Undiscounted optimal growth in the two-sector Robinson-Solow-Srinivasan model: a synthesis of the value-loss approach and dynamic programming

We highlight two features of undiscounted optimal growth in the context of a two-sector model due to Robinson, Solow and Srinivasan. First, we use the value-loss approach of Radner-Gale-McKenzie to show a multiplicity of optimal programs in situations when optimality does not coincide with value-loss minimization. Second, we use a theory of undiscounted dynamic programming, not available in the literature, to derive properties of the optimal policy correspondence. In terms of a methodological perspective, we suggest a synthesis of the two methods for the analysis of problems of optimal intertemporal resource allocationThis essay is dedicated to Mukul Majumdar on the occasion of his sixtieth birthday, with affection and admiration. We would like to thank Robert Becker, Minako Fujio and Ron Jones for useful discussions and to a referee of this journal for very insightful comments. We are grateful to the Center for Analytic Economics at Cornell and to the Center for a Livable Future at Johns Hopkins for research support     

Partial privatization and yardstick competition

We analyse the dynamics of public and private sector employment in Bangladesh, using the natural experiment provided by the partial privatization of the jute industry. The public sector had substantial excess employment of workers initially, but this excess was substantially eroded by the end of the period we studied. The extent of erosion differs between white‐collar and manual worker categories, with excess employment persisting only in the former. Our findings suggest that partial privatization increases the efficacy of yardstick competition in the regulation of public firms, because heterogeneous ownership undermines collusion between public sector managers, and also makes excess employment more transparent to the general public.     

On choice of technique in the Robinson–Solow–Srinivasan model

We report results on the optimal "choice of technique" in a model originally formulated by Robinson, Solow and Srinivasan. By viewing this model as a specific instance of the general theory of intertemporal resource allocation associated with Brock, Gale and McKenzie, we resolve long-standing conjectures in the form of theorems on the existence and price-support of optimal paths, and on their long-run behavior. We also examine policies, due to Stiglitz, as a cornerstone for a theory of transition dynamics in this model. We present examples to show that: (i) an optimal program can be periodic; (ii) a Stiglitz' program can be bad; and (iii) a Stiglitz production program can be non-optimal. We then provide sufficient conditions under which the policies proposed by Stiglitz coincide with optimal behavior.     

Entrepreneurial management revisited

Dan Steinbock. 2001. The Nokia Revolution: The Story of an Extraordinary Company that Transformed an Industry, New York: AMACOM. ISBN: 0‐8144‐0636‐X. Saul Rubenstein & Thomas A. Kochan. 2001. Learning from Saturn: Possibilities for Corporate Governance and Employee Relations. Ithaca, NY: Cornell University Press. ISBN: 0‐8014‐3873‐X. Jason Goodwin. 2001. Otis: Giving Rise to the Modern City. Chicago: Ivan S. Dee. ISBN: 1‐56663‐385‐0.     

Poverty and the Distribution of Land

Redistributive land reforms have begun to attract the attention of scholars and policy makers once again. In this paper, we review old arguments and bring them up-to-date in the light of recent research. We begin with the case in favour of redistributive reforms focusing on fragmented factor markets and systems of labour control, of which concentration of land ownership is but one aspect. We then examine land reform in practice, focusing on distinct regional features and outcomes in sub-Saharan Africa, Latin America, the transition economies of the former Soviet bloc and, as examples of success, East Asia (including China and Vietnam). Next we discuss the macroeconomic context and the two-way direction of causality between a redistribution of productive assets and the overall performance of the economy. We underline the importance of weakening the system of labour control, eliminating landlord bias and correcting urban bias. Finally, we argue that a prominent feature of all successful land reforms has been a high degree of land confiscation; full compensation and various types of 'market friendly' land reform are unlikely to be successful.     

PRIVATE INTERGENERATIONAL TRANSFERS AND THEIR ABILITY TO OFFSET THE FISCAL BURDEN OF AGEING

The ratio of retirees to workers in developed countries is expected to increase sharply in the next few decades. In the presence of unfunded income support policies, this increase in old age dependency is expected to increase the future fiscal burden of ageing, which is seen as a threat to living standards. Private intergenerational transfers in the form of bequests are also expected to increase in ageing societies, which may offset the adverse effects of the fiscal burden of population ageing on future living standards. This paper quantifies the ability of these private intergenerational transfers to offset the future fiscal burden of ageing in Australia. This is done through developing a dynamic overlapping generations simulation model with realistic demographics. Calculations based on steady-state simulations (with a pay-as-you-go tax rate equal to 3.3% of GDP) suggest that a bequest to GDP ratio of 1% offsets approximately one-third of the fiscal burden over the lifecycle when measured as a proportion of simple labour income and one-eleventh of the fiscal burden when measured as a proportion of full income (labour income plus leisure). The model is calibrated for Australia under a small open economy assumption such that the optimal solution mimics important cross-sectional and time-series fundamentals of the Australian economy. For the non-steady-state, intergenerational accounting suggests that the empirically plausible intergenerational transfers are strong enough to offset most of the tax burden (80–90%) when measured as a percentage of simple labour income and up to one-quarter of the burden when fiscal burden is measured as a percentage of full income.     

Economic status of households and labour supply to market and non-market activities mdash; some results from a poor rural economy

Assuming a given underlying utility structure for all households, we have demonstrated that the differential labour supply behaviour among household categories results owing to the different sets of constraints they face depending on their economic status and asset ownership. Using the criteria implied by the theoretical model four household gorups are defined. The labour supply functions estimated for these four groups support the theoretical result of significantly different supply behaviour. The empirical exercise, as expected, indicates that the labour supply decision of the subsistence group is guided by their need to achieve the minimum level of consumption while the middle-income households, who do not have enough non-labour income to meet their minimum subsistence need, tend to work longer hours in market activities than the workers from high-income households. However, market labour supply by high-income households is found to be relatively more sensitive to changes in the wage rate. The behaviour of the household groups differ so significantly that if an aggregate model is estimated ignoring inter-household differences, the predicted hours will grossly over-estimate labour supply to market activities.     

A Model of Sponsorship Effects on the Sponsor's Employees

Drawing from the corporate sponsorship literature, a model is developed that seeks to explain how externally directed corporate sponsorship can influence the behavior of the sponsor's employees. External sponsorship conveys a signal that can impact on employees’ perceptions of their employer. The model seeks to explain the processes and types of possible impacts. Although the model requires confirmation, its conceptualization raises additional avenues to assess the benefits of corporate sponsorship.