Weakest-link public goods: Giving in-kind or transferring money

This paper extends the analysis of weakest-link public goods, whose level equals the smallest of the agents’ provision levels, by permitting an agent either to increase one's own provision or else augment both one's own provision and that of the other agent(s). Nash equilibria may be either symmetric with agents matching one another's provision or else asymmetric with an in-kind transfer by one agent to another. An equilibrium with cash transfers, but no in-kind transfers, may be Pareto superior to one with only in-kind transfers. If agents differ in their efficiency, then in-kind transfers by the low-cost agent may dominate a cash transfer. The possibility of Pareto-improving transfers is enhanced as the number of agents increases.     

Development policies in the presence of unemployment and non-traded intermediate goods

The role of non-traded intermediate goods has not been satisfactorily studied in the context of a developing economy with involuntary unemployment. In this paper we examine this phenomenon within the framework of a Harris-Todaro-type migration model. We show that the presence of the intermediate good creates a strong linkage between the rural and urban regions. Under certain reasonable assumptions on factor intensities, this linkage causes an increase in the price of the urban good to benefit the intermediate good as well, and an expansion in the urban output to drive an expansion in the production of the intermediate good. Finally, wage subsidies to urban firms increase the unemployment rate, despite the ameliorating effect of the inter-sectoral linkage.We would like to thank M. Ali Khan, Bela Balassa, Will Carrington, and the members of the J. H. U. Trade and Development and Summer Seminars for advice and comments. We would also like to thank two anonymous referees for pointing out several errors in an earlier draft. Any remaining errors are, of course, ours.     

Durable goods with quality differentiation

We study the optimal strategy of a durable-goods monopolist who can offer goods in different qualities. The key finding is that the presence of the additional sorting variable further undermines the firm's commitment problem, leading to results that contrast sharply with those of standard durable-goods models or those of models where the firm can commit.     

Public pricing of final and intermediate goods in the presence of externalities

The purpose of this paper is to investigate the impact of externalities on pricing decisions by a public or a private regulated firm selling both final and intermediate goods. The externalities generate feedbacks in demand that affect both consumers and producers. The model is very general in that it does not impose constant returns to scale on private production, allows for distributional effects of both the publicly determined prices and private sector profits, and captures the general equilibrium effects of public pricing. Socially optimal pricing rules are derived, and the relation of the results with previous models of pricing in the presence of externalities is investigated.     

Real exchange rate dynamics in the presence of non-traded goods and transaction costs

This paper studies the role of non-traded goods and transaction costs in accounting for the puzzling behavior of real exchange rates. We show that introducing the transaction costs and non-traded goods in an otherwise standard competitive model dramatically improves its ability to rationalize observed real exchange rate dynamics.     

A simple search model of money with heterogeneous agents and partial acceptability

Summary. Simple search models have equilibria where some agents accept money and others do not. We argue such equilibria should not be taken seriously. This is unfortunate if one wants a model with partial acceptability. We introduce heterogeneous agents and show partial acceptability arises naturally and robustly. There can be multiple equilibria with different degrees of acceptability. Given the type of heterogeneity we allow, the model is simple: equilibria reduce to fixed points in [0,1]. We show that with other forms of heterogeneity equilibria are fixed points in set space, and there is no method to reduce this to a problem in R¹.Received: 4 September 2002, Revised: 23 September 2002JEL Classification Numbers: C78, E40.A. Shevchenko, R. Wright: We thank seminar participants at the Federal Reserve Bank of Cleveland, Indiana University, Purdue University, University of Toronto, the 2002 Midwest Macroeconomics Conference at Vanderbilt University, and the 2001 Conference on Economic Dynamics at the University of Essex. The National Science Foundation and the Federal Reserve Bank of Cleveland provided financial support. Braz Ministerio de Camargo and Gabriel Camera provided some helpful suggestions. Correspondence to: R. Wright     

Commodity price cycles and heterogeneous speculators: a STAR–GARCH model

We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR–GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types. The paper represents the authors’ personal opinion and does not necessarily reflect the views of the Deutsche Bundesbank.     

The transactions demand for money in the presence of currency substitution: evidence from Vietnam

Currency substitution – the use of foreign money to finance transactions between domestic residents – is widespread in low income and transition economies. Traditionally, however, empirical models of the demand for money tend to concentrate on the portfolio motive for holding foreign currency, while maintaining the assumption that the income elasticity of demand for domestic money is invariant to the degree of currency substitution. A simple re-specification of the demand for money is offered which more accurately reflects the process of currency substitution by allowing for a variable income elasticity of demand for domestic money. This specification is estimated for Vietnam in the 1990s. Using a standard cointegration framework evidence is found for currency substitution only in the long-run but well-defined wealth effects operating in the short-run.     

Productivity growth of newly industrializing economies in heterogeneous capital goods markets: the case of the Korean machinery and equipment industry

Although many previous studies have investigated the economic growth of East Asian countries from the perspective of productivity growth, they have adopted a limited focus only on the national level or on the aggregated level and have overlooked the heterogeneity at the disaggregated level. Furthermore, only a few studies have examined the sources of the remarkable growth and trade performance of the Korean machinery and equipment industry, despite its importance for sustainable growth of national economy. Therefore, we investigated the Total Factor Productivity Growth (TFPG) of the Korean machinery and equipment industry and its 12 sub-sectors from 1970 to 2012 using the stochastic frontier production approach. As a result, we found that the industry has achieved labour input-driven TFPG largely due to technical progress. This is contrary to the previous result that East Asia has expanded the production frontier by capital accumulation. In contrast, in some sub-sectors, scale effect and allocation efficiency have driven TFPG. We also found distinctive patterns of TFPG across different sub-sectors from the perspectives of the effect of input factors and the pattern of technical progress. These results imply that policy makers should consider industry-specific policy designs that incorporate the specific characteristics of individual sub-sectors.     

Measuring the benefits of local publilc goods: environmental quality in Gaston County,North Carolina

Local governments across the United states have been confronted with a growing range of federal and state-mandated environmental protection programmes. It is found that an application of contingent valuation to a local environmental policy is internally valid by theoretically and empirically examining the economic determinants of responses to a hypothetical referendum. The resulting option price estimate is statistically reliable and has a reasonable order of magnitude. Results indicate that respondents are willing to pay for improvements in water quality,but not air qualilty. It is found that informatiion from various external sources helps to explain risk perceptions, and these perceptions, in turn influence willingness to pay. The aggregate benefits of an air and water polllution control programme to Gaston County are estimated to be $13.07 million annually with a 90% confidence interval of $11.07 million and $16.12 million.     

The welfare effect of quality degradation in the presence of network externalities

This paper examines how the presence of network externalities affects a monopolist's incentive for quality degradation and its welfare consequence. The software and Internet service industries provide our primary motivation. The network externality may lead to a Pareto-improving quality degradation that would not be realised in the absence of network externalities. However, it may also overturn a potentially Pareto-improving quality degradation to a welfare-reducing one, or result in the realisation of a welfare-reducing quality degradation that would be avoided without network externalities. We also endogenise the firm's forward and backward compatibility decisions between the original and degraded goods.     

Fiat money in the Kiyotaki-Wright model

Summary We study versions of the Kiyotaki-Wright (1989) model with fiat money and show that: (1) The use of a low storage cost fiat money may be necessary for specialization and trade, (2) there can be valued fiat money steady states which are indeterminate, (3) there are no nontrivial steady-states in which all trades consist of fiat money for goods, (4) fiat money may be valued even if it is not the least costly-to-store object, and lastly, (5) two fiat monies with different storage costs may both be valued.We thank Randall Wright for comments and helpful discussions.The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.     

Public goods in networks

This paper considers incentives to provide goods that are non-excludable along social or geographic links. We find, first, that networks can lead to specialization in public good provision. In every social network there is an equilibrium where some individuals contribute and others free ride. In many networks, this extreme is the only outcome. Second, specialization can benefit society as a whole. This outcome arises when contributors are linked, collectively, to many agents. Finally, a new link increases access to public goods, but reduces individual incentives to contribute. Hence, overall welfare can be higher when there are holes in a network.     

Revisiting the demand for money model: money and loans in selected manufacturing industries

Using a dynamic infinite horizon optimizing model, it is shown that the empirical demand for money equation employed by a generation of applied monetary researchers is a reduced form model of the dynamic Euler equations for real money balances. The Euler equations derived in this paper focus on the finance capital for the firm and consist of real money balances (M1) and real business loans (F1) for selected manufacturing industries. By employing explicit structural dynamic specification and sectoral disaggregation, the question of how firms close the gap between desired real money balances and actual real money balances is examined. Model consistent ‘desired’ levels of money balances and business loans are found to depend not only upon the usual transactions variable and interest rate but also upon relative prices and a technology index. Moreover, the speed in closing the gap between desired and actual money balances (loan balances) is estimated using annual two-digit Standard Industrial Code data for durable and non-durable industries. Non-durable industries tend to close the gap faster than durable industries by as much as 25% in a given year.     

论商品价值性质

不是任何抽象劳动都形成商品的价值,而是具有社会性、交换性和补偿性的抽象劳动才形成商品的价值。形成价值的抽象劳动的社会性、交换性和补偿性同时存在,三者互为前提,相互联系。抽象劳动的社会性、补偿性和交换性在生产过程和交换过程中形成商品价值性质。商品价值性质的核心是生产者的劳动时间与社会总劳动时间的关系。价值性质范畴有助于深化和发展劳动价值论,为判断劳动是否生产商品和形成价值提供新的视角。依据商品价值性质有助于解释一些经济现象,使劳动价值论更有说服力,从而增强其生命力。     

评商品社会下的利息观

本文从中国经济生活中利息和利润性质根本不同的现实出发，用马克思关于生产劳动与非生产劳动划分的学说和劳动价值学说，重新认识了利息的质和量，揭示利息“是来源于广大存款者和银行职员二者自身以向借款者提供对过去劳动成果的节约劳动形式，共同参与再生产活动所创造的价值。”因此，利息实质是一种类似劳务的费用或收入，不是m分割的一部分。对于一个具有法人实体和市场主体资格的企业，在其外部，只有其所有者和国家二者有资格和权利参与其m分配(割)，其他任何当事人与企业之间都是等值劳动交换者。资本主义制度下的资本家具有劳动与剥削双重人性，其占有的m作为货币积累生息，其中含占有再占有雇佣劳动者的节约劳动成果份额。把利息观念建立在劳动价值论的科学基础上，有助加深对中共十五大报告作出的“把按劳分配和按生产要素分配结合起来”，“允许和鼓励资本、技术等生产要素参与收入分配”的决策的理解。     

Intraindustry trade in intermediate goods

Since intermediate goods play such a vital role in foreign trade, this paper develops a model that explains the benefits from intraindustry trade in differentiated intermediate goods. In comparison with a situation of autarchy, this type of trade causes an increase in the number of intermediate good varieties. In this way, the producers of final goods will benefit from intermediate good varieties, which are closer to the ideal for a specific production process. At the same time, the producers of intermediate goods will, under conditions of international division of labor, benefit from economies of scale.