Employment,schooling and productivity growth

Summary This paper presents an empirical analysis of labour demand and labour productivity growth in The Netherlands. Assuming an aggregate production function with as factors capital and 3 types of labour, distinguished by educational attainment, cost minimization leads to a set of 3 labour demand relations to be estimated on time series data. Using the estimates and the implied elasticities, aggregate labour productivity growth is decomposed into factor substitution, autonomous factors, labour time shortening, economies of scale, utilization rates and the increased educational level of the working population. The contributions of substitution, utilization rates and education appear to be substantial, notably in the seventies.

List of symbols

Variables a _i Efficiency index of skill leveli - C production - h _i working-time index for skill leveli - g _i steady-state growth rate of skill leveli - K capital stock - L _i employment volume of skill leveli - L _i ^* desired level of labour skill leveli - p output price - p ^* desired output price - s _i ^* long-run static labour shares in the production value - p _k rental price of capital - P index of total factor productivity - P _l index of labour productivity - u _i utilization rate of skill leveli - u _k utilization rate of capital - w _i wage rate for skill leveli - y production volume - y _yij Hicks partial elasticities of complementarity - _i steady-state cost share of skill leveli - _k Bk steady-state cost share of capital - _f lf highest level price index in cost function nesting - _g 4 intermediate level price index in cost function nesting - _h 4 lowest level price index in cost function nesting - _i steady-state relative wage share of skill leveli - _ij Allen partial elasticities of substitution Parameters d _i l adjustment speed of skill leveli - d _p price adjustment speed - M mark-up on marginal costs - scale elasticity of production - _i distribution parameter in cost function,i = 3, g - _i distribution parameter in cost function,i = k, h - _i distribution parameter in cost function,i =1, 2 - _i autonomous labour productivity growth for skill leveli - _i cost share of skill level in base year - _f production cost index in base year - _i hours elasticity in labour efficiency index - group elasticity of substitution betweenL ₃ and (K, (L ₁,L ₂)) - _g Og group elasticity of substitution betweenK and (L ₁,L ₂) - _h 6h group elasticity of substitution betweenL ₁ andL ₂ We would like to thank B. Downey, G.M.M. Gelauff, A. Nieuwenhuis, J.M.M. Ritzen, J.C. Siebrand and an unknown referee for helpful comments on earlier drafts.     

Inflation and Structural Change in 50 Developing Countries

This study provides evidence on whether the inflation rate is stationary or nonstationary using quarterly inflation rate data from 50 developing countries. As Johansen [Johansen, Soren. “Testing Weak Exogeneity and Order of Cointegration in UK Money Demand Data,” Journal of Policy Modeling, 14, 3, June 1992, pp. 313–334] put it, “some time series such as the log of prices (P), have the property that even the inflation rate ΔP is nonstationary, whereas the second difference Δ²P is stationarity.” Results from fractional integration analyses provide evidence of long memory and confirm that the nonstationarity threshold of d³0.5 is satisfied in the majority of the cases. Results from recursive analyses indicate that, despite the finding that structural changes influence the behavior of the estimated integration parameters, evidence of long memory and nonstationarity can be found in each subsample as well as the full sample data.     

Interpretation of error covariances with nonrandom data: An empirical illustration of returns to college education

Conclusion This paper reviews two models of selectivity and gives an interpretation of the covariance terms that are particular to self-selectivity models. While the second model examined in this paper has been discussed elsewhere, the estimates presented for the first model have not been discussed in previous papers. More importantly though, the paper proposes an hypothesis about the expected relationship between error covariances. According to this hypothesis, if all individuals who are faced with the choice between two regimes (1 and 2) choose the regime which yields a maximum value, then the expected relationship between covariances is ₁ < ₂ . If all individuals choose that regime which yields a minimum value, then the expected relationship between covariances is ₁ > ₂ . This relationship holds for a very general class of selectivity models, so long as individuals are choosing between regimes by comparing the expected value (to them) of each regime.This paper was written while I was working under the professional development program at CNA.     

Aggregation,Dividend Irrelevancy,and Earnings‐Value Relations*

In this paper I show that the aggregation of operating and financial income imposes three conditions on earnings‐based value functions. These three conditions provide a shortcut way to identify dividend irrelevant value functions. For example, consider any value function V_t of book value b_t, earnings x_t, and dividends d_t. The aggregation conditions imply that V_t must be of the form V_t = (1 ? k)bt + k [f xt ? dt]. f is the permanent earnings capitalization factor and undetermined weight k may be any function of Δ_t ≡[φx_t ? d_t] ? b_t. The Ohlson 1995 model is the special case when k is constant. But generally k does not have to be constant to maintain dividend irrelevancy. Whenk varies with Δ_t, V_t is nonlinear in earnings. Hence, this result specifies how V_t may be nonlinear in earnings in settings with limited liability or production or abandonment options and still be dividend‐irrelevant. An even more remarkable feature of this result is that it holds whether accounting is clean surplus or not. One must conclude that accounting‐based valuation properly builds from accounting aggregation and Δ_t, and not from the clean surplus relation and abnormal earnings as many now believe.     

A Simple Cross-Country Index of Trade Specialization

We propose a cross-country specialization index - the B ^⋆ - defined as the share of a given product in total country’s exports “normalized” by the average share across all countries. This indicator draws from the Revealed Comparative Advantage index suggested by Balassa (Manch Sch Econ Soc Stud 33(2):99–123, 1965), but its dynamic and cardinal properties are more suitable to perform a cross-country analysis over time. This feature is illustrated with a simple two-country by two-product stylized example and complemented with empirical evidence derived from 79 countries/groups of countries and four distinct technological sectors since the late sixties. We also provide empirical evidence on the external shape of the distribution of the B ^⋆ and on its intra-distribution dynamics in different technological sectors. The results indicate that the overall degree of specialization is higher for high-tech exports than for low-tech exports. From a dynamic point of view, there is evidence of significant persistence of the cross-country export patterns.     

LABOUR SKILLS AND HUMAN CAPITAL IN THE EXPLANATION OF TRADE PATTERNS

In the discussion of the qualitative inferences to be drawnfrom the signs of _s and c₃ [OEP 43.2 p. 448], possibilities(ii), (iii) and (iv) and the beginning of the immediately followingparagraph should read:

1. if both _s and c₃ are positive and ß₃₁> ß₃₂
2. if _s is positive and c₃ is negative theneither ß₃₁and ß₃₂ are both positive andß₃₁ > ß₃₂,or they are both negativeand |ß₃₂|>|ß₃₁|,or ß₃₁ ispositive and ß₃₂ is negative.
3. if _sis negative andc₃ is positive then either ß₃₁and ß₃₂ areboth positive and ß₃₂ < ß₃₁,or theyare both negative and |ß₃₁| > |ß₃₂|,or ß₃₁ is negative and ß₃₂ is positive.

Notice that without first confirming that _s = 0 when c³ 0 nothingmuch can be said about the factor content of trade by lookingat c₃ alone; for, in terms of signs of ß₃₁ and ß₃₂,c₃ < 0 precludes only the combination (ß₃₁ <0 & ß₃₂ > 0); and c₃ > 0 precludes onlythe combination (ß₃₁ > 0 & ß₃₂ <0). Similarly...     

Real money balances as factor saving media: A note

Conclusion A variety of specifications and arguments have been presented in the past in dealing with money in the production system. The most plausible role of money in production seems that it saves production factors as an indirect servicing medium facilitating exchanges and other transaction activities. Based on this hypothesis, real money balances were introduced into the input demand equations in a simultaneous production-equation system. It has been found thatm ₁ plays a more significant factor-saving role thanm ₂ and it saves capital more than labor. Considering the theoretical merits and the statistical consistency of our model, it is suggested that in macro model building real money balances should be treated as input-saving media appearing in the input demand equations rather than direct production factors to be included in the production function.     

MonetÄre aspekte des jahresgutachtens 1971/72 des sachverstÄndigenrats

Summary Monetary Aspects of the 1971/72 Report of the German Council of Economic Advisers. — This paper deals mainly with the concept of a “computable credit maximum” (K _s ⁺ ) for the commercial banking system, as presented by the German Council of Economic Advisers. K _s ⁺ is supposed to be based on a theory of credit creation which, however, is not explained. The advisers base interpretations of monetary policy on K _s ⁺ and, strangely enough, use it as an indicator, at the same time, of the direction and the energy of (1) total monetary policy, (2) minimumreserve policy alone and (3) monetary impulses in general. This paper shows first that, contrary to what the advisers suppose, a complete analysis can very well include the influence on K _s ⁺ of the public’s use of cash. Then, the indicative capacity of K _s ⁺ is systematically analysed by means of a simple model and compared with that of other monetary variables. The outcome is that K _s ⁺ is incapable of fulfilling any of the indicative functions attributed to it by the German Council of Economic Advisers.

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Résumé Aspects monétaires du rapport de 1971/72 du Conseil Economique de la République Fédérale Allemande. — Cet article s’occupe surtout de la notion d’un ?maximum calculable de crédit? (K _s ⁺ ) pour le système bancaire commercial, notion qui a été élaborée par le Conseil Economique. On y prétend que K _s ⁺ est basé sur une théorie de création de crédit qui, cependant, n’est pas expliquée. La rapport fonde sur K_s ⁺ ses interprétations de politique monétaire et s’en sert — ce qui est extraordinaire — comme indicateur à la fois de la direction et de la force 1. du total de la politique monétaire, 2. de la seule politique des réserves et 3. des impulsions monétaires en général. Cet article démontre d’abord qu’une analyse complète peut très bien — contrairement à ce que suppose le rapport — tenir compte de l’influence qu’exerce sur K _s ⁺ la manière dont le public se sert d’argent comptant. Ensuite, le caractère indicatif de K _s ^su+ est analysé systématiquement, au moyen d’un modèle simple, et comparé avec celui d’autres variables monétaires. Il en résulte que K _s ⁺ est incapable d’accompli une seule des fonctions indicatives qui ont été attribuées par le Conseil Economique.

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Resumen Aspectos monetarios d’informe 1971/72 del Consejo de Expertos Económicos. — Este artículo trata primordialmente del concepto presentado por el Consejo de Expertes Económicos y llamado ?tope credicio? (K _s ⁺ ) del sistema de la Banca privada. Parese que K _s ⁺ se basa en una teoría de creación de crédites, la cual, sin embargo, no se hace explícita. Los Expertes deducen del K _s ⁺ conclusiones en materia de política monetaria y lo utilizan particularmente como indicador de la direccíon y la potencia de (1) toda política monetaria, (2) política de réservas mínimas, y (3) impulses monetarios. En este artíeulo se muestra que en analisis más completose puede considerar la influencia del comportamiento del publico con respecte a la mamtención de dinero en líquidez sobre el K _s ⁺ , cosa que creían los Expertes. A continuación se analiza sistemáticamente dentro de un modelo sencillo las evalidades indicativas del K _s ⁺ y se las compara con aquéllas derivadas de otras variables monetarias. El resultado es que K _s ⁺ no puede cumplir con ninguna de las funciones que el Consejo de Expertes Económicos le atribuye.

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Riassunto Aspetti monetari del rapporte 1971/72 del Consiglio degli Esperti Economici. — Questo articolo si occupa principalmente della nozione ?massimo credite computabile? (K _s ⁺ ) del sistema delle banche di credito, presentata dal Consiglio degli Esperti. Si suppone che K ⁺ si basi su una teoria di creazione di credito che tuttavia non è spiegata. Gli esperti fondano su K _s ⁺ interpretazioni politico-monetarie e la adoperano in modo notevole, contemporaneamente, come indicatore della direzione dell’effetto e della forza d’urto (1) dell’intera politica monetaria, (2) della politica della riserva minima soltanto e (3) di impulsi monetari in generale. L’articolo mostra dapprima che, in un’analisi più compléta, contrariamente alle supposizioni degli esperti, può essere presa in considerazione l’influenza del denaro contante del pubblico su K _s ⁺ . Successivamente sono analizzate sistematicamente, nel quadro di un modello semplice, le qualità d’indicatore di K _s ⁺ e comparate con quelle di altre variabili monetarie. Il risultato è che K _s ⁺ non può adempiere nessuno dei compiti d’indicatore ad essa destinati dal Consiglio degli Esperti.

     

De wet van Walras (II)

Summary Walras' Law occupies an important place in the discussions about some famous controversies such as the Patinkin-controversy and that between the Loanable Funds Theory and the Liquidity Preference Theory. After a brief introductory section about the contents and the basis of this theorem, the question of the traditionally attached identity predicate is discussed. In this connection it seemed useful to distinguish between: (a) equilibrium equations, (b) falsifiable identities, and (c) tautological identities. Walras' Law belongs to the class of falsifiable identities, because — given the assumption of the validity of the budget principle and the traditionally used definition of the excess demand concept — the Walrasian Theorem is valid even in disequilibrium situations, although it can be falsified in the real world. The second part of this study has been devoted to the question for which economic models this law can be said to be appropriate. In this connection the criticisms of Hansen, Rose, Archibald and Lipsey, Patinkin, Clower, and Tsiang have been thoroughly studied. The final conclusion is that the expressed criticisms cannot stand up, unless the underlying assumptions are changed,e.g., if a system of highly monopolized markets is chosen in stead of the traditional general equilibrium analysis based on perfect or monopolistic competition. Generally speaking, we may say that Walras' Law is also valid in inflationary, unemployment or non-tatonnement models, because these additional assumptions do not necessarily violate the above-mentioned underlying assumptions of the Walrasian Theorem. These basic assumptions are very useful and fairly reasonable in such a general equilibrium analysis, but they are neither necessarily inevitable nor always sufficiently realistic.

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Het eerste gedeelte van dit artikel is opgenomen in De Economist 1968, aflevering 4.     

Swedish artisans in the nineteenth century

Abstract

The history of the artisan class and of the gild system in Sweden has been dealt with in a number of works, such as Professor E. Heckscher's Sveriges ekonomiska historia [The Economic History of Sweden] and in two of the volumes of the great work of Landsorganisationen ¹ Landsorganisationen, popularly known as ‘L.O’, the Swedish equivalent of the T.U.C. : Den svenska arbetarklassens historia [History of the Swedish Working Class], as well as in Professor E. Söderlund's Stockholms hantverkarklass 1720–1772 [The Artisan Class of Stockholm, 1720–1772]. These topics are of course also touched upon in histories of towns and other literature. However, in those studies which cover the whole country the subject has only been pursued to the end of the 18th century or the beginning of the 19th. The subsequent period is discussed in Henry Lindström's two books Näringsfrihetens utveckling i Sverige 1809–1836 and Näringsirihetsirågan i Sverige 1837–1864 [The Development of Industrial Freedom in Sweden, 1809–1836, and The Problem of Industrial Freedom in Sweden, 1837–1864], but only from a special point of view. Thanks, however, to the good offices of Sveriges hantuerks- och småindustriorgonisation (The Swedish Craft and Minor Industries Organisation), an attempt has now been made, in a work by Dr. Tom Söderberg that has been in preparation for some time, to fill the gap thus existing in respect of the period after 1815. The result, in spite of the relatively limited number of pages, is a very comprehensive exposition, even if the subject obviously cannot be exhausted within the given frame of reference.     

A generalized multi-country endogenous growth model

The transitional dynamics of open-economy endogenous growth models are largely unexplored. The present paper fills this gap in the literature. By applying the familiar Travis–Dixit–Norman (Dixit and Norman, Theory of International Trade, Cambridge University Press, Cambridge, UK, 1980) approach to a general class of growth models, it provides original results on the transitional dynamics of the multi-country open-economy versions of several prominent special cases, including the models of Romer (J Polit Econ, 94:1002–1037, 1986; J Polit Econ 98:S71–S102, 1990), Lucas (J Monet Econ, 22:3–42, 1988), Grossman and Helpman (Innovation and Growth in the Global Economy. MIT Press, Cambridge, MA, 1991a, Chaps. 3 and 4; Rev Econ Stud 58:43–61, 1991b), Jones (J Polit Econ, 103:759–784, 1995a), and Segerstrom (Am Econ Rev, 88:1290–1310, 1998). This approach also shows that, in the class of models considered, the question of whether or not international economic integration accelerates growth in the long run is equivalent to the question of whether or not scale effects prevail.      

Trade uncertainty and specialization. Social versus private planning

Summary A small trading economy which produces and trades an arbitrary, but finite, number of goods and faces given terms of trade in combination with an uncertain volume of trade is studied. An exogenous probability of trade disruption forces both public and private decision-makers to specialize to a lesser extent in accordance with their comparative advantage. A unique optimal point of production exists for each probability of trade disruption. A private competitive economy will not produce at this point: it produces too much of the good with a comparative advantage.Notation C ² class of twice continuously differentiable functions - C _i consumption of goodi - f free-trade utility function - g autarky utility function - p international relative price of goody - p _d domestic relative price of goody - Q solution set of - U utility function - U marginal utility of goodi - U _x marginal utilities of lastn goods - x goodx - x ^* autarky production of goodx - x free-trade production of goodx - x _pr private production of goodx - x ₀ optimal production of goodx - x _m maximal production of goodx - y goody - Y income function - private economy equilibrium function - difference function - production possibility function - _x derivative of - probability that free trade occurs - indirect utility function - solution function to optimality problem - c consumption vector - p relative price vector - x goods vector - t transpose - R ₊ ⁿ n-dimensional positive orthant This article communicates the opinion of the author. The views expressed herein are not necessarily shared by his employer.Comments by Willem Buiter, Casper de Vries and participants at the Buiter Workshop Series at the University of Groningen (May 1989) were very useful.     

Swedish trade unions and the social democratic party: The formative years

Abstract

The history of labour movements in many countries of the Western world includes a period in which the relationship between the trade-union arm and the political arm undergoes significant change. This formative period is conditioned in an immediate way by the political framework and more generally by the economic and social milieu. In respect of the actors themselves—trade unions and party organisations—latter-day interpreters have frequently regarded developments of union-party relationships as a process in which the unions, to the extent they are successful and true to their character and objectives as trade unions, free themselves from party domination. ¹ The most obvious example is found in the works of the late Professor Selig Perlman, especially his A Theory of the Labor Movement, (New York, 1928). It is recognised here that Perlman did not discuss Swedish developments. The historical fragment which follows is intended to demonstrate that, for the Swedish experience, such an interpretation leaves much to be desired.     

Een eenvoudig macro-economisch model voor Nederland

Summary On the basis of the neo-classical theory of the cycle, developed by D. B. J. Schouten, an effort has been made to introduce some of its elements in an empirical model for the Dutch economy. As far as possible this theory has been used to explain production, investment, employment and wages. The sampling period covered 1953–1965; estimates of the parameters were ordinary least squares estimates. A simulation of the Dutch economy for the period 1953–1968, with only the exogenous variables predetermined, gave satisfying results. System stability tests showed dampened oscillations, each cycle taking about 8 1/2 years.D Symbolenlijst c consumptieve bestedingen van gezinshuishoudingen (p _c ) - ç _a ,c _a bruto produktiecapaciteit van bedrijven (p _ij ) - e uitvoer goederen en diensten (p _e ) - h arbeidsproduktiviteit bij bedrijven (p _ij ) - ,i bruto investeringen van bedrijven, excl. woningbouw en voorraadvorming (p _i ) - l werkgelegenheid bij bedrijven, incl. zelfstandigen - m invoer goederen en diensten (p _m ) - p _i loonsom per man bij bedrijven (P _c ) - q over- of ondercapaciteit bij bedrijven als percentage van de bruto produktiecapaciteit in periodet-1 - v bruto afzet van goederen en diensten, excl. voorraadvorming, primaire inkomens van en naar het buitenland en lonen en salarissen betaald door de overheid (p _v ) - w werkloosheid als percentage van de afhankelijke beroepsbevolking, incl. zelfstandigen - ij bruto produktie van bedrijven (p _ij ) - z bruto beschikbaar overig inkomen (p _i ) Exogene variabelen h _w herwogen wereldhandel - x materiële overheidsuitgaven en woningbouw (p _x )     

Probability and the synthetic <Emphasis Type="Italic">a Priori</Emphasis>: A reply to block

Conclusion Contrary to Block, the synthetic a priori has little to do with our dispute. My critique of the Austrians is not that their methods are “unscientific,” but that their most distinctive positions are false or overstated. Yet Block’s latest reply does inadvertently make Austrian economics more reasonable. If synthetic a priori claims vary in degree of probability, they can no longer be treated as scientifically superior to empirical claims. Furthermore, while empirically testing absolutely certain synthetic a priori claims is pointless, empirically testing uncertain synthetic a priori claims is not. As is often the case with Austrians, Block is better at criticizing neoclassicals than he is at producing a sound alternative. He is right that most economists do not practice the logical positivism that they preach. He is also correct to maintain that logical positivism is mistaken. However, both of these problems can be resolved if neoclassical economists themselves adopt the Bayesian model of belief formation that they routinely apply to everyone else.     

The Janus face of race: Rhonda M. Williams on orthodox economic schizophrenia

The American Negro has the great advantage of having never believed that collection of myths to which white Americans cling. … The tendency has really been, insofar as this was possible, to dismiss white people as the slightly mad victims of their own brainwashing. [The problem of the color line is] a fearful and delicate problem, which comprises, when it does not corrupt, all the American efforts to build a better world—here, there, or anywhere. It is for this reason that everything white Americans think they believe in must now be reexamined.—James Baldwin (The Price of the Ticket, 377–378).     

Global manufacturing SO2 emissions: does trade matter?

A growth-decomposition (scale, technique and composition effect) covering 62 countries and seven manufacturing sectors over the 1990–2000 period shows that trade, through reallocations of activities across countries, has contributed to a 2–3% decrease in world SO₂ emissions. However, when compared to a constructed counterfactual no-trade benchmark, depending on the base year, trade would have contributed to a 3–10% increase in emissions. Finally adding emissions coming from trade-related transport activities, global emissions are increased through trade by 16% in 1990 and 13% in 2000, the decline being largely attributable to a shift of dirty activities towards cleaner countries.     

The Nordic Countries' Trade Liberalisation in the 1950s: An introduction

Abstract

The fall of the Soviet Union re-awoke the interest in economic regime transformation. ¹ See for instance Dornbusch, R. et al (eds.), Postwar Economic Reconstruction and the Lessons for the East Today, Cambridge, Mass.: MIT Press 1993. How should liberated states navigate the complex and difficult transition from state controlled bilateralism to a market-oriented multilateralism? Liberalisation and structural adjustment could happen faster than the social institutions were capable of absorbing. Transnational economic integration brings returns and efficiency, but at the same time challenges the social and political institutions on which the economic transactions are based. Liberalisation of trade, capital and payments impose considerable constraints on the democracies' governments in their pursuit of national consensus, stability and prosperity. This topic is at the core of the globalisation debate, and formulated as a trilemma between economic integration, proper public economic management and national sovereignty. ² Lawrence, S.H., Reflections on managing Global Integration, Journal of Economic Perspectives, vol. 23, 1999, 3–18.      

Een dynamisch duopoliemodel II

Summary This paper is a continuation of ‘A Dynamic Duopoly Model’ (De Economist, 1970, pp. 458–490). According to the argument given in that paper, each duopolist changes his price twice in each period: first, there is an autonomous change, and, secondly, an induced one to neutralize the effect of the autonomous price change of the other duopolist. In the present paper, however, it is assumed that both duopolists change their prices only once a period. These ‘combined’ price changes are partly autonomous and partly induced; only the duopolist himself could tell in how far they are autonomous or induced. The steady state solution of this model corresponds with the endogenously determined duopoly solution of the earlier investigations.