Collateral secured loans in a monetary economy

This paper presents a microfounded model of money where durable assets serve as a guarantee to repay consumption loans. We study a steady state equilibrium where money and credit coexist. In such an equilibrium, a larger investment in durable capital relaxes the borrowing constraint faced by consumers. We show that the occurrence of over-investment and the behavior of capital accumulation depend on the rate of inflation, the relative risk aversion of agents and the marginal productivity of the capital goods.     

Durability choice with differentiated products

In a two-period setting we explore the impact of a related non-durable good or service on a monopolists’ choice of product durability. We show that a renting firm will provide the social efficient cost-minimizing durability independent of the related non-durable product. Thus Swan’s [Swan, P., 1970. Durability of consumption goods. American Economic Review 60, 884–894; Swan, P., 1971. The durability of goods and the regulation of monopoly. Bell Journal of Economics and Management Science 2, 347–357] market independence result can be extended to include durable goods renters that manufacture related non-durables. This finding, however, does not extend to sales markets. With sales, the monopolist will practice planned obsolescence (manufacture goods with uneconomically short lives). We find that planned obsolescence is maximized when the related output is highly complementary with the durable good. This indicates that in durable products markets, such as the electronics industry, public policies that encourage the adoption of complements for the durable may well lead to a less efficient durability choice.     

The Timing of Purchases and Aggregate Fluctuations

We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy. At the microeconomic level, the timing of durable goods purchases supplies some insulation for non-durable consumption over the cycle. At the macroeconomic level, the timing decisions tend to amplify and propagate wealth and income shocks. Our model also allows for endogenous price determination. When the price of the durable changes due to inflexibility of workers between sectors, the effect of adverse shocks is even stronger and longer.     

Quality growth: New evidence from Japanese household-level data

This article estimates quality Engel curves for 52 durable goods used to measure quality upgrading in the Japanese CPI between 1990 and 2004. The estimation shows that the unmeasured quality growth is averaging less than 0.1% annually.     

环境信息披露机制与企业发展——以日常耐用品生产企业为例

日常耐用消费品与人们的生活息息相关,其环保程度,对大众的身体健康有着重要影响。企业通过信息披露机制反映自身关于企业污染、治理方面的信息,可反映企业产品的环保程度,有利于消费者更好地了解企业,更好地反映产品的品质信息。企业披露高质量的环境信息,有利于建立良好的社会形象,有利于发展与消费者、政府间的互信机制,有利于强化企业产品的差异化程度,增强产品市场竞争力。     

Public investment and budgetary consolidation in Portugal

In this paper we find that public investment in durable goods has a positive effect on long-term economic performance in Portugal. We also find that these positive effects are not strong enough for public investment to pay for itself in the form of future tax revenues. Therefore, cuts in public investment in durable goods, although costly in terms of long-term economic performance seem to be an effective way of alleviating pressure on the public budget. It is important to note, however, that this general result contrasts sharply with the evidence found in this paper for public investment in equipment, a small component of public investment in durable goods, as well as with evidence elsewhere for public investment in transportation infrastructures. For these, the effects on output are strong enough for public investment to pay for itself. Therefore, cuts in these two types of public investment, would have negative long-term economic effects as well as negative long-term budgetary effects. Clearly, not all public investment is created equal. We would like to thank the editor as well as two anonymous referees for unusually useful comments and suggestions. The usual disclaimers apply.     

Taxation and market power when products are durable

Empirical studies suggest that industries hardest hit by government regulations, such as pollution regulations, are both highly concentrated and manufacture durable products. We analyze a two-period durable goods monopoly model where the firm faces government restrictions in the form of pollution or excise taxes. In contrast to non-durable monopolistic industries, we show that taxes on pollution or an excise tax on output may increase a durable goods monopolist's commitment ability and market power. Indeed, any policy which restricts future output may have the perverse effect of increasing a monopolist's bargaining power with buyers and enhance their profits.The authors would like to thank several anonymous referees and the editor for helpful comments and suggestions on earlier drafts of the paper. Of course, any remaining errors are the sole responsibility of the authors.     

ON THE TAXATION OF DURABLE GOODS

This article proposes a dynamic Mirrleesian theory of commodity taxation in the presence of durable goods. A uniform taxation across all goods is suboptimal even when the consumption preferences are separable from labor. If the consumption utility function is strictly concave and durable stocks are adjustable without friction, durable investment should be taxed at a higher rate than the purchase of nondurable goods. With adjustment frictions, the wedge on durable investment depends on substitution effects between durable and nondurable consumption and can be positive or negative. An application suggests that housing investment should face higher tax rates than regular consumption.     

Why does the velocity of money move pro‐cyclically?

The velocity of money usually rises in expansions and falls in recessions This paper explains this pro‐cyclical movement of velocity using two ideas: (i) during business cycles the movement of investment and consumption of durable goods has a larger amplitude than consumption of non‐durable goods and services; (ii) the velocity associated with expenditure on investment and durable goods is much higher than the velocity associated with consumption of non‐durable goods and services, because the former expenditures are synchronized with the attainment of money by economic agents whereas the latter are not. In this setting, the rise in the weight of expenditure in durable goods relative to the weight of non‐durable goods and services, which occurs during expansions, generates an increase in the average velocity of circulation. The opposite happens during recessions and thus velocity moves pro‐cyclically.     

Household Demand, Network Externality Effects and Intertemporal Price Discrimination

This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination.     

Effect of ageing on the ownership of durable goods

I analyse how ageing affects the demand for non‐housing durable goods. Based on the English Longitudinal Study of Ageing, individual characteristics, cohort and time effects can explain most of the age variation in the ownership and purchase of durable goods. A life‐cycle model is derived to capture the complex relation between ageing and the demand for non‐housing durable goods. Decreasing survival probability, deteriorating health and changing preferences are jointly reflected in the age gradient of demand. Simulations indicate that higher chances of survival increase the ownership ratio of the durable items.     

Measuring the contribution of durable goods to the welfare cost of inflation

In this paper, we measure the contribution of durable goods to the welfare cost of inflation, in the context of an endogenous growth model with durable and nondurable goods, where purchases of the latter require only a partial cash payment compared with the former. Unlike existing measures, our proposed welfare measure is computationally efficient and relatively easy to implement.We find that durability adds a significant component to the welfare costs of inflation.     

ESTIMATES OF THE AGGREGATE QUARTERLY CAPITAL STOCK FOR THE POST-WAR U.S. ECONOMY

We construct quarterly aggregate gross and net capital stock series for the post-war U.S. economy using annual capital stock, capital depreciation, and capital discard figures along with quarterly investment series. We construct nominal and real measures of all three categories in the aggregate capital stock: consumer durable goods, producer durable goods, and business structures. In constructing the nominal series we take into account the changes in capital goods' prices. The series are constructed using four different methods. Using time- and frequency-domain techniques, we compare the constructed series and characterize their short-run, business cycle, and long-run cyclical properties. We find that the constructed series exhibit very different cyclical and shock persistence dynamics. Practial implications are discussed.     

A NOTE ON DURABLE GOODS MONOPOLISTS: COMMITMENT TO FORWARD COMPATIBILITY

This note re‐examines the previous results on durable goods monopolists under the time inconsistency problem that the firm tends to make its goods less compatible as a “planned obsolescence” strategy in the presence of network effects. We find that the possibility of the commitment to forward compatibility is profitable to the monopolist, depending upon the degree of technological progress and network effects. Therefore, contractual commitments that are frequently feasible and observed in real‐world markets make the society better off.     

Price convergence in the European Union – What has changed?

This paper investigates price convergence in European Union countries using disaggregated price level indices in the period 1999–2016. Our results show that prices of both tradable and nontradable goods had a significantly lower dispersion in 2016 than in 1999. The convergence was faster in the case of countries with price level below the average, which can be interpreted as catching-up. However, further analysis shows that most prices converged only up to 2008. While prices of transport equipment continue to converge across the European Union, several durable consumption categories show price divergence after 2008. We attribute this to the drop in international trade of durable products due to increasing inflation and exchange rates volatility following the global financial crisis. From the monetary policy perspective, the existing price-level gaps, shown in our study, may pose a risk of higher inflation, especially in catching-up economies.     

Inflation Stabilisation and the Consumption of Durable Goods

Exchange rate-based stabilisations in chronic-inflation countries have often been characterised by an initial consumption boom (which is most evident in the behaviour of durable goods) followed by a later contraction. This paper provides an explanation for such a boom-recession cycle based on the timing of purchases of durable goods. The initial fall in inflation results in a wealth effect which induces many consumers to bring forward their purchases of durable goods, thus generating an aggregate consumption boom. Since most consumers replenish their stock of durable goods at the beginning of the programme, a later slowdown follows.     

Multiplicity and stagnation under the Romer model with increasing returns of R&D

This study develops a simple growth model to explain stagnation and non-simple growth patterns by using increasing returns of R&D efficiency. The study adopts a type of the lab-equipment model, namely, the Romer model, where goods are used as R&D input. Here, we assume capital, or durable goods, as the R&D input factor, and R&D efficiency is assumed to be variable. This arrangement yields three steady states, namely: no-growth, low-growth, and high-growth steady states. These trajectories are jumpable. Accordingly, global indeterminacy is obtained. By uniting the numerical analysis, we obtain that all steady states are saddle stable. However, when the increasing R&D efficiency is small, the path converging to a high-growth-rate steady state shows local indeterminacy.     

SOME INEFFICIENCY IMPLICATIONS OF GENERATIONAL POLITICS AND EXCHANGE*

This paper explores the implications of generational selfishness in a model in which each generation has its own government. Such selfish generational governments will potentially distort the economy along a number of dimensions. One is the monopolization of factor supplies; another is the under- or overprovision of durable public goods. We demonstrate that selfish generations may place sizable marginal taxes on their factor supplies in order to monopolize their factor markets. We also show that selfish generations will provide inefficient levels of durable public goods both at the local and national levels. Finally, we demonstrate that generational inefficiencies can arise even in models of cooperative bargaining because of the first-mover advantage of earlier generations.     

ECONOMIC AND ENVIRONMENTAL EFFECTS OF REFILL PACKS

It is common sense that refill packs can increase the repeated use of durable goods, reduce resource waste and be conducive to environmental protection. However, their existence also has an economic effect. For instance, we find that the profit of a monopolistic firm will increase as a result of selling the refill packs when the depreciation rate of the durable good is low. In an extension of the model, we point out that there is an entrant that competes with the incumbent in relation to the composite goods and the refill packs. In order to compete in terms of the prices of the composite goods, the incumbent sells the refill packs not only to increase profit, but also to reduce the amount of waste resulting from the durable goods. As for competing in regard to the prices of the refill packs, if the cost of the composite goods is small, then the incumbent's profit from selling the composite goods will increase. By comparing two extensions of the model, we find that the environmental effect of the price competition in regard to the refill packs is greater than the environmental effect of the price competition in relation to the composite goods.     

International business cycles and the relative price of investment goods

Abstract Is the relative price of investment goods a good proxy for investment specific technology? We model this relative price in a flexible price international economy with two fundamental shocks, namely, the total factor productivity (TFP) shock and the investment‐specific technology (IST) shock. We show that the one‐to‐one correspondence between the IST shock and the relative price of investment goods breaks down in an international economy because of the short‐run correlation between the terms of trade and the relative price of investment goods. The data congruent negative correlation between the investment rate and the relative price of investment goods thus does not necessarily reflect decline in investment frictions (rise in IST), as suggested by many studies. A calibration experiment with the US data demonstrates that such an inverse relation between rate of investment and the relative price of investment goods basically reflects the positive effect of TFP on the terms of trade for a broad range of economies where the home bias in consumption exceeds investment and there is a sizable adjustment cost of investment.