Capacity utilization and depreciation-in-use

In this paper, the effect capacity utilization has on the depreciation of capital goods is studied, starting from a quadratic approximation to a normalized short-run cost function. Expressions for the optimal rate of capacity utilization, the demands for labour and energy, and for investment are obtained. Investment is a function of past capital stock, expected future capital stock, expected future relative prices and expected future depreciation rates. Expectations are modelled via instruments. The model is tested using US total manufacturing quarterly data. Depreciation dependent upon usage is found to be both statistically and economically significant.     

The Legislator as Political Entrepreneur: Investment in Political Capital

This paper applies the standard Austrian theory of capital investment to the standard interest group model of legislator behavior. Distinguishing between reputational capital and representative capital as interdependent forms of political capital, I argue that legislator behavior (specifically roll call voting) can be explained as entrepreneurial investment in political capital under uncertainty. I discuss several examples in which this approach can potentially add predictive power regarding legislative voting.     

Road Transport Externalities

During the last decade much progress has been made in defining & measuring the external costs of transport. As the cost of tolling equipment falls, the set of realistic policy options to internalise these externalities will continue to grow. This will determine the research and policy agenda. We make three points. Firstly, empirical work is still necessary to better identify marginal external costs, including congestion, accident and environmental costs. Secondly, any assessment of policy options should treat externalities simultaneously. The use of pricing instruments and emissions standards are discussed within this framework. Thirdly, we emphasise the role of government. Designing the optimal road-pricing institutions requires consideration of horizontal and vertical tax competition, while double-dividend arguments are central to the question of securing public support.     

Stationary solution to the overlapping generations model of fiat money: Experimental evidence

Overlapping generations model of fiat money yields an infinity of competitive equilibrium solutions, only one of which is stationary. Economies reported in this paper involved a sequence of overlapping generations of three or four individuals; each individual lived for two periods. In their young age individuals were endowed with chips that could be traded for fiat money wish the individuals of the old generation. In their old age, individuals could exchange their units o flat money for the consumption good. Results of the experiments exhibit some support for the stationary solution. The results are robust to two designs of exchange institutions (double oral auctior and supply schedule auction) and to two different endogenous ways of converting money into chips at the end of the game (average price prevailing during the last period the game is actually played and the average price forecast made during the last period the game is actually played).A preliminary version of this paper was presented at the meeting of the Economic Science Association and at the Federal Reserve Bank of Minneapolis. The authors are grateful for comments received from various participants at both presentations. Financial support was provided by the McKnight Foundation, the Honeywell Foundation, National Science Foundation (SES 89-12552), and Richard. M. and Margaret Cyert Family Funds.     

Computerization and Structural Change

I develop three measures of structural change on the basis of U.S. data: changes in occupational composition, changes in input–output technical coefficients, and changes in capital coefficients. Using pooled cross-section, time-series data for 44 industries over the period from 1970 to 1990, I find that computer investment per worker has had a positive and significant effect on the degree of occupational change and changes in input and capital coefficients.