Resolving distributional conflicts between generations

Summary. We describe a new approach to the problem of resolving distributional conflicts between an infinite and countable number of generations. We impose conditions on the social preferences that capture the following idea: If preference (or indifference) holds between truncated paths for infinitely many truncating times, then preference (or indifference) holds also between the untruncated infinite paths. In this framework we use such conditions to (1) characterize different versions of leximin and utilitarianism by means of equity conditions well-known from the finite setting, and (2) illustrate the problem of combining Strong Pareto and impartiality in an intergenerational setting.Received: 8 May 2002, Revised: 12 June 2003, JEL Classification Numbers: D63, Q01.Correspondence to: Geir B. AsheimWe thank Kaushik Basu, Marc Fleurbaey, David Miller, Tapan Mitra, Lars-Gunnar Svensson, and an anonymous referee for helpful comments. Asheim gratefully acknowledges the hospitality of the Stanford University research initiative on the Environment, the Economy and Sustainable Welfare, and financial support from the Hewlett Foundation through this research initiative.     

Investment,interest rate rules,and equilibrium determinacy

Summary. By adding endogenous investment to a flexible-price, money-in-the-utility-function model, this paper studies the role that physical capital plays in stabilizing the real side of the economy when the monetary authority follows interest-rate feedback rules. We show that with inelastic labor supply equilibrium uniqueness is ensured under both active and passive monetary policies. For the case where money affects both preferences and technology, the uniqueness result remains true under active monetary policy. With endogenous labor supply, the uniqueness result holds again regardless of the stance of monetary policies for the case with separable leisure, but indeterminacy remains likely under both active and passive monetary policies when leisure is nonseparable.Received: 19 December 2001, Revised: 12 May 2003, JEL Classification Numbers: E52, O42.We are grateful to Jess Benhabib and an anonymous referee for helpful comments and suggestions. Correspondence to: C.K. Yip     

Regulating Public Transit Networks: How do Urban‐Intercity Diversification and Speed‐up Measures Affect Firms’ Cost Performance?

Abstract Empirical studies on the cost structure of Public Transit Networks are mainly based on specialized firms providing urban or intercity services. In this study we estimate a translogarithmic variable cost function to assess the behaviour of returns to scale and the impact of network characteristics. The analysis is based on a sample of 45 Italian municipal companies observed from 1996 to 1998 and including both specialized and mixed transit operators. Results confirm previous evidence on the existence of natural monopoly in the industry and support a regulation introducing competitive tenders to access to the market. In addition, we provide insights about the advantages associated with urban‐intercity diversification and with the improvement of network commercial speed. Cost benefits can then be achieved by promoting mergers between neighbouring firms, so as to create new companies operating on integrated local networks and supplying in combination urban and intercity public transport. Implications of such a strategy for the design of tender mechanisms are also underlined, together with the need for a regulatory policy which takes more care of speed‐up measures.     

Model selection for nonlinear time series

We investigate the finite-sample performance of model selection criteria for local linear regression by simulation. Similarly to linear regression, the penalization term depends on the number of parameters of the model. In the context of nonparametric regression, we use a suitable quantity to account for the Equivalent Number of Parameters as previously suggested in the literature. We consider the following criteria: Rice T, FPE, AIC, Corrected AIC and GCV. To make results comparable with other data-driven selection criteria we consider also Leave-Out CV. We show that the properties of the penalization schemes are very different for some linear and nonlinear models. Finally, we set up a goodness-of-fit test for linearity based on bootstrap methods. The test has correct size and very high power against the alternatives investigated. Application of the methods proposed to macroeconomic and financial time series shows that there is evidence of nonlinearity.First version received: September 2002/Final version received : October 2003I would like to thank Cees Diks, Cars Hommes and an anonymous referee for useful comments that significantly improved the paper.     

Cross-country catch-up in the manufacturing sector: Impacts of heterogeneity on convergence and technology adoption

We analyze how technology transfer from a leading economy affects followers productivity growth in manufacturing sectors and Gross Domestic Product. Allowing for heterogeneous technology levels we explore how this impacts rates of catch-up in labor productivity across manufacturing sectors and GDP for 16 OECD nations. Our results indicate that aggregate studies bias downward the estimated rates of catch-up. These rates of catch-up, as well as efficiency levels, also differ across countries. We find that institutional factors such as bureaucratic efficiency are important determinants of the estimated catch-up rates.First version received:October 2001/Final version received:September 2003Earlier versions of this paper have been presented under the titles of Cross-Country Catch-up in Manufacturing and Heterogeneous Rates of Catch-up in Manufacturing Industries. The authors would like to thank participants of the North American Productivity Conference, June 2000, at Union College, N, Y., and the Associate Editor for helpful comments and criticisms.     

An empirical note about additive outliers and nonstationarity in Latin-American inflation series

This note shows the empirical dangers of the presence of large additive outliers when testing for unit roots using standard unit root statistics. Using recent proposed procedures applied to four Latin-American inflation series, I show that the unit root hypothesis cannot be rejected.Jel classification: C2, C3, C5I want to thank Pierre Perron for useful comments on a preliminary version of this paper. Helpful comments from an anonymous referee, and Yiagadeesen Samy are appreciated. I thank the Editor Baldev Raj for useful comments about the final structure of this paper. Finally, I also thank André Lucas for helpful suggestions concerning the use of his nice computer program Robust Inference Plus Estimation (RIPE).First revision received: August 2001/Final revision received: December 2002     

Inflation and growth: Explaining a negative effect

The paper presents a monetary model of endogenous growth and specifies an econometric model consistent with it. The economic model suggests a negative inflation-growth effect, and one that is stronger at lower levels of inflation. Empirical evaluation of the model is based on a large panel of OECD and APEC member countries over the years 1961–1997. The hypothesized negative inflation effect is found comprehensively for the OECD countries to be significant and, as in the theory, to increase marginally as the inflation rate falls. For APEC countries, the results from using instrumental variables also show significant evidence of a similar behavior. The nature of the inflation-growth profile and differences in this between the regions are interpreted with the credit production technology of the model in a way not possible with a standard cash-only economy. Research assistance by László Konya, Rezida Zakirova, and Anton Nakov and comments by Michal Kejak, Myles Wallace and Toni Braun are kindly acknowledged, along with comments from the 17^th European Economic Association Meetings, Venice, and the 10^th International Panel Data Conference, Berlin. We also thank the editors and referees for valuable comments, and the first author is grateful to Central European University for research funds.     

Fractional integration and business cycle features

We show in this article that fractionally integrated univariate models for GDP lead to a better replication of the main business cycle characteristics. We firstly show that the business cycle features are clearly affected by the degree of integration as well as by the other short run (AR, MA, etc.) components of the series. Then, we model the real GDP in the UK and the US by means of fractionally ARIMA (ARFIMA) model, and show that the time series can be specified in terms of this type of model with orders of integration higher than one but smaller than two. Comparing the ARFIMA specifications with those based on ARIMA models, we show via simulations that the former better describe the business cycles features of the data.Jel classification: C12, C15, C22The authors want to thank two anonymous referees for wise remarks. We have also benefited from questions and comments of the attendances at the econometric seminar of the Humboldt Universität zu Berlin and the ESEM2001 congress in Lausanne. Remaining errors and omissions are ours. All correspondence to: Luis A. Gil-Alana.First version received: February 2002/Final version received: December 2002     

Endogenous cycles and human capital

Existing evidence shows that human capital investment is countercyclical. In a dynamic model, I show that countercyclical investment in human capital arises as a result of a parametric combination relating to preferences and technologies. This countercyclical reaction is responsible for complex dynamics in the evolution of human capital, thus initiating a self-sustained sequence of events that generate endogenous cycles.     

Seasonality,price discrimination,and welfare

We discuss a potential limitation to a widely accepted result, namely that an output increase is a necessary condition for welfare to increase with price discrimination. We use a theoretical model to show that the existence of seasonal demand fluctuations may allow for a simultaneous reduction in average output and increase in average welfare. We also discuss a number of extensions of our basic model.