Demand and supply as factors determining economic growth

Summary In models of economic growth the long-run rate of growth is usually determined by exogenous factors like the increase in working population and technical progress. In this article the rate of technical progress is treated as an endogenous variable depending on the increase in real wages and the degree of capacity utilization. A clay-clay production model is presented. Moreover, consumption, investment, changes in wages and in prices are explained by additional equations. Numerical steady state solutions for different values of the parameters are discussed. In each case the specific role played by demand and supply is stressed.The authors are Professor of Economics and Assistant Professor of Economics, University of Tilburg, The Netherlands. They are indebted to Professor S. K. Kuipers for valuable comments on an earlier version of the article.     

A critique of labour values for planning

In some contemporary extensions of the Marxian model, use of labour values for purposes of socialist planning has been commended.This paper examines the validity of this type of calculation for non-capitalist economies for purposes of obtaining an allocations vector which will be optimal. The model uses a heterogeneous capital-goods model from which balanced growth allocation equations in general form are derived. The dual of these is shown to be labour values, only in a stationary state or where capital intensity is the same in all processes. In general, it is synchronised values obtained by allowing for growth (without consumption out of surplus) which form the dual of the optimal- allocation vector. A system of synchronised prices is then exhibited to take account of induced consumption, and in that case it is the dual of these which leads to optimal allocations.This paper then exhibits the inadequacy of Marxian labour values for planning purposes in a non-capitalist economy.     

Interrelationships in maize markets in Southern Africa I: Structural effects of the farmer support programme

A dynamic linear programming matrix is assembled in order to model the Southern African summer grain industry. Supply, demand and production risk, including interactions with production substitutes, are considered. The model is used to evaluate the possible structural effects of the farmer support programme (FSP) taking into account the interrelationships in grain markets in Southern Africa. The effects are evaluated under different marketing policies with respect to changes in land use, prices and labour requirements. A macro view is taken.

An effective FSP will lead to structural changes in land use, prices of products and labour requirements. The effect of the FSP on production, prices and labour will not only vary according to the success in changing over from subsistence maize production to commercial farming in the developing areas, but is also dependent on marketing policies in general. The interrelationships in agriculture and the economy emphasise the need for an overall policy plan.     

Inflation,wage bargaining,wage policy and production structure: Theory and empirical results for the Netherlands

Summary Starting from traditional neo-classical results, a theory is developed in which, in addition to prices, labour productivity and unemployment, the degree of unionization, the profit rate and the shifting-on of direct taxes and social security contributions influence nominal contract wages. A separate theoretical framework is constructed for wage drift.It is furthermore shown how the wage theory presented is related to Friedman-Phelps specifications. After a discussion of wage policy and its potential influence on wages, wage equations are estimated for the key bargaining sector as well as for wage followers. After their characteristics have been dealt with, as well as the effects of wage policy and the role of wage drift, the relationship between key bargaining, inflation and employment is analysed, showing that the model presented is able to explain stagflation.My thanks are due to Mr. H. von Eye for his help in carrying out the calculations and to Mr. A. de Reyger for providing me with the sectoral unionization rates and his general research assistance. Mr. A. J. van Geel kindly prepared the graphs.     

Determinants of households’ inflation expectations in Japan and the United States

Using a VAR model that includes survey data on households’ inflation expectations for Japan and the US, we investigate their determinants and influences on the economy and compare their properties in two countries. Short-term non-recursive restrictions are imposed taking account of simultaneous co-dependence between realized and expected inflation. We find that responding to changes in exogenous prices and to monetary policy shocks, inflation expectations adjust more quickly than does realized inflation. Compared with Japan, the effects of exogenous prices on inflation and inflation expectations in the US are not only large but also long lasting and shocks to expectations have self-fulfilling effects on inflation.     

A clay-clay vintage model approach for sectors of industry in Netherlands

Summary To confirm on a more disaggregated level earlier macro-economic studies in the field, an attempt is made in this paper to find out whether a vintage model of the clay-clay type also provides a framework for a plausible explanation of long-run sectoral developments of production capacity, labour requirements and employment. Nine sectors are considered, comprising the total enterprises sector. For this total enterprises sector an (amended) clay-clay vintage model is also (re-)estimated. The results indicate that in the process of adjustments, real labour costs are the strategic variable, though capacity utilization is also recognized as a factor affecting employment directly and indirectly. Projections of employment with the macro vintage model are satisfactory. Specifically, they are more satisfactory than the extrapolations for either manufacturing or non-manufacturing taken separately, and the macro projections compete fairly well with those based on an overall aggregation of employment projections over all nine sectors considered.     

住房贷款与房地产价格关系的实证研究——来自深圳的证据

本文围绕住房贷款与住房价格的关系展开研究,将住房贷款与住房价格视为内生变量,将购买住房成本、二手住房价格、住房供求缺口、收入住房价格比视为外生变量,采用深圳市2006年1月至2008年5月的月度数据估计了包括2个内生变量、4个外生变量的VECM模型。实证结果表明：深圳住房贷款与住房价格之间存在长期均衡关系,中央银行信贷数量调控效果要优于利率价格调控效果,银行业住房信贷政策整体上讲是稳健的,基于此并针对有关结论提出了政策建议。     

Manorial economy and corvée labour in southern Sweden 1650–1850*

This essay is an inquiry into manorial production in Scania. Its growth was dependent on the long‐term development of European grain prices. When prices increased landlords were encouraged to put more land under the plough. The estates’ main income came, to an increasing extent, from demesne production, which finally dominated the income profile. The peasants’ most important contribution to the landlords became, in most cases, their corvée labour, and their uncertain tenure rights were illustrated with great clarity in the continuing evictions, which were accelerated in the nineteenth century with the aim of expanding the demesne.     

HIV/AIDS AND POVERTY IN SOUTH AFRICA: A BAYESIAN ESTIMATION OF SELECTION MODELS WITH CORRELATED FIXED‐EFFECTS

In this paper, we estimate the causal impact of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) on monetary poverty using a panel database from South Africa. We treat endogeneity and selection problems associated with HIV/AIDS by a selection model that includes correlated fixed effects both in the level and in the participation equations, which are estimated simultaneously via original Bayesian methods. We model the consequences of the illness on both labour income and income transfers, and disentangle between urban and rural households. While no significant impact of HIV/AIDS on labour income is found because of households' recomposition, we find a substantial fall in received transfers among rural population and a dramatic increase in chronic poverty.     

A Model of a Padi Farming Household in Central Java∗

A model of a padi-producing household is developed permitting effects of changes in exogenous variables to be traced through simultaneous changes in household production and consumption behaviour. The model, applied to a village in Central Java, incorporates both a Cobb-Douglas function to represent production of padi for a representative household, and a linear expenditure system to describe the household's consumption behaviour. Assuming a perfect labour market, the model is used to estimate some elasticities of policy significance. An important finding is that padi output, market surplus, employment and rural wages are all positively related to padi price.     

Are House Prices Responsible for Unemployment Persistence?

The paper analyses the ambiguous role of house prices and housing investment for unemployment dynamics. Whereas traditional models see an increase in house prices as a dynamic multiplier that contributes positively to business cycle swings, the paper considers additional transmission mechanisms via the competitiveness channel (wages) and productivity. As house prices rise, wages tend to follow in order to make up for the loss in real disposable income, which limits employment creation. In addition, with rising house prices, the relative size of the construction sector – a low-productivity industry – tends to increase, lowering aggregate productivity growth, further dampening competitiveness. The paper estimates a stylised dynamic general equilibrium model with unemployment flows. Introducing different transmission mechanisms through which the housing market influences labour and macroeconomic dynamics, the size and direction of the housing market channel is being analysed. The estimation results show that housing shocks can have long-lasting negative effects on employment even though a housing boom can generate a short-lived stimulus on growth and employment. The paper also offers some policy advice simulating housing shocks under different types of structural reforms and macro-prudential regulation.     

Methodology and application of price analysis

Summary This paper deals with the relationship between the development of unit costs and prices of production factors and the development of the prices of final products. The investigation of these relationships during the various stages of production in the economic process, an activity called price analysis, may contribute to the analysis of inflation. In this respect the influence of the wage rate on the development of the prices of final expenditure is more considerable than the influence of the prices of imports of goods and services. However, taking into account the modifications in the structure of production, particularly regarding labour productivity and import substitution, the main explanation of the price increase in 1976 compared with 1970 of three categories of final expenditure,viz. exports of goods and services, private consumption expenditure and gross fixed capital formation of enterprises is to be found in the unit costs of imports of goods and services rather than in the unit labour costs. An earlier version of this paper was presented at the 17th General Conference of the International Association for Research in Income and Wealth, Gouvieux, France, August 17–22, 1981. The author thanks C.B.S. staff members for many fruitful discussions and he is grateful to a referee for his helpful comments.     

The case for price level or inflation targeting—What happened to monetary policy effectiveness during the Japanese disinflation?

This paper examines whether price level or inflation targeting would have been appropriate policy choices for Japan during its disinflation and deflation period. We employ Markov switching and structural vector autoregressions, together with structural IS equations, to investigate monetary policy effectiveness during the Japanese disinflation. We find evidence of regime switching in the mid-1990s in a model including the nominal policy interest rate. When monetary policy shocks are identified by using the McCallum rule for monetary base, a monetary expansion is found to have a statistically significant impact on prices. Moreover, a lower real ex ante interest rate can still stimulate the economy despite the zero lower bound on nominal interest rates.     

The effects of demographic changes on the real interest rate in Japan

What are the effects of demographic changes on the real interest rate in Japan? We present a dynamic general equilibrium model in which demographic changes are captured by exogenous changes in the ratio of workers to the total population. Our model predicts that a decline in this ratio in the process of population aging lowers the real interest rate; and the demographic impact on the real interest rate is amplified by a fall in land prices in the presence of collateral constraints. The model is simulated with the realized and forecasted changes in the working-age population ratio, the TFP growth, and government spending in Japan. Our results indicate that the TFP growth is the main source of variations in the real interest rate, but the demographic factor is also quantitatively important especially for its long-term movements.     

Estimating national economic parameters for Namibia using the shadow pricing approach

This paper estimates national economic parameters to be used for project appraisal in Namibia. The shadow prices of capital, labour, and foreign exchange are derived. The results suggest that the economic opportunity cost of capital is 7.2%. The economic costs of Namibian labour as a share of financial costs are 32% for urban semi-skilled and unskilled labour, and 54% for rural semi-skilled and unskilled labour. The economic costs of foreign labour as a share of financial costs are 59%. The shadow exchange rate factor is estimated to be 4% for the Namibian economy.     

Labour policy in the plantation islands

This article studies the evolution of labour policy in the context of the political economy of plantation islands. In order to analyse the relationship between labour policy and various institutional factors (social, political and economic), the author discusses the development of the plantation system — its origins based on slavery and indentures, and subsequent changes resulting from problems of cultural pluralism, labour productivity, falling world market prices, and a general process of economic modernization. He concludes with a discussion of the changes in industrial relations and government labour policy which emerged after the Second World War as a result of the changed constitutional status of the islands as well as the population explosion.     

Two Orthogonal Continents? Testing a Two-country DSGE Model of the US and the EU Using Indirect Inference

We examine a two country model of the EU and the US. Each has a small sector of the labour and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data, we find the model as a whole is rejected. However it is accepted for real variables, output and the real exchange rate, suggesting mis-specification lies in monetary relationships. The model highlights a lack of spillovers between the US and the EU.     

Impact of the Information Asymmetry Between Managers and Owners Under Oligopoly

We show, using a Hotelling (1929) model with Laffont and Tirole (1986) firms, that under duopoly, the information asymmetry caused by the separation of ownership and control has two effects on owners’ incentives to induce effort. Information asymmetry raises the marginal cost of inducing effort, which decreases efforts and increases prices. Since all firms’ prices increase, this leads to a change in the expected demand of each firm, and thus in the marginal benefit of inducing effort, which may amplify or mitigate the initial impact. As a consequence, information asymmetry may induce some firms to increase efforts and lower prices. More surprisingly, it may increase both ex post and ex ante social welfare.     

Pricing and Mispricing of Accounting Fundamentals in the Time‐Series and in the Cross Section

This study examines the extent to which parsimonious and general cross‐sectional valuation models, restricted to include only publicly available historical accounting information, explain share prices in the cross section, identify periods when market mispricing may be more pervasive, and also identify which shares within those cross sections are more likely to be mispriced. Our model simply includes historical book value, earnings, dividends, and growth, but it explains on average over 60 percent of the cross‐sectional variation in share prices in annual estimations across 1975–2011. We also examine the extent to which the residuals indicate mispricing. The quintile of stocks picked by our model as most likely underpriced outperform the quintile of stocks picked as most likely overpriced by an average of 9.9 percent over the following 12 months, after controlling for size. We also predict and find that value residuals are better predictors of future abnormal returns: (i) among firms that are not covered by analysts; (ii) among firms that face fewer accounting measurement challenges; and (iii) when we estimate value model parameters by industry/year. We also predict and find our approach works better in periods when the mapping of fundamentals into prices is weaker. This study contributes a novel and straightforward approach to map accounting fundamentals into share prices in order to identify mispricing in time‐series and in the cross section.     

Does local governments’ budget deficit push up housing prices in China?

Budget deficit has been a common fiscal pressure facing Chinese cities since the 1994 fiscal reform. Meanwhile, land lease sales have become a significant off-budgetary revenue to local governments since 2003. This paper investigates whether financing budget deficit is an important driving force of the recent soaring housing prices when local governments function as the monopoly supplier of urban land. A conceptual framework is developed to illustrate a transmission mechanism from budget deficit to housing prices. This leads to an empirical model consisting of two simultaneous structural equations for housing prices and land prices. Using data for the 35 major Chinese cities from 2003 to 2011, an empirical exercise shows that although budget deficit has a positive effect on land prices, it is the factors from demand side, such as amenities, income and the user cost of housing capital, that have been pulling up the housing prices.