1975 familiar results in the trade literature are thereby explicated for the nonspecialist who is nonetheless familiar with brock s work there are some new results regarding the role played by income and substitution effects in determining the consequences of terms of trade shifts this paper introduces a perfect foresight optimizing model of the monetary approach to the balance of payments for a small country on fixed exchange rates the model is then used to analyse the effects on the balance of payments of devaluation of a tariff and of changes in the terms of trade the effects of devaluation tariffs and changes in the terms of trade have been analysed previously within the framework of nonoptimizing models dornbusch 1973 1980 and anderson and takayama 1977 have studied the effect of devaluation mussa 1974 1976 anderson and takayama 1978 1981 and batra and ramachandran 1980 have studied the effect of tariffs and rodriguez 1976 batra and ramachandran 1980 and anderson and takayama 1981 have studied the effect of changes in the terms of trade optimizing models in which real balances appear as an argument in the utility function are increasingly popular in international economics the general approach was inspired by sidrauski 1967 and brock 1974 1975 recent contributions to the trade literature using this framework include dornbusch and mussa 1975 calvo 1980 1981 liviatan 1981 and obstfeld 1981 a 1981 b 1982 the purpose of this paper is to translate the conventional small country fixed exchange rate model into this framework the results are generally congruent with those in the nonoptimizing literature which suggests that the money in the utility function approach works well here compared to the nonoptimizing literature the real advance is that price adjustment and price expectations are endogenous and rational among the benefits are that one need not postulate the ad hoc price adjustment mechanism used by anderson and takayama nor the backward looking and hence irrational permanent income formulation used by rodriguez furthermore there has been controversy over the balance of payments effects of a shift in the terms of trade while the model s predictions on this issue are theoretically ambiguous the model shows that the answer depends crucially on the magnitude of income effects this clarifies the conditions required for a terms of trade shift to improve or worsen the balance of payments

regional innovation systems theory empirics and policy asheim b t lawton smith h and oughton c regional innovation systems theory empirics and policy regional studies interest in regional innovation systems has grown significantly over the past three decades driven partly by advances in theoretical analysis partly by the growing interest in innovation as a source of competitive advantage and partly by the need for new policies to address regional inequalities and divergence this article explores the elements and characteristics that exemplify the regional innovation systems approach it provides an appraisal and synthesis of the regional innovation systems paradigm and aims to shed light on a number of areas where theoretical empirical and policy based questions remain unanswered it outlines and assesses the major strands in recent theoretical and empirical debates and discusses how they might be developed to contribute to the further advancement of the regional innovation systems literature three interrelated questions form the key themes arou

territorial innovation models a critical survey moulaert f and sekia f 2003 territorial innovation models a critical survey reg studies 37 289 302 this paper provides a critical review of the literature on territorial innovation models industrial districts milieux innovateurs new industrial spaces local production systems etc the review is organized in two stages first the main features of each of these models and their view of innovation are compared second their theoretical building blocks are reconstructed and evaluated from the point of view of conceptual clarity and analytical coherence it is found that despite some semantic unity among the concepts used economies of agglomeration endogenous development systems of innovation evolution and learning network organization and governance territorial innovation models tims suffer from conceptual ambiguity the latter is mainly a consequence of the way territorial innovation is theorized i e in terms of technologically driven innovation and a business culture that is ma

futures markets and monetary policy abstract it has recently been argued that when differentially informed agents trade with one another monetary policy can influence the distribution of output by altering the information content of prices this paper introduces a futures market into the barro 1980 model and shows that under certain conditions prices may aggregate information in a manner such that differentially informed agents hold identical beliefs concerning aggregate market conditions in such cases monetary policy will be unable to influence the distribution of output these results then serve as a backdrop for a more general discussion of the relationship between asset prices and the role of monetary policy

the evolution of comparative or competitive advantage a preliminary report on a study this paper is a preliminary report on a study of the comparative evolution of several major high tech industries in the us japan and western europe in general the paper examines similarities and differences in the ways these industries developed in different countries and the factors explaining those differences the project especially focused on understanding the instances when firms in a particular country gained a strong competitive advantage over firms based in other countries the industries studied are organic chemical products computers semiconductors software numerical controlled machine tools pharmaceuticals in the age of biotechnology and medical devices copyright 1996 by oxford university press

open economy implications of two models of business fluctuations a wage contract model and misperceptions model of aggregate fluctuations are shown to have strikingly different implications when applied to a small open economy with a flexible exchange rate positive monetary disturbances reduce the relative price of non traded goods and create a trade surplus in the wage contract model but raise the relative price of non traded goods and create a trade deficit in the misperceptions model they also have different implications for production in each industry consumption nominal prices and the exchange rate open economy applications of macro economic models are shown to be a useful source of additional testable implications

the triple helix an evolutionary model of innovations abstract the lock in model by arthur arthur w b 1988 competing technologies in dosi g freeman c nelson r silverberg g soete l eds technical change and economic theory pinter london pp 590 607 can be extended to the case of two and even three sources of random variation thus one can model a triple helix of university industry government relations in the case of two sources the stabilization of a technological trajectory is enhanced while in the case of three a complex regime can be generated conditions for lock in lock out return to equilibrium substitution etc are specified in relation to the assumed complexity of the dynamics under study and with reference to the stage of development that is before or after lock in some normative implications of the triple helix model of innovations can be specified

the rise and persistence of rigidities in this paper we argue that employment protection legislation is more likely to arise when the rents earned by the employed over their alternative wage is greater the model explains why economies with greater real wage rigidity also have greater employment protection the model also predicts that lower turnover increases the political support for employment protection and that this political support is greater when employment protection is more harmful for employment also rigidities are persistent as they create a constituency of low productivity sectors whose workers would oppose the removal of firing costs even though existing rents would not generate support for introducing them we argue that tight labour markets due to post war reconstruction needs in europe made it easier for insiders to create such rents which in turn led them to support employment protection legislation in the late 1970s rents started to fall but reforms proved difficult because of ratchet effects this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

a comparison of the dynamics of industrial clustering in computing and biotechnology abstract this paper compares the dynamics of the process by which industrial clusters emerged in the us computing and biotechnology industries it examines whether new companies are attracted by industry strength in particular sectors or by the strength of the science base at particular locations in biotechnology it also compares the growth of incumbent firms in the two industries and asks whether growth is boosted by being within a cluster the paper finds that within computing there are some important cross sectoral effects on entry while in biotechnology these cross sectoral effects are more limited in biotechnology the science base plays an important role in promoting entry the growth of incumbent firms in both industries is promoted by strength in the company s own sector and cross sectoral effects and the role of the science base are negligible

local demand pull policy and energy innovation evidence from the solar photovoltaic market in china abstract market demand is an important driver for inducing innovation with many empirical studies supporting the demand induced innovation hypothesis critiques of such studies however emphasize that new empirical evidence that can address existing empirical challenges is needed furthermore existing literature disagrees about whether the locus of demand pull policy matters in this paper we use empirical evidence from the distributed solar photovoltaic pv market in china to address the following questions 1 is there evidence of demand induced innovation 2 does the effect of local demand pull policy differ from the effect of non local demand pull policy on demand induced innovation to address these questions we develop and analyze an original database of pv balance of system bos patents in the distributed pv market filed between 2005 and 2014 in china our results support the demand induced innovation hypothesis and suggest that only local demand significantly induces pv bos innovations in the distributed pv market in china the different effects of local demand and non local demand emphasize the importance of local markets and local policies lending some support to bottom up approaches to clean energy governance

on the optimality of activist policies with a less informed government abstract i investigate whether a government should lead an activist policy in a rigorous utility maximizing framework under rational expectations the economy is one with preset wages and is subject to both demand and supply shocks it is assumed that the government can never act on the basis of information superior to that of the private sector moreover wages are set after government policy has been carried out we find that the optimal policy is nevertheless an activist countercyclical one it has the remarkable property that although the economy is hit each period by stochastic shocks after wages have been preset this optimal policy will nevertheless succeed in keeping the economy on a full employment track

stabilization policies in open economies with imperfect current information abstract in an open economy with perfect capital mobility the exchange rate and the interest rate may convey different information about current shocks in a model with one period wage contracts we explore the information content of the financial signals along with the optimal stabilization policy and how the two may be related some self fulfilling properties of the information structure are encountered and it is shown that the market clearing level of outputs is generally obtainable while full information output may only be obtained in special cases where it is a necessary condition that the agents believe the signals are informationally different

eu regions and multinational corporations change stability and strengthening of technological comparative advantages in a rapidly globalizing economy and particularly in the face of a process of economic integration such as that occurring in the eu regions forge an increasing number of linkages with other locations within and across national boundaries through the local technological development efforts of multinational corporations mncs by using a database of patents granted to the largest firms by the us patent and trademark office uspto we have shown in previous research that the pattern of mnc networks for innovation conforms to an internal within national boundaries hierarchy of regional centres in this paper the hypothesis of the combined significance of cumulativeness and incremental change in innovation is examined by testing the extent of continuity in the sectoral composition of technological profiles of different eu regional centres between the 1970s and the 1990s the results provide support for our hypothesis that a geographical hierarchy of regional locations can be established also across national boundaries within the eu it is shown that the core european regions can be divided into two kinds those in which mncs have consolidated areas of traditional specialisation for the regions in question and those in which there has been a shift towards and a relative growth of the development of fields of high technological opportunities

the trade balance and real exchange rate under currency substitution abstract it is demonstrated that the calvo and rodriguez 1977 results hold up in a utility maximizing model contrary to the claim of liviatan 1981 it is argued that liviatan s conclusions are based on a mistaken assumption having rescued calvo rodriguez from liviatan it is then shown that the calvo rodriguez results are dependent on two special assumptions that there is only one foreign asset traded and its real return is zero the paper also shows that there is an avenue for foreign inflation transmission under perfectly floating exchange rates even when goods prices are perfectly flexible however the direction of response of real variables is in general ambiguous

money output and the trade balance theory and evidence this paper develops a two country equilibrium model of the world economy under floating exchange rates and draws out its implications for co movements of money output and the trade balance the predictions of this model are then compared with those of a fixed price keynesian version of the mundell fleming model the predictions of the two models for co movements of money output and the trade balance are shown to differ on almost all counts empirical evidence on the effects of anticipated and unanticipated changes in money growth rates on output and the trade balance from the recent canadian experience with floating rates is presented and discussed this evidence generally speaking is consistent with the implications of the equilibrium model

fixed versus flexible exchange rates in an equilibrium business cycle model abstract this essay re examines the question of which exchange rate regime is preferable using a rational expectations model that explicitly incorporates wealth and emphasizing the information signalling role of prices previous authors have stressed the argument that floating rates provide agents with an additional source of information which improves forecasting accuracy leading to more efficient allocations this paper adds the counterweighing argument that they also have the effect in contrast to fixed rates of introducing an additional source of monetary disturbances in the determination of real variables another issue addressed is the nature of exchange rate adjustments to monetary disturbances

is western europe losing the technological race abstract using a variety of indicators this paper compares technological levels in japan the usa and w europe there is no justification for assuming general european technological backwardness whilst it lags in electronics and since 1975 has had a relatively slow rate of growth of innovative activities it also has sectors of strength chemicals machinery production engineering and countries whose relative commitments of resources to innovative activities are at least equal and sometimes superior to those of japan and the usa frg sweden switzerland its main policy challenges are to increase the rate of growth of innovative activities in lagging countries and to ensure pervasive applications of information technology similarly there is no convincing evidence that w europe is relatively backward in converting technology into economically efficient innovations some policy problems are significant in all three regions skill shortages whilst others are in the usa and w europe short term planning horizons of top management particular european problems are the effects of social legislation on worker flexibility and mobility of national regulations on intra european competition and of slow rates of growth of output on the growth of innovative activities japan and the usa have their problems with the latter continuously under challenge from the former and increasingly specialised in defence and raw materials related technologies

aggregate information and the role of monetary policy in an open economy a model of a small open economy in which agents trade in local goods markets and an economy wide asset market is developed purchasing power parity is assumed to hold at the aggregate level however because of local deviations from purchasing power parity agents possess differential information using this framework it is shown that when the exchange rate is flexible monetary policy can influence the distribution of real output by altering the information content of the exchange rate however when monetary policy is committed to fixing the exchange rate by a feedback rule the distribution of real output is independent of the particular exchange rate rule chosen the stability of real output under the two regimes is compared and it is demonstrated that regardless of the stability of domestic monetary policy a flexible exchange rate regime is superior in this respect possible qualifications and extensions of these results are also discussed

localised production of technology for global markets given the trends towards increasing globalization of markets and of production the globalization of technology remains a subject of considerable interest to analysts and policymakers in the 1990s the main conclusion of this paper is that there is no systematic evidence to suggest that widespread globalization of technological activities occurred in the 1980s the evidence based on the u s patenting activities of 569 of the world s largest firms based in 13 countries and covering 17 product groups shows that for an overwhelming majority of them technology production remains close to the home base the analysis also shows the dangers of generalizing on the basis of anecdotal evidence from a small sample of firms from a particular country or sector c 1995 academic press inc copyright 1995 by oxford university press

terms of trade shock and the current account in a monetary economy over the period 1973 81 the terms of trade of non oil developing countries deteriorated at about 2 per cent per annum this was accompanied by an increase in current account deficits in excess of 3 per cent above what they had been in the previous decade see khan and knight 1983 for a discussion these authors find the terms of trade shocks the major cause of the deficits this has led to a renewal of interest in the effects of changes in terms of trade for a small open economy the conventional wisdom first put forward by laursen and metzler 1950 and harberger 1950 emphasized the fact that a terms of trade worsening lowered real income which in turn lowered savings and worsened the current account the laursen metzler effect the recent reappraisal was initiated by obstfeld 1982 he showed in an infinite horizon optimizing framework with perfect capital mobilizing that if the discount rate was a function of the level of utility surpluses and not deficits accompany an unanticipated and permanent terms of trade worsening the long run level of the discount rate is tied down by the given world rate of interest this in turn fixes the long run level of utility the terms of trade shock tends to lower the level of utility and agents save to offset this across steady states there is only a substitution effect on the other hand if the discount rate is fixed and equal to the world interest rate then the economy adjusts to the terms of trade shock by immediately lowering real expenditure by the same amount as the decline in real income so that the current account is always balanced svensson and razin 1983 showed that in a two period framework this does not necessarily happen for the infinite horizon case they showed that if preferences were separable over time and the discount rate was increasing in instantaneous utility then obstfeld s results were indeed obtained in a two period overlapping generations model the results could be modified owing to the fact that human wealth and non human wealth are not perfect substitutes and a terms of trade shock affects these differently see matsuyama 1988 for a discussion but it is still true that an unanticipated permanent terms of trade shock has a one shot effect on the current account unless some ad hoc costs of adjustment are introduced see e g persson and svensson 1985 and matsuyama 1988 the uncertain lifetime model see e g frenkel and razin 1988 and matsuyama 1987 generates non trivial

policy effectiveness in an open multi market economy with risk neutral exchange rate speculation abstract in an open multi market equilibrium model of the business cycle the informational role of a forward exchange market is that the forward rate aggregates individual perceptions of the aggregate state of the economy in the case of risk neutral exchange rate speculation the forward rate perfectly reveals average expectations of current nominal shocks that hit the economy this paper analyzes the informational implications of forward speculation when markets are structurally diverse the two types of structural diversity considered are heterogeneous price elasticities of output demand and supply and asymmetric information between traders in output markets and traders in asset markets in contrast to previous results the paper shows that risk neutral speculation is not in general sufficient to generate a fully revealing rational expectations equilibrium in which monetary policy is ineffective

the tobin tax asset accumulation and the real exchange rate abstract we extend a standard model of exchange rate determination in a small open economy to examine the general equilibrium consequences of a tax on foreign assets the model 1 incorporates asset market clearing at a point in time 2 accounts for asset accumulation over time by way of trade imbalances and the government s financing needs and 3 broadens the government s policy options to include a tariff on the traded good and a tax on foreign assets a capital tax results in a transitory trade deficit because agents shift to home assets their decumulation of foreign assets is mirrored in a trade deficit

the propensity to patent abstract this paper analyzes the relationship between 1974 rd among the exceptions the tendency was toward diminishing returns variables measuring overseas sales federal r d support diversification scope of invention use and invention type had only modest explanatory power there was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries

currency substitution and the real exchange rate the utility maximization approach abstract this paper studies the currency substitution hypothesis with rational expectations in terms of a sidrauski type model where domestic and foreign money enter the utility function it shows that contrary to liviatan 1981 the approach does not necessarily contradict calvo and rodriguez 1977 furthermore the impact of monetary stabilization policy is fully characterized with flexible and pre fixed rates for an extension of dornbusch and mussa 1975 a brief analysis of the optimal quantity of money is also provided

dollarization and inflation in a two country optimization model abstract in a two country two currency model this paper examines the conditions of dollarization analyzes the effect of government inflation finance and studies the strategic interdependence of different currency inflation jel f30

price and output responsiveness to nominal changes under differential information abstract the paper considers how changes in nominal income are transmitted into price and output changes within a setting where the traditional assumption of instantaneous market clearing costless coordination is given up in favour of a more realistic setting where price decisions are made by numerous agents firms acting independently on their private decentralized information the responsiveness of firm specific prices is considered and it is shown how absolute or nominal price rigidity can be explained building this into a theory of the general price level it is proved that heterogenously perceived nominal changes affect the price level less than proportionally moreover it is shown how a phillips curve relation between inflation and output can be rationalized within the model finally the issue of relative price variability is considered and related to misallocation of economic resources under differential information

an informational rationale for action over disclosure abstract the past two decades have seen a considerable increase in the amount of public information provided by policymakers are such disclosures desirable or is it instead preferable to use such information to condition a policy instrument such a tax or an interest rate this paper studies the relative merits of each means to use a policymaker s information in a flexible class of economies that feature dispersed information and payoff and learning externalities i provide conditions for when the exclusive use of a policy instrument or disclosure is optimal i then relate these to differences in the equilibrium and socially optimal use of information i conclude with a series of applications that show how my results apply to common beauty contest models competitive economies and a broad class of macroeconomic models among others

an evolutionary approach to understanding international business activity the co evolution of mnes and the institutional environment this paper examines the co evolution of mne activities and institutions external and internal to the firm we develop a theoretical framework for this analysis that draws on the more recent writings of douglass north on institutions as a response to complex forms of uncertainty associated with the rise in global economic interconnectedness and of richard nelson on the co evolution of technology and institutions we link historical changes in the character of mne activities to changes in the institutional environment and highlight the scope for firm level creativity and institutional entrepreneurship that may lead to co evolution with the environment we argue that the main drivers for institutional entrepreneurship are now found in the increasing autonomy of mne subsidiaries thus mne agency derives from more decentralized forms of experimentation in international corporate networks which competence creating nodes of new initiatives can co evolve with local institutions unlike most other streams of related literature our approach connects patterns of institutional change in wider business systems with more micro processes of variety generation and experimentation within and across individual firms this form of co evolutionary analysis is increasingly important to understanding the interrelationships between mne activities and public policy

the policy implications of the globalisation of innovation abstract the paper develops a taxonomy of the globalisation of innovation based on three categories a the international exploitation of technology produced on a national basis b the global generation of innovations c the global technological collaborations the most evident changes implied by the increasing globalisation of innovation and technology are the tougher and increased competition and the greater collaboration between actors both across and within national boundaries the advantages just as the costs of these tendencies can be substantial leading to a higher risk of winners and losers the paper analyses the different impact that each category might have on the economic and innovative performance of countries and regions with the aim of defining the implications for national policies it is suggested that public policies play a different role in each of the three processes of the globalisation of innovation and that a single strategy does not exist neither from a firm s nor from a government s perspective the paper emphasis that none of the three categories in this taxonomy renders national policy obsolete on the contrary public policies are necessary on a far wider range than those currently implemented in the majority of countries

government spending and the real exchange rate i study the effect of government spending on the real exchange rate in an open economy version of the sidrauski model with a time varying rate of time preference that introduces complementarity between consumption at different points in time i show that a balanced budget fiscal expansion causes a real depreciation and a current account surplus if the expansion falls on traded goods if the increase falls instead on nontraded goods both the stylized results of a real appreciation and a current account deficit and the perverse result of an appreciation and a surplus can occur

the globalisation of technology what remains of the product cycle model this paper reexamines two hypotheses associated with earlier versions of the product cycle model the first hypothesis that innovations are almost always located in the home country of the parent company is rejected on the basis of evidence drawn from one hundred years of u s patent office data the second hypothesis that the international dispersion of activity is led by technology leaders is historically valid however over the last twenty years technology leaders have been ahead instead in the globalization of technology that is in developing internal international networks to exploit the locationally differentiated potential of foreign centers of excellence c 1995 academic press inc copyright 1995 by oxford university press

crawling peg inflation hedges and exchange rate dynamics this paper stresses the effects of currency substitution and speculation on inflation hedges on the relative price of home goods in the two sector general equilibrium portfolio balance model examining the overshooting hypothesis of exchange rates in association with the overshooting phenomenon of price of inflation hedges it has shown that exchange rate undershooting is plausible with the significant overshooting of the price of inflation hedges when domestic residents hold only domestic money and inflation hedges however the impact of currency substitution is strong enough to lead to exchange rate overshooting if the domestic residents have access to foreign currency

the capital inflows problem revisited a stylized model of southern cone disinflation in the late 1970s countries in latin america s southern cone initiated attempts to lower domestic inflation rates through the progressive reduction of a preannounced rate of exchange rate devaluation the stabilization programs gave rise to massive capital inflows real exchange rate appreciation and current account deficits this paper develops a stylized intertemporal framework in which the effects of a credible preannounced disinflation scheme can be studied it is shown that even when agents have perfect foresight and markets clear continuously the capital inflows phenomenon and the associated real appreciation may result while unanticipated permanent inflation changes are neutral in the paper anticipated inflation is neutral only in exceptional circumstances a preannounced disinflation operates by altering the path of an expenditure based real domestic interest rate that depends on expected changes in the prices of liquidity services and nontradable consumption goods

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

technological internationalisation in the electro technical industry a cross company comparison of patenting patterns 1986 2000 abstract this paper addresses the issue of r d internationalisation of two multinationals in the electro technical industry ge and abb by means of a patent data analysis the overwhelming majority of both companies r d activities are concentrated in western europe and north america the locational overlap between the two firms activities is small these results are consistent with findings from earlier studies that 1 there is little evidence to suggest that the production of technology is globalised in a general sense and 2 that tapping knowledge from an industry s global lead location plays a very limited role in foreign r d investments

developing innovative competences the role of institutional frameworks the recent development of the biotechnology and computer industries has highlighted the variety of ways in which firms in different countries and sectors can develop innovative competences four aspects are particularly important the degree of involvement in the public science system involvement in industry collaborations reliance on specialist skills of individuals and the ability to change collective competences radically national and regional variations in these result from differences in dominant institutional frameworks in addition to the organization of capital and labour markets and the structure of inter firm relations these frameworks include the nature of the public science system particularly important features of these systems include the organization of research training the flexibility of researchers and organizations in developing novel goals and approaches the organization of scientific careers and the prevalent science and technology policies of the state distinct combinations of these institutional features have become established in different market economies and led to contrasting styles of innovative competence development being adopted these in turn help to explain continuing variations in patterns of technological change between countries

intertemporal substitution and the role of monetary policy new classical macroeconomists have asserted that once one ignores the consequences of sustained expected inflation or what is normally referred to as the tobin effect or inflation tax monetary policy is invariably ineffective both in the long and short run this view is not correct it will be shown that inflation tax free monetary policy rules can have strong stabilisation effects in rational expectations models with intertemporal substitution the best way to eliminate possible inflation tax effects of monetary growth is to assume that as in barro s i976 model the long run expected rate of growth of the money supply is zero more generally if one were concerned exclusively with the effectiveness of stabilisation policy in the new classical sense i e the capability of influencing deviations of actual equilibrium output from its full information level it would be sufficient to postulate that money transfers are simply proportional to pre existing money holdings the a priori exclusion of the tobin effect as a pre requisite for the new classical doctrine is clearly stated in lucas i98i

export specialisation and local economic growth this paper aims to provide empirical evidence on whether export specialization or diversification is better for local economic growth using export data from 354 magisterial districts of south africa for 1996 and 2001 we estimate spatial growth regressions that include measures of the degree of export specialization and diversification overall exporting regions outperform other less or non exporting regions also we find that export specialisation rather than export diversification has been associated with local economic growth with specialization in mining and agriculture being especially beneficial our results support the view that specialization in a locality s area of comparative advantage is good for local economic development we also find that localities with higher initial levels of human capital and higher subsequent population growth performed better this is consistent with the belief that policies aimed at strengthening human capital and improving agglomeration economies will enhance local economic development

currency substitution foreign inflation and terms of trade dynamics this paper incorporates rational expectations full price flexibility and currency substitution into the usual small economy model taking explicit account of inflation abroad not only will the steady state terms of trade be affected by an increase in the rate of monetary expansion when the inflation rate abroad is assumed to be nonzero but its dynamic path may also be different from the usual case in which inflation abroad is ignored it has been shown that if the import demands are relatively inelastic the terms of trade will undershoot their equilibrium value if the import demands are elastic the terms of trade will overshoot the key to these diametrically opposite results is the degree of ultimate deterioration in the terms of trade which in turn turn on the size of the two import demand elasticities

specialization and size of technological activities in industrial countries the analysis of patent data abstract the determinants and direction of the technological specialization of advanced countries are investigated in this paper using patent counts and citations as technology indicators during the 1980s international patenting increased more rapidly than the resources devoted to r d indicating a globalization of technology markets paralleled by a growing degree of sectoral specialization of countries innovative activities a clear cut inverse relationship between countries technological size measured by cumulative r d expenditure and degree of specialization has been found only large countries can afford to spread their activities across most technological fields while small and medium sized countries are to some extent forced to specialize in more narrow niches some methodological aspects in the use of patenting as an internationally comparable indicator are also discussed considerable differences emerged between patent specialization profiles in the internal and in external markets firms tend to protect their internal market through patenting also in fields where they do not excel at the international level leading to a smoother specialization profile

the narrow moving band the dutch disease and the competitive consequences of mrs thatcher notes on trade in the presence of dynamic scale economies abstract this paper presents a model of trade in which comparative advantage instead of being determined by underlying attributes of countries evolves over time through learning by doing in this model arbitrary patterns of specialization once established tend to become entrenched over time the model sheds light on three widely held views that do not make sense in more conventional models first is the view that temporary protection of selected sectors can permanently alter the pattern of comparative advantage in the protecting country s favor second is the view that seemingly favorable developments such as the discovery of exportable natural resources may lead to a permanent loss of other sectors and reduce welfare in the long run third is the possibility that a temporary overvaluation of a currency due to tight money can lead to a permanent loss of competitiveness in some sectors

accumulating technological competence its changing impact on corporate diversification and internationalization recent studies have suggested that firm specific technological competence may be diversified and internationalized we show that increases in competence increased corporate technological diversification until the early 1970s and then again more recently however a new interrelationship has now emerged between the accumulation diversification and internationalization of technological competence due to the formation of internationally integrated networks within firms the empirical analysis consists of a dynamic cross section model applied to the corporate patenting in the us of 166 of the largest european and us industrial firms from 1901 to 1995 copyright 2000 by oxford university press

endogenous real exchange rate fluctuations in an optimizing open economy model abstract this paper constructs a simple intertemporal model of a small open economy inhabited by forward looking agents in which endogenous fluctuations in the real exchange rate can arise in equilibrium i e fluctuations that are not linked to movements in economic fundamentals the key condition for the main results is the assumption that the marshall lerner condition does not hold i e that the country s exports and imports are inelastic to its real exchange rate it is shown that given that the marshall lerner condition fails there exist periodic equilibria and or stationary sunspot equilibria in the neighborhood of the stationary state

the existence of fully rational expectations approximate equilibria with noisy price observations abstract nonrevealing fully rational expectations approximate equilibria exist in microeconomic pure exchange economies in which uninformed agents have suitably dispersed noisy price observations such traders maximize a state dependent expected utility conditional on the price vector they observe the distributions of noisy price observations and the correct equilibrium relationship between states of the world and prices in equilibrium aggregate excess demand is small with high probability in every state of the world and its expectation is also small this magnitude diminishes as the noisy price observations become more accurate equilibria are obtained by applying a fixed point argument to state dependent excess demand functions which are smooth because of the noisy price observations

dynamics of export specialization in the regions of the italian mezzogiorno persistence and change guerrieri p and iammarino s 2007 dynamics of export specialization in the regions of the italian mezzogiorno persistence and change regional studies 41 933 947 during the 1980s and 1990s the italian southern economy displayed signs of transformation in production and export structures accompanied by sharp geographical differentiation debate on these changes mainly spurred by growing international pressure has given rise to different views and expectations on the opportunities for endogenous growth on the italian periphery the aim of this paper is to contribute to this ongoing debate by looking at the evolution of sectoral export specialization patterns i e relative comparative advantage structures in the mezzogiorno regions in the period 1985 2000 focusing on inter provincial comparisons the analysis concentrates on the extent of persistence versus change in the evolution of provincial specialization patterns shedding light on the relationship between export structure and performance

information aggregation and policy the function of monetary policy to alter the informational content of money price signals is examined in a model where traders can observe an economy wide financial signal and a local commodity price under a passive policy money demand disturbances which are not directly observable are shown to be confused with real productivity shocks and thereby preclude prices from fully reflecting all information even when the policy authority has no informational advantage prospective money growth feedback rules can improve the structure of available information applications of the rational expectations hypothesis to monetary theory have focused on the informational aspects of money price signals a key element of the models of lucas 1972 1975 barro 1976 and sargent and wallace 1975 is that agents have limited powers of information acquisition and use prices as imperfect summaries from the rest of the world those works have suggested that monetary policy can affect the informational content of observed price signals and thereby affect real variables in weiss 1980a it was shown systematic money growth feedback rules can contribute to economic efficiency when the money demands of one group are based on factors not directly observed by all in this context monetary policy can alter the information content transmitted from the informed to the uninformed through observation of nominal price signals a limitation of these analyses is the omission of economy wide financial signals clearly stock and bond prices are observed accurately and costlessly empirically there are strong comovements between financial signals and economic activity traditional keynesian theory argues that financial signals exert an important influence on output by affecting the demand for new capital goods understanding the informational role of such signals is crucial to any theory which explains fluctuations as arising from incomplete information the present analysis investigates the structure of available information with its implications for real variables in a model where agents trade on both an economy wide capital market and a local commodity market the model has positive implications for the comovements of money demand disturbances aggregate investment expected and realized returns as well as normative implications for the conduct of policy the structure of exogenous information in the model differs from that of my earlier paper rather than assuming two types of traders informed and uninformed the model considers traders to have symmetric although noisy exogenous private information in this framework the economy wide market both aggregates and transmits individuals information about an aggregate structural variable this modification is both analytically convenient and illustrates how noise in the price system alters the importance of public relative to private sources of information the idea that prices aggregate individual information was first formalized in grossman 1976 in that paper a non monetary model of a speculative market was developed in which the price system conveyed all relevant information so as to yield an efficient allocation however this feature was also shown to break down if prices are influenced by

money prices and the current account in a dual exchange rate regime abstract this paper examines the behavior of money prices and the current account in a dual exchange rate regime where all current account transactions take place at a pegged official rate and all capital account transactions occur at a freely floating financial rate the adjustment of a small open economy to a monetary disturbance under this regime is compared to that found under unified fixed and flexible rates the results concerning the behavior of the economy under dual rates are shown to apply also to an economy operating with fixed rates and controls on the international movement of capital

uneven growth between interdependent economies an evolutionary view on technology gaps trade and growth preface part one theory and empirics of international growth rate differentials and technology gaps chapter 1 technology growth and welfare a historical perspective 1 1 the search for welfare and the role of technology 1 2 aim of the book 1 3 organisation of the rest of the book notes chapter 2 the literature on economic growth and technological change 2 1 a brief overview 2 2 the traditional literature on economic growth 2 3 new neoclassical growth models endogenous innovation 2 4 the role of technological change 2 5 explaining growth rate differentials notes chapter 3 an evolutionary theory of economic growth and technological change the basics 3 1 economic growth as an evolutionary process a macroeconomic interpretation 3 2 economic growth as an evolutionary process a microeconomic interpretation 3 3 towards an evolutionary theory notes chapter 4 technology and growth in an international perspective 1960 1990 an impressionistic approach 4 1 economic growth and structural change 4 2 technology 4 3 technology and growth catching up or falling behind a global issue 4 4 summary and conclusions appendix iv 1 postwar economic welfare and the selection of country samples appendix iv 2 the 3 digit isic sector classification revision 2 appendix iv 3 on measuring and graphing structural differences between countries appendix iv 4 some tests for the influence of multicollinearity on the regressions in section 4 2 notes part two technology spillovers between interdependent economies catching up or falling behind chapter 5 a model of catching up or falling behind 5 1 description of the model 5 2 solving the model 5 3 the outcomes of the model under varying parameter restrictions 5 4 conclusions of the model notes chapter 6 an empirical test of the model 6 1 testing procedure and data sources 6 2 result 6 3 interpreting the results 6 4 summary and some policy conclusions appendix vi l a description of the data appendix vi 2 the calculation of the n statistic notes part three technological change international trade and economic growth chapter 7 an evolutionary model of technological change specialisation and economic growth 7 1 a descriptive interpretation 7 2 the model 7 3 simulation results 7 4 summary and conclusions appendix vii 1 initial values of the simulation runs for the 3 country 2 sector case appendix vii 2 some mathematical details of the selection equation in discrete time notes chapter 8 an empirical view on the evolution of trade and technology 8 1 patents as indicators of innovation 8 2 summarising some known correlations 8 3 trade and technology a dynamic evolutionary framework 8 4 estimation of the replicator equation 8 5 some further tests on the robustness of the replicator estimates 8 6 explaining the results for the patent variables 8 7 summary and conclusions

real exchange rate effects of monetary disturbances under different degrees of exchange rate flexibility an empirical analysis abstract we examine the effects of monetary policy on the real exchange rate in a cross country analysis we find that the variability of money shocks and the degree of informativeness of the exchange rate are important determinants of the magnitude of the real exchange rate effects of domestic money shocks our results are consistent with previous cross country evidence on the output effects of money shocks but also highlight the role of the exchange rate regime

the changing landscape of jibs authorship in this study we examine the landscape of jibs authorship over time to assess 1 the accessibility of jibs to new contributors and 2 the diversity of authors contributing to jibs our analysis of author data from 1972 to 2014 shows that jibs is becoming more accessible as indicated by the high and sustained proportion of first time contributors to the journal this is also evident from the recent decline in the share of authors with multiple past jibs publications with regard to diversity our findings show that jibs has a much wider geographic scope of authors on its landscape in comparison to previous decades this may be attributed partly to increasing travel and communication in scholarly communities and partly to the increased migration of scholars in the recent decades our analysis of migration patterns of jibs authors suggests that about 51 of prominent international business scholars are employed outside their country of birth of the 49 employed in their country of birth 12 are return migrants in our sample china south korea and canada have the highest number of returnees the usa the uk germany the netherlands and china have the highest number of natives whose country of birth country of phd granting institution and country of university affiliation are identical

a prudential stable funding requirement and monetary policy in a small open economy abstract the basel iii net stable funding requirement introduced in january 2018 requires banks to use a minimum share of long term wholesale funding and deposits to fund their assets a similar regulation has been in place in new zealand since 2010 we introduce the stable funding requirement sfr into an open economy dsge model featuring a banking sector with richly specified liabilities and estimate the model for new zealand we then evaluate the impact of the new prudential instrument on monetary policy trade offs a higher steady state sfr level amplifies the effects of shocks to the spread on long term bond financing in the banking sector adding to macroeconomic volatility conditional on these shocks however the sfr plays a passive role in the transmission of all other shocks to the real economy hence in the overall picture the monetary policy trade off between inflation stabilisation and output stabilisation is only slightly worsened by the sfr we note that the trade off can be improved when monetary policy responds systematically to credit growth

empowering coffee traders the coffee value chain from nicaraguan fair trade farmers to finnish consumers this article analyzes the distribution of benefits from fair trade between producing and consuming countries fair trade and conventional coffee production and trade were examined in nicaragua in 2005 2006 and 2008 consumption of the respective coffees was assessed in finland in 2006 2009 the results indicate that consumers paid considerably more for fair trade certified coffee than for the other alternatives available although fair trade provided price premiums to producer organizations a larger share of the retail prices remained in the consuming country relative to conventional coffee trade paradoxically along with the certified farmers and cooperatives fair trade empowers roasters and retailers

monetary expansion and real exchange rate dynamics this paper examines the effect of a change in the rate of monetary expansion on the dynamics of the real exchange rate under fully flexible domestic prices and a floating exchange rate the model is similar in structure to an ealier paper by calvo and rodriguez the main difference being that in our model consumers have an infinite planning horizon and long run perfect foresight one of the main findings is that an increase in the rate of monetary expansion has the impact effect of creating a real appreciation of the exchange rate and a deterioration of the balance of payments contrary to the results of calvo and rodriguez

efficiency and a simple model of exchange rate determination abstract a monetary model has no intrinsic dynamics so the intertemporal behavior of exchange rates spot and forward depend entirely upon the time processes of the exogenous variables for typical values of interest elasticities of money demand only if all shocks are permanent do exchange rates follow random walks recently changes in relative outputs and money supplies in the canadian us context have evidenced serial correlation so that shocks are not exclusively permanent ones none the less exchange rates have followed a random walk this suggests that the monetary model is an inappropriate specification and that models which pay attention to the choice of currency of denomination deserve greater attention

historical evolution of technological diversification a positive relationship exists between national technological size and technological diversification across fields of innovative activity this paper shows how the nature of this relationship has changed historically there has been a downward structural shift in the cross country size diversification frontier since 1965 for any given size countries have become less diversified or more narrowly concentrated in their technological specialisation one explanation is that international technology sourcing by mnes has led locations to focus on what they do best a supporting factor may be a rise in technological interrelatedness which encourages focus upon a specific selection of complementary combinations

monetary autonomy and exchange rate dynamics under currency substitution abstract this paper uses a two country model to demonstrate that currency substitution is a channel for the international transmission of monetary disturbances under flexible exchange rates in the long run the division of world real wealth and consumption and real exchange rates depend on the growth rates of both monies but inflation of prices denominated in a particular currency depends only on the rate of growth of that money in the short run currency substitution combined with perfect foresight can be responsible for overshooting in the exchange rate in both price levels in real exchange rates and in national levels of real wealth and consumption

geographical amplitude in the international generation of technology present situation and business determinants abstract building on a rich dataset with information on 65 000 firms and 465 000 european patent applications from 1978 to 2000 this paper addresses the geographical amplitude of international technology generation first we show that the number of countries hosting international technological activities is increasing the usa and some developing nations benefit from this internationalisation conversely although europe as a whole still plays a leading role in the encouragement of foreign technological activities some european countries such as germany and the uk appear to be losing their technological appeal second we verify that multinational corporations mncs have increased the geographical amplitude of their technological activities in fact the mean number of countries in which mncs internationalised technology generation has doubled during the 23 years we have analyzed third we address the business characteristics that explain this phenomenon a negative binomial regression suggests that internationalisation is higher in mncs showing a greater technological diversification a higher volume of technological activity a wider presence in international markets and more experience in the international generation of technology finally american corporations and regardless of the home country those firms whose main technological fields are in chemistry pharmaceuticals or electronics present the highest geographical dispersion of their international technological activities

the national system of innovation in historical perspective contrary to some recent work on so called globalisation this paper argues that national and regional systems of innovation remain an essential domain of economic analysis their importance derives from the networks of relationships which are necessary for any firm to innovate whilst external international connections are certainly of growing importance the influence of the national education system industrial relations technical and scientific institutions government policies cul tural traditions and many other national institutions is fundamental the historical examples of germany japan and the former ussr illustrate this point as well as the more recent contrast between east asian and latin american countries introduction the national system of friedrich list according to this author s recollections the first person to use the expression national system of innovation was bengt ake lundvall and he is also the editor of a highly original and thought provoking book 1992 on this subject however as he and his colleagues would be the first to agree and as lundvall himself points out the idea actually goes back at least to friedrich list s conception of the national system of political economy 1841 which might just as well have been called the national system of innovation the main concern of list was with the problem of germany overtaking england and for underdeveloped countries as germany then was in relation to england he advocated not only protection of infant industries but a broad range of policies designed to accelerate or to make possible industrialisation and economic growth most of these policies were concerned with learning about new technology and applying it the racialist and colonialist overtones of the book were in strong contrast to the inter nationalist cosmopolitan approach of the classical free trade economists and list s belief that holland and denmark should join the german bund and acquire german nationality because of their descent and whole character reads somewhat strangely in the european community of today nevertheless despite these unattractive features of his outlook he clearly anticipated many contemporary theories after reviewing the changing ideas of economists about development in the years since the second world war the world bank 1991 concludes that it is intangible investment in knowledge accumulation which is decisive rather than physical capital investment as was at one time believed pages 33 35 the report cites the new growth theory

monetary policy and the information content of prices rational expectations and cleared markets lead to the proposition that feedback monetary policy is irrelevant to real activity as in the analyses of sargent and wallace however if agents are differentially informed and have access to a common price then prospective monetary policy actions future feedback to imperfectly known current circumstances can alter real activity by changing the information content of prices

sectoral systems of innovation and production the concept sectoral system of innovation and production provides a multidimensional integrated and dynamic view of sectors it is proposed that a sectoral system is a set of products and the set of agents carrying out market and non market interactions for the creation production and sale of those products a sectoral systems has a specific knowledge base technologies inputs and demand agents are individuals and organizations at various levels of aggregation they interact through processes of communication exchange co operation competition and command and these interactions are shaped by institutions a sectoral system undergoes change and transformation through the co evolution of its various elements 2002 elsevier science b v all rights reserved

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

does host market regulation induce cross border environmental innovation this paper evaluates the effect of host country environmental policy stringency on the offshoring of environmental patents for 2000 top world r d performers it is shown that a more stringent environmental regulation triggers both the extensive and intensive margin of patent offshoring in the field of environmental technologies results are robust to various different specifications alternative definitions of innovation offshoring and of regulation restrictions and to the consideration of possible endogeneity of regulation it is suggested inter alia that r d subsidies and non market based regulatory measures are more important than market based instruments as drivers of cross border environmental innovation length 26 pages

location and the multinational enterprise in the early development of the international business field the focus of attention moved from the country level to the firm level and interest in location issues declined more recently firm based research has itself become increasingly concerned with the study of firm location interactions when examining two way knowledge flows or spillovers between multinational enterprises mnes and other actors in specific locations the diversity or heterogeneity of firms matters as does the diversity of locational environments the localization of knowledge sources depends on mne group level strategies for growth and organizational decentralization on subsidiary level evolution towards local competence creating efforts and on the development of suitable business networks within locations mnes now have a greater potential to benefit from a synergistic locational portfolio of complementary sources of knowledge the locational composition of the international network for knowledge sourcing of a given mne depends upon the extent of institutional compatibility between the locations in which the mne is active this compatibility between locations in turn affects the capacity of the mne to become an insider in local business systems and to influence the local institutional environment

the drivers of foreign direct investment into research and development an empirical investigation this paper examines the determinants of foreign direct investment fdi in research and development laboratories by 32 multinational enterprises in the pharmaceutical and electronics industries the paper applies a dichotomous set of motives for fdi results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of a country s science base determine whether fdi in research and development is carried out in order to exploit existing firm specific advantages or in order to build up new firm specific advantages this holds true in similar form for japanese european and u s firms and across the two industries

dynamics of a floating exchange rate regime we study the full equilibrium dynamics of a two country world economy with a floating exchange rate traded and nontraded goods and explicit modeling of the use of money the resulting exchange rate equation depends on several details of the economic structure such as the supply structure and propensities to spend on various goods although real exchange rate movements have the usual association with the current account the ordinary exchange rate may appreciate or depreciate when there are deficits on current account even when the quantities of money do not change deviations from purchasing power parity and the fisher equation are shown to be the rule rather than the exception

large firms in the production of the world s technology an important case of non globalisation us patenting by 686 of the world s largest manufacturing firms shows that their share of the world s production of technology is less than their share of r d activities and varies greatly amongst sectors in most cases the technological activities of these large firms are concentrated in their home country the characteristics of which influence the volume and trends in their technological activities much more strongly then the international component of these activities at the same time these large firms are major elements in the volume and the pattern of sectoral specializations in their home countries technological activities

exchange rate policy and monetary information this paper develops a model of a small open economy in which the presence of local deviations from purchasing power parity give rise to differential information it is assumed that the monetary authorities are committed to buy and sell foreign exchange in order to support an exchange rate policy rule it is demonstrated that exchange rate policy can influence the distribution of real output i if agents possess incomplete and differential information and ii if they have contemporaneous money supply or balance of payments information it is also shown that exchange rate policy can be effective because of its ability to influence the information content of available monetary data the argument is turned around and used to support the frequent release of monetary data

decentralised r d and strategic competitiveness globalised approaches to generation and use of technology in multinational enterprises mnes abstract using material from surveys of multinational enterprise mne production subsidiaries and laboratories operating in the uk the paper seeks to discern vital changes in the roles of such r d facilities from the primarily tactical and technologically dependent role of adapting established group products for the local market these labs now take more committed positions in support of their group s strategic competitiveness this can involve a much more profound involvement in original product development or inputs into programmes of pre competitive basic or applied research to support the longer term evolution of the core technology of the mne group it is suggested that this evolution of decentralised labs positioning in mne knowledge strategies implies i an increasing involvement in product development rather than adaptation ii an interdependent rather than dependent position in group technology programmes iii increased relevance of supply side influences host country technology competencies capacities and heritage iv decline of centralising forces on r d e g economies of scale communication and co ordination problems concerns of knowledge security

determinants of the internationalization of regions the role and effectiveness of public policy measures banno m piscitello l and varum c determinants of the internationalization of regions the role and effectiveness of public policy measures regional studies this paper assesses the role of public policy measures on outward internationalization of regions by including financial and non financial incentives among the determinants of the international competitiveness of regions it is found that the former are important to enhance their active internationalization but that variables related to the knowledge and competence base of regions are even more so financial incentives related to equity participation as well as non financial incentives related to the provision of information come out highly significant in stimulating outward internationalization the empirical analysis is conducted for the twenty italian nuts 2 regions over the period 2003 2008

tariffs quotas and welfare in a monetary economy abstract the effects of tariffs and quotas on welfare in a monetary economy are considered it is shown that while both policies improve the balance of payments they have different lifetime welfare implications even when they are equivalent in the long run the speed of adjustment is shown to be more rapid under a tariff than under a quota therefore adjustment costs associated with changes in money holdings are lower under a tariff while those associated with changes in consumption are higher simulation results are used to examined the implications of various structural parameters for lifetime utility under the two policies

the economics of technical change this paper reviews the recent rapidly growing literature on technical change in the economy it concentrates on innovations and their diffusion at firm and industry level since this was the area designated as relatively weak in earlier literature surveys the review argues that the extensive empirical evidence and theoretical analysis now available presents a basic challenge to neoclassical theory after indicating some weaknesses in the neo schumpeterian literature the paper concludes by advocating an experiment with a new form of assessment by neighboring disciplines to economics itself which would take full account of the fundamental issues at stake in this modern methodenstreit c 1994 academic press inc copyright 1994 by oxford university press