Accessing other people’s technology for non–profit research

As patents and other forms of intellectual property become more pervasive in the next generation of biotechnologies, designing policies and practices to ensure sufficient freedom to operate (i.e., the ability to practice or use an innovation) will be crucial for non–profit research agencies, especially those intent on developing technologies destined for commercial release. Are non–profit organisations exempt from intellectual property claims? What constitutes infringement of a patent? How does a non–profit establish its freedom to operate? We address these issues in this paper and evaluate various options for accessing other people’s technologies. Options include cross–licensing agreements, research–only or cost–free licences, market segmentation strategies, mergers or joint ventures, and patent pooling or clearinghouse mechanisms. Responding creatively to the new intellectual property environment will have far reaching consequences for the future of non–profit research.     

Farmer Decision‐Making with Conflicting Goals: A Recursive Strategic Programming Analysis

This paper concerns the analysis of farmers' goal trade‐offs using a series of representative dairying and beef/sheep farm models. The models employ an adaptive feedback structure and expectations model to track adjustment processes over a seven‐year planning horizon, 1991/92 to 1997/98. Model solutions, under a conventional profit maximising objective function, and using a weighted goal programming formulation, under a series of empirically specified alternative goal orientations, are examined and compared. The paper identifies significant variation among farm families in terms of ability to attain key goals concerning farm profitability, family consumption, farm investment, growth and cash flow. The results quantify the trade‐off between family consumption and farm investment/growth goals.     

Multinational activity and CEO compensation: Preliminary evidence from large UK firms

Multinational Activity and CEO Compensation: Preliminary Evidence from Large UK Firms. — Since the early 1980s the rate of growth in executive remuneration has consistently outpaced that of average earnings. This phenomenon has been widely assumed to be part of an internationalization of the executive labor market. This paper starts from the premise that the multinational enterprise will be a major agent in such a market and presents some preliminary tests for the impact of multinational activity in general, and specific regional effects in particular, on CEO remuneration using a sample of large UK firms. Surprisingly, we find no evidence to support our conjecture that CEO pay will be positively related to firm involvement in the United States. However, multinational activity does generate a significant premium over purely domestic activity.     

One little Lebanese cucumber is not going to break the bank: Price in the choice of fresh fruits and vegetables

This paper reports on empirical research into individual consumer behaviour in the context of fresh fruit and vegetable purchases. The discussion draws on research results from two studies conducted around the actual shopping process. The findings suggest that consumers' price response behaviour may not be consistent with that predicted by economic theory and that this could be significant at the aggregate level. The existence of 'acceptable price ranges' points to the presence of price thresholds within which consumers are relatively insensitive to price movements. Also of relevance is that the primary influence of the budget constraint may be at a broader level rather than at the level of choosing particular products.     

More on money as a medium of exchange

Summary We extend the analysis of Kiyotaki and Wright, who study economies where the commodities that serve as media of exchange (or, commodity money) are determined endogenously. Kiyotaki and Wright consider only steady-state, pure-strategy equilibria; here we allow dynamic and mixed-strategy equilibria. We demonstrate that symmetric, steady-state equilibria in mixed-strategies always exist, while sometimes no such equilibria exist in pure-strategies. We prove that the number of symmetric steady-state equilibria is generically finite. We also show, however, that for some parameter values there exists a continuum of dynamic equilibria. Further, some equilibria display cycles.We thank the National Science Foundation and the University of Pennsylvania Research Foundation for financial support, as well as seminar participants at Stanford University, the London School of Economics, the Econometric Society World Congress in Barcelona, and the Conference on Monetary Theory and Financial Institutions at the Federal Reserve Bank of Minneapolis for their comments or suggestions. Alberto Trejos provided research assistance. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.     

Do Price Discreteness and Transactions Costs Affect Stock Returns? Comparing Ex‐Dividend Pricing before and after Decimalization

By the end of January 2001, all NYSE stocks had converted their price quotations from 1/8s and 1/16s to decimals. This study examines the effect of this change in price quotations on ex‐dividend day activity. We find that abnormal ex‐dividend day returns increase in the 1/16 and decimal pricing eras, relative to the 1/8 era, which is inconsistent with microstructure explanations of ex‐day price movements. We also find that abnormal returns increase in conjunction with a May 1997 reduction in the capital gains tax rate, as they should if relative taxation of dividends and capital gains affects ex‐day pricing.     

Indivisibilities,lotteries, and sunspot equilibria

Summary We analyze economies with indivisible commodities. There are two reasons for doing so. First, we extend and provide some new insights into sunspot equilibrium theory. Finite competitive economies with perfect markets and convex consumption sets do not allow sunspot equilibria; these same economies with nonconvex consumption sets do, and they have several properties that can never arise in convex environments. Second, we provide a reinterpretation of the employment lotteries used in contract theory and in macroeconomic models with indivisible labor. We show how socially optimal employment lotteries can be decentralized as competitive equilibria without lotteries once sunspots are introduced.We thank Kenneth Arrow, Aditya Goenka, Ed Green, Jeremy Greenwood, Walter Heller, Steve Matthews, Herve Moulin, Roger Meyerson, Jim Peck, Patrick Kehoe, Ramon Marimon, Ed Prescott, Richard Rogerson, Nancy Stokey and Raghu Sundaram for their comments. We also thank participants in seminars at Northwestern, Yale, USC, Cornell, Barcelona, Madrid, Santander, and the Canadian Economics Association annual meetings in Victoria. We are grateful to the National Science Foundation (through grants SES-8606944 and SES-8821225), the Center for Analytic Economics, the Thorne Fund, and the University of Pennsylvania Research Foundation for research support. The views expressed here are those of the authors, and not necessarily those of the Federal Reserve System or the Federal Reserve Bank of Minneapolis.     

Explaining economic growth in the Soviet Union, 1950–86

Production function estimates are provided for Soviet industrial production and gross national product for the period 1950–86. A variety of alternative specifications is tested, including Cobb-Douglas, constant elasticity of substitution and variable elasticity of substitution production functions, and an error correction mechanism is used to investigate the long-run properties of the estimated equation. The structural stability of the estimates is also examined. Constant-returns-to-scale Cobb-Douglas production functions suggest that the rate of total factor productivity growth in the Soviet economy has declined steadily over time, becoming negative sometime in the period between 1970 and 1980. However the extensive statistical tests can doubt on the validity of any production function estimated on Soviet data.     

Why Free Trade May Hurt Developing Countries

This paper builds a general equilibrium trade model where a country produces two traded goods and one nontraded public consumption good. The government finances the provision of the public good by taxing the incomes of factors of production, and/or by imposing tariffs. Within this framework, the paper (i) shows that a small tariff or an income tax improves the country's welfare if there is an undersupply of public good, and (ii) identifies the circumstances in which an improvement in the country's terms of trade may reduce its welfare, and free trade can be inferior to autarky. A terms of trade improvement, or the movement from autarky to free trade, definitely improves the country's welfare if the government imposes a tariff that leaves the domestic relative price of the imported good unchanged.