Term Structure of Interest Rates Under Recursive Preferences in Continuous Time

This paper proposes a testable continuous-time term-structure model with recursive utility to investigate structural relationships between the real economy and the term structure of real and nominal interest rates. In a representative-agent model with recursive utility and mean-reverting expectations on real output growth and inflation, this paper shows that, if (1) real short-term interest rates are high during economic booms and (2) the agent is comparatively risk-averse (less risk-averse) relative to time-separable utility, then a real yield curve slopes down (slopes up, respectively). Additionally, for the comparatively risk-averse agent, if (3) expected inflation is negatively correlated with the real output and its expected growth, then a nominal yield curve can slope up, regardless of the slope of the real yield curve.     

An Index Number Method for Estimating Scale Economies and Technical Processes Using Time-series of Cross-section Data: Sources of Total Factor Productivity Growth for Japanese Manufacturing, 1964–1988

Sample multicollinearity often makes it difficult to estimate returns to scale. We present an index number method to overcome potential multicollinearity problems when the production function is homogeneous of degree k . We apply our method to estimate empirically the effects of returns to scale and technical progress on growth in total factor productivity (TFP) using establishment data for Japanese manufacturing industries. We find that, while significant scale economies exist in many manufacturing industries, the TFP growth in the last twenty-five years is attributable primarily to technical progress. This finding also validates the current practice of assuming constant-returns-to-scale production functions in macroeconometric modelling.
JEL Classification Numbers: C43, D24, 030.     

The conditions of collective action for local commons management: the case of irrigation in the Philippines

We examine factors affecting the success and failure of collective action toward the management of local commons. Using cross‐section survey data on the activities of irrigators' associations in the Philippines, regression analysis is conducted to identify factors underlying the success and failure in farmers' organizing collective action for the maintenance and operation of irrigation systems. We find that collective action is difficult to organize where (a) water supply is uniformly abundant; (b) water supply is greatly different between upper and lower streams in lateral; (c) the size of the association is large; (d) population density is low; (e) the share of nonfarm households is high; and (f) the history of irrigated farming is short. Our findings suggest that these difficulties can be overcome with adequate supports of state agencies to promote community‐level cooperation.     

The impact of the presence of biased managers as strategic commitment on endogenous market structures

We consider the endogenous selection of strategic contracts in an asymmetric duopoly with substitutable goods. The market includes a biased manager, in terms of the market size the manager expects, in a managerial duopoly with separation between ownership and management. In particular, we focus on how the types of managers selected by owners affect the equilibrium market structures. Furthermore, by considering that each manager's expectation of market size depends on their own type and the type of the rival manager, we examine a situation in which the owner is less certain of the type of manager.     

Purchasing Power Parity and the Taylor Rule

It is well known that there is a large degree of uncertainty around Rogoff's consensus half‐life of the real exchange rate. To obtain a more efficient estimator, we develop a system method that combines the Taylor rule and a standard exchange rate model to estimate half‐lives. Further, we propose a median unbiased estimator for the system method based on the generalized method of moments with non‐parametric grid bootstrap confidence intervals. Applying the method to real exchange rates of 18 developed countries against the US dollar, we find that most half‐life estimates from the single equation method fall in the range of 3–5 years, with wide confidence intervals that extend to positive infinity. In contrast, the system method yields median‐unbiased estimates that are typically shorter than 1 year, with much sharper 95% confidence intervals. Our Monte Carlo simulation results are consistent with an interpretation of these results that the true half‐lives are short but long half‐life estimates from single‐equation methods are caused by the high degree of uncertainty of these methods. Copyright © 2014 John Wiley & Sons, Ltd.     

A supply chain-transport supernetwork equilibrium model with the behaviour of freight carriers

This paper presents a supernetwork equilibrium model integrating supply chain networks with a transport network, namely, a supply chain-transport supernetwork equilibrium model. The model takes into account the behaviour of freight carriers and transport network users to endogenously determine the transport costs generated in the supply chain networks. The interaction between transport network and supply chain networks can also be examined. Results of the numerical tests reveal that the improvement of transport network could enhance the efficiency of supply chain networks. The paper makes contributions to modelling of supply chain networks as well as to that of transport networks.     

Effects of re-invention on industry growth and productivity: evidence from steel refining technology in Japan, 1957–1968

This paper examines the economic impact of re-invention – the degree to which an innovation is modified by user – on industry growth and productivity. The paper focuses on two re-inventions made by a Japanese steel company; these inventions improved the productive efficiency of Austrian-made refining technology, namely basic oxygen furnace (BOF). Results obtained from the plant-level production function estimation indicate that re-inventions account for approximately 30% of the total factor productivity of the BOF, substantially promoting the dissemination of the BOF technology. Our simulation analysis indeed reveals that re-inventions contributed to steel output growth by about 14%. This paper also documents that innovating companies played the role of a ‘lead user’ in developing and disseminating their re-invented technologies.