SUFFICIENCY OF THE LENS CONDITION FOR FACTOR PRICE EQUALIZATION

Abstract.  Demiroglu and Yun (1999 ) and Wong and Yun (2003 ) gave counterexamples to show that the lens condition is not sufficient for factor price equalization. However, they leave the following two important problems untouched: why the lens condition is not sufficient for factor price equalization in general; and whether counterexamples can be given only in a very special case. This paper extends these papers to a framework without two input vectors being proportional to explain why the lens condition loses sufficiency and gives a lot of counterexamples which include those provided in above papers as special cases.     

QUANTITY VERSUS PRICE IN A HOMOGENEOUS PRODUCT DUOPOLY*

In a simple homogeneous product setting, the paper looks at the debate on whether firms should choose quantity or price as their strategic variable. It examines a two-stage game between firms with symmetric costs in which the firms choose the strategic mode of operation in the first period and then, in the second period, price or output are chosen simultaneously according to the mode chosen in the first stage. In this game it is possible to have two Nash equilibria where either both play in quantities or both play in prices. One firm choosing price and the other quantity can never be a Nash equilibrium in the two-stage game. Both choosing quantity is always a Nash equilibrium. Both choosing prices may be a Nash equilibrium only in some situations: the structure of the cost functions decides this issue.     

THE MEASUREMENT OF CONSTANT PRICE AGGREGATES IN CANADA*

This paper is in part directed towards a partial examination of Canadian concepts and methods used in the deflation of constant price estimates of gross domestic product from both an expenditure and industry-of-origin point of view, and in part toward certain problems arising in the development of a conceptually balancing set of accounts in real terms. It also provides reference material to allow the reader to pursue the detailed methodology and data underlying the Canadian constant price accounts.     

MEASUREMENT BIAS IN PRICE INDEXES FOR CAPITAL GOODS*

The official U.S. price deflators for investment goods continue to be based on defective methodology, despite frequent criticism in recent years. This paper contributes new price information, which is combined with the empirical results from other studies to yield a revised investment deflator for the 1954–1963 period which (a) rises much more slowly than the official index and (b) declines relative to a revised price index for consumption expenditures.     

JAPANESE CONTRIBUTIONS TO NONLINEAR CYCLE THEORY IN THE 1950s*

In the early 1950s pioneering contributions were made to the nonlinear theory of Keynesian macrodynamics by Shinichi Ichimura, Michio Morishima and Takuma Yasui. They were the first to formally investigate the existence, stability and uniqueness of limit cycles in macrodynamics. An attempt is made to place the contributions of this Japanese school of nonlinear trade cycle theorists within the context and development of math‐ematical economics in early post‐war Japan. As an additional, although minor, exercise, Morishima's model of the cycle is simplified and generalized to show, using the Andronov‐Hopf bifurcation theorem, the existence of a periodic orbit.     

TYPES OF PUBLIC CAPITAL AND THEIR PRODUCTIVITY IN JAPANESE PREFECTURES*

Several researchers have studied the productivity of public capital in Japan but most have not paid attention to the types of public infrastructure or differences in production technology between prefectures. We estimate prefectural production functions with differently aggregated public capital. Through the model selection process, we examine the types of productive public capital. The empirical results show the production technologies used and how types of productive public capital differ between prefectures.     

PRODUCTIVITY AND BUSINESS CYCLES IN JAPAN: EVIDENCE FROM JAPANESE INDUSTRY DATA*

Constructing a database of 37 industries, we examine whether the measured productivity in Japan is pro‐cyclical and investigate the sources of this pro‐cyclicality by using the production function approach employed by Hall (1990) and Basu and Fernald (1995). The aggregate Solow residual displays pro‐cyclicality. A large number of industries show constant returns to scale. No significant evidence for the presence of thick‐market externalities is found. Our results also hold when we consider labour hoarding, part‐time employment, and the adjustment cost of investment. The results indicate that policies to revitalize the Japanese economy should concentrate on promoting productivity growth.     

调整过程中的价格刚性与失业要素波动:一个动态一般均衡角度的分析

运用多产品和多要素的动态一般均衡模型,该文研究了从一个均衡价格向另一个均衡价格过渡的调整过程.应用搜寻模型,该文建立了一种联系产品市场和要素市场的调整技术,随后求解了一个最优控制问题,并证明最优价格调整路径必然是渐进的、逐步的.     

CONSUMER SEARCH,PRICE DISPERSION,AND INTERNATIONAL RELATIVE PRICE FLUCTUATIONS*

This article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price (LOP) and relative price fluctuations. Search frictions lead firms to price discriminate across markets based on the opportunity cost of search, which depends on the local wage. With productivity and taste shocks estimated from the data, deviations from the LOP are as volatile and persistent as in the data. Fluctuations in relative wages, real exchange rates, and the terms of trade are also consistent with the data.