On Lipschitz continuity of policy functions in continuous-time optimal growth models

Summary. This paper proves the C ^1,1 differentiability of the value function for continuous time concave dynamic optimization problems, under the assumption that the instantaneous utility is C ^1,1 and the initial segment of optimal solutions is interior. From this result, the Lipschitz dependence of optimal solutions on initial data and the Lipschitz continuity of the policy function are derived, by adding an assumption of strong concavity of the integrand. Received: July 29, 1996; revised version: November 25, 1997     

The optimal control of emissions and renewable resource harvesting under uncertainty

A model of a renewable resource is developed where the growth and quality of the resource are reduced by pollution. Ambient pollution concentrations and the renewable resource stock are modeled as stochastic processes. Conditions for the optimal harvest plan and the optimal emissions rate are derived. The effect of stochastic variations on the optimal management of the resource is analyzed. The steady-state joint probability distribution of the resource and pollution stocks is shown to exist under certain conditions.     

On perfect equilibria in stochastic models of growth with intergenerational altruism

Summary. The well-known model of altruistic growth/strategic bequest is studied. A stochastic transition function is considered and fairly general sufficient conditions for the existence of Markov-stationary subgame-perfect equilibrium are given. Also some special cases in which the equilibrium policy is continuous and nondecreasing are discussed.Received: 20 September 2003, Revised: 11 December 2004, JEL Classification Numbers: C73, D91, O40.Research was partially supported by KBN grant 5 PO3A 01420.     

Existence of solutions in continuous-time optimal growth models

This paper studies the existence of solutions in continuous time optimization problems. It provides a theorem whose conditions can be easily checked in most models of the optimal growth theory, including those with increasing returns and multi-sector economies.      

基于新疆经济增长的财政支出最优规模估算

财政支出规模反映了政府对经济的干预程度,然而财政在支出过程中有个量的把握,即占GDP的比重存在一个最优值。在最优值以内,财政部门为私人企业提供公共产品以及弥补外部性等,提高财政支出能够提高经济增长率,当财政支出超过这个最优值时,税收的扭曲作用会不断加强,增加财政支出对经济增长起阻碍作用。将财政支出纳入生产函数模型中,通过实证分析,估算出新疆的最优财政支出规模。     

Economic growth,the nature of growth and poverty reduction in rural China

This paper examines some of the major driving forces of poverty reduction in China. Based on time series and cross-sectional provincial data, the determinants of rural poverty incidence are estimated. The results show that economic growth is an essential and necessary condition for nationwide poverty reduction. It is not, however, a sufficient condition. While economic growth played a dominant role in reducing poverty through the mid-1990s, its impact has diminished since that time. Beyond general economic growth, growth in specific sectors of the economy is also found to be effective in reducing poverty. The finding of our paper is consistent with the idea that poverty reduction in the future will need to be adjusted with more emphasis being given on direct targeting through helping the poor to increase their human capital and incomes.     

Investment under uncertainty: The nature of demand shocks and the expected profitability of capital

This paper analyses the disparity regarding the sign of the investment-uncertainty relationship in models of investment under symmetric adjustment costs. That sign is determined by the shape of the profit function, which is related to the nature of demand shocks.     

The complete removal of individual uncertainty: multiple optimal choices and random exchange economies

Summary. The aim of this paper is to develop some measure-theoretic methods for the study of large economic systems with individual-specific randomness and multiple optimal actions. In particular, for a suitably formulated continuum of correspondences, an exact version of the law of large numbers in distribution is characterized in terms of almost independence, which leads to several other versions of the law of large numbers in terms of integration of correspondences. Widespread correlation due to multiple optimal actions is also shown to be removable via a redistribution. These results allow the complete removal of individual risks or uncertainty in economic models where non-unique best choices are inevitable. Applications are illustrated through establishing stochastic consistency in general equilibrium models with idiosyncratic shocks in endowments and preferences. In particular, the existence of “global” solutions preserving microscopic independence structure is shown in terms of competitive equilibria for the cases of divisible and indivisible goods as well as in terms of core for a case with indivisible goods where a competitive equilibrium may not exist. An important feature of the idealized equilibrium models considered here is that standard results on measure-theoretic economies are now directly applicable to the case of random economies. Some asymptotic interpretation of the results are also discussed. It is also pointed out that the usual unit interval [0,1] can be used as an index set in our setting, provided that it is endowed together with some sample space a suitable larger measure structure. Received: September 14, 1998; revised version: January 6, 1999     

中国商业银行成本效率实证研究

基于随机前沿法原理,利用超越对数成本函数模型,本文评估了中国14家主要商业银行在1998—2003年间的成本效率情况,并按考虑贷款产出质量的2003年成本效率情况对各银行排序。实证研究结论为(1)中国商业银行总体的成本效率并不很差;(2)国有商业银行成本效率处于上升趋势,股份制商业银行则保持波动攀升趋势;(3)贷款产出质量对中国商业银行的成本效率有明显的负面影响,在考虑产出质量时,国有商业银行成本效率明显落后于股份制商业银行。     

The impacts of membership in multi-hospital systems on cost,productivity growth and technical change

We examine whether affiliation in a multi-hospital system contributes to higher rates of total factor productivity (TFP) growth, technological progress and cost efficiency. With a 1996 to 1999 panel of 248 US hospitals (some are private nonprofit (church-related and other nonprofit) and the remaining are public (government, nonfederal)), empirical results indicate that urban system member hospitals experienced higher rates of both TFP growth and technical progress than the rates of TFP growth and technical progress experienced by urban nonsystem hospitals. Rural system member hospitals experienced smaller rates of both TFP decline and technical regress than the rates of TFP decline and technical regress experienced by rural nonsystem hospitals.     

The Greek economy under the twin-deficit pressure: a demand orientated growth approach

This paper uses an alternative growth approach in line with Thirlwall’s model in order to predict economic growth in Greece taking into account internal and external imbalances caused by public deficit/debt and lack of trade competitiveness. It is shown that the simple Thirlwall’s Law (given by the product of the ratio of the income elasticities of demand for exports and imports, and the growth of foreign demand) over-predicts real growth in Greece while the more complete extended model, makes a closer prediction which is consistent with the high deficit/debt and current account deficit experienced in this country. The simulation approach shows that the most efficient policy to attain higher growth is to reduce external imbalances while policies to reduce internal imbalances are low growth enhancing.     

On the role of domestic and international financial cyclical factors in driving economic growth

ABSTRACT

We investigate the effects of (domestic and international) financial cyclical factors on the US business cycle over the period 1890–2013 using an augmented stochastic version of the neoclassical growth model. In our setting, financial factors enter as determinants of the total factor productivity cyclical pattern. By means of static and dynamic estimations we find that (i) the inclusion of financial cyclical factors improves the model’s performance; (ii) the sensitivity of economic growth to financial factors is time-varying; (iii) domestic financial factors have a key role in explaining short-run output fluctuations only in the first half of the 20th century; (iv) US business cycle fluctuations have been mainly driven by global financial factors (i.e., financial integration) over the last three decades.

JEL CODES: O40, E32, C32     

Indeterminacy of equilibrium in stochastic OLG models

Summary. This paper studies the equilibria of a stochastic OLG exchange economies consisting of identical agents living for two periods, and having the opportunity to trade a single infinitely-lived asset in constant supply. The agents have uncertain endowments and the stochastic process determining the endowments is Markovian. For such economies, the literature has focused on studying strongly stationary equilibria in which quantities and prices are functions of the exogenous states of nature which describe the uncertainty: such equilibria are generalizations of deterministic steady states, and this paper investigates if they have the same special status as asymptotic limits of other equilibrium paths. The difficulty in extending the analysis of equilibria beyond the class of strongly stationary equilibria comes from the presence of indeterminacy: we propose a procedure for overcoming this difficulty which can be decomposed into two steps. First backward induction arguments are used to restrict the domain of possible prices; then if some indeterminacy is left, expectation functions are introduced to make the forward equilibrium equations determinate. The properties of the resulting trajectories, in particular their asymptotic properties, can then be studied. For the class of models that we study this procedure provides a justification for focusing on strongly stationary equilibria. For the model with positive dividends (equity or land) the justification is complete, since we show that the strongly stationary equilibrium is the unique equilibrium. For the model with zero dividends (money) there is a continuum of self-fulfilling expectation functions resulting in a continuum of equilibrium paths starting from any admissible initial condition: under conditions given in the paper, these equilibrium paths converge almost surely to one of the strongly stationary equilibria-either autarchy or the stochastic analogue of the Golden Rule. Received: November 19, 2001; revised version: March 22, 2002 RID="*" ID="*" We are grateful for the stimulating environment and research support provided by the Cowles Foundation at Yale University during the Fall 2000 when this paper was first conceived. We are also grateful to the participants of the SITE Workshop at Stanford University and the Incomplete Markets Workshop at SUNY Stony Brook during the summer 2001 for helpful discussions. Correspondence to: M. Magill     

The effects of environmental taxes and quotas on the optimal timing of emission reductions under Choquet–Brownian uncertainty

The effects of two environmental policy options for the reduction of pollution emissions, i.e. taxes and non-tradable quotas, are analyzed. In contrast to the prior literature this work endogenously takes into account the level of emissions before and after the adoption of the new environmental policy. The level of emissions is determined by solving the firm's profit maximization problem under taxes and fixed quotas. We find that the optimal adoption threshold under taxes is always larger than the adoption threshold under fixed quota, even in a setting characterized by ecological uncertainty and ambiguity – in the form of Choquet–Brownian motions – on future costs and benefits over adopting environmental policies.     

The hopf bifurcation and the existence and stability of closed orbits in multisector models of optimal economic growth

It is shown that under very general circumstances, the standard optimal growth model with two or more capital goods can give rise to optimal trajectories that are limit cycles. An example with a nonjoint production Cobb-Douglass technology giving rise to closed cycles around a unique steady state is constructed. The stability of orbits is also studied.     

A note on the effect of patents in endogenous growth models

This note examines the effect of patent protection in an endogenous growth model with a generic innovation process. It indicates that increasing patent breadth stimulates innovation when R&D is less intermediates-intensive than production, whereas it has a non-monotonic effect on innovation when the former is more intermediates-intensive than the latter.     

Fiscal policy,government debt,and economic growth in the Kaleckian model of growth and distribution

This article presents the Kaleckian model of growth and distribution that sets a budget deficit ratio as an indicator of fiscal policy and examines the short- and long-run effects of an increase in budget deficits and a rise in income tax rates on the economy. The key short-run outcomes are as follows. First, expanded budget deficits have a positive effect on the rate of capacity utilization. Second, the tax rate for wage income does not affect the rate of capacity utilization, whereas the tax rate for capital income has a favorable impact on it. This result implies that raising the tax rate for capital income can be an important policy instrument for stimulating the economy. Third, we find that the economy exhibits a wage-led aggregate demand in the short run. The main long-run results are as follows. First, the effect of expanded budget deficits on the growth rate is ambiguous, since a higher debt burden negatively influences the rate of capacity utilization and hence economic growth, despite the increase in demand caused by government borrowing. A higher budget deficit ratio thus raises the growth rate only if a certain condition is satisfied. Second, the tax rate for capital income has a positive impact on the growth rate. Third, the economy shows a wage-led growth in the long run.     

On the impact of innovation and inequality in economic growth

We present robust results on the empirical relationship among income inequality, innovation, and economic growth for a panel dataset of 74 countries over the period 1996–2014. We estimate pairwise causality tests to show that there is bidirectional causality between GDP per capita and R&D, while R&D causes the Gini index of income inequality, and it causes human capital. Allowing coefficients to be different across cross-sections of countries, we get in any case a pairwise bi-directionality. By dynamic panel data estimations, when regressing R&D on GDP per capita, we obtain a threshold value of 0.16% of R&D such that for values above it there is economic growth. While regressing R&D on the Gini index, we get a threshold of 0.10% of R&D above which, the income distribution begins to improve. Finally, we estimate a growth equation that depends on R&D, income inequality, and physical capital. We obtain two thresholds, one of 38.79 for the Gini (above which the economic growth decreases), and one of 0.06% for R&D such that above it, economic growth is rising.     

Elasticity of substitution and growth: normalized CES in the Diamond model

Summary. It is often asserted that the more substitutable capital and labor are in the aggregate production the more rapidly an economy grows. Recently this has been formally confirmed within the Solow model by Klump and de La Grandville (2000). This paper demonstrates that there exists no such monotonic relationship between factor substitutability and growth in the Diamond overlapping-generations model. In particular, we prove that, if capital and labor are relatively substitutable, a country with a greater elasticity of substitution exhibits lower per capita output growth in transit and in steady state. Received: October 27, 2001; revised version: February 25, 2002