External economies as a mechanism of agglomeration in EU manufacturing

Productive externalities are significant determinants of agglomeration, not deeply studied at the industry and international level. We analyse the impact on productivity growth of technological externalities, both inter- and intraindustry, national or international, at the industry level for the EU countries and the period 1995–2002. The results confirm the advisability of considering international externalities when countries are taken as regions, whose omission underestimates national spillovers. Together with national endowments and a central geographical position, the growth of productivity is encouraged by national and international specialization as a general result; moreover, it is fuelled by stronger interindustry spillovers and productive diversification, a result more evident for high technology industries, while lower technology industries are more sensitive to the omission of international externalities. Economic integration seems to be relevant, because supranational regions with less friction for goods and factor movements are more likely to take advantage of external economies as a mechanism of productivity growth and agglomeration.     

UNION–FIRM BARGAINING AGENDA REVISITED: WHEN UNIONS HAVE DISTINCT PREFERENCES

In this paper we revisit the issue of the scope of bargaining between firms and unions by considering a more general union's utility function with distinct preferences and sequential negotiations. First, we compare exogenously given labour market institutions; i.e., right‐to‐manage (RTM) and sequential efficient bargaining (SEB). We show that the conventional wisdom, which states that firms always prefer RTM, no longer holds. In fact, when unions are adequately wage aggressive and have strong enough bargaining power, firms may prefer SEB negotiations; however, firms switch their preference to RTM when unions are very strong. Moreover, we show that a conflict of interest between the parties may emerge when unions are sufficiently employment oriented as well as sufficiently wage aggressive and not too strong or too weak in bargaining. Second, we analyse the endogenous choice of the bargaining agenda. We show that a rich plethora of equilibria may occur and new situations of conflict/agreement of interests between the bargaining parties arise in particular when unions are sufficiently wage‐aggressive.     

Identifying Human-Capital Externalities: Theory with Applications

The identification of aggregate human-capital externalities is still not fully understood. The existing ( Mincerian ) approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, the Mincerian approach yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human-capital externalities, whether or not aggregate demand for human capital slopes downward. Another advantage of our approach is that it does not require estimates of the individual return to human capital. Applications to U.S. cities and states between 1970 and 1990 yield no evidence of significant average-schooling externalities.     

国际货币的惯性及对人民币国际化的启示

随着人们对人民币国际化问题的普遍关注,货币的国际化成为国际金融领域的热点问题。利用货币竞争模型分析由于货币的网络外部性和转换成本的存在所造成的国际货币的惯性,从而解释世界上到底需要多少种国际货币、为什么在每个时期只能有一种货币可以成为真正意义上的国际货币、为什么一种货币想要取代已有的国际货币的过程都十分漫长等问题。对上述问题的解释启示我们在人民币国际化的过程中,要关注货币网络外部性和转换成本的影响,可以通过贸易逆差输出人民币和中国金融市场的发展来培育人民币的网络外部性。     

Information sharing between vertical hierarchies

When do principals independently choose to share the information obtained from their privately informed agents? Information sharing affects contracting within competing organizations and induces agentsʼ strategies to be correlated through the distortions imposed by principals to obtain information. We show that the incentives to share information depend on the nature of upstream externalities between principals and the correlation of agentsʼ information. With small externalities, principals share information when externalities and correlation have opposite signs, and do not share information when externalities and correlation have the same sign. In this second case, principals face a prisonersʼ dilemma since they obtain higher profits by sharing information.     

When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services

The privatisation of social services is being increasingly discussed. The social services market is characterised by multiple market failures, including informational asymmetries, agency problems, externalities, and distributional concerns. Consumers may care as much or more about quality of services than about price. If quality is readily observable, the government can regulate private providers to assure standards are met. But when standards are difficult to observe or when the recipient is not the agent who makes the decisions, government ownership may be preferable. This paper categorises the market situations in which government provision of social services is likely to be most versus least attractive.     

Consumption Externalities,Coordination, and Advertising*

The aim of this article is to demonstrate that advertising can have an important function in markets with consumption externalities apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. Although, at times, the one‐period advertising expense can exceed the one‐period monopoly profit, in equilibrium, consumers will pay a premium for the more heavily advertised brand.     

Network externalities and interconnection: the case of information intrastructures

Information infrastructures are characterized by the existence of direct and indirect network externalities. However, the presence of externalities poses two types of problem: they create phenomena of overproduction (consumption) and under-production (consumption); and they require the operators reach a critical size of subscribers quickly. Facing this question of critical size, the interconnection makes it possible for the networks to develop by relying on network externalities. However, the justification of interconnection does not concern the externalities solely but is also based on the existence of essential facilities. The first part examines the various types of network externalities, whose implications are presented in the second part. The third part deals with the stakes of the interconnection.     

Consumption externalities and direct versus indirect corrective pricing

In a competitive economy with consumption externalities arising only if some commodities are put to particular uses and where individual marginal contributions to the level of the externality may differ among individuals, a first best Pareto-optimum can be attained through a set of Pigouvian taxes discriminating between users and uses of the externality-generating commodities. In the present paper we shall discuss the optimal structure of commodity taxes in the case that policy discrimination is not possible or feasible. If policy discrimination between users or uses is not possible, we show that apart from taxing or subsidizing the direct sources of externalities, it may be optimal to impose taxes or subsidies on related goods, i.e., indirect corrective pricing.     

Optimal product strategies in the presence of network externalities

A network externality exists when a user’s benefit from a product increases with the number of other users in the same network. We examine the possibility that a software firm may exploit network externalities by introducing a limited feature version of its commercially available software into the market. The two versions need not be perfectly compatible and network externalities are allowed to decline as the difference between the versions increases. We obtain conditions under which introducing a limited feature version is optimal.     

Should public policy respond to positional externalities?

A nice suit is one that compares favorably with those worn by others in the same local environment. More generally, a positional good is one whose utility depends strongly on how it compares with others in the same category.¹A positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated.² For example, if some job candidates begin wearing expensive custom-tailored suits, a side effect of their action is that other candidates become less likely to make favorable impressions on interviewers. From any individual job seeker's point of view, the best response might be to match the higher expenditures of others, lest her chances of landing the job fall. But this outcome may be inefficient, since when all spend more, each candidate's probability of success remains unchanged. All may agree that some form of collective restraint on expenditure would be useful.In such cases, however, it is often impractical to negotiate private solutions. Do positional externalities then become legitimate objects of public policy concern? In attempting to answer this question, I employ the classical libertarian criterion put forth by John Stuart Mill³, who wrote the state may not legitimately constrain any citizen's freedom of action except to prevent harm to others. I argue that many positional externalities appear to meet Mill's test, causing not just negative feelings but also large and tangible economic costs to others who are ill-equipped to avoid them. I also discuss an unintrusive policy remedy for positional externalities, one modeled after the use of effluent charges to curb environmental pollution.The paper is organized as follows. Section 1 notes the deep similarity between the conditions that give rise to positional arms races and those that give rise to conventional military arms races. Section 2 follows with a review of evidence concerning the strength of concerns about relative position. Section 3 describes some of the tangible economic costs that people experience as a result of positional externalities arising from such concerns. Section 4 takes up the question of whether collective action directed against positional externalities is consistent with respect for individual rights. Section 5 describes how a progressive consumption tax could neutralize many of the most costly effects of positional externalities.     

Externalities,entry bias,and optimal subsidy policy for cleaner environment

This paper analyses alternative subsidy schemes and long-run entry bias in a new industry that creates positive environmental externalities (both generation externalities and externalities associated with interindustry technology spillovers). It demonstrates that per-unit subsidy scheme, despite attracting fewer firms, results in higher industry output and economic surplus in the equilibrium compared with the expenditure equivalent lump-sum subsidy scheme. However, the later leads to higher total surplus, unless spillover externalities are sufficiently small. Further, the free-entry equilibrium number of firms may be excessive or insufficient. A key finding of this paper is that the first-best equilibrium outcome can be implemented through a unique combination of per-unit subsidy and lump-sum subsidy/tax, which involves positive government expenditure in the presence of positive externalities.     

The Core, Transaction Costs, and the Coase Theorem

This paper clarifies and synthesizes elements of the two decade old debate concerning the Coase theorem and the empty core. Five lessons can be derived from this debate. First, the Coase theorem may break down when there more than two participants (provided the additional participants bring an additional externality to the table). Second, the problem of the empty core does not disappear in a world of positive transaction costs. Under reasonable assumptions about the transactions technology, transaction costs may well exacerbate the empty-core problem. As a consequence, it is important to differentiate between transaction costs (when the core exists) and costs due to the empty core because each has different implications for rationalizing institutional arrangements. Third, the Coase theorem will not break down when the number of participants increases if the new participants do not bring additional externalities with them. If, however, additional participants bring in additional externalities, then the core may be empty and Pareto efficiency may not emerge from costless negotiations. Fourth, Pareto Optimality can be achieved when the core is empty by judicious use of penalty clauses, binding contracts, and constraints on the bargaining mechanism. Fifth, when a non-excludable public good is involved, a free-rider problem arises as the number of agents increases, and this undermines the Coase theorem; in this case, Coasean efficiency requires the participation of all agents affected by the externality in the writing of binding contracts.     

THE EXISTENCE OF EQUILIBRIUM IN A DIFFERENTIATED DUOPOLY WITH NETWORK EXTERNALITIES*

The existence of a pure‐strategy subgame‐perfect equilibrium in qualities and prices is investigated in a duopoly model of vertical differentiation where quality improvements require a quadratic variable cost and network externalities operate. We show that there exists a parameter region where the incentive to predate at the quality stage prevents firms from reaching a pure‐strategy non‐cooperative equilibrium with prices above marginal costs. If network externalities are sufficiently large, a Bertrand equilibrium with zero profits may arise, although the amount of product differentiation is strictly positive.     

Distributive Politics and the Costs of Centralization

This paper studies the choice between centralization and decentralization of fiscal policy in a political economy setting. With centralization, regional delegates vote over agendas comprising sets of region–specific projects. The outcome is inefficient because the choice of projects is insufficiently sensitive to within–region benefits. The number of projects funded may be non–monotonic in the strength of project externalities. The efficiency gains from decentralization, and the performance of "constitutional rules" (such as majority voting) which may be used to choose between decentralization and centralization, are then discussed in this framework. Weaker externalities and more heterogeneity between regions need not increase the efficiency gain from decentralization.     

ON THE IMPACT OF HETEROGENEITY ON INDETERMINACY*

Some recent research indicates that the occurrence of indeterminacy in models with externalities may be overstated because these models ignore agents' heterogeneity. We consider a neoclassical two‐sector growth model with technological externalities. Agents are heterogeneous with respect to their shares of the initial stock of capital and in labor endowments. We find that the sign of the effect of inequality on indeterminacy is not pinned down by the standard properties of preferences. However, when the inverse of absolute risk aversion is a convex (respectively concave) function, homogeneity (heterogeneity) tends to neutralize the external effects and eliminate indeterminacy.     

Risk externalities in a payments oligopoly

I discuss the role to be played by central banks in payment systems by way of an oligopoly model of a payments market where firms exert negative risk externalities upon each other. A central bank participating actively in this market is modelled as benign in two ways: exerting less externalities than other banks and maximizing welfare rather than profit. Because other banks react strategically to the central bank’s presence due to its low externalities, there is a risk that it backfires, with these other banks’ taking more risky positions than if the central bank were not there. The proper role of the central bank may actually be to stay out.     

Optimal Disease Eradication in Sympatric Metapopulations

The paper analyses the management of an infectious disease in a sympatric metapopulation, under both Nash and cooperative behaviour, through the development of a differential game and an optimal control problem with connected local state variables. As pathogens are renewable resources with negative value, the problem may be non-convex. Since the disease can be transmitted across various connected populations, externalities may be involved. A numerical application is presented, with reference to a livestock disease that can be transmitted between herds on common pastures. The results suggest that optimal eradication in finite time should be pursued when possible. However, optimal eradication is not always feasible (sometimes eradication can be only achieved asymptotically), and the ecology of the disease is of paramount importance in this respect. Also, convergence to an internal steady-state does not minimise the present value of the disease damage and control cost (a result consistent with the existing literature). Ignoring these results may lead to inadequate policy design.     

经济集聚中马歇尔外部性的识别-基于中国制造业数据的研究

本文提出了识别经济集聚中马歇尔外部性的方法,并将其应用于中国制造业数据。通过考察制造业集聚水平和产业间专业化分工的协同演进过程,本文一方面发现两者具有替代关系,验证了马歇尔外部性是经济活动空间集聚后果的理论假说;另一方面证实了马歇尔外部性是推动中国制造业空间不断集聚的基本因素。本文还发现市场化改革是实现马歇尔外部性的积极力量。本文的结论为我国企业选址、产业布局和城市发展政策提供了依据。     

Consumption externalities with endogenous time preference

This paper shows that in a model with inelastic labor supply, consumption externalities have impacts on stationary consumption and capital. The key element in observing the effects of consumption externalities on stationary consumption and capital is the endogeneity of the time preference rate, which depends on future-oriented resources rather than on private consumption. We conclude that when individuals experience jealousy, they become more impatient, leading to a lower level of capital stock and a higher level of consumption relative to those of the social optimum, while when they experience admiration, these relationships are reversed. We examine an optimal tax policy that replicates the socially optimal path in the centrally planned economy. Finally, using numerical analysis we explore how this economy evolves through time.