Learning-by-doing versus Schooling in a Model of Endogenous Growth

A two sector model of learning-by-doing measured by means of production aggregated over time and of human capital accumulation in a schooling sector is presented. Time utilization is rival between schooling and learning-by-doing. Depending on the sum of elasticities of the accumulated factors (i.e., of production experience and educational human capital) in both sectors, a situation with or without endogenous growth results. Dynamic optimization of the choice between leisure and working and of the division of human capital between education and production is executed. Transitional dynamics are analyzed for a Cobb-Douglas example and a numerical simulation is performed.JEL classification: C61, D90, O41.Acknowledgements The author would like to thank Eric C. Meyer and two anonymous referees for helpful comments. The usual caveats apply.revised version received November 23, 2003     

Market Designs for a Completely Renewable Power Sector

The article discusses whether the current German electricity market design is suitable for an electricity system completely based on renewable sources, and analyzes alternatives. Such a system becomes ever more likely due to the phase-out of nuclear power and the carbon reduction targets. Various existing scenarios for a completely renewable electricity system are analyzed and compared with respect to the contribution of different renewable technologies. Challenges for the market design arising from the differences between the current and a completely renewable system are identified??notably problems with cost recovery and investment incentives, an increased need for balancing and/or intraday adjustments, an increased diversity of actors, grid congestion and the continuing occurrence of market power. The current market design??s ability to solve these issues is assessed with the result that all but the critical problem of investment incentives and cost recovery can be solved by adapting certain rules. A?comparison with other suggested market designs reveals that some designs could ensure cost recovery and investment incentives. However, these market designs have other drawbacks. Therefore, the identification of the optimal market design for a completely renewable electricity system requires further research regarding the qualitative and quantitative effects of different changes to the current market design. The article concludes by developing concrete policy recommendations.     

Virtual travel agencies

NETNOMICS: Economic Research and Electronic Networking -     

TAX EVASION AND STATE PRODUCTIVITY—AN EXPERIMENTAL STUDY

In an overlapping generations experiment with multiple families participants can support their parents directly and thereby reduce their tax burden or rely on tax‐financed old‐age support. State productivity is captured by the factor with which total tax revenues are multiplied to determine old‐age support. This factor is systematically varied from 0.75 to 1.25. Tax payments depend on declared endowment. Tax evasion is possible, but monitored. Our results suggest that state productivity influences neither direct support of own parents nor tax evasion. The main effect is that rich endowment triggers relatively low support of own parents and high (and more frequent) tax evasion.     

Shared Tax Sources and Public Expenditures

This paper deals with a specific vertical assignment of public functions in a federation: Two levels of government share both the same tax source and expenditure on a productivity increasing public service. We consider surplus maximizing Leviathan governments which provide public services in order to increase their potential tax base. The Nash equilibrium is characterized by overtaxation and relative to surplus maximization—depending on whether or not the public goods are sufficiently complementary with the entire tax base—either underprovision or overprovision of the public service. The implications of these results, in terms of welfare and potential use for earmarking taxes are also considered.     

The Competitive Effects of Advertising in the US Automobile Industry, 1970‐94

Is advertising anticompetitive? One school of thought in industrial economics holds that advertising increases profits and reduces consumer welfare by creating spurious product differentiation and barriers to entry. Another school focuses on the informative character of advertising, claiming that advertising makes markets more competitive and reduces profits by supplying consumers with information about price and quality. We distinguish these views by examining the effect of advertising on competition in the US automobile industry. Our data include advertising, sales, profit, and market-share figures for General Motors, Ford, and Chrysler over a 25-year period from 1970 to 1994.We ask if advertising increases or decreases profitability, controlling for market structure and other factors affecting demand.Wefind that these firms cannot increase their profits above normal levels by increasing their advertising expenditures. This evidence supports the view that advertising serves primarily to transmit information, not to create entry barriers.     

Foreign Direct Investment,Regulations and Growth

The paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. We argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, we test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result is robust to different specifications of the econometric model.