Growth, Technological Change, and ICT Diffusion: Recent Evidence from OECD Countries

In this paper we present an overview of GDP and productivitygrowth patterns in OECD countries over the past decade, on thebasis of harmonized data. Our evidence suggests that fast-growingcountries generally shared three characteristics: improvementsin labour utilization; a generalized enhancement in human capital;and rapid shifts in the composition of physical capital towardsinformation and communication technology (ICT) equipment. Particularly,we show that technological change embodied in new ICT capitalgoods has been a primary source of output and productivity growthin ICT-using sectors. The international comparison allows relatinggrowth patterns to institutional and policy indicators, therebyoffering some preliminary insights into the potential sourcesof growth disparities. Cross-country evidence yields some tentativesupport to the idea that institutional factors affecting competitionin the product market are likely to affect productivity patterns,especially in a period of rapid diffusion of a general-purposetechnology (such as ICT).     

Daily short interest,idiosyncratic risk,and stock returns

This paper examines the relation between short selling and returns and the impact of arbitrage costs on short sellers’ behavior. Using daily UK short selling data, we find that stocks with low short interest levels experience significant positive returns on both an equal- and value-weighted basis. Economic theory predicts that short sellers avoid establishing positions in stocks with high idiosyncratic risk. Our results indicate a negative relation between short interest and returns among high idiosyncratic risk stocks and that short selling activity is mostly concentrated in low idiosyncratic risk stocks where it is less costly to arbitrage fundamental risk.     

How useful are no-arbitrage restrictions for forecasting the term structure of interest rates?

We develop a general framework for analyzing the usefulness of imposing parameter restrictions on a forecasting model. We propose a measure of the usefulness of the restrictions that depends on the forecaster’s loss function and that could be time varying. We show how to conduct inference about this measure. The application of our methodology to analyzing the usefulness of no-arbitrage restrictions for forecasting the term structure of interest rates reveals that: (1) the restrictions have become less useful over time; (2) when using a statistical measure of accuracy, the restrictions are a useful way to reduce parameter estimation uncertainty, but are dominated by restrictions that do the same without using any theory; (3) when using an economic measure of accuracy, the no-arbitrage restrictions are no longer dominated by atheoretical restrictions, but for this to be true it is important that the restrictions incorporate a time-varying risk premium.     

The Asset Pricing Palette: Cash Flows, Returns and Trading Behavior

Asset pricing is the topic of the 2001 Eastern Finance Association Symposium and the five papers selected for this collection, which are summarized below, span a broad range of subjects that fall under the umbrella of the determinants of market prices. For example, the Schwartz and Moon article that introduces the symposium uses real options methodology to value firms whose cash flows are subject to multiple sources of uncertainty while the Luders and Peisl and Mixon analytical models that close the selections incorporate dual stochastic processes to derive relationships between information flow, trading volume and price volatility that are consistent with empirical evidence. In between, Mishra and O'Brien present new evidence on the important of index and factor selection when estimating the required return on equity and Spahr and Schwebach revisit the issue of time diversification by reintroducing a statistical construct from earlier times. Each of the works included here makes an important contribution to our understanding of the asset pricing process in a distinct area and opens new doors onto avenues for future research.     

Service provision for street-based traders in Pietermaritzburg,KwaZulu-Natal: comparing local findings to lessons drawn from Africa and Asia

South Africa's informal economy absorbs approximately one-quarter of the labour force of 15 million people and is therefore the fastest growing sector of employment. Street-based trading constitutes a major subsector within the informal economy and is continuously expanding through unrelenting proliferation of survivalist micro-enterprises. However, few organisations that support enterprises are accessible or appropriate to survivalist and informal sector micro-enterprises. Interviews were conducted with 98 Pietermaritzburg street-based traders and ten KwaZulu-Natal service providers to determine service provision requirements. The results are compared with findings of four international studies. The findings suggest that for survivalist enterprises to benefit from entrepreneurial education and training services, obstacles with regard to South African traders' understanding of entrepreneurship and cultural limitations to enterprise growth should be overcome. Service institutions also require incentives to serve the informal sector, as well as the capacity to design and deliver appropriate services.     

Costly state verification and debt contracts: a critical resume

This paper presents a critical review of the Costly State Verification framework starting from the basic model by Gale and Hellwig [Review of Economic Studies 52 (1985) 647] and further examining the most recent developments. It aims both at discussing the optimality of debt contract in alternative contexts and at offering a reply to the critiques usually moved to this approach within a unified framework.     

Is sustainable growth optimal?

This paper analyzes sustainable growth in a stochastic environment, with human extinction as a possible outcome. The basic constraint of sustainability is that consumption never decreases over an infinite horizon, which requires that the probability of extinction be maintained at zero. We show that this problem can be examined in a standard optimal-growth model. Under certain conditions, the solution of this problem is a corner solution with probability of survival equal to one, at the cost of economic growth. These conditions depend on the initial development level and on the elasticity of utility with respect to consumption. In some circumstances, which depend on the social discount rate, optimal-growth paths do not exist. In these situations, the sustainable-growth concept has a clear autonomy with respect to the usual optimality criterion.     

Will East Germany Become a New Mezzogiorno?

Despite massive regional policy efforts, GDP per capita in Southern Italy has only briefly converged on Northern Italian levels in the 1960's. Failure of convergence since then is associated with a policy switch from investment toward income maintenance, with reduced wage sensitivity to regional labor market conditions and with increases in rent-seeking opportunities and corruption. East Germany's early experience of rapid wage and income, but not productivity, convergence raised fears that aMezzogiornoscenario could be repeated. Since then, however, investment and productivity have risen while wage setting has become more flexible. Given East Germany's greater “social capability” for growth, and provided that investment continues to be encouraged, the prospects for convergence are now more promising.J. Comp. Econom.,June 1997,24(3), pp. 241–264. Magdalen College, University of Oxford, Oxford OX1 4AU, United Kingdom; University College London, London WC1E 6BT, United Kingdom; and School of Oriental and African Studies, University of London, London WC1H 0XG, United Kingdom.