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

urban rural gaps in the developing world does internal migration offer opportunities this article provides an overview of the growing literature on urban rural gaps in the developing world i begin with recent evidence on the size of the gaps as measured by consumption income and wages and argue that the gaps are real rather than just nominal i then discuss the role of sorting more able workers into urban areas and review an array of recent evidence on outcomes from rural urban migration overall migrants do experience substantial gains on average though smaller than suggested by the cross sectional gaps i conclude that future work should help further explore the frictions in particular information financial and in land markets that hold back rural urban migration and may help explain the persistence of urban rural gaps

corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

more on measuring budget related rent seeking a comment following the work of tuuock 1967 kreuger 1974 and posner 1975 the theory of rent seeking has become a well established part of economics in a recent paper we katz and rosenberg 1989 offered a measure of the rentseeking associated with government spending basing himself on our work scully 1991 presents further results relating to such rent seeking and makes two claims first that our measure is a conceptually incorrect evaluation of the rent seeking associated with government expenditure and second that the measure of rent seeking suggested by him and into which our measure is an input is a meaningful and appropriate estimate of such rent seeking while reading scully s paper we realized that he touches upon a matter whose importance goes far beyond his offered measure this issue concerns the extent of rent seeking that takes place in given periods of time is there rentseeking for everything in every period or does the rent seeking occurring at any point in time mainly involve struggles over m i n o r reallocations of property rights the answer to this question has crucial implications for the amount of waste which occurs through rent seeking activities if rent seeking is always for everything rent seeking waste is likely to suck up a large proport ion of gnp in each period in this view rent seeking constitutes something like an economic black hole which threatens all economic well being if on the other hand rent seeking involves minor adjustments then while it reduces economic welfare rent seeking does not devour the benefits of a major proport ion of economic activity

immigration and structural change evidence from post war germany does immigration accelerate sectoral change towards high productivity sectors this paper uses the mass displacement of ethnic germans from eastern europe to west germany after world war ii as a natural experiment to study this question a simple two sector model of the economy in which moving costs prevent the marginal product of labor to be equalized across sectors predicts that immigration boosts output per worker by expanding the high productivity sector but decreases output per worker within a sector using german district level data from before and after the war we find strong empirical support for these predictions

rent seeking in u s government budgets 1900 88 a measure of waste from the competitive rent seeking activity of special interest groups in federal state and local budgets was calculated over the period 1900 88 this period in u s fiscal history is characterized by constitutional changes that have made for more transparency in governmental fiscal activities and for greater diffusion of taxes the xvi amendment to the constitution created the progressive individual income tax the corporate income tax was judged to be an excise tax in 1909 and passed the test of constitutionality high marginal tax rates are a justification for a high average level of taxation the full employment act of 1946 insitutionalized government deficits as a means of meeting a political objective as a result opportunities for rent seeking through budgetary reallocations rose in the united states in the first two decades of the 20th century waste at all levels of government represented about 10 percent of incremental national output today waste is three times that amount the transparency and diffusion of taxes are highest at the federal level and least at the local level rent seeking through budgetary reallocation has followed the public purse one explanation for the observed centralization of government in the 20th century may be that opportunities to concentrate benefits and diffuse taxes are highest at the federal level finally the withdrawal of resources from the productive economy to pursue rent seeking in government budgets lowers the rate of real economic growth i find that rent seeking through budget reallocations has had a significant and large negative effect on the growth rate

the illusory effects of saving incentives on saving the authors evaluate research on how tax based saving incentives iras and 401 k s affect saving previous research overstates the impact of the incentives on saving by failing to account for several issues households with saving incentives have stronger tastes for saving than others saving incentives have interacted with debt nonfinancial assets financial markets and pensions and saving incentives represent pretax balances whereas taxable accounts represent posttax balances accounting for these issues essentially eliminates the impact of saving incentives on saving the authors conclude that little if any of the contributions to existing saving incentives have raised saving

de agriculturalization as a result of productivity growth in agriculture abstract this paper explores the secular decline in the employment share in agriculture as a result of productivity growth in the agricultural sector i study an equation that states that employment share in agriculture is determined by the subsistence constraint and productivity in agriculture given the calibrated value for subsistence level of consumption in agriculture labor productivity in this sector implies a share of employment in agriculture in the model that turns out to be very close to the data for a variety of countries between 1963 and 2005

efforts in two sided contests the degree of rent dissipation is studied in extended two sided contests that in volve two types of efforts while usual contestants expend resources in trying to win the contested prize potential recipients of the rent seeking efforts also participate in the con test this is due to uncertainty regarding the source of power in the contest that induces the bureaucrats to expend resources to increase their share in the rent seeking efforts by try ing to appear as the party controlling the allocation of the prize we show that the existing theoretical and empirical studies are incomplete and may underestimate the extent of rent dissipation

rent seeking for budgetary allocation preliminary results for 20 countries in this paper we present quantitative measures of the proneness of different countries to respond to pressure groups in determining the composition of their spending these in turn help us to derive simple measures of the rent seeking done in relation to the government s spending pie

barriers to capital accumulation and aggregate total factor productivity i develop a growth model where a single good can be produced with a traditional and a modern technology the traditional technology features low total factor productivity tfp and a low share of reproducible capital in this framework barriers to capital accumulation affect technology use and therefore aggregate tfp the theory thus connects recent models of factor accumulation and of tfp the model is calibrated by interpreting traditional production as agriculture and nonreproducible capital as land the theory implies that barriers are associated with large agricultural shares as supported by cross country and time series evidence the required tfp differences needed in the model to account for a given income disparity are reduced by 1 2 relative to the standard model that abstracts from technology choice

agricultural productivity and the sectoral reallocation of labor in rural india abstract how do shocks to agricultural productivity affect the allocation of labor across sectors of the economy to answer this i use data from rural india to show that exogenous increases in agricultural productivity caused by abnormally high levels of precipitation lead to an increase in the labor share of the non agricultural sector i further show that the non tradable sector expands significantly when agricultural output increases this evidence is consistent with increasing agricultural output causing increased demand for local non tradables which in turn increases the non agricultural labor share

the impact of education in rural ghana examining household labor allocation and returns on and off the farm most of the human capital literature pertaining to developing countries focuses on the returns to education in either farm work or wage work few studies examine how education affects the allocation of time between these activities this paper estimates the returns to education in farm and off farm work and consequently the role of education in determining the allocation of labor the results from this study show that off farm work has a much higher return to education than does farm work and suggest that this divergence in returns affects the allocation of labor in farm households between farm and off farm work

communal land and agricultural productivity this paper quantifies the aggregate impact of communal land tenure ar rangements that prevail in sub saharan africa such tenure regimes limit land transfer ability by prohibiting sales subjecting rented out land to the risk of expropriation and redistributing it to existing farmers in a progressive fashion we use a general equilibrium two sector selection model featuring agents heterogeneous in skills to compute the result ing occupational and operational choices as well as land allocations the quantification of the model is based on policies deduced from ethiopia in the sub saharan african context we find that such policies substantially dampen nominal agricultural relative to non agricultural productivity by 25 real relative agricultural productivity however only falls by 4 since cross sectoral terms of trade adjust strongly with excess agricul tural employment only amounting to some 1 5 percentage points the loss in gdp is small about 2 that serves as a reminder that ostensibly highly distortionary policies need not have substantial bite when individuals strategically adjust to them and equilib rium prices adapt for example the model predicts that at given prices 62 of farmers in an economy such as ethiopia would leave farming if tenure were secured casting land insecurity as a major obstacle yet only 9 would actually switch sectors after price adjustments are factored in

transportation costs agricultural productivity and cross country income differences i document large difierences in domestic transport costs and transportation infrastructure across nations the richest countries have 5 times lower transport costs and 32 times more infrastructure per capita than the poorest countries of the world are these difierences a source of aggregate labor productivity difierences across nations using a three sector two region general equilibrium model i show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non agriculture taking as given the observed difierences in transportation costs and transportation infrastructure per capita i quantify the role of transportation for cross country income difierences the calibrated model produces an income disparity of 7 5 between the 5 rich and 5 poor countries this corresponds to an improvement of 50 relative to the disparity predicted by a two sector model of agriculture and non agriculture furthermore the efiects of advancements in transportation are non linear the elasticity of aggregate labor productivity with respect to transport labor productivity in the poorest nations is 6 times higher than in the richest ones the efiects of transport frictions are even more pronounced when restrictions to regional migration are introduced

rural urban disparity and sectoral labour allocation in china this study examines china s rural urban segmentation and its causes in the context of economic reforms household survey and aggregate data indicate a v shaped process in which rural urban consumption and income differentials decreased between 1978 and 1985 but then have continually increased to historically high levels this sectoral division is consistent with production function estimates based on provincial data that reveal higher labour productivity in urban state owned industries than in rural industries and agriculture to explain the v shaped change we argue that the precedent of successful rural reforms raised farmers relative earnings but the remaining obstacles to an efficient sectoral allocation of labour have prevented china from eliminating dualism recent financial policies consisting of urban price subsidies and increased investment credits have also had influential distribution effects that are biased against the rural sector

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

how important are dual economy effects for aggregate productivity this paper brings together development accounting techniques and the dual economy model to address the role that factor markets have in creating variation in aggregate total factor productivity tfp development accounting research has shown that much of the variation in income across countries can be attributed to differences in tfp the dual economy model suggests that aggregate productivity is depressed by having too many factors allocated to low productivity work in agriculture data show large differences in marginal products of similar factors within many developing countries offering prima facie evidence of this misallocation using a simple two sector decomposition of the economy this article estimates the role of these misallocations in accounting for the cross country income distribution a key contribution is the ability to bring sector specific data on human and physical capital stocks to the analysis variation across countries in the degree of misallocation is shown to account for 30 40 of the variation in income per capita and up to 80 of the variation in aggregate tfp

anonymity efficiency wages and technological progress although the industrial revolution is often characterized as the culmination of a process of commercialisation the precise nature of such a link remains unclear this paper provides an analysis of one such link the role of commercialisation in raising wages as impersonal labour market transactions replace personalized customary relations in the presence of an aggregate capital externality we show that the resulting shift in relative factor prices will under certain conditions lead to higher capital intensity in the production technology and hence a faster rate of technological progress we provide historical evidence using european data to show that england was among the most urbanized and the highest wage countries at the onset of the industrial revolution the model highlights the effects of changes in the availability of information typical of a modernising country on efficiency wages and technological progress

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

using national statistics to increase transparency of large land acquisition evidence from ethiopia the 2007 08 commodity price boom triggered a rush for land in developing countries yet many affected countries lacked the regulatory infrastructure to cope with such demand and reliable data on investors performance this study uses the example of ethiopia to show how simple improvements in administrative data collection can help to address this by i allowing assessment of the productivity of land use and taking measures to increase it ii comparing productivity between large and small farms to identify spillovers and ways to improve these and iii setting in motion a process of continuing improvement implications for global investment in this area are drawn out

how migration restrictions limit agglomeration and productivity in china china strongly restricts rural urban migration resulting in a well acknowledged surplus of labor in agriculture but migration is also restricted within sectors this paper argues that these intra sector restrictions lead to insufficient agglomeration of economic activity in both the rural industrial and urban sectors with resulting first order losses in gdp for urban areas the paper estimates a city productivity relationship based on city gdp numbers the effects of access educational attainment fdi and public infrastructure on productivity are estimated given these worker productivity is shown to be an inverted u shape function of city employment with the peak point shifting out as industrial composition moves from manufacturing to services as predicted by urban theory as far as we know this is the first paper to actually estimate the relationship between output per worker and city scale for any country the majority of chinese cities are shown to be potentially undersized below the lower bound on the 95 confidence interval about the size where their output per worker peaks the paper calculates the large gains from increased agglomeration in both the rural industrial and urban sectors

education s role in china s structural transformation abstract we explore education s role in improving the allocation of labor between china s agricultural and nonagricultural sectors and measure the portion of china s recent growth attributable to this channel using detailed micro level data and an empirical model that allows for the endogenous selection of education and sector of employment we estimate the relationship between an individual s educational attainment sector and income we find that about 11 of aggregate growth in output per worker from 1978 to 2004 is accounted for by increased education with 9 coming through the labor reallocation channel and 2 attributable to increased within sector human capital

should we refinance unfunded social security within a continuous time overlapping generations model featuring endogenous intensive margin of the labour supply and retirement decision we analyse the issue of passing the burden of payroll revenues onto consumption or capital we find that large long run welfare gains occur when pension benefits are refinanced by consumption taxes however the transition to the new steady state is very painful for a large fraction of existing cohorts on the other hand the capital base is too small to sustain pension benefits but could be made larger if capital taxes are raised yet that would entail significant welfare losses

what is the aggregate economic rate of return to foreign aid in recent years academic studies have been converging towards the view that foreign aid promotes aggregate economic growth we employ a simulation approach to i validate the coherence of empirical aid growth studies published since 2008 and ii calculate plausible ranges for the rate of return to aid our results highlight the long run nature of aid financed investments and the importance of channels other than accumulation of physical capital we find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity

do neoliberal policies deter political corruption this article probes the relationship between neoliberal economic poli cies and political corruption focusing in particular on the impact of trade and invest ment policies regulatory policy and the overall size of the public sector on corruption using a large cross national data set from the mid to late 1990s we test the neolib eral hypotheses that market oriented economic policies are associated with lower lev els of political corruption and state intervention in the economy with higher levels consistent with the neoliberal argument we find that open trade and investment pol icies and low effective regulatory burdens do correlate with lower levels of political corruption however we find no consistent relationship between the aggregate size of the public sector and political corruption while the neoliberal hypothesis on polit ical corruption has initial empirical support its lessons cannot be applied wholesale market oriented states may be less corrupt but interventionist states as measured by public spending are not necessarily more corrupt

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

the industrialization and economic development of russia through the lens of a neoclassical growth model this article studies the structural transformation of russia in 1885 1940 from an agrarian to an industrial economy through the lens of a two sector neoclassical growth model we construct a data set that covers tsarist russia during 1885 1913 and soviet union during 1928 1940 we develop a methodology that allows us to identify the types of frictions and economic mechanisms that had the largest quantitative impact on russian economic development we find that entry barriers and monopoly power in the non agricultural sector were the most important reason for tsarist russia s failure to industrialize before world war i soviet industrial transformation after 1928 was achieved primarily by reducing such frictions albeit coinciding with a significantly lower performance of productivity in both agricultural and non agricultural sectors we find no evidence that tsarist agricultural institutions were a significant barrier to labour reallocation to manufacturing or that big push mechanisms were a major driver of soviet growth

structural change and economic growth this paper presents a model in which a country s measured average propensity to save endogenously rises when its economy industrializes the model has agricultural and manufacturing sectors only agriculture uses land if at early dates income per capita is low agricultural consumption is important land is valuable and capital gains on land may constitute most wealth accumulation leaving the country s nipa aps low if exogenous technological progress raises incomes over time engel s law shifts demand to manufactured goods then land s portfolio importance relative to reproducible capital diminishes and the national income and products account saving rate can rise this paper presents a model illustrating that structural change due to the operation of engel s law can systematically affect an economy s measured saving rate according to the model a country s national income and product account average propensity to save will rise naturally if and when technological progress sufficiently lifts its income per capita this suggests a new interpretation of time series evidence while saving rates historically tend to be higher after industrialization than before one cannot automatically infer that changing wealth accumulation behaviour led to modernization rather structural change accompanying growth may have caused the rise in saving rates this paper also warns that international trade could lead to a contrasting pattern in cross sectional data highincome nations might contemporaneously have lower measured saving rates than poor countries recent work by mankiw romer and weil 1992 islam 1995 mankiw 1995 and others investigates long run patterns the analyses assume that each economy has attained or is moving toward a steady state equilibrium as in solow 1956 a country s steady state level of per capita gdp depends on its average propensity to save aps its rate of population growth the efficiency of its production sector etc regression outcomes seem consistent with the solow model s prediction that a higher aps will ceteris paribus lead to a higher level of income per capita the idea is that heterogeneity of exogenous preferences leads to international differences in aps s and in turn to long run differences

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

the agricultural productivity gap in europe for fifteen european countries over the 1970 2004 period we establish that there is a large and persistent agricultural productivity gap the ratio of labor productivity in non agriculture to that in agriculture correcting for under reporting of selfemployment income in both agriculture and non agriculture significantly reduces the measured agricultural productivity gap for countries with information on years of school and experience at the sector level we also find substantially higher human capital in non agriculture than in agriculture our findings suggest that measured labor productivity differences between agriculture and non agriculture in european countries are not an indicator of resource misallocation but possibly an artifact of mismeasurement of value added and sectoral differences in human capital

rural urban interdependence structural change and development abstract this paper presents a model of development that explicitly incorporates the interaction between rural agriculture and urban non agriculture explored by murata 2002 the increase of capital stock leads to capital intensive agriculture and the reallocation of labor from agriculture to non agriculture people who migrate to urban areas create new intermediate goods and enhance non agricultural productivity which in turn causes capital accumulation and capital intensive agriculture this mechanism causes a poverty trap stagnation and unbounded growth

the international effects of china s growth trade and education booms china s international trade flows have increased by 500 since 1992 far outstripping gdp growth likewise tertiary education enrollments have increased by 300 we simulate these changes using a multi sector growth model of the chinese and usa economies a decade of trade biased growth in china is found to have a large effect on the usa economy raising gdp approximately 3 4 5 percentage points we also show that the trade bias in china s growth accounts for more than half of the observed growth in tertiary enrolments in china in contrast neutral growth has practically no effect on usa incomes or china s stock of skilled labour finally the simulations reveal that china s education boom per se has practically no long run impact on the usa economy the results thus indicate that the pattern of productivity growth in exports sectors as might be caused by falling trade costs has been critical in transmitting benefits of chinese growth to the world economy they also point to an important link between falling trade costs and human capital formation

employment and hours over the business cycle abstract approximately one quarter of the adjustment in total hours of employment over the business cycle represents adjustments in hours while the remainder is explained by changes in employment real business cycle models characterize agents as either continuously adjusting their hours or making only labor force participation decisions about jobs with indivisible hours in this paper we extend the representative agent framework to allow for decisions on both participation and hours we calibrate and simulate a dynamic version of the model and show that it is better able to mimic some features of the aggregate data

the role of the structural transformation in aggregate productivity we investigate the role of sectoral differences in labor productivity in explaining the process of structural transformation the secular reallocation of labor across sectors and the time path of aggregate productivity across countries using a simple model of the structural transformation that is calibrated to the growth experience of the united states we measure sectoral labor productivity differences across countries productivity differences between rich and poor countries are large in agriculture and services and smaller in manufacturing moreover over time productivity gaps have been substantially reduced in agriculture and industry but not nearly as much in services in the model these sectoral productivity patterns generate implications that are broadly consistent with the cross country evidence on the structural transformation aggregate productivity paths and relative prices we show that productivity catch up in industry explains about 50 percent of the gains in aggregate productivity across countries while low relative productivity in services and the lack of catch up explains all the experiences of slowdown stagnation and decline observed across countries

the depressing effect of agricultural institutions on the prewar japanese economy why didn t the japanese miracle take place before world war ii the culprit we identify is a barrier that kept prewar agricultural employment constant using a standard neoclassical two sector growth model we show that the barrier induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level without the barrier japan s prewar gnp per worker would have been at least about a half of that of the united states not about a third as in the data the labor barrier existed because we argue the prewar patriarchy forced the son designated as heir to stay in agriculture

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

do individual retirement accounts increase savings do iras increase savings or are they merely a windfall for otherwise well off taxpayers a major objective of universal iras was to encourage saving for retirement a spirited debate has ensued over the use of ira tax deductions as a means of promoting private savings the crucial policy issue is not whether ira contributions were substantial they clearly were representing about 30 percent of personal savings from 1982 to 1986 rather the important question is the source of ira contributions iras can be financed out of 1 tax savings themselves 2 shifting existing assets into iras 3 borrowing 4 diverting new savings into iras or 5 reducing consumption the key question is how much of ira savings comes from reduced consumption for overall savings to increase private savings must increase by more than the tax savings conventional economic theory and evidence strongly suggests that iras were not effective savings incentives the challenge to this view rests largely on studies which have appealed to a variety of psychological factors not normally incorporated in economic analysis this paper reviews both types of analysis and concludes that the conventional view remains sound thus a dollar devoted to deficit reduction is likely to be a safer bet for increasing savings than a dollar devoted to ira benefits

the convergence of fiscal regimes and the decline of the tiebout effect i have argued that the spatial convergence of per capita incomes and income distributions lead to the spatial convergence of fiscal regimes and that convergence diminishes opportunities for tiebout type moves in the economy considerable empirical evidence confirms the hypothesis states with relatively low initial levels of taxation have had relatively higher growth rates of taxation low per capita income states have had higher growth rates of real per capita incomes than have had high per capita income states the high economic growth rate states have had lower growth rates of taxation than the low income growth rate states spatial convergence of per capita incomes is associated with spatial convergence of fiscal regimes furthermore there has been a spatial convergence in income distributions increased equality of income empirically is associated with increased size of the fiscal regime confirming the public choice insight the spatial convergence of fiscal regimes has diminished the gains from tiebout type moves as such fiscal convergence diminishes the opportunity for citizen voters to reveal their preference for collective goods through migration of course at the limit where per capita incomes and the income distribution are invariant spatially the spatial convergence of fiscal regimes makes the musgrave samuelson problem of revealed preference for collective goods as intractable at the state and local levels as at the national level tiebout type moves no longer allow escape from leviathan

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

agriculture and aggregation abstract we study the shape of the aggregate production function in the presence of land intensive agriculture the traditional cobb douglas formulation is corrected to include a diversification component the implied tfp differences across countries are larger than what solow residuals suggest

modernization of agriculture and long term growth abstract this paper develops a two sector model that illuminates the role played by agricultural modernization in the transition from stagnation to growth when agriculture relies on traditional technology industrial development reduces the relative price of industrial products but has a limited effect on per capita income because most labor has to remain in farming growth is not sustainable until this relative price drops below a certain threshold thus inducing farmers to adopt modern technology that employs industry supplied inputs once agricultural modernization begins per capita income emerges from stasis and accelerates toward modern growth our calibrated model is largely consistent with the set of historical data we have compiled on the english economy accounting well for the growth experience of england encompassing the industrial revolution

productivity growth in u s agriculture a postwar perspective there has been a long standing fascination with productivity trends in u s agriculture in part this stems from the historical importance of agriculture to the economy but it also reflects economists early and continued interest in quantifying the rate of return to society s sizable investment in agricultural r d the sum of government sponsored and private sector r d investment in agriculture is estimated to have been 268 million in 1953 in that year total r d investment in the economy from all sources amounted to 5 1 billion 2 excluding defense and space related r d which accounted for approximately half of the u s total in the early fifties 3 r d expenditures dedicated to agriculture equaled approximately 10 of total u s investment in r d from all sources

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

what drives the global land rush the authors review evidence regarding the size and evolution of the land rush in the wake of the 2007 8 boom in agricultural commodity prices and authors study the determinants of foreign land acquisition for large scale agricultural investment the use of data on bilateral investment relationships to estimate gravity models of transnational land intensive investments confirms the central role of agro ecological potential as a pull factor however this finding contrasts the standard literature insofar as the quality of the destination country s business climate is insignificant and weak tenure security is associated with increased interest for investors to acquire land in the country policy implications are discussed

wage growth landholding and mechanization in chinese agriculture this paper uses farm panel data from china to examine the dynamics of land transactions machine investments and the demand for machine services recently china s agriculture has experienced a large expansion of machine rentals and machine services provided by specialized agents which has contributed to mechanization of agricultural production the empirical results show that an increase in nonagricultural wage rates leads to expansion of self cultivated land size a rise in the proportion of nonagricultural income or the migration rate also increases the size of self cultivated land interestingly however relatively educated farm households decrease the size of self cultivated land which suggests that relatively less educated farmers tend to specialize in farming the demand for machine services has also increased if agricultural wage and migration rate increased over time especially among relatively large farms the results on crop income support the complementarity between rented in land and machine services demanded which implies that scale economies are arising in chinese agriculture with mechanization and active land rental markets

changes in sectoral composition associated with economic growth in this paper the author uses dynamic general equilibrium methods to examine the interrelationship between sectoral composition and growth she shows that growth is affected by sectoral composition and vice versa the model is basically a solow model of sustained growth with multiple consumption goods and nonhomothetic preferences each consumption good is produced using different factor intensities the rate of exogenous technological change is different in each sector nonhomotheticity of preferences drives the result that sectoral composition affects growth rates copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

all λ separable demands and rationalizing utility functions abstract frisch demands depend on prices and a multiplier associated with the consumer s budget constraint the case in which demands are separable in has been the case of greatest empirical interest since latent variable methods can be adopted to control for consumer wealth when estimating demands subject only to standard modest regularity conditions we show that quantities demanded are separable if and only if the rationalizing utility function is additively separable in these quantities

hybrid innovation in meiji japan japan s hybrid innovation system during the meiji era provides a useful laboratory for examining the effectiveness of complementary incentives to patents patents were introduced in 1885 and by 1911 1 2 million mostly nonpecuniary prizes were awarded at 8 503 competitions prizes provided a strong boost to patents especially in less developed prefectures and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes relative to distant control prefectures without prizes linking competition expenditures with the expected market value of patents induced by the prizes permits a cost benefit assessment of the prize competitions to be made

catching up in education in the economic catch up of japan with the united states 1890 1990 i the problem and the approach the record of modern economic growth a la simon kuznets shows that sustained increases in real national income in advanced market economies depend predominantly on improved efficiency as measured by the growth of total factor productivity tfp real national income is less dependent on increases in conventional inputs that is physical capital and labor in personhours with the strong advocacy of economists such as theodore schultz it has been established that investment in education is a major source of growth in tfp and hence national income estimations of the contribution of tfp to economic growth in advanced market economies have hitherto been limited to periods after these economies reached a stage of relatively high income however recent extensions of growth accounting analysis for earlier stages of industrialization in the united states as well as in japan show that the contribution of tfp growth to national income growth was relatively minor these historical findings are also consistent with other studies indicating that the contribution of tfp growth to economic growth was small in comparison to the contribution of physical capital accumulation in newly industrialized economies nies in recent decades such observations suggest that the role of education may be different between the earlier and the later stages of modern economic growth the validity of this hypothesis is critical for drawing relevant policy implications for developing economies from the historical experiences of developed economies nevertheless a comprehensive analysis on the role of education covering the entire span of modern economic growth has been stymied by the sheer

do all countries grow alike abstract this paper investigates the driving forces of output change in 77 countries during the period 1970 2000 a flexible modeling strategy is adopted that accounts for i the inefficient use of resources and ii different production technologies across countries the proposed model can identify technical efficiency and input change for each of three endogenously determined regimes membership in these regimes is estimated rather than determined ex ante this framework enables explorations into the determinants of output growth and convergence issues in each regime

appropriate technology and income differences this article studies the relative productivity of skilled to unskilled workers across countries relative productivities are broken down into the human capital embodied in skilled workers and relative physical productivities reflecting production techniques i find that skilled workers from poorer countries embody less human capital and are also relatively less physically productive furthermore results show that production techniques are inappropriate for most low income countries and these countries experience large increases in gdp per capita by increasing the relative physical productivity of skilled to unskilled workers this suggests that there are significant barriers to the adoption of skill complementary technologies

the effects of tax based saving incentives on government revenue and national saving this paper shows that previous analyses of ira type plans that seek to encourage household saving have miscalculated their effect on tax revenue and therefore on national saving by ignoring their favorable impact on corporate tax payments recognizing the important effects of ira plans on corporate tax revenue changes previous conclusions about the revenue loss in a fundamental way the revenue loss associated with iras either is much smaller than has generally been estimated or is actually a revenue gain

economic structure and factor payments there is a growing body of evidence that the labour payment share in national income varies across countries and over time suggesting that the popular aggregate cobb douglas production function may not capture income share dynamics there remains conflicting evidence on the importance of natural resource rents among low income economies and on estimates of the rate of return to produced capital this paper focuses on the structural differences among countries confirming the importance of the agriculture sector in estimates of labour and land s share of factor income based on 81 countries at diverse levels of economic development in the year 2005 i find that cross country data are best modelled by a ces production function with an elasticity of substitution of 0 8 and that many low income countries have a higher return to capital than the united states

assessing the effectiveness of saving incentives concluding that iras and 401 k s do increase saving this text provides a fresh cost benefit approach for analyzing the success of savings incentives it compares the new savings to the government tax revenue lost through contributions to iras and 401 k s

education and allocative efficiency household income growth during rural reforms in china this paper studies the contribution of schooling to rural income in china during factor market liberalization between 1986 and 1995 the relaxation of controls permitted farm households to reallocate productive inputs from agriculture to nonagricultural activities it is hypothesized that education facilitates this adjustment panel data from sichuan province suggest that schooling enhanced the ability of farmers to devote labor and capital to nonfarm production given the evidence that less than optimum levels of these inputs were allocated to nonagricultural uses during the transition the expansion of nonfarm activities contributed significantly to household income growth

structural change and cross country growth empirics one of the most striking features of economic growth is the process of structural change whereby the share of agriculture in gdp decreases as countries develop the cross country growth literature typically estimates an aggregate homogeneous production function or convergence regression model that abstracts from this process of structural change this paper investigates the extent to which assumptions about aggregation and homogeneity matter for inferences regarding the nature of technology differences across countries using a unique world bank dataset it estimates production functions for agriculture and manufacturing in a panel of 40 developing and developed countries for the period from 1963 to 1992 it empirically models dimensions of heterogeneity across countries allowing for different choices of technology within both sectors the paper argues that heterogeneity is important within sectors across countries implying that an analysis of aggregate data will not produce useful measures of the nature of the technology or productivity it shows that many of the puzzling elements in aggregate cross country empirics can be explained by inappropriate aggregation across heterogeneous sectors

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

china s mobility barriers and employment allocations china s hukou system imposes two main barriers to population movements agricultural workers get land to cultivate but are unable to trade it in a frictionless market social transfers education health etc are conditional on holding a local hukou we show that the land policy leads to over employment in agriculture and it is the more important barrier to industrialization effective land tenure guarantees and a perfect competitive rental market would correct this inefficiency the local restrictions on social transfers favour rural enterprises over urban employment with a relatively smaller impact on industrialization

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded