bluuebunny/crossref_metadata_2025_split huggingface dataset:
Technology Adoption in Follower Countries: With or Without Local R&D Activities?
Authors: Todo Yasuyuki 
Published: December 2005

Abstract
Technology adoption in follower countries can be accomplished by local R&D activities, but it can also be achieved without formal R&D, for example, by foreign direct investment. Empirical evidence suggests that current R&D activities often expand local knowledge for future R&D, while adoption without R&D does not seem to have this effect. We formalize this idea in a quality-ladder growth model and find that this biased externality results in multiple steady states: In the long run, countries with sufficient initial knowledge and human capital converge to a state in which R&D is locally undertaken and thus become relatively rich, while other countries fully rely on technology adoption without R&D and stay poor. Switching regression using cross-country data supports the presence of multiple steady states in R&D expenditures.
Should Developing Countries Strengthen their Intellectual Property Rights?
Authors: Angeles Luis 
Published: December 2005

Abstract
This paper evaluates the welfare consequences of implementing intellectual property rights in developing countries. The protection of intellectual property in poor countries promises to increase world innovation, but this would not come without costs. Higher prices for consumers in that part of the world are the negative side of this policy.We present a general equilibrium model with two regions (the North and the South) to compare these two effects. Our main contribution is to show that the results will depend on the difference in economic development (represented by labor productivity) between the two regions. The South might suffer a net welfare loss if its productivity level is very low with respect to the North.
Vertical Diversity, Communication Gap and Equilibrium Growth
Authors: Das Satya P 
Published: December 2005

Abstract
This paper examines the effect of vertical diversity in workers' skill on the long-run growth rate of an economy. It uses a two-sector model where the technology of the consumption-good sector is supermodular and that of the R&D sector is submodular. By adopting Grossman and Maggi's (2000) model to a framework of growth, it shows first that diversity is conducive to growth. As the main innovation, a notion of communication gap is introduced among workers. It is shown that if vertical diversity is sufficiently high relative to the communication gap, the growth rate may not increase with diversity; there may be an inverse-U shaped relationship.
Aggregate Price Changes and Dispersion: A Comparison of the Equity and Goods and Services Markets
Authors: Parsley David C. , Popper Helen A. 
Published: December 2005

Abstract
Many existing studies have found a correlation between inflation and price dispersion in goods markets. In this paper, we document that a similar correlation can be found in equity markets. We estimate the correlation between overall price changes and dispersion in the NYSE and in the NASDAQ. Using quarterly data from 1975 to 1999, we compare the stock market correlations with those of goods markets. We find striking correlations in both sets of markets. The most prominent explanations of the goods market correlation (such as menu costs) cannot plausibly apply to equity markets. Thus, our findings indicate that the correlation appears to be more widespread than can be accounted for by the usual explanations.
The Buffer-Stock Consumption Model with Endogenous Income Shifts
Authors: Malchow-Møller Nikolaj , Thorsen Bo Jellesmark 
Published: December 2005

Abstract
Credit-constrained households must use savings both to smooth consumption and to finance productive investments. This non-separability between consumption and production decisions is ignored in the standard intertemporal buffer-stock consumption model where income growth is exogenous. This paper develops an intertemporal model of household consumption and investment in the presence of credit constraints and income uncertainty. Investment options are modelled as irreversible, indivisible, and non-stationary, allowing for endogenous income growth. The resulting behaviour is markedly different from that of the standard buffer-stock model.
Dissemination of Technology in Market and Planned Economies
Authors: Iacopetta Maurizio 
Published: December 2005

Abstract
The Soviet Union was competing head to head with market economies in the generation of new technologies, not only in traditional industries such as steelmaking, electricity, and machineries, but also in high tech-areas such as synthetic materials and microelectronics. Yet its productivity performance was significantly worse than that of both developing and industrial countries. R&D-based growth models cannot explain this fact, as the Soviet effort in research and education was comparable to that of most advanced countries. I claim that a technology adoption model helps us understand better the Soviet experience. I hypothesize that the Soviet managerial compensation system generated an incentive for the manager to perform only a modest retooling activity out of fear of breaking the production norm that the planner imposed upon the firm.
Interest-Rate Smoothing: Monetary Policy Inertia or Unobserved Variables?
Authors: Gerlach-Kristen Petra 
Published: December 2005

Abstract
Interest-rate smoothing is traditionally attributed to the gradual adjustment of monetary policy to shocks. Rudebusch (2002) argues that smoothing can also arise spuriously if an autocorrelated variable is incorrectly excluded from the estimated reaction function. This paper presents a model which discriminates between these two explanations using U.S. data. We find that both seem to matter, but that policy inertia appears to be less important than suggested by the existing literature. Further, the excluded variable is likely to reflect financial market conditions.
What Does It Take to Explain Procyclical Productivity?
Authors: Wen Yi 
Published: December 2005

Abstract
Labor productivity comoves strongly with output, leads output and employment, and is only weakly correlated with employment. Procyclical productivity is observed in virtually all countries and industries, and it is observed even in periods of fluctuations due to pure demand shocks, such as during the Great Depression and the second World War. This paper shows that a standard RBC model driven by demand shocks alone is able to explain procyclical productivity without the need to resort to technology shocks or increasing returns to scale. The key element is labor hoarding due to adjustment cost of labor. It is also shown that the observed cross-country differences in productivity cycles can be rationalized by a single parameter alone - the size of the adjustment cost of labor.
Endogenous Distribution, Politics, and the Growth-Equity Tradeoff
Authors: Das Satya P , Ghate Chetan 
Published: December 2005

Abstract
In comparison to the standard literature on inequality and growth which assumes the former to be exogenous, we formulate a model in which inequality and growth are both endogenous. Long-run distribution, at least locally, is shown to be independent of the initial distribution of factor ownership. It is shown that exogenous policy changes that are primarily targeted towards growth and foster less inequality do enhance growth. But policies that are primarily redistributive and imply a more equal distribution reduce growth. This is consistent with recent empirical work which shows that inequality and growth may be positively related.
Tariffs, Entry Regulation and Markups: Country Size Matters
Authors: Hoekman Bernard , Kee Hiau Looi , Olarreaga Marcelo 
Published: December 2005

Abstract
Actual and potential competition is a powerful source of discipline on the pricing behavior of firms. This paper extends the empirical literature on the pro-competitive impact of policy reforms by investigating the effects on price markups of barriers to both domestic and foreign entry in a sample of developed and developing countries. While both are found to be important determinants of industry markups, we find that country size affects the impact of tariffs and domestic entry regulation. Country size dampens the impact of the former and strengthens the effect of the latter.
Risky Collateral and Deposit Insurance
Authors: Kocherlakota Narayana R 
Published: December 2005

Abstract
This paper provides a new rationalization for deposit insurance and systemic disintermediations. I consider an environment in which borrowers face no penalty for failing to repay obligations except the loss of their collateral. I assume that this collateral has aggregate risk. For a subset of the exogenous parameters, I demonstrate that an optimal arrangement features deposit insurance. For a strictly smaller set of parameters, it is optimal in some states of the world to have systemic distintermediations and concomitant falls in real output.
Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)
Authors: Carroll Christopher Dixon 
Published: December 2005

Abstract
This paper shows that standard methods for estimating log-linearized consumption Euler equations using micro data cannot successfully uncover structural parameters like the coefficient of relative risk aversion from a dataset of simulated consumers behaving exactly according to the standard model. Furthermore, consumption growth for the simulated consumers is very highly statistically related to predictable income growth -- and thus standard `excess sensitivity' tests would reject the hypothesis that consumers are behaving according to the model. Results are not much better for the second-order approximation to the Euler equation. The paper concludes that empirical estimation of consumption Euler equations should be abandoned, and discusses some alternative empirical strategies that are not subject to the problems of Euler equation estimation.
Population Changes and Capital Accumulation: The Aging of the Baby Boom
Authors: Ríos-Rull José-Víctor 
Published: December 2005

Abstract
In this paper I explore the quantitative implications for savings of population aging. In doing so, I pay particular attention to some features that have been partially over-looked in the literature. These features include the details of the population aging process, the initial conditions with respect to assets holdings, and the relation between age and household size. In order to do so, I develop recursive methods capable of dealing with overlapping generations environments where the population is stochastic.
The main findings are: i) If population patterns revert to the averages of the last 50 years, the reduction in aggregate savings due to changes in the age structure of the population is small. ii) If, however, the demographic process is such that fertility patterns remain at their current low levels, then the effects of the aging of the baby boom are very large. iii) Initial conditions matter: both the choice for initial assets and the choice for the mechanism through which current fertility reverts to its long run average have implications for the economic allocations. And iv) The contribution of general equilibrium effects is to exacerbate the reduction of savings since population aging tends to make labor relatively scarce, and, therefore, to reduce rates of return of capital, which in turn reduces savings even further.
The Great Inflation of the Seventies: What Really Happened?
Authors: Nelson Edward 
Published: December 2005

Abstract
This paper revisits the issue of what factors produced the macroeconomic policies that led to the Great Inflation of the 1970s. I emphasize that a satisfactory explanation should satisfy two important criteria. First, it must be consistent with the record of views on the economy, manifested in statements by policymakers and prominent financial commentators. Second, it should work for countries beside the United States. I show that the monetary policy neglect hypothesis–which claims that policymakers took a nonmonetary view of the inflation process–meets these criteria. Other explanations of the Great Inflation are ruled out, with one exception (the output gap mismeasurement hypothesis), which supplements the monetary policy neglect hypothesis. The study covers the Great Inflation in both the United Kingdom and the United States, with policymakers’ views on the economy documented using 1970s news reports.
Unstable Relationships
Authors: Burdett Kenneth , Imai Ryoichi , Wright Randall 
Published: December 2005

Abstract
We analyze models where agents search for partners to form relationships (employment, marriage, etc.), and may or may not continue searching for different partners while matched. Matched agents are less inclined to search if their match yields more utility, and also if it is more stable. If one partner searches the relationship is less stable, so the other is more inclined to search, potentially making instability a self-fulfilling prophecy. We show this can generate multiple -- indeed, a continuum of -- equilibria. We investigate efficiency and show that in any equilibrium there tends to be too much turnover, unemployment, and inequality. We calibrate an example to see how well the model can account for job-to-job transitions, and to see how much endogenous instability matters.
Second-Best Pollution Taxation and Environmental Quality
Authors: Gaube Thomas 
Published: December 2005

Abstract
This paper deals with second-best pollution taxation by investigating allocations instead of the corresponding tax rates. Assuming certain restrictions on utility and that the marginal revenue from environmental taxation is positive, it is shown that environmental quality is higher in second best where only distortionary taxes are used to finance public expenditures than in the first-best optimum where lump-sum taxes are available.
Home Bias in Portfolios and Taxation of Asset Income
Authors: Gordon Roger Hall , Gaspar Vitor 
Published: December 2005

Abstract
Intuitively, the observed "home bias" in individual portfolios plausibly explains the international capital immobility reported by Feldstein and Horioka (1980) as well as the survival of taxes on capital income. These intuitions are examined in a model where consumers prefer to consume domestically produced goods. The results show that international capital immobility is indeed present in the model: extra domestic savings generate extra investment primarily in the home country. When monetary policy focuses on exchange rate stabilization random domestic prices cause individuals to heavily invest in domestic equity as a hedge against price fluctuations. However our findings show that the specialization of equity portfolios does not necessarily facilitate the taxation of capital income. While random equity returns do facilitate taxes on equity income, as shown in Gordon and Varian (1989) and Huizinga and Nielsen (1997), random consumer prices appear to undermine taxes on capital income.
Do Publicly Traded Corporations Act in the Public Interest?
Authors: Gordon Roger H. 
Published: December 2005

Abstract
Models of corporate behavior normally assume that a firm acts in the interest of shareholders, and that shareholders care only about the returns they receive on the shares they own in that firm. But shareholders should also care about the effects of a manager's decisions on the value of shares they own in other firms, on the price they pay as consumers for the firm's output, on the costs they bear from pollutants emitted by the firm, on the value of the firm's bonds they own, on government tax revenue that finances public expenditures benefiting shareholders, etc. These effects are normally presumed to be of second order. This paper reexamines this presumption, argues that many of these effects are likely to be important, and explores the resulting implications for forecasted corporate behavior.
Tax Reform and Human Capital Accumulation: Evidence from an Empirical General Equilibrium Model of Skill Formation
Authors: Taber Christopher 
Published: December 2005

Abstract
The progressivity of the tax system has a potentially large disincentive effect on human capital accumulation. It is thus surprising that Heckman, Lochner, and Taber (1998b, 1999a,b) represent the only previous empirical work on this important topic. I build on their work a) by accounting for the tax system when estimating the model, b) by performing welfare analysis, c) by examining the transition from one steady state to another, and d) by adding a number of robustness checks. I first estimate a dynamic general equilibrium model of schooling and on-the-job training on micro data. The estimates are then used to measure the extent to which the progressivity of the tax system distorts human capital. I find a small long run effect of progressivity on schooling. I find larger short run effects, but that they are short lived. The impact of the reform on human capital acquired on the job depends on how it is measured. Under one measure the effect is large, but the consequence of this on earnings seems to be small. Perhaps surprisingly, the welfare effects are typically favorable for progressive wage taxes (with flat capital taxation) versus a flat income tax in the long run. The welfare effects are different when I examine a progressive income tax as virtually all workers prefer the flat income tax to it. I also build on Heckman, Lochner, and Taber's (1998b,1999a,b) evidence on the extent to which taxation of physical capital favors human capital investment. These simulations also yield small long run effects on schooling and on human capital stocks.
Internationally Common Features of Public Old-Age Pensions, and Their Implications for Models of the Public Sector
Authors: Mulligan Casey B , Sala-i-Martin Xavier 
Published: December 2005

Abstract
What does the international history of old-age Social Security program design say about the forces creating and sustaining it as a public program? First, because many program features are internationally common, and/or explained by country characteristics, SS may emerge and grow due to systematic political and economic forces. Second, some observations suggest that political forces are important: (a) SS redistributes from young to old, even when the elderly consume as much or more than do the young, and (b) benefits increase with lifetime earnings and are hardly means-tested. On the other hand, it is not simply a matter of the elderly out-voting the young, because: (c) benefit formulas induce retirement, especially in the countries with the largest SS budgets, and (d) similar public pension programs emerge and grow under very different political regimes. We explain how empirical observations, and some currently unanswered empirical questions, relate to various public pension theories.
Ethnic Ties and the Provision of Credit: Relationship-Level Evidence from African Firms
Authors: Fisman Raymond J 
Published: December 2005

Abstract
This paper studies the effect of ethnic ties on trade credit provision. Previous work in Africa has found that entrepreneurs of Asian and European descent are more likely to obtain credit from their suppliers. However, since these analyses use firm-level data, one cannot distinguish the effect of community ties from that of unobserved firm quality that is correlated with the owner's ethnic background. Using data on specific supplier relationships of African firms, this paper more directly examines the effect of ethnic ties on trade credit provision. Results from random and fixed-effects models indicate that firms are twice as likely to obtain credit from suppliers from within the owners' ethnic communities as from outsiders, suggestive of a very strong effect of communal ties. However, these ties accounts for only a small proportion (15 percent) of the overall preferential credit access enjoyed by entrepreneurs of non-African descent.
Political and Economic Forces Sustaining Social Security
Authors: Mulligan Casey B , Sala-i-Martin Xavier 
Published: December 2005

Abstract
What economic forces create and sustain old-age Social Security as a public program? We relate political, efficiency, and narrative theories of Social Security to empirical results reported in our companion paper in this volume. Political theories, including rational majority voting and pressure group theories, feature a redistributive struggle among groups. "Efficiency theories," which model SS as a full or partial solution to market failure, include optimal redistribution, retirement insurance, and alleviating labor market congestion. Finally we analyze three "narrative" theories.
Overall, retirement, and not alleviating poverty, seems important at the margin, which means that plans to reduce intergenerational redistribution may not be politically sustainable merely because they provide "adequate" incomes for the elderly. Politics seem important, because cross-cohort redistribution is so prevalent, even when the old are consuming as much or more than do the young. SS reform would therefore be assisted by political reforms equalizing political power across generations.
The Budgetary Repercussions Of Capital Convictions
Authors: Baicker Katherine 
Published: December 2005

Abstract
Understanding how transient fiscal distress affects the stability and distribution of local budgets is increasingly important as control of public spending and revenues becomes more decentralized. This paper exploits the large and unexpected shock to county budgets imposed by capital crime trials, first to understand the incidence of the cost of capital convictions, and second to uncover the effects of local fiscal distress on the level and distribution of public spending and revenues. I show that these trials are quite costly relative to county budgets (with each trial causing an increase in county spending of more than $2 million), and that the costs are borne primarily by increasing taxes (although perhaps partially by decreases in police and capital spending). Using these trials as a source of exogenous variation, I also find significant inter-jurisdictional spillovers of both spending and revenues.
Why Governments Should Tax Mobile Capital in the Presence of Unemployment
Authors: Koskela Erkki , Schöb Ronnie 
Published: December 2005

Abstract
This paper shows that a small open economy that suffers from involuntary unemployment should levy a positive source-based tax on capital income. A revenue-neutral tax reform that increases the capital tax rate and reduces the labour tax rate will induce firms to substitute labour for capital. Such a tax reform will lower the marginal cost of production, increase output, reduce unemployment, and increase domestic welfare as long as the labour tax rate exceeds the capital tax rate. The result holds even though trade unions might succeed in subsequently increasing the net-of-tax wage rate, if the elasticity of substitution between capital and labour is above a critical value (which is itself below one). Finally, and importantly, independent of the size of the elasticity of substitution, the government can promote wage moderation and reduce unemployment by increasing the personal tax credit of employed workers instead of reducing the labour tax rate.
The Effects of Social Security Privatization on Household Saving: Evidence from Chile
Authors: Coronado Julia Lynn 
Published: December 2005

Abstract
In recent years, a handful of countries have converted the financing of their social security systems from pay-as-you-go (PAYGO) to partial or full funding. Privatization is viewed as one way to insulate social security from the political and demographic pressures that currently threaten the financial stability of PAYGO systems. However, privatization would improve a nation's situation only if such a reform increases domestic saving. In this paper I use evidence from Chile, where social security was privatized in 1981, to assess the impact of such a reform on household saving rates. I find that the reform provided a significant stimulus for net of social security household saving; increasing household saving rates between 5 and 10 percentage points.