KNOWLEDGE AND GROWTH IN THE VERY LONG RUN

This article proposes a theory for the gradual evolution of knowledge diffusion and growth over the very long run. A feedback mechanism between capital accumulation and the ease of knowledge diffusion explains a long epoch of stasis and an epoch of high growth linked by a gradual economic takeoff. The feedback mechanism can explain the Great Divergence, the failure of less developed countries to attract capital from abroad, and the productivity slowdown. An extension toward a two‐region world economy shows robustness of results and other interesting interaction between forerunners and followers of the Industrial Revolution.     

MANAGING CALIFORNIA's WATER IN THE LONG RUN

Water development in the western states has passed through an "expansive" phase and now is entering an "intensive" phase. Large untapped sources of high-quality fresh water no longer are available. Using current supplies more efficiently and reallocating water among uses will be necessary so as to sustain economic growth. Water conservation, particularly in the agricultural sector, will be an important part of decreasing both the quantity problems and the quality problems that have developed. This paper discusses alternative policies for gaining these benefits.     

THE LONG RUN PHILLIPS CURVE AND THE GOVERNMENT BUDGET CONSTRAINT

This paper considers the proposition that the long run Phillips Curve is vertical except in special cases. It argues that this proposition cannot be sustained once the implications of the government budget constraint are considered. It is then a matter for government policy choice whether the long run Phillips Curve is vertical or non-vertical, and neither case can be considered more general than the other.     

THE DECLINE OF JAPAN'S SAVING RATE AND DEMOGRAPHIC EFFECTS*

This paper investigates the phenomenon in which Japan's household saving rate showed a sharp decline even during the long stagnation period called “the lost decade.” Our empirical results show that the sharp decline in the saving rate in the 1990s can be explained by the significant impact of demographic factors. Furthermore, the estimated life cycle curve is hump shaped, meaning that the prediction of the life cycle model is confirmed with time series data on the Japanese saving rate.     

THE MARKET SELECTS THE WRONG FIRMS IN THE LONG RUN*

We consider the effects of free entry on the market structure and social welfare of an asymmetric Cournot oligopoly. Even if we allow for the existence of different types of firms initially, only one type (in almost all cases) can survive in the long run. Free entry leads an economy to a symmetric equilibrium, in which the excess entry theorem holds. Further, we consider the socially optimal policy for this economy. In cases of either (i) a concave demand (which implies strategic substitutability) or (ii) strategic complementarity (which implies a convex demand), the type of firms that should remain in the market to achieve social optimality does not necessarily coincide with the type of firms that will survive in the long run. The market may select not only the wrong number of firms but also the wrong type of firms in the long run.     

PRODUCTIVITY GROWTH IN LATIN AMERICA OVER THE LONG RUN

The low pace of Latin American productivity growth in recent decades, despite extensive economic reforms, has yet to be understood in a longer‐run context where factors such as demographic changes, structural shifts, and investment levels can be taken fully into account. The OxLAD database provides comparable sectoral output and workforce series over 1900–2000 for the six leading economies in the region for the first time. Our analysis of this new dataset shows that: intersectoral resource reallocation reduced aggregate productivity growth in all three periods; total factor productivity growth was low throughout the century, and even negative in the closing three decades; and thus factor accumulation—investment in fixed capital and skilled labor—was the main source of productivity growth in Latin America during the twentieth century.     

THE TAYLOR PRINCIPLE IN THE LONG RUN: AN EMPIRICAL PERSPECTIVE

In this paper, we empirically assess the Taylor principle in the long run with a small‐scale, trivariate structural vector autoregression. Using U.S. data spanning the period from 1959Q1 to 2010Q2 and different measures of inflation and the output gap, we find that the Taylor principle is supported in the long run for the post‐1979 era, but the principle is unlikely to hold in the long run for the pre‐1979 era. (JEL E52, E58)     

CAPACITY UTILISATION IN THE LONG RUN: SOME FURTHER CONSIDERATIONS

The variability of long-run capacity utilisation has to be consideredas an expression of the determining role played by aggregatedemand in the process of growth. This paper discusses the modelproposed by Serrano in which such a determining role is apparentlyreconciled with the condition of normal utilisation of existingcapacity in the long run. It is shown that Serrano's conclusionslie on the hypothesis of the constancy of the growth rate ofautonomous demand, an assumption which seems to originate froman erroneous interpretation of the property of ‘relativepersistence’ of ‘normal’ magnitudes. The paperargues that if that assumption is abandoned, the autonomy ofaggregate demand necessarily shows itself through the variabilityof capacity utilisation in the long run as well as in the shortrun.     

DETERMINANTS OF THE SAVING RATE: AN INTERNATIONAL COMPARISON

Economists have extensively analyzed the interactions between economic-demographic factors and saving. Fertility rates and the dependency ratio have received considerable attention, but the effect of life expectancy improvements have not been analyzed explicitly. This paper provides an added dimension to the existing literature by empirically examining the role of life expectancy as a determinant of saving. Recent data demonstrate that life expectancy is a statistically significant and quantitatively important factor affecting less developed countries' saving performance. One must consider human capital investments when assessing population growth's impact on saving. The analysis here is one of few that incorporate human capital in defining saving. The overall results are sensitive to level of development and regional diversity .     

THE REAL RATE OF U.S. NATIONAL SAVING

The conventional measure of national saving in U.S. accounts does not include saving in consumer durables, public investment, or intangible capital. It reflects a measure of net foreign investment that relates in considerable part to original cost rather than market values. It also does not include real capital gains.
Comprehensive, adjusted measures of national saving are calculated for as many of the years from 1946 to 1989 as relevant components are available. They generally suggest much larger rates of national saving than are usually recognized. They also cast a sharp and substantially different light on the likely effects of policies designed to increase provision for the future.     

COMPETITIVE LONG RUN INDUSTRY EQUILIBRIUM AND FACTOR-PRICE UNCERTAINTY*

In this paper we have considered competitive long run industry equilibrium with factor-price uncertainty. We discussed the long run equilibrium output of firms with risk neutrality, output price and their responses to changes in uncertainty, factor price and industry demand. In the first part of this paper we have derived a result that, given risk neutrality, the firms operate at proper capacity, i.e. where expected long run marginal cost is equal to expected long run average cost, as shown in the case of output-price uncertainty. This result is, however, different from that obtained from Sheshinski and Dréze (1976). From the comparative static analysis we first discovered that even under risk neutrality factor-price uncertainty affects the long run industry equilibrium: that is, a mean preserving increase in uncertainty leads firm's to enter the industry, because they can decrease expected long run costs as the variability of factor price increases. Consequently, output price goes down. In contrast, firm size is kept invariable in response to its increase as long as the cost function is separable, i.e. the separability of the cost function holds when production functions are the Cobb-Douglas and CES types used commonly in empirical work, although firm size might, generally, be affected by the increase. It is an interesting fact that firm size and industry size will express different responses to a change in risk. The result that the long run industry equilibrium with cost uncertainty is explicitly affected is a sharp contrast to the result under output-price uncertainty and provides a new aspect for understanding about the behaviour of the industry with uncertainty. Secondly, increased factor-price causes the number of firms in the industry to decline and output price to rise. In addition, firm's size will expand with its increase if that factor is inferior, while the effect on firm size is ambiguous if it is normal. The firm's output, i.e. firm size, is, however, kept constant if the cost function is separable. Thirdly, the long run equilibrium output of the firm remains intact but the number of firms increases as industry demand rises. This result holds, regardless of the firm's attitude towards risk. Finally, we find throughout the paper that the functional form of the cost function plays a significant role in determining the behaviour of the industry with factor-price uncertainty.     

THE SAVING RATE IN JAPAN: WHY IT HAS FALLEN AND WHY IT WILL REMAIN LOW*

Japan is in the midst of a demographic transition that is larger and more rapid than other OECD countries. We are interested in understanding the role of lower fertility rates and aging for the evolution of Japan's national saving rate. We use a computable general equilibrium model to analyze the response of the saving rate to changes in demographics and total factor productivity. In our model demographic factors account for 2–3 percentage points of the 9% decline in the saving rate between 1990 and 2000 and persistently depress the saving rate in future years.     

EXPLAINING THE DECLINE OF THE U.S. SAVING RATE: THE ROLE OF HEALTH EXPENDITURE

The U.S. saving rate declined by 8% between 1980 and 2009. We document that the decline can be explained by rising health expenditures. Using exogenous variation in medical expenses generated by Food and Drug Administration drug approvals, we document that a 1 percentage point increase in health expenditure generated a decline in saving rate of 0.9 percentage points. We then estimate a model of household decisions to evaluate the mechanisms behind the decline. We find that the rise in health expenses and drop in saving rate are driven by progress in health technology, reduction in copayment rates, and improvements in income processes.     

HOUSEHOLD SAVING,FINANCIAL CONSTRAINTS,AND THE CURRENT ACCOUNT IN CHINA

In this article, we present a model that can account for the changes in the current account balance in China since the 2000s. Our results suggest that inadequate insurance through government programs for the elderly and the decline in family insurance due to the one-child policy led to large increases in the household saving rate. These increases coupled with the financial frictions preventing the household saving from being invested in domestic firms resulted in large current account surpluses until 2008. Relaxation of financial constraints, on the other hand, was responsible for the decline in the current account surplus after 2008.