the phillips curve macroeconomic policy and the welfare of canadians a review of the two competing paradigms explaining inflation and unemployment fluctuations singles out the keynesian phillips curve as the clear empirical winner over its classic competitors reestimation of the canadian phillips curve for 1957 90 identifies a sharp structural shift toward a high degree of unemployment hysteresis after 1972 the recent attempt of macropolicy to flatten the aggregate demand curve and limit supply side shock accommodation which aims at lower and more stable inflation is then shown to make unemployment higher and more unstable on average to an extent that is an increasing function of the degree of hysteresis understanding and reducing hysteresis and developing a consensus based incomes policy that has a chance of alleviating the dismal trade off should therefore to top research and policy priorities

investment and market dominance we analyze a model of oligopolistic competition with ongoing investment special cases include incremental investment patent races learning by doing and network externalities we investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments to this end we derive a new comparative statics result for general games with strategic substitutes which applies to our investment game finally we highlight plausible countervailing effects that arise when investments of leaders are less effective than those of laggards or in dynamic games when firms are sufficiently patient

defensive strategies in the quality ladders abstract this paper analyses the potentially defensive behaviour of patent race winners and the ensuing effect on aggregate r d effort we propose a quality ladder model where leaders strategically acquire a technology advantage and are able to innovate in this context product market regulation by affecting this strategic behaviour may have either a positive or negative effect on aggregate r d intensity the negative effect is likely to pertain in liberal markets whereas the positive influence arises in more regulated environments and can be stronger for larger jumps in innovation these steady state equilibrium outcomes are consistent with the puzzling patterns in data from manufacturing industries in 14 oecd countries over the 1987 2003 period

global liquidity through the lens of monetary aggregates this paper examines how the financial activities of non financial corporations nfcs in international markets potentially affects domestic monetary aggregates and financial conditions monetary aggregates reflect in part the activities of nfcs who channel capital market financing into the domestic banking system thereby influencing funding conditions and credit availability periods of capital inflows are also those when the domestic currency is appreciating and such periods of rapid exchange rate appreciation coincide with increases in the central bank s foreign exchange reserves increasing the stock of narrow money the paper examines economic significance of cross country panel data on monetary aggregates and other measures of non core bank liabilities non core liabilities that reflect the activities of nfcs reflect broad credit conditions and predict global trade and growth

understanding innovation an analysis of persistence for spanish manufacturing firms abstract this study focuses on the persistence of innovation in a panel of spanish manufacturing firms for the period 1990 2008 in particular we analyse whether persistence in firms innovation activities over time is the result of previous experience the dynamic capabilities of the firm or industry market related characteristics we find that r d input and innovation output are highly persistent at the firm level after controlling for unobserved heterogeneity and initial conditions and by using a dynamic random effects probit we conclude that there are similar determinants of persistence in r d and innovative activities among external environmental factors market dynamism affects r d and innovation regarding firm specific characteristics size and outsourcing also have a positive impact on both processes past innovative behaviour is clearly more decisive in explaining the current state of r d and innovation activities than external factors or firm level heterogeneity

linear pigovian taxes and the optimal size of a polluting industry confusion surrounding the appropriateness of long run considerations in effluent regulation has arisen in the literature and recently carried over into textbooks we use a factor input model under oligopsony to show that when firms can influence the level of marginal damages a linear pollution tax does not satisfy the long run entry exit condition previous results to the contrary are shown to depend on restrictive assumptions efficient policy design requires a lump sum refund or any one of various non linear pricing schemes jel classification q2 l1 il y a beaucoup de confusion dans les debats qui entourent la reglementation des effluents et son caractere plus ou moins appropriea long terme tant dans la litterature specialisee que dans les manuels les auteurs tentent d eliminer cette confusion en analysant les emissions a l aide d un modele standard de demande d intrant quand les entreprises peuvent influencer la valeur presente des dommages marginaux un impot lineaire sur la pollution n entraine pas necessairement les decisions appropriees d entree et de sortie on peut corriger le probleme a l aide d un remboursement forfaitaire ou de l une ou l autre des formes de tarification non lineaire

is the price level tied to the m2 monetary aggregate in the long run a long run link between money and prices is evident for the united states since the korean war if the m2 measure of money is used and the velocity of m2 v2 is modeled as a mean reverting series this link between m2 and prices is the basis for a dynamic model of inflation that compares favorably in forecasting exercises with phillips curve and more typical monetarist approaches the behavior of v2 is examined from 1870 to the present providing a basis for reconsidering previous findings that v2 follows a random walk copyright 1991 by american economic association

common agency and coordination general theory and application to government policy making we develop a model of common agency with complete information and general preferences with nontransferable utility and we prove that the principals nash equilibrium in truthful strategies implements an efficient action we apply this theory to the construction of a positive model of public finance where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump sum taxes or transfers the lobbies use only the nondistorting transfers in their noncooperative equilibrium but their intergroup competition for transfers turns into a prisoners dilemma in which the government captures all the gain that is potentially available to the parties

patent length and the rate of innovation this paper models the effect of patent length on the rate of innovation and consumer welfare the authors find that the patent length that maximizes the rate of innovation exceeds that which maximizes consumer welfare they show a countervailing effect of patent length upon the size and frequency of innovation longer patents increase the size but decrease the frequency of innovation the patent lengths that maximize the rate of innovation and welfare represent balance points between size and frequency the divergence of the welfare maximizing and rate of innovation maximizing patent lengths has important policy implications that the authors briefly explore copyright 1996 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the determinants of an environmentally responsive firm an empirical approach abstract our empirical results indicate that a firm s formulation of an environmental plan is positively influenced by customer pressure shareholder pressure government regulatory pressure and neighborhood and community group pressure but negatively influenced by other lobby group pressure sources and a firm s sales to asset ratio firms which view environmental issues as important in the next 5 years are also more likely to have a plan relative to the manufacturing sector firms in the natural resource sector are more likely to formulate environmental plans while firms in the service sector are less likely to have plans our results provide insight into how firms react to environmental issues they also offer policymakers a list of determinants which can be used either as an alternative or complement to environmental regulation

a new test of money income causality this paper investigates the prima facie causal relationship between money and income employing a methodology the multiple rank f test the results of which are invariant to monotonic transformations of all variables and robust over alternative distributions of the errors in contrast to prior functional form dependent parametric analyses evidence of prima facie causality between money and income is found for the 1970 88 time period this evidence is consistent with an elementary theoretical framework in which the direction and strength of causality is dependent upon the definition of money copyright 1992 by ohio state university press

a general equilibrium analysis of the optimal number of firms in a polluting industry in partial equilibrium competitive models in which emissions are proportional to output the optimal output of individual firms in a polluting industry is the same with or without a pigouvian tax the same holds in general equilibrium only if the production function of those firms is homothetic the pigouvian tax increases the price of the polluting good reducing industry output and as a consequence the relative price of the input in which polluting firms are relatively intensive they will adjust their input ratios accordingly and if production functions are non homothetic this will either increase or decrease the level of output at which the total profit of the individual firm is zero une analyse en equilibre general du nombre optimal de firmes dans une industrie polluante dans les modeles concurrentiels en equilibre partiel la production optimale des firmes individuelles dans une industrie polluante est identique qu il y ait ou non une taxe a la pigou on obtient le meme rdsultat en equilibre general si la fonction de production de ces firmes est homothetique la taxe a la pigou augmente le prix du produit polluant reduit le niveau de production de l industrie et par voie de consequence le prix relatif de l intrant employe de fa9on relativement intensive par les firmes polluantes ces firmes vont ajuster les ratios d intrants en consequence si les fonctions de production ne sont pas homothetiques ces ajustements vont augmenter ou reduire le niveau de production qui correspond a un profit total nul pour la firme individuelle

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

the effect of punishment on firm compliance with hazardous waste regulations abstract this paper examines the effect of epa s dramatic 1991 increase in the penalties associated with violations of hazardous waste regulations on firm compliance although data from epa s rcra information system show an increase in detected violations after the penalty change once inspection levels are incorporated into the analysis through a censored bivariate probit model i find that violations have decreased since the penalty change however the decrease in violations appears small relative to the increase in recommended penalty levels i also find evidence that the likelihoods of inspection and compliance vary significantly across regions

a positive theory of environmental quality regulation this paper demonstrates that environmental quality regulation may enhance producer wealth while simultaneously reducing an externality problem by restricting access to common property regulation not only corrects a resource misallocation but it creates a scarcity rent as well in the recent history of environmental quality the common access problem has been addressed by federal and state agencies through a standards based approach rather than through the enforcement of tradable property rights as a consequence rents from the right to use these assets have accrued to producers the data are convincing that there is a strong interplay between producers consumers and the victims of pollution each party has some influence on the outcome and one sided analysis neglects many important aspects of regulation environmental quality regulation is complicated but many of the observed perplexities are consistent with a rent seeking self interest theory of government 46 references 1 figure 7 tables

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

why do manufacturing facilities introduce environmental management systems improving and or signaling performance abstract in this paper we explore the motivation for the introduction of environmental management systems and their certification a distinction is drawn between their role in bringing about better compliance or improved performance and as external indicators of good environmental practices to both other market participants and regulatory authorities drawing upon a database of approximately 4000 facilities in seven oecd countries empirical evidence is found for the role that both factors play in encouraging the adoption and certification of ems s but that the relative importance of different factors varies according to facility size

environmental policy in a federation with special interest politics and inter governmental grants the paper explores the potential effect of intergovernmental grants igg on sub national local environmental policy in a federal structure in the model a politically inclined local government receives campaign contributions from the polluters lobby in return for lower pollution taxes a benevolent federal government uses igg as an incentive to reduce the resulting distortion in the local pollution tax igg are formulaic transfers that are conditional on pollution levels lower pollution in a sub national jurisdiction relative to others translates into a higher share of the grant and vice versa in equilibrium the grant effect reduces the distortion created in the pollution tax by the lobby effect and may even lead to a higher than pigouvian tax when the local government assigns a large enough weight on social welfare and or when the grant is large enough further igg result in the tax levels of jurisdictions becoming interdependent in an interesting way environmental policies in two jurisdictions may become strategic complements or substitutes depending on their relative pollution levels the possibility of strategic substitution implies that federal welfare may not increase even when environmental policy becomes stricter in one state

growth with non drastic innovations and the persistence of leadership abstract in a model of endogenous growth with improvements in the quality of products i provide a new explanation of the persistence of leadership by assuming that innovations are non drastic and that the current leader has a move advantage in the next patent race under these circumstances the value of being leader exceeds temporary monopoly profit since the leader reaps an extra profit in the next patent race despite free entry by outsiders this will increase the incentive to innovate and hence the rate of growth which is higher than in the leapfrogging model however the welfare comparison of the leapfrogging and persistent leadership equilibria is ambiguous

the social choice of alternative corrective devices the social preference of corrective taxation to corrective subsidy or to a policy of no action at all is examined within the context of a simple general general equilibrium framework in which an external production diseconomy exists equilibrium positions are obtained for a number of different parameter sets and resource endowments for each equilibrium position different mechanisms are introduced as procedures for distributing revenues accruing to a central authority which administers the corrective tax or for collecting revenues to finance a subsidy programme the only income redistribution which occurs in this economy is through these distribution mechanisms any change in policy regarding the correction of allocation inefficiencies resulting from the existence of externalities in the economy will be reflected in changes in prices of both final goods and resources and the resulting income redistribution necessitated by the need for revenues by the central authority or the need to reduce tax collections from individuals if a corrective tax yields revenues from an industry to maintain a balanced budget constraint in an economy in which no government goods are produced a tax reduction implies transfers to individuals within this framework the following results emerge 1 if the distribution mechanism is regressive proportional or progressive the corrective tax will always be preferred to the corrective subsidy as a method for internalizing external costs only under extreme progressivity does this support become unanimous in all other situations only the agents controlling the one particular resource which identifies the firm will oppose the choice of the tax 2 the status quo equilibrium will also be preferred to the equilibrium resulting from the use of a corrective subsidy again this result occurs consistently and with the same coalition of agents supporting the status quo as supported the corrective tax 3 only under the proportional mechanism is the corrective tax preferred consistently to a do nothing policy if the distribution mechanism is progressive or regressive there exist situations in which the status quo equilibrium state will be preferred by a majority of individuals to the state resulting after corrective action is taken and resources are efficiently allocated as progression increases the likelihood of the corrective tax finding support from a majority of the agents in this economy tends to fall 4 while majorities may exist they appear to be tenuous at best in many situations the difference between utility levels is at times very small and with the introduction of transaction costs associated with casting a vote some individuals may find it less costly to abstain from voting in cases such as these a majority of those voting may oppose an alternative which would have been supported had transaction costs not been introduced there is also the problem of whether or not individuals actually perceive small differences in utility from state to state however since the model has demand functions based upon individuals who maximize a particular utility function it would be inconsistent to assume that as consumers they are aware of their utility when choosing between different commodity bundles but when comparing alternate states they suddenly have a perception problem the assumption of threshold perceptions for utility differences would require the development of an entirely different demand function this extension does not appear to be as profitable as the introduction of transaction costs 5 the distribution mechanism and the progressivity of the mechanism are exogenously determined the convention that voters choose from among competing corrective devices but do not choose the degree of progression or the specific form of the mechanism could be relaxed the easiest extension of this work can include both the choice of the progressivity of the distribution mechanism and the choice of the corrective device 6 a further extension of this work could include a role for the central authority within the equilibrium framework as a user of resources not only may voting carry a cost but the implementation and monitoring of corrective policies require resources this results in incentives in conflicting directions the costs involved in administering a programme reduce the potential gains to consumers while the expansion of an industry the central authority provides benefits to others bureaucrats to the extent that the resources used in the production of corrective policies gain particular groups may find income increases which offset price increases and make a costly corrective scheme more desirable than no action at all 7 another valuable extension of this work would be to generalize the production and utility functions to examine the implications of the model with variable elasticities of substitution between the inputs used in the two industries a further change within this framework would be to introduce an externality which results in increasing marginal damages rather than the decreasing marginal damages exhibited in this model

friedman s velocity hypothesis abstract the purpose of this note is to report tests of friedman s velocity hypothesis that money growth volatility affects velocity in the case of france the evidence provides some additional support for this hypothesis however the evidence is less clear out than the one found in studies of other industrial countries

innovation and industry evolution the theoretical literature on innovation has been concerned with a single innovation produced by a number of identical agents by contrast we consider a market in which one firm is the current incumbent while the remaining firms are challengers moreover we consider a sequence of innovations so that success does not imply that the successful firm reaps monopoly profits forever after but only until the next better innovation is developed we begin with a fully optimizing behavioral model and derive the equivalent of the schumpeterian process of creative destruction that is a firm enjoys temporary monopoly power but is soon overthrown by a more inventive challenger the essential point to grasp is that in dealing with capitalism we are dealing with an evolutionary process the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers goods the new methods of production or transportation the new markets the new forms of industrial organization that capitalist enterprise creates schumpeter 1942 pp 82 83

how pollution taxes may increase pollution and reduce net revenues this paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments environmental and industry lobby groups influence governments with campaign contributions first pollution may increase in the pollution tax because the abatement subsidy increases decreases with the tax and pollution increases decreases in the abatement subsidy this occurs because the lobbying incentives change at a pollution tax reform second pollution taxes may reduce net revenues because subsidy expenditures rise third pollution may increase simultaneously as net revenues fall finally the welfare effect of a pollution tax may be negative

the dynamic study on firm s environmental behavior and influencing factors an adaptive agent based modeling approach employing an adaptive agent based modeling approach the present study explored the evolvement of firms environmental behavior and influencing factors using empirical data from 167 firms in china the simulation results revealed that firms environmental behavior followed this evolvement path defensive behavior preventive behavior and enthusiastic behavior computational experiments indicated that with increased financial ability and level of environmental preparedness the number of firms in all three categories of environmental behavior increased and so did their profits with increased public pressure the number of firms with defensive environmental behavior and their profits decreased but the number of firms with preventive and enthusiastic environmental behavior and their profits increased on the other hand when managers education level increased the number of firms with defensive behavior deceased but their profits increased slightly though the number of firms with preventive and enthusiastic behavior and their profits increased sharply in addition with the increased regulation level the number of firms with a different category of environmental behavior and their profits decreased finally with increased financial subsidy and market share the number of firms with different behavior and their profits were modified slightly

environmental protection in the federalist system the political economy of npdes inspections i introduction federal regulatory programs from occupational safety to protection of the environment are implemented jointly by national and state agencies more broadly almost all regulatory programs involve some delegation to branch offices meat inspections or regional districts tax collection given the pervasiveness of regulatory federalism surprisingly little research has been done on the political consequences of delegating national policy to local actors in particular the small but growing literature on the politics of regulation has almost completely ignored the role of federalism in implementing regulatory policy 1 perhaps the most widely accepted model of bureaucratic decision making peltzman s 1976 model of support maximization implies that delegation can have a profound impact on the implementation of regulatory policy peltzman s model posits that regulators maximize support while minimizing opposition in the context of environmental protection a rational regulator would calculate the marginal support from pollution abatement generated by inspecting a given plant and equate that to the marginal opposition arising from job loss generated by that action pashigian 1985 points out that in environmental legislation local and national interests are unlikely to be identical because industry the primary target of pollution control measures has an uneven geographic distribution thus a local regulator performing peltzman s calculation is quite likely to reach a very different decision than a national regulator this paper examines the extent to which local regulators are able to respond to local interests when enforcement of a national policy has been delegated to them there are three possibilities one is that delegation of enforcement to local government represents a complete abdication of control by the federal government at the other extreme is the possibility the federal government can delegate with no loss of control because of its ability to enforce its goals through the use of threats loss of authority over the program and incentives additional grant money the third possibility is that both local and national interests can influence a delegated program the federal government will lose some control when it delegates but the loss will not be total the clean water act of 1972 is one of the largest federal regulatory programs ever delegated to the states under the act the federal government took over the previously state level responsibility for regulating water pollution 2 under the clean water act industrial polluters are issued permits which specify types and amounts of pollutants allowed in effluent discharged during a given time period these limits are set by state or regional authorities but must conform to minimum national standards permit writers may consider the desires of the local community if those desires demand more stringent standards than the federal minimums but may not respond to community demands for lower standards local communities with considerable employment in the industry for example might want a lower standard than the federal mandate although a politically minded regulator does not have the ability to actually grant a permit with a lower standard a second source of discretion is available in the form of selective enforcement while permits are difficult enough to issue they are meaningless without some method of verifying compliance 3 the state or regional environmental protection agency epa conducts regular on site inspection of polluters although the epa requests that delegated states inspect polluters at least once a year it is not required in practice states have considerable discretion on how and when to inspect polluters this should not come as a surprise there are 7 500 npdes facilities in the country variation in state performance could be due to location alone this study using data from the epa s permit compliance database which tracks compliance with the clean water act analyses plant level inspection violation and effluent discharge data

sustainable production and consumption systems cooperation for change assessing and simulating the willingness of the firm to adopt develop cleaner technologies the case of the in bond industry in northern mexico abstract over the last decade literature on the greening of industry and environmental policy has provided numerous important insights into the determinants of the firm s innovative behaviour in cleaner technologies however this literature still lacks empirically tested theoretical models this paper contributes to fill this gap proposing a definitional system that enables the testing of hypotheses of dependence between willingness to innovate in cleaner technologies and its determinants and to explore the conditions under which the firms innovative behaviour could be fostered regression and simulation outcomes indicate against the general wisdom that stringent environmental regulation without consideration to the dynamics of technical change and environmental and economic risk perceptions in the part of firms would play against the promotion of innovation in cleaner production

information as regulation the effect of community right to know laws on toxic emissions abstract there is growing academic and policy level interest in the use of information as quasi regulatory mechanisms such as toxic release inventory tri and green labels mandatory disclosure requirements have been touted as market based incentives that may affect firm behavior we provide new evidence on the effectiveness of disclosure requirements by examining firm behavior in response to disclosures of tri emissions we find that firms with the largest stock price decline on the day this information became public subsequently reduced emissions more than their industry peers this is consistent with the view that financial markets may provide strong incentives for firms to change their environmental behavior

antitrust in innovative industries we study the effects of antitrust policy in industries with continual innovation antitrust policies that restrict incumbent behavior toward new entrants may have conflicting effects on innovation incentives raising the profits of new entrants but lowering those of continuing incumbents we show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed we apply this framework to analyze several specific antitrust policies we also show that in some cases the tension does not arise and policies that protect entrants necessarily raise the rate of innovation

the search for a stable money demand function a survey of the post 1973 literature phe question of whether the demnand function for money is stable is one of the most important recurring issues in the theory and application of macroeconomic policy what is being sought in a stable demand function is a set of necessary conditions for money to exert a predictable influence on the economy so that the central bank s control of the money supply can be a useful instrument of economic policy as such the notion of a stable demand function appears to involve three key elements e g john t boorman 1976 p 317 and david e w laidler 1977 pp 34 35 first the demand for money relation should be highly predictable in a statistical sense as measured by the usual goodness of fit statistics precision of estimated coefficients and presumably its ability to forecast accurately out of sample second a stable demand function for money has relatively few arguments a relationship that requires knowledge about a large number of variables in order to pin it down is in effect not predictable finally the variables that appear as arguments in the function should represent significant links to spending and economic activity in the real sector in sum a stable demand function for money means that the quantity of money is predictably related to a small set of key variables linking money to the real sector of the economy the importance of a stable money demand function for monetary policy can be illustrated with the standard is lm model in which interest rates and gnp are the endogenous variables in this context a stable demand function for money translates into a well defined relationship between money interest rates and gnp

endogenous market structures and innovation by leaders an empirical test models of competition for the market with endogenous market structures show that contrary to the arrow view an endogenous entry threat induces the average firm to invest less in r d and the incumbent leader to invest more we test these predictions using a unique dataset for the german manufacturing sector the mannheim innovation panel in line with our predictions endogenous entry threats as perceived by the firms in survey data reduce r d intensity for an average firm but they increase it for an incumbent leader these results hold after a number of robustness tests with instrumental variable regressions

fear of nuclear war and intercountry differences in the rate of saving fear of nuclear war and intercountry differences in the rate of saving joel slemrod i introduction and review of previous literature can differences in the perceived likelihood of nuclear war explain intercountry differences in saving behavior the analysis presented in this paper based on recent international surveys of attitudes concerning the likelihood of world war suggests that the answer to this question is yes holding other determinants of saving constant a country s saving rate is lower the greater is the fraction of its population that believes a world war is imminent the hypothesis that changes in public perceptions of the likelihood of a nuclear war influence the rate of saving first proposed in slemrod 1982 is consistent with the behavior of an expected utility maximizing consumer faced with a changing probability of the survival of oneself and one s heirs whether the relationship is of quantitative significance is another question the evidence examined to date while not conclusive suggests that it may be slemrod 1986 shows that holding other determinants of saving constant two separate indices of fear of nuclear war have a statistically significant negative correlation with the u s net private saving rate between 1948 and 1984 the analysis suggests that a diminution in the fear of war from its highest postwar level to its lowest postwar level is associated with an increase of 1 7 percentage points in the net private saving rate compared to an average value of 10 6 over this period note that during this period as many as 53 percent of americans believed that the chances of a nuclear war occurring within ten years were at least 50 50 hendershott and peek 1985 1989a using several alternative definitions of savings and investigating other influences on saving also find that increased fear has tended to reduce saving in the postwar u s economy they also hendershott and peek 1989b contend that changes in nuclear fear are an important factor in the movement of real interest rates in the 1970s and 80s while russett and lackey 1987 find no consistent relationship between savings fear of war at the aggregate level for several advanced countries their analysis of individual data from the u s national election survey indicates that for individuals who did some saving actual saving is negatively related to fear of nuclear war they conclude that the most appropriate data set is consistent with the hypothesis that fear of nuclear war reduces saving 1 ii methodology data and results in recent years the gallup international research institutes have annually conducted a poll in as many as thirty three countries concerning attitudes about the likelihood of world war 2 the poll in each country asks a random sample of individuals to assess on a zero to ten scale the likelihood of a world war breaking out in the next ten years 3 table i ranks the countries surveyed in 1986 according to the fraction or respondents who felt that the chance of world war was 50 percent or greater within the next ten years most striking to a student of saving behavior is that the u s stands at the top of the list with 49 percent of the respondents indicating at least a 50 50 chance of a world war occurring within ten years also of special interest is that japan which has had exceptionally high saving rates is near the bottom of the list with only 15 percent of those interviewed professing to a high fear of world war table table i fraction of respondents saying in 1986 that the chance of world war within ten years is 50 percent or greater by country united states 49 italy 22 south africa blacks 49 italy 22 ecuador 45 norway 21 chile 43 austria 20 colombia 42 great britain 20 australia 38 south korea 19 uruguay 38 denmark 18 brazil 34 greece 18 canada 34 luxembourg 18 south africa whites 33 switzerland 18 india 30 west germany 18 argentina 30 finland 17 philippines 27 hongkong 17 ireland 25 japan 15 portugal 25 sweden 15 belgium 24 turkey 15 france 24 netherlands 14 source the gallup poll released january 11 1987

campaign contributions as investments the u s house of representatives 1980 1986 this paper treats the market for special interest campaign contributions and political favors as a simple asset market the model yields a simple equilibrium relationship among three variables the total amount of investor contributions a candidate receives the monetary value of the favors he has promised and his probability of winning using data on open seat races for the u s house of representatives i confront the model with a series of tests despite the starkness of the model the results of these tests are highly supportive

is there a role for commodity prices in the design of monetary policy some empirical the consumer price index in the united states follows a non trend stationary stochastic process that describes the index as drifting randomly upward without bound monetarists have long pointed to similar properties in the time series of monetary aggregates as the source of this incipient inflation their solution to this problem is close adherence by the central bank to targets for a monetary or reserve aggregate that correspond to slow and steady monetary growth with any periods of excessive monetary growth subsequently offset this would produce monetary series that are trend stationary if the demand for money is reasonably stable price series would also become trend stationary and for properly chosen targets the price level would be bounded with a mean inflation rate of zero

the political economy of environmental regulation towards a unifying framework there are several theories that attempt to explain various aspects of environmental policy building on insights from this theoretical work and recent advances in our understanding of instrument performance this paper constructs a more complete theory of environmental regulation there are two primary contributions of this research the first is to provide more satisfactory explanations for a number of observed patterns of environmental policy for example there is as yet no satisfactory theory about the emergence of incentive based mechanisms such as marketable permits and effluent fees the second contribution of this paper is to develop a parsimonious framework for understanding many important aspects of environmental policy this framework suggests the outputs of environmental policy emerge from a struggle between key interest groups

short run money demand abstract the conventional wisdom holds that the short run demand for money is unstable this paper challenges the conventional view by finding a stable demand for m1 in u s data from 1959 through 1993 the approach follows previous work in interpreting long run money demand as a cointegrating relation and it uses goldfeld s partial adjustment model to interpret short run dynamics the key innovation is the choice of the interest rate in the money demand function most previous work uses a short term market rate but this paper uses the average return on near monies the savings accounts and money market mutual funds that are close substitutes for m1 this choice helps rationalize the behavior of money demand in particular the increase in the volatility of velocity after 1980 is explained by increased volatility in the returns on near monies

general wisdom concerning the factors affecting the adoption of cleaner technologies a survey 1990 2007 abstract cleaner technologies ct have recently received much attention in diverse media and policy agendas this comes out of the clear role they play in environmental protection and sustainability and the large potential to contribute to economic growth and competitiveness the realization of both potentials depends on the level diffusion and exploitation achieved today very low this article presents a selective survey of papers that today represent the general wisdom concerning the factors affecting adoption as a primary condition to diffusion and exploitation of ct the paper helps to clarify the challenges facing diffusion modelers and policy makers when dealing with policy design assessing the levels of diffusion achieved as well as the factors affecting diffusion of a particular technology the paper ends outlining further research need in the field

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

the effect of emission taxes and abatement subsidies on market structure comment abstract conrad and wang 1993 international journal of industrial organization 11 499 518 determine that a tax on emissions decreases the total output of a polluting industry but if demand is sufficiently inelastic can increase the number of firms in that industry this follows from their proposition that the tax reduces the scale of the polluting firm in contrast the scale of the polluting firm in the present model increases when there are increasing returns to scale in abatement whereas conrad and wang extend their results to cases of monopolistic competition the present paper is confined to perfect competition but extends the analysis to the pollution damaged industry

an agent based analysis of the german electricity market with transmission capacity constraints while some agent based models have been developed for analyzing the german electricity market there has been little research done on the emerging issue of intra german congestion and its effects on the bidding behavior of generator agents yet studies of other markets have shown that transmission grid constraints considerably affect strategic behavior in electricity markets in this paper the implications of transmission constraints on power markets are analyzed for the case of germany market splitting is applied in the case of congestion in the grid for this purpose the agent based modeling of electricity systems ames market package developed by sun and tesfatsion is modified to fit the german context including a detailed representation of the german high voltage grid and its interconnections implications of transmission constraints on prices and social welfare are analyzed for scenarios that include strategic behavior of market participants and high wind power generation it can be shown that strategic behavior and transmission constraints are inter related and may pose severe problems in the future german electricity market

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

intellectual property rights in a quality ladder model with persistent leadership this paper analyzes the effects of intellectual property rights in a quality ladder model of endogenous growth in which incumbent firms preemptively innovate in order to keep their position of leadership unlike in models with leapfrogging granting forward protection and imposing a non obviousness requirement reduces growth in the main case where entrants and incumbents have free access to the same r d technology infinite protection against imitation granted independently of the size of the lead maximizes growth if entrants have to engage in costly catch up before they can undertake frontier r d growth is maximal for a finite expected length of protection against imitation

the political economy of trade liberalization and environmental policy a pressure group model where environmental and industry lobby groups offer political support in return for favorable pollution tax policies is used to explain and predict the equilibrium pollution tax in sectors protected by tariffs the political economy effects of trade liberalization are investigated the pollution tax is shown to decrease if the lobbying effort by the environmental lobby decreases more rapidly than by the industry lobby ceteris paribus the level of political conflict falls with trade liberalization pollution may increase because of a reduction of the pollution tax and tax revenues may fall simultaneously as pollution increases the global trading system is currently undergoing another round of multilateral trade liberalization and regional economic integration is occurring in several parts of the world the trade environment link has become an important part of trade liberalization talks it is commonplace for industry representatives to argue that less stringent environmental regulations give less developed countries ldcs a comparative advantage in pollution intensive goods and that industries with high abatement costs will migrate to ldcs environmentalists argue that international differences in environmental laws and regulations may be reduced to their lowest common denominator through political pressure this is not a fear of trade liberalization itself but of the effects of lower trade barriers on the political determination of environmental regulation

when subsidies for pollution abatement increase total emissions in a first best deterministic world it is well known 2 28 30 that a unit tax on emissions equal to marginal damage is an efficient mechanism for internalizing the damages caused by polluting firms a unit subsidy for emissions abated also equal to marginal pollution damage has the same desirable property but only in the short run in the long run such subsidies induce polluting firms to operate at too small a scale and attract an excessive number of new firms to the polluting industry this can have the perverse result that there are more emissions when abatement is subsidized than when it is not nevertheless economists have been reluctant to give up entirely on the subsidy approach recognizing with oates 23 290 that polluters will obviously be far more receptive to measures that assist with the costs of pollution control than to those that place the burden upon themselves it is therefore not surprising that economists have continued to look for and find new justifications for subsidizing pollution control thus mestelman 20 187 argues that the subsidy scheme may be a second best alternative for externality control when the direct taxation alternative is not politically viable mchugh 17 64 shows that subsidies for pollution abatement expenditures can be a useful instrument in the case of cost increasing technological innovations harford 6 demonstrates that subsidies for pollution control inputs may be efficient when enforcement is sufficiently costly harford 7 makes still another argument for subsidies in the case in which the day to day performance of abatement equipment is uncertain but the uncertainty can be reduced by maintenance expenditures finally there are schemes for combining subsidies and taxes 14 26 given the continuing interest in subsidies it is important to examine carefully the disturbing case in which subsidies increase rather than decrease total emissions

policies influencing cleaner production the role of prices and regulation abstract low prices of inputs low costs associated with non product outputs and poor regulatory forcing have often not been conducive to diffusion of cleaner production however developments may be noted in the field of taxation subsidies liability and permits that tend to be more favourable to cleaner production extension thereof may favour cleaner production more in the future cleaner production stands to gain much by slashing subsidies and substantial ecotaxation of inputs and non product outputs similarly the regulatory enforcement of best available technologies liability for waste and tradable permits may help the diffusion of cleaner production

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

breaks in money demand during the last twenty years beginning with the provocative paper by goldfeld 5 that revealed the case of the missing money the question of whether money demand the relationship between money income and an interest rate is stable has been intensively investigated using a variety of econometric techniques currently the most popular framework for examining the behavior of money demand is the cointegration framework in this framework the stationarity of money demand instead of the stability of money demand is evaluated earlier tests of the stability of money demand typically centered on whether the coefficient estimates were stable i e not subject to a structural break these tests did not consider the underlying time series aspects of the variables in money demand or the time series properties of their joint relationship prior to estimation as is now common given the seminal work of engle and granger 1 since then newer tests have focussed on the time series properties of the money demand variables and whether the joint relationship between the variables is stationary i e whether the variables are cointegrated engle and granger 1 and johansen and juselius 10 offer cointegration estimation procedures that have been applied by numerous researchers to the money incomeinterest rate relationship the pervasive finding is that money demand is non stationary see section ii below structural stability has not typically been a facet of investigation however the issues of stationarity and stability should not necessarily be treated independently failure to take account of structural change may bias the results in favor of non stationarity as shown in perron 16 1 history suggests that the economic environment and monetary institutions regulations and operating procedures have changed over time in the early 1970s the fixed exchange rate system collapsed when the gold exchange standard was abandoned and the u s dollar became a fiat currency during that same time the u s suffered an oil price shock that produced accelerating inflation and stagnant gdp growth an outcome that had never before been experienced in

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

politics and social costs estimating the impact of collective action on hazardous waste facilities firms that generate negative externalities may consider the effects of their location on the surrounding environment because of the right of their prospective neighbors to demand compensation for pollution and raise the transaction costs of location since communities vary both in the value individuals place on the environment and in the ability of residents to organize politically locations that generate the least political opposition may not be the locations that result in the lowest externalities this article tests whether the degree to which firms internalize their externalities depends on the ability of affected communities to engage in collective action the results indicate that firms processing hazardous waste when deciding where to expand capacity do take into account variations in the potential for collective action to raise their costs

are contributors rational untangling strategies of political action committees empirical public choice literature and casual observation suggest that the behavior of political action committees is remarkably unsophisticated meaning that pacs give to those legislators who would support their interests anyway thus it is suggested that contributor behavior deviates from rational behavior which is a cornerstone of economic analysis in this paper a switching regression model is estimated that allows for strategies of pacs to vary for different contribution recipients i analyze the behavior of farm pacs over three election cycles in contrast to previous findings i find that contributor behavior is not inconsistent with rational behavior contributors who attempt to influence the voting behavior of members of congress give the most money to legislators whose constituency interest suggests that they are likely to be undecided on how to vote and pacs give less money to legislators who represent districts with larger farm populations because those legislators are likely to vote in con

is there persistence in innovative activities abstract this paper examines firm innovative persistence using patent applications of 577 uk manufacturing firms non parametric techniques show the empirical distributions of patents are neither geometric nor poisson there exists a threshold effect represented by the first patent the probability to go from zero to one patent is uniformly much lower than from n to n 1 patents with n 1 transition probability matrices show little persistence in general but strong persistence among great innovators that account for a large proportion of patents requested innovative activities at least which are captured by patents are persistent there is heterogeneity across industrial and size classification

what causes over investment in r d in endogenous growth models endogenous growth models may exhibit either under or over investment in r d the possibility of over investment is generally attributed to a business stealing effect that arises as the latest innovator destroys and or appropriates previous incumbent s rents we argue that this conventional wisdom is misleading in standard models business stealing by itself cannot result in excessive r d we explain the other effects that must be at work here thus contributing towards a better understanding of when and why the market may be biased towards excessive r d

causal relationships among economic aggregates in china using china s macro data from 1952 to 1989 the stationarity and causality tests to two types of economic aggregates are applied the first type relates to the conventional money income and consumption relationship and the other is associated with the interest rate money and investment income relationship as embodied in a financial repression model stationarity test results show that a different direction of causality exists when different measurement of price is used a causal relationship between interest rate money and investment income is also found

the persistence of innovative activities abstract this paper examines the persistence of innovative activities at the firm level in a comparative perspective a new data set is used composed of six panel data one for each of the following countries france germany italy uk japan and the usa for each country we use data on patent applications to the european patent office in the period 1978 1993 by 1200 1400 manufacturing firms using a transition probability matrix tpm approach we find evidence for the existence of persistence in innovative activities although it is not very high in the aggregate and it declines as time goes by however both great innovators and non innovators have a high probability to remain in their state and persistent innovators originate a disproportionate share of innovative activities in this sense persistence in innovative activities is quite strong these tendencies apply to all countries considered here although clear country specific properties are observed moreover there is heterogeneity also across industrial and size classification intersectoral differences are invariant across countries suggesting that persistence is at least partly a technology specific variable persistence tends to increase with firm size but the relationship between firms size and persistence is strongly country specific and it is not a simple one

the effect of emission taxes and abatement subsidies on market structure abstract emission taxes and abatement subsidies are considered to be efficient measures for environment protection the purpose of this paper is to quantify their effects on industry output firm output and on the number of firms in the industry three types of market structure are under discussion perfect competition oligopoly and a dominant firm with a competitive fringe it turns out that emission taxes and abatement subsidies affect the structure of the polluting industry in opposite ways while the effects on industry s emissions are similar in direction but different

lessons on monetary policy from the 1980s t he half decade running from mid 1982 to mid 1987 was a pretty good era for u s monetary policy as these things go a sharp easing of policy beginning some time around midyear 1982 helped set in motion a recovery from the most severe business downturn the united states had experienced since the 1930s a downturn that tight monetary policy earlier on had deliberately brought about in order to slow the alarming acceleration of prices the recovery that ensued developed into a sustained expansion that continued without interruption through the end of 1987 thereby setting a new record for the longest recorded business expansion in u s peacetime experience a fiscal policy based on unprecedentedly large and continually growing structural budget deficits was a major factor underlying this record length expansion but at least monetary policy did not stand in the way just as importantly the severe 1981 82 recession served its intended purpose of substantially restoring price stability and even after five years of expansion inflation remained modest by recent historical standards at least as judged by these outcomes for the standard objectives of macroeconomic policy u s monetary policy was a distinct success during these years economists hoping to say something useful about monetary policy have had a tougher time the quantitative relationships connecting income and price movements to the growth of familiar monetary aggregates including especially the m1 measure of the money stock that had been the chief focus of monetary policy during 1979 82 utterly fell apart during this period moreover the collapse of these long standing

production externalities and corrective subsidies a general equilibrium analysis abstract several recent attempts have been made to demonstrate that corrective subsidies and taxes do not have symmetric allocation effects these demonstrations have utilized graphical partial equilibrium analysis in this paper a general equilibrium model is introduced to show that a standard partial equilibrium result may be incorrect and that subsidies may lead to equilibrium states which are socially preferred to the status quo position

cleaning up while cleaning up pollution abatement interest groups and contingent trade policies this paper analyzes the political economy of environmental policy formation in a trading economy with established rules for administered protection we argue that the social costs associated with the adoption of an inefficient environmental regime are likely to be compounded by induced restrictions on trade when the effected industries are import competing the preferences of interest groups for alternative environmental regimes tend to be linked to the legal institutional setting in which trade policy is conducted under existing rules and practices in the area of administered protection there is reason to believe that interest group preferences for an inefficient approach to pollution control will be strengthened because the adoption of such a regime is more likely to lead to a concomitant increase in trade barriers

treasury bill rates in the 1970s and 1980s as is widely recognized real interest rates in the early 1980s were at peaks not witnessed since the late 1920s less well perceived is the sharp decline in real interest rates in the middle 1980s to their average levels of the previous quarter century this paper seeks to identify the underlying determinants of the major movements in real six month treasury bill rates the primary innovation is the development of a new monetary policy proxy that explains much of the real rate movement in the 1980s copyright 1992 by ohio state university press

innovation by heterogeneous leaders we develop a schumpeterian growth model in which leaders and followers conduct research and development rd this result is consistent with the actual behaviors of some previous leader firms such as sony and eastman kodak moreover we show that subsidizing the r d of followers can promote the aggregate r d of leaders because promotion of followers r d decreases increases the number of leaders with larger smaller quality leads and smaller larger r d investments

rent seeking and its implications for pollution taxation one of the fundamental insights gained from the study of economics comes from an understanding of how market prices arising from private property and exchange can motivate efficient responses to the problem of scarcity not surprisingly when private property rights and market exchange are deemed not to be feasible for either technological or political reasons economists have overwhelmingly recommended that politically imposed prices be employed as surrogates for market prices the most extensively discussed example of this in the literature is the use of pollution taxation as a means of motivating polluters to take the full cost of their polluting activities into account 1

the marginal efficiency effects of taxes and subsidies in the presence of externalities a computational general equilibrium approach abstract using 1983 data we develop a 19 sector computational general equilibrium model incorporating producer producer externalities and producer consumer externalities simulation results indicate that when additional government expenditure is financed by pigouvian taxes the marginal cost of public funds is substantially below one labor sales and output taxes also affect the output of the polluting industries and thus have indirect pigouvian effects which tend to reduce the associated marginal costs of public funds pigouvian taxes are usually more efficient than pigouvian subsidies since the tax revenue can be used to reduce other taxes

service induced campaign contributions and the electoral equilibrium candidates for office are modeled as promising services such as support for legislation and intervention in the bureaucracy to interest groups in exchange for campaign contributions an electoral equilibrium is characterized in which candidates choose service contribution offers and interest groups choose whether to contribute the model provides several explanations of congressional incumbents success in over 90 percent of their reelection contests a recognition advantage a high personal valuation of the office a lower cost of providing services and policy alignment with high demand interest groups the model yields predictions that are consistent with empirical findings on the relation between campaign contributions and election outcomes