Bifurcation and sunspots in the continuous time equilibrium model with capacity utilization

In the present paper, we construct a continuous time model of economic growth with positive externalities and with variable capacity utilization, and study the global equilibrium paths in this model. If there is a homoclinic orbit or a periodic solution in this model, equilibrium is globally indeterminate. We show that positive externalities can yield multiple steady states, a one-parameter family of homoclinic orbits, and a two-parameter family of periodic solutions. It is also shown that there exists a sunspot equilibrium in this model.     

Working and Training: A Nonlinear Dynamic Analysis of Human Capital Development

We tend to think of workers completing their education and then entering the workforce, where they will gradually develop their skills. In fact, however, a worker's career may be characterized not only by this gradual buildup of job-related skills but also by recurrent education, i.e. the phenomenon whereby a worker alternates between earning-intensive periods and training-intensive periods along his career path. In this study, we build a dynamic optimization model of earning/training decisions of a worker in which these patterns of his career path can be explained in an integrated manner.     

Expectations Heterogeneity and Excessive Price Sensitivity in the Land Market

This paper analyses price behaviour in the land market in which the Walrasian auctioneer is absent. Sellers are informed about the land value and post their asking prices; buyers are uninformed, have different opinions, and decide whether or not to accept the sellers' offers. In this market, sellers are "price-makers" with probabilisitic market power : they can influence the sale probability through their asking price. Price may be excessively sensitive to unexpected changes in market conditions. Moreover, buyer heterogeneity may accentuate the excessive price sensitivity. It has been shown that, the more heterogeneous their opinions, the more sensitive are prices.
JEL Classification Numbers: D40, D43, D82, D84, E44, G12.     

Chaotic Equilibria in a Small, Open, Overlapping-Generations Economy with Child–Parent Externality

This paper presents a simple overlapping-generations model of a small open economy with child–parent externality that exhibits chaotic equilibrium dynamics.     

SUNK COSTS OF CAPITAL AND THE FORM OF ENTERPRISE: INVESTOR‐OWNED FIRMS AND WORKER‐OWNED FIRMS*

ABSTRACT ** : This paper examines implications of sunk costs of capital for efficient forms of enterprise. It is assumed that firm owners and outside traders are asymmetrically informed of venture risks, and that there are sunk costs associated with investment in physical and human capital. We then make an efficiency comparison between investor‐owned and worker‐owned firms. We find that the firm is efficient when it is owned by the input supplier (the investor or worker) who incurs large sunk costs. This is because such an input supplier can credibly signal to the other input supplier that he in fact has a safe project. An empirical study based on the Japanese manufacturing industry seems to support the theoretical result.     

On the effect of mean-nonstationarity in dynamic panel data models

In this paper, we investigate the effect of mean-nonstationarity on the first-difference generalized method of moments (FD-GMM) estimator in dynamic panel data models. We find that when data is mean-nonstationary and the variance of individual effects is significantly larger than that of disturbances, the FD-GMM estimator performs quite well. We demonstrate that this is because the correlation between the lagged dependent variable and instruments gets larger owing to the unremoved individual effects, i.e., instruments become strong. This implies that, under mean-nonstationarity, the FD-GMM estimator does not always suffer from the weak instruments problem even when data is persistent.     

Optimal Pricing Strategy in the Case of Price Dispersion: New Evidence from the Tokyo Housing Market

We adopt a multistage search model, in which the home seller's reservation price is determined by her or his opportunity cost, search cost, discount rate and additional market parameters. The model indicates that a greater dispersion in offer prices leads to higher reservation and optimal asking prices. A unique dataset from the Tokyo condominium resale market enables us to test those modeled hypotheses. Empirical results indicate that a one percentage point increase in the standard deviation of submarket transaction prices results in a two‐tenths of a percent increase in the initial asking price and in the final transaction price. Increases in the dispersion of market prices enhance the probabilities of a successful transaction and/or an accelerated sale.     

Competitive equilibrium cycles

Sufficient conditions on the structure of technology that give rise to robust periodic cycles in stocks, outputs, and relative prices in a stationary, fully competitive economy with an infinitely lived representative agent are given. The results are first derived in the context of a general intertemporal model of accumulation that has been used in the turnpike literature. These results are then applied to a two-sector neoclassical model of production, and sufficient conditions giving rise to robust periodic cycles are obtained in terms of relative capital intensities of the two sectors.