The skill premium and economic growth with costly investment,complementarities and international technological-knowledge diffusion

We analyse the skill premium and the growth rate in an innovator-imitator general equilibrium growth model assuming (i) internal costly investment in both physical capital and R&D, (ii) complementarities between intermediate goods in production and (iii) technological-knowledge diffusion. We find that in the imitator country these three elements influence the economic growth rate and the skill premium. In the innovator country, while the growth rate is affected by costly investment and complementarities, the skill premium is not affected by any of our assumptions. It depends solely on the productive advantage of high-skilled over low-skilled labour, which suggests that the sustained increase in the skill premium observed in several developed countries over the last three decades may have been due to increases in such productive advantage.     

Strategies for Fiscal Reform in the Context of the EMU: the Case of Portugal

The authors use an endogenous growth dynamic general‐equilibrium model, which accommodates the institutional constraints of the Stability and Growth Pact, to study tax reform in Portugal. Simulation results suggest that tax cuts financed in a nondistortionary way increase long‐term GDP; i.e., they are efficiency improving, but do not always increase welfare. The tradeoff between efficiency and welfare is alleviated when reductions in public spending or increased public indebtedness finance the tax cuts. Since these mechanisms are not realistic under the institutional setting of the Stability and Growth Pact, tax reform in Portugal must involve trading off distortionary tax margins. In this case, the best strategy to increase both efficiency and welfare is to increase investment tax credits and finance them either through personal income taxes or through employers’ social security contributions.     

Technological Innovations and the Interest Rate

We build a dynamic general equilibrium model that adds a banking sector to the standard RBC model. We look at the response of the real interest rate to innovations in the banks' technology and in the nonbank firms' technology. While technological innovations in the nonbanking sector put upward pressure on the interest rate, technological innovations in banks exert downward pressure on the interest rate. This implies that, if the technological innovations in banks are strong enough, stochastic simulation experiments generate negative correlations between the real interest rate and current and future values of real output. This is especially significant because negative correlations between the interest rate and output are a key post-war U.S. business cycle fact difficult to replicate in benchmark dynamic models.     

LOCATION OF VERTICALLY LINKED OLIGOPOLISTS

This paper examines the geographical equilibrium of location of N vertically linked firms and its relation to the creation of an industrial cluster. In a two-region spatial economy, a monopolist firm supplies an input to N consumer goods firms that compete in quantities. When the transport cost of the input increases, downstream firms prefer to agglomerate where the upstream firm is located, to save in production cost. However, simultaneous increases in the transport cost of the input and of the consumer good or increases in the number of downstream firms lead to a relative dispersion of these firms, to reduce competition and locate closer to the local final consumer. In contrast to Mayer (2000) , when both transport costs increase, the location decision of downstream firms is based more on the geographical point that maximizes accessibility to the local final consumer than on the geographical point that minimizes the production cost.     

A dynamic model of contraceptive choice of Spanish couples

We propose a simple dynamic stochastic model of sterilization and contraceptive use and we estimate its structural parameters using a sample of married couples from the 1995 Spanish Family and Fertility Survey. The estimated structural model improves on previous studies in terms of its ability to rationalize observed behaviour. Allowing for simple forms of permanent unobserved heterogeneity across couples in their ability to conceive has important implications for estimates of utility and cost parameters. Estimates of child valuation parameters imply that most Spanish couples would have two children, but significant deviations from this goal are brought about by imperfect and costly fertility control. We perform simulations to quantify the impact on fertility of the availability of sterilization and other technologies which improve fertility control. Copyright © 2006 John Wiley & Sons, Ltd.     

Politique du logement et lutte de classes au Chili (1970-75)*

To analyse the historical evolution of the building sector in Chile, and the way in which it reflects and affects the social structure as a whole, it is necessary to consider two aspects:

• 1 the building sector, considered as a specific part of the production sphere, a specific system of economic and social interests;
• 2 the building front, where the social practices of the conflicting forces express the needs of the reproduction of the labour force, and the class struggle in the building sector, opposed to speculation and capital accumulation processes.

Before 1970, the capital interests were dominant, strongly organized through the Chilean Building Chamber and its influence on government policy-making, and linked with US imperialism, particularly at the finance level. With the Popular Unity Government, a series of measures expressed the shift to the dominant interests of the working class: nationalization of the main private banks; control of the housing market; organization, control and partial socialization of the building industry; breaking of urban segregation patterns; national agreement on wages policy. The construction front was affected by new forms of class struggle: construction brigades, unemployed brigades, popular planning and, at the same time, new forms of economic and political retaliation by capital. This led first to the employers' strike and then, through the constitution of a capitalist class bloc supported by imperialism, to the coup d'etat, which restored the fullest opportunity for exploitation, speculation, segregation, and the power of the Chilean Building Chamber.     

A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability

We present a simulation-based method for solving discrete-timeportfolio choice problems involving non-standard preferences,a large number of assets with arbitrary return distribution,and, most importantly, a large number of state variables withpotentially path-dependent or non-stationary dynamics. The methodis flexible enough to accommodate intermediate consumption,portfolio constraints, parameter and model uncertainty, andlearning. We first establish the properties of the method forthe portfolio choice between a stock index and cash when thestock returns are either iid or predictable by the dividendyield. We then explore the problem of an investor who takesinto account the predictability of returns but is uncertainabout the parameters of the data generating process. The investorchooses the portfolio anticipating that future data realizationswill contain useful information to learn about the true parametervalues.     

Financial and economic performance of major Brazilian credit cooperatives

The credit union's main functions are the provision of individual financial loans based on collective savings, reaching up to provide full banking services, with expansion of its social function. Cooperatives are an alternative to supply a credit demand in the market, because a third of the municipalities have no bank branches. Although the participation of cooperatives in credit operations is still small compared to the Brazilian national banking system, its continued growth demonstrates the importance of this sector. In this sense, the analysis of the performance of these cooperatives becomes relevant to the extent that incentives to industry expansion differ from other financial institutions. In this context, this study aimed to analyze which the financial and economic performance of Brazil's largest credit unions. This performance analysis was performed using the indicators proposed by the CAMEL model, then the data envelopment analysis (DEA). It can be seen that there is a positive relationship between the use of variables in the model and the measurement of financial performance of credit unions. Moreover, according to the results, it can be observed that Uniprime Northern Paraná, Sicoob Cocred and Sicredi North RS/SC were cooperatives that stood out as efficient.     

The effects of globalization and technology on the elasticity of substitution

The elasticity of substitution between capital and labor (\(\sigma\)) is usually considered a “deep parameter”. This paper shows, in contrast, that \(\sigma\) is affected by both globalization and technology, and that different intensities in these drivers have different consequences for the OECD and the non-OECD economies. In the OECD, we find that the elasticity of substitution between capital and labor is below unity; that it increases along with the degree of globalization; but it decreases with the level of technology. Although results for the non-OECD area are more heterogeneous, we find that technology enhances the substitutability between capital and labor. We also find evidence of a non-significant impact of the capital-output ratio on the labor share irrespective of the degree of globalization (which would be consistent with an average aggregate Cobb–Douglas technology). Given the relevance of \(\sigma\) for economic growth and the functional distribution of income, the intertwined linkage among globalization, technology and the elasticity of substitution should be taken into account in any policy makers’ objective function.