Vertical Integration,Firms’ Entry,Exit, Strategic Shifts,Age, and The Productivity Growth in Korea's Core Growth‐Leading Industries

This study attempts to measure the impact of firms’ entry, exit, strategic shifts, and age on the productivity growth of Korea's three core growth‐leading industries and their vertical integration with capital share (VI) firms and non‐VI (NVI) firms in view of the 2008 global financial crisis and the institutional push by the Korean Government. A stochastic frontier production model was applied to firm‐level panel data from 2006 to 2011 for Korea's automobile, electronics and general machinery industries. The results show that exogenous shocks to the market triggered large‐scale resource reallocations from firms with declining productivity to firms with less declining or rising productivity, and market share reallocation between VI firms and NVI firms. The Korean Government's institutional push led the productivity growth of NVI firms to reach their highest levels in 2010. In a VI structure, a structure comprising VI firms only, the agency problem dominated the synergies of secure supply chains and saving on transaction costs, while NVI firms endeavoured to raise their productivity to step into a VI structure to secure stable supply chains, only to find their R&D initiatives stagnated once they took on the VI structure. Therefore, efficient resource reallocation is hindered by the agency problem within the bounds of vertically integrated industrial structures.     

Technological progress,structural change and productivity growth: a comment

In a recent article, Fagerberg [Struct. Change Econ. Dyn. 11 (2000) 393] finds changes in the employment share of the electrical machinery industry to positively impact the manufacturing sector productivity growth. Fagerberg's approach has some methodological drawbacks, however. This note seeks to complement Fagerberg's analysis by estimating the impact of the employment share of technologically progressive industries using a more adequate methodology. Fagerberg's claim that the share of the ‘electronics’ industry positively affects manufacturing is confirmed. However, the size of the impact, and as a consequence the extent of spill-overs, is found to be much smaller than estimated by Fagerberg.     

The Real Effects of Transnational Activity upon Investment and Labour Demand within Japan's Machinery Industries

This paper attempts to estimate the real effects of transnational activity upon both investment and labour demand, within each of the five industries that comprise Japan's domestic machinery sector. The study uses a standard model of investment and labour demand, which is augmented to include foreign wages. It is argued that this approach is the most suitable for capturing the real effects of transnational activity, since foreign wages indicate the attractiveness of alternative sites for investment, production and employment. A simultaneous equations estimator is employed and, for each industry, there is evidence that both the behaviour of investment and labour demand are sensitive to foreign wage conditions. The results indicate the extent to which transnational activity has had a real effect upon Japan's domestic machinery sector.     

Environmental regulation and investment: Evidence from European industry data

This paper contributes to the empirical literature on the effects of environmental regulation on investment. In particular, we ask whether and how strongly an industry's investment responds to stringency in environmental regulation. Environmental regulation is measured as (i) an industry's total current expenditure on environmental protection, and (ii) a country-industry's revenue from environmental taxes. Focusing on European data of manufacturing industries between 1998 and 2007, we estimate the differential impact of environmental stringency on four types of investment: gross investment in tangible goods, in new buildings, in machinery, and in ‘productive’ investment (investment in tangible goods minus investment in abatement technologies). Both environmental variables enter positively, and their quadratic terms exhibit significantly negative parameter estimates. This, in turn, indicates a positive but diminishing impact of environmental regulation on investment.     

R&D Spillovers: Evidence from U.S. Food Processing,Farm Machinery and Agricultural Sectors

This paper computes private and social rates of return to R&D capital in the three vertically linked sectors, primary agriculture, food processing, and the farm machinery in the United States. Using a cost function approach, the private rates of return to R&D ranged from an average of 21.5% per annum for farm machinery to 87.5% for agriculture. The social rates of return to R&D in food processing and farm machinery are larger than the private rates due to spillovers. We find that spillovers from public agricultural R&D mitigates the market's failure in farm machinery to fully appropriate the returns to its R&D capital.     

The Impact Of Computer Prices On International Comparisons Of Labour Productivity

This paper analyses the international comparability of methods used to convert the value added of the office and computing machinery sector (OCM) into constant prices for nine OECD countries. It concludes that the variations which exist in the price indexes are largely due to differences in the methods countries use to capture changes in the quality of an industry's output over time. The paper evaluates the impact of these different OCM price indexes on the growth rate of labour productivity during the 1980s by conducting a sensitivity test where the US OCM index is substituted for each of the individual country indexes. This experiment causes the OCM labour productivity growth rate to change by over a factor of ten for several countries. This result suggests that international comparisons of labour productivity should not be made for the OCM sector using the official data, and that labour productivity comparisons of sectors OCM belongs to—non-electrical machinery and fabricated metal products and machinery—should be conducted cautiously, if at all.     

The role of foreign capital in domestic manufacturing productivity: empirical evidence from Asian economies

The paper empirically examines the relative contribution of foreign and domestic machinery and equipment on manufacturing productivity in seven Asian economies. A Cobb-Douglas production function is used to test whether foreign machinery is more productive than domestic machinery. The study is based on a pooled cross-sectional time-series model, including seven countries - Hong Kong, Singapore, South Korea, Malaysia, Indonesia, the Philippines and India - for the years 1975 to 1990. The results support the hypothesis that a country's stage of development, skill-level of its labour force, and the technology embodied in capital play a crucial role in determining the relative impact of foreign and domestic capital on manufacturing productivity.     

Tying the politicians’ hands: The optimal limits to representative democracy

The citizen candidate models of democracy assume that politicians have their own preferences that are not fully revealed at the time of elections. We study the optimal delegation problem which arises between the median voter (the writer of the constitution) and the (future) incumbent politician under the assumption that not only the state of the world but also the politician's type (preferred policy) are the policy‐maker's private information. We show that it is optimal to tie the hands of the politician by imposing both a policy floor and a policy cap and delegating him/her the policy choice only in between the cap and the floor. The delegation interval is shown to be the smaller the greater is the uncertainty about the politician's type. These results are also applicable to settings outside the specific problem that our model addresses.     

David Ricardo: on the art of “elucidating economic principles” in the face of a “labyrinth of difficulties”

Abstract

The paper discusses David Ricardo's analytical achievements. These concern his approach to the theory of value and distribution; his analysis of the effects of different forms of technical progress on income distribution; his analysis of exhaustible resources in terms of differential rent; his discussion of machinery and induced technical progress; and his theory of foreign trade and the principle of comparative advantage. It is argued that Ricardo's analysis has been frequently misrepresented and is a great deal more sophisticated than is commonly acknowledged. There are still ideas in his writings that have yet to be fully explored.     

Ricardo on machinery: a dynamic analysis

I construct a dynamic two-sector model which formalizes Ricardo's argument on the effects of the introduction of machinery. My model does not require the inappropriate assumptions common to other Ricardian models. Using this model, I show that if machinery is introduced, both the demand for labour and the output of the consumption good must decline temporarily and can then recover. As well, the temporal decline of value of the gross produce is not a necessary condition for the above temporal decline of the demand for labour.     

Odious Debt in an Imperfect World

The odious debt problem refers to a government's ability to borrow for elite consumption while the general population repays. Although an intuitive response is to ban lending to such regimes, this paper shows that if a government faces endogenous replacement risk, then an international odious debt doctrine which (i) decreases the country's debt ceiling; (ii) decreases the likelihood that the citizens must repay the debt; or (iii) increases the government's cost of borrowing for a given default risk can all decrease citizens' welfare. These findings suggest that, even when a regime is clearly odious, allowing it to borrow up to a point may be preferable to a complete lending ban.     

RISKY VERSUS RISKLESS BARGAINING PROCEDURES: THE AUMANN‐ROTH CONTROVERSY REVISITED*

In a series of papers, Aumann and Roth discussed a game in which players can cooperate in pairs and two of them prefer to form a coalition with each other. Roth argued that the only rational outcome is that the players who prefer each other form a coalition; Aumann argued that all three coalitions are possible because the players have a problem of expectation coordination. A non‐cooperative analysis provides additional support for Aumann's arguments and shows that the difference between Aumann's and Roth's views can be traced back to a difference (risky versus/riskless) in the bargaining procedure.     

Efficient performance in two agent bargaining

This paper concerns ex ante incentive efficient performance in the bargaining of one buyer and one seller over a single item. For any element in a specified class of distributions of the buyer's and the seller's valuations of the item, all of the (interim) individually rational and efficient allocation rules are characterized. It is also shown that the “buyer's bid” and the “seller's price” double auctions are efficient for all distributions in the specified class. These results are obtained by studying efficiency as a linear programming problem.     

Sidgwick and Edgeworth on indeterminacy in the labour market

Commentators have underlined Sidgwick's influence on Edgeworth's thinking and more particularly on New and Old Methods of Ethics (1877). But have failed to notice that Sidgwick remained a major reference in Mathematical Psychics (1881). Therefore, the purpose of this paper is to show that, in this book, Edgeworth wanted to refine upon the problem of wages addressed by Sidgwick in 1879. The thesis of the paper is that Sidgwick and Edgeworth's disagreement as to the role of open competition in the resolution of indeterminacy in the labour market stems from two different notions of competition. This latter can be seen as a differentiation process, as in Sidgwick's, or as a replication mechanism, as in Edgeworth's.     

Moran's I test of spatial panel data model — Based on bootstrap method

Under the condition of the finite sample or the unknown distributed error term, testing for spatial dependence in panel data models is an unresolved problem in spatial econometrics. In this paper, a fast double bootstrap (FDB) method is used to construct bootstrap Moran's I tests for Moran's I test in spatial panel data models, and Monte Carlo simulation experiments are used to prove the effectiveness from two aspects including size distortion and power. The experiment results show that, in asymptotic Moran's I test, there is serious size distortion, which could be rectified in bootstrap Moran's I test.     

Agency Contracts,Noncommitment Timing Strategies and Real Options

Given that an owner lacks the ability to commit to his or her timing decisions under a manager's hidden action, we consider the optimal design of the contract and the owner's optimal timing decisions. Using a real options approach, we show that, compared with the full commitment case, a higher (lower)‐quality project is launched later than (at the same time as) the first‐best case, whereas the replacement of the manager is (is not necessarily) made later if the hidden‐action problem is severe enough (is not severe enough). Severance pay may serve to minimize the compensation for the manager's loss of corporate control.     

Population density,urbanisation and agricultural mechanisation in modern Ghana

Farmers' technological choices take place within farming systems that are shaped by population pressure, connectivity to urban markets and agro-ecological conditions. The relationship between these drivers and agricultural technology use is ambiguous. On the one hand, population growth can increase the supply of labour, driving down wage rates and reducing the incentives for mechanisation. On the other hand, rural–urban movements of people can reduce rural labour supply while simultaneously driving up the demand for food and hence the demand for mechanisation. Past theories of agricultural mechanisation have explained the low adoption of agricultural machinery in land-abundant cereal production systems of SSA in terms of these drivers. However, recent empirical observations find extensive adoption of mechanised ploughing technology by small, medium and large-scale farmers in Ghana. Examining the Ghanaian experience can thus shed new light on theories of mechanisation. A large household survey dataset covering eight districts is combined with geo-spatial data on population, urban proximity and agro-ecological factors to consider whether the existing theories are able to explain farm-level adoption decisions in this context. The analysis finds that a farmer's decision to use agricultural machinery is associated with lower population density and proximity to urban centres. In northern Ghana, these drivers of technological change are as important as farm household characteristics in understanding cross-sectional patterns of machinery adoption.     

A macroeconometric analysis of the effects of taxation on financing and real investment in equipment in Canada

This paper analyses the impact of taxation on corporate financing and corporate investment in machinery and equipment in Canada. A coherent macroeconometric model of the firm's real and financial decision process is theoretically developed and empirically tested on Canadian data. Estimates of the impact of taxation in general and of the 1987 Canadian government's White Paper in particular, are analysed. The estimates suggest that income taxation has a negative but relatively small impact on equipment investment in Canada, and that models that ignore the link between the real and financial decisions overestimate the impact of taxation on real investment. With respect to tax reform, the White Paper reduces the incentive to save and invest in equity capital, and is expected to decrease real capital investment in the long run.     

The Monetary Policies of the European Central Bank and the Euro's (Mal-)Performance: A stability-oriented assessment

The stability-oriented macroeconomic framework established in the Treaties on European Union, especially the unparalleled status of independence and peculiar mandate of the European Central Bank (ECB), were promised virtually to guarantee price stability and a strong euro. Shattering these hopes and promises in a rather drastic way, the euro's external value has declined markedly while consumer price inflation has quadrupled since the new currency's inception. This paper assesses the ECB's role in relation to the euro's (mal-)performance. It challenges the truly odd conventional wisdom that, despite these dismal monetary developments, neither the Maastricht regime nor the ECB might possibly be at fault. Reviewing the ECB's interest rate policies and scrutinising its rationale, a conspicuous anti-growth bias is diagnosed that has produced rather perverse consequences.This stability-oriented assessment concludes that the ECB has been key to the 'euro puzzle', propagating euro weakness and pushing up inflation. Euroland's democratically elected representatives are therefore urged to reform Europe's key structural problem, namely, the ECB, an independent monetary policymaker whose unbounded discretion allows it to pursue ill-guided and thoroughly idiosyncratic policies without being held to account for the consequences.     

The effect of patient's asymmetric information problem on elderly use of medical care

It has been proposed that the patient's relative ignorance about medicine, ‘asymmetry of information between doctor and patient’, should place a patient in a disadvantaged position when purchasing medical care. Even if rapidly developing information technologies can enhance the patient's access to health information, a patient doesn’t have enough ability to understand, interpret and evaluate it. So, the doctor's effort at sincerely helping patient understand and utilize health information by effective communication with patient might improve the patient's asymmetric information problem and affect the patient's use of medical care by way of its being a source of patient's solid trust on doctor. This research seeks to determine whether a doctor's effort, mentioned earlier can affect the elderly use of medical care. This study used data from a survey sample of people aged more than 65 living in Seoul and Chuncheon, Korea. The results suggest the doctor's effort level has a statistically significant positive effect on the elderly use of medical care, which suggest a doctor's effort of effectively communicating with patient would ameliorate patient's information problem and it could be a source of patient's trust on doctor, so this trust would lead a patient to consume more medical care.