LONG‐RUN GROWTH AND WELFARE EFFECTS OF TAX REFORM

This paper introduces an endogenously‐determined fertility rate into a Romer‐type endogenous growth model and, accordingly, investigates the effects on fertility, economic growth and social welfare of a revenue‐neutral tax reform that involves switching from an income tax to a consumption tax. We show that, in a departure from the existing literature, tax reform could be harmful, rather than favourable, to both growth and welfare, due to an endogenous fertility rate. We also conduct a simple numerical analysis to investigate under what conditions the negative effect on growth and welfare occurs.     

THE MECHANICS OF ECONOMIC GROWTH THROUGH CAPITAL ACCUMULATION AND TECHNOLOGICAL PROGRESS*

This study develops a model wherein capital is used in final goods production and research and development (R&D) activities. This arrangement generates changes of the equilibrium capital allocation corresponding to capital endowment, which engenders a regime change from capital based growth with decreasing returns to R&D based perpetual growth. These two growth phases account for the polarization of economies. The model also engenders multiple equilibria on capital allocation—which emerge during the middle stages of capital accumulation—accounting for leapfrogging and the instability of the economic growth of developing countries with medium capital accumulation.     

LONG‐TERM CARE AND FAMILY BARGAINING*

We present a structural model of how families decide who should care for elderly parents. We use data from the National Long‐Term Care Survey to estimate and test the parameters of the model. Then we use the parameter estimates to simulate the effects of the existing long‐term trends in terms of the common but untested explanations for them. Finally, we simulate the effects of alternative family bargaining rules on individual utility to measure the sensitivity of our results to the family decision‐making assumptions we make.     

SENIORITY WAGES AND ECONOMIC GROWTH*

Economies that lack well‐developed markets for mobilizing household savings may, in some instances, grow faster than those that are financially more developed, provided that their labour markets are also characterized by seniority rather than spot wages. This occurs because of a Kaldorian redistribution effect in a model where households have finite‐horizons and where older workers, as an endogenous feature, have higher saving rates.     

THE IMPACT OF ANTI‐TERRORISM EXPENDITURE ON ECONOMIC GROWTH AND WELFARE

This paper examines the effects of increasing anti‐terrorism expenditure on economic growth rate and social welfare. It is shown that: (i) spending the least amount possible on anti‐terrorism expenditure will lead to a maximum economic growth rate; and (ii) to achieve maximum social welfare, the government should allocate its budget to anti‐terrorism expenditure. The results shed light on why the US government has chosen to uphold and pursue its anti‐terrorism policies in recent years to present day.     

LONG‐TERM AND SHORT‐TERM CONTRACT IN A MIXED MARKET*

With a two‐period mixed oligopolistic framework, this paper analyses the interaction between the length of incentive contracts and market behaviour. Assuming an environment in which firms choose either a long‐term or short‐term contract, we examine how contracts differ between public and private firms. The results show that the contracts would differ completely among firms; public firm prefers to make a short‐term contract while private firm makes a long‐term contract.     

PRODUCTIVE GOVERNMENT SPENDING,PATTERNS OF SPECIALIZATION AND ECONOMIC GROWTH IN A SMALL OPEN ECONOMY*

Constructing a two‐sector small open endogenous growth model with productive government spending, this paper examines patterns of specialization and the growth effects of fiscal policy. It is shown in this model that a change in income tax rate can cause a change in an equilibrium pattern of specialization. Because of this property, the relationship between the tax rate and the growth rate yields either a humped shape or a two‐humped shape, depending on world commodity prices. We also show that the growth maximizing tax rate is not necessarily equal to the tax rate that maximizes the level of social welfare.     

LONG‐TERM AND SHORT‐TERM EQUITY MARKET PRICE INTERACTIONS BETWEEN AUSTRALIA AND THE CHINESE STATES*

This study investigates the extent and manner of long‐term and short‐term price interaction between the equity market of Australia and those of China, Hong Kong, Singapore and Taiwan taking into account the effect of the Asian financial crisis. It uses cointegration and generalised forecast variance and impulse response analyses. The study finds no long‐term price relationship between the equity markets of Australia and the Chinese states. The short‐term evidence indicates that Australia was only significantly interdependent with Hong Kong during the pre‐Asian crisis period and with Hong Kong and Singapore during the post‐crisis period. Australia and these markets react to a shock from each other immediately during the first day and complete this reaction by day two. These findings are useful for investors and policy makers, especially in light of the economic importance of these nations and China's recent admittance to the World Trade Organisation.     

LAND PRICE,COLLATERAL AND ECONOMIC GROWTH*

This paper extends Kiyotaki and Moore's (1997 ) to an endogenous growth model and investigates the dynamic properties of a growing economy with binding credit constraint when land is used not only as an input of production but also as collateral. There exists a balanced growth path in an economy with binding credit constraint. In response to a once and for all productivity shock, the developed model shows the propagation mechanism among output, capital, bank credit and the land price in terms of the growth rate. The model's tractability allows us to derive interesting qualitative and quantitative findings on business cycles.     

SOCIAL STATUS,EDUCATION AND GOVERNMENT SPENDING IN A TWO‐SECTOR MODEL OF ENDOGENOUS GROWTH*

This paper extends the relative wealth specification of status preference to the two‐sector Uzawa (1965 )– Lucas (1988 ) model and examines the effectiveness of government spending on economic growth. It is found that the desire for relative wealth‐induced social status and/or the education component of relative wealth‐induced social status are important ingredients in determining the growth rate effects of government spending. Provided that the agent is concerned with his or her relative social position, the education‐induced social status plays a more important role than the physical‐asset‐induced social status in determining the validity of public spending on growth. If individuals do not care about their education‐driven social rewards, then an increase in government spending has no effect on the balanced growth rate regardless of the presence of the physical‐asset‐induced social status. A rise in government spending reduces the long‐run growth rate if the education‐induced social status is present.     

RELATIONSHIP BETWEEN BUSINESS DEFINITION AND THE LONG‐TERM GROWTH OF COMPANIES: IS LEVITT RIGHT?

Abstract.  Theodore Levitt argued that organizational growth can be threatened because firms define their businesses incorrectly. He believed that businesses should be defined in terms of 'needs', not 'products', if they are to survive in the long term. In this paper I investigate the relationship between business definition and the long-term growth of companies in order to prove Levitt's idea. I statistically analyse relationships between past business definitions and financial performance up to the present using 50 Japanese electric/electronics companies. I find that there is a clear relationship between 'functionality' of a business definition and long-term growth in sales and aggregate market value.     

AN EMPIRICAL STUDY ON HEALTH IN TAIWAN AND ITS LONG‐TERM ADJUSTMENT*

This paper investigates the dynamic change of the population health status in Taiwan. Specifically, it provides insight into the empirical determinants of health production function and explores the nature of the long‐term adjustment in health performance. For these purposes, panel data are used incorporating dynamic effects as well as controls for unobservable area‐specific effect and area‐invariant time effect. The findings are consistent with the earlier research in terms of the determinants of the health production function. The result of the present paper suggests that after decades of improvement in health care, people in Taiwan have lower age‐adjusted mortality rates. Also, the decreases in mortality rates follow a rapid pace of long‐term adjustment implying that health‐care policy that focuses on the provision of medical care services substantially benefits the nation's health.     

INVESTMENT IN PRIMARY, SECONDARY, AND HIGHER EDUCATION AND THE EFFECTS ON ECONOMIC GROWTH

This author analyzes the effects of primary, secondary, and higher education on per capita growth for flow measures of education: enrollment rates, public expenditures, and expenditures per student. Worldwide panels since 1960 and developing and developed country subsamples are examined. Secondary and higher education enrollment rates and expenditures per student in lower education stages and primary overall demonstrate significance. Public higher education expenditures overall and per student are disadvantageous. This study recommends raising enrollment rates and prioritizing public expenditures toward lower education stages, while ensuring that expenditures per student keep up with increases in student cohorts. Indirect effects of education are explored. (JEL O11 , H52 , I28 )     

GROWTH,INTER‐INDUSTRY AND INTRA‐INDUSTRY COMPETITION AND WELFARE*

In this paper we introduce strategic interaction between firms in an R&D growth model which captures both the intra‐industry competition between firms operating within an industry and the inter‐industry competition between firms in different industries. We show that the more substitutable the goods produced within each industry (across industries) are, that is, the more intense the intra‐industry (inter‐industry) competition, the higher is the growth rate. In the comparison between social optimum and a decentralized economy, it is shown that the market outcome is characterized by inefficiently high entry of firms within each industry and insufficient productivity growth.     

ROLE OF ECONOMIC STRUCTURAL ADJUSTMENT FOR LONG‐TERM ECONOMIC STABILITY IN CHINA: ESTIMATION BASED ON VARIANCE DECOMPOSITION

Based on the variance decomposition method of Eggers and Ioannides, the sources of long‐term stability of the Chinese economy since the mid‐1990s are estimated and the potential influence of structural optimization is predicted. Results show that: (i) the contribution of industrial structural adjustment was a negative 46.38%; and (ii) if the share of the expenditure structure was adjusted to the average level in the early period, the contribution of structural optimization would be approximately 38.25%. Moreover, it is believed that a reasonable economic structure can be achieved only through the implementation of a development strategy that takes comparative advantage into consideration.     

GROWTH AND CYCLES, IN THE MODE OF MARX AND SCHUMPETER

I propose a theory of endogenous growth and cycles under competitive conditions. Firms choose how many workers to hire, how much to invest, and which technologies to use. New capacity, embodying labor-saving technologies, is costlier than old one but allows for a lower wage bill. The interaction between labor-saving innovations and changes in the relative price of labor is the source of growth cycles.     

SECTOR‐SPECIFIC EXTERNALITIES AND STATUS PREFERENCES IN THE UZAWA‐LUCAS MODEL*

This paper shows that introducing preferences for social status based on human capital holdings modifies the finding of Gómez (2004 ) that sector‐specific externalities associated with human capital in the goods sector do not violate the optimality of the competitive economy in the Uzawa–Lucas model. The effect of an increase in the degree of sector‐specific externalities is qualitatively the same as that of an increase in the strength of the desire for status. Hence, paradoxically, a greater degree of sector‐specific externalities makes human capital accumulation more excessive from the social point of view.     

PRIVATE AND PUBLIC EDUCATION: HUMAN CAPITAL ACCUMULATION UNDER PARENTAL TEACHING*

This paper examines a simple overlapping generations model of human capital accumulation under both the public and private education regimes. Both young individuals and their parents allocate time to human capital accumulation. Under the public education regime, the government collects tax to finance expenditure for education resources. We show that there exists a level of tax which maximizes the speed of human capital accumulation because of parental teaching; and, if the government chooses tax rates adequately, human capital grows faster and welfare levels become higher under the public education regime than under the private.     

NEOCLASSICAL GROWTH AND THE DISTRIBUTION OF CONSUMPTION

Abstract.  The neoclassical growth model is used to compare an economy with growing per capita income with an economy with stationary per capita income, in terms of equity in distribution of consumption. The economies have the same initial conditions including the same initial wealth distribution. The outcome of the comparison depends on the nature of structural differences between the economies. Even with convergence in wealth distribution in the growing economy, the consumption distribution there may be less equitable and dynasties with least initial levels of wealth may be worse off than dynasties with same initial wealth levels in the stationary economy.     

ADOLESCENT VIDEO GAME PLAYING AND FIGHTING OVER THE LONG‐TERM

I present new evidence of the link between video game play and fighting. The General Learning Model predicts that increased aggression from playing violent video games. These predictions are tested using a large longitudinal data set tracking adolescents over time. Consistent with previous research, there is a positive raw correlation between video game playing as an adolescent and aggressive outcomes, in this case fights, even more than a decade later. However, multivariate and instrumental variables estimators do not find a causal relationship. Some implications are: support policy for further interventions is undermined, future research should be more careful about identification threats, and similar methodological approaches can be applied to the effects of other new communication technologies. (JEL D18, L86, O35)