A MATHEMATICAL APPROACH TO HARROD'S OPEN ECONOMY DYNAMICS

This paper investigates an open economy dynamic model in the Harrod tradition. Its goal is to check if in accordance with Harrod's thought, opening to foreign trade is able to reduce the cyclical instability the economic system exhibits when it is closed to the international trade. We show that the system's dynamic behavior depends on changes in the saving rate, the competitiveness of home products in the foreign markets and the initial sign of the balance of trade. We demonstrate that stable cycles are possible only under particular conditions. Otherwise, the economy may experience chaotic motions in the long period.     

A General Approach to Rational Learning in Games

This paper provides a general framework for analysing rational learning in strategic situations in which the players have private priors and private information. The author analyses the behaviour of Bayesian rational players both in a repeated game and in a recurrent game when they are uncertain about opponents' behaviour and the game they are playing. The aim of the paper is to explain how Bayesian rational agents learn by playing and to characterize the outcome of this learning process. By studying the concept of 'conjectural equilibrium' and analysing the process of convergence of players' behaviour, the roles played by the notions of merging and of consistency are demonstrated.     

Do unemployment benefits promote or hinder job reallocation?

According to recent and largely untested theories, unemployment benefits (UBs) could improve the extent and quality of job reallocation even at the cost of increasing unemployment. In this paper, we use a new set of yearly panel data from a large number of countries to evaluate empirically the relationship between unemployment benefits and job reallocation. Unlike previous work assessing the effects of UBs on labor market stocks, we focus on flows and rely on policy “experiments,” notably the introduction from scratch of unemployment benefits in many countries. We exploit the longitudinal nature of our data to lessen the potentially important selection, endogeneity, and omitted variable problems. We find a positive, sizable, and significant effect of the introduction of UBs on job reallocation, arising mainly from the job destruction margin although this effect fades away over time. These findings appear to be robust to changes in the countries in the sample, control variables or estimation methods. We discuss to what extent our results are consistent with equilibrium matching models with or without endogenous sorting of workers into jobs providing entitlement to UBs and stochastic job matching.     

Designing foresight studies for Nanoscience and Nanotechnology (NST) future developments

Nanoscience and Nanotechnology (NST) is widely considered as one of the most promising areas of scientific and technological development for future decades. As a consequence, almost every country in the world has chosen to invest significantly in this area. This choice, however, is only a first step in the investment decision process, given that almost any scientific discipline can be taken at the scale of a nanometre. In this paper, it is argued that foresight studies to decide where to invest in the nanotechnology area should be designed in a different way from what is normally done. Nanotechnology, in fact, has specific characteristics that should be taken into account when evaluating its expected impacts and potentialities.     

Coordinating the accumulation of physical and human capital in different institutional settings

This paper presents an out-of-equilibrium model to explain differences in the capacity to absorb new skill-biased technologies. The usual mainstream viewpoint focusing only on the role of labour markets will be re-examined in a context characterized by a sequential structure of both the processes of production and the skill formation, whose interaction brings about coordination failures harming the viability of the innovation process. Our out-of-equilibrium approach allows us to consider the more general interplay between stylized labour and product market characteristics, on the one hand, and educational policies, on the other hand. The robust results of the simulations show that educational policies appear to be important in restoring the required coordination both in rigid and in flexible systems, but for different reasons. In the former case, educational policies financed by taxation allow the system to escape a low-productivity final equilibrium. In the latter case, they contrast the financial constraint associated with a large decrease in the unskilled wage. Altogether, a moderate degree of rigidity seems to be the most appropriate institutional environment to reach the targets of viability and of a full exploitation of the technological potential.     

Precautionary saving in the presence of other risks: a comment

Courbage and Rey (Econ Theory 32:417–424 2007) analyse precautionary saving in the presence of a background risk under specific sets of assumptions on the form of income risk and background risk. Three cases are examined: the case of independent risks, the case of Bernoulli-distributed random variables and the case of risk first-degree stochastic. For each of these cases Courbage and Rey compute the specific sets of conditions related to precautionary saving. This comment shows that some of their conclusions are partially incorrect.      

The perspectives of the North-South Dialogue

During the 1970s the North-South Dialogue, which will shortly be continued at the summit in Mexico, was characterized by a gross disproportion between monstrous expenditure—with many losses due to friction —and negligible results. Symptoms of fatigue with regard to the Dialogue are spreading not only among governments, but also among the public in the North. The disillusionment and disappointment are proportionally greater in the South. As no one would presumably like to risk a failure of the Dialogue, which would probably result in a severe aggravation of the North-South conflict, a reorientation of the Dialogue now suggests itself.     

Innovation and the Economy

Unemployment has remained at relatively high levels across most European countries for a generation now. There have been a number of suggested explanations for this, with correspondingly different policy implications. Two of the major hypotheses relate, first, to the impact on the European economies from increased international competition, and 'globalisation' more generally, and, secondly, to the effects of new technology and innovation. The effects of both globalisation and technology on growth and employment in Europe have been researched over the past two years through an EU-funded project, the results of which, relating in particular to innovation, are reported in this Special Issue of the International Review of Applied Economics. (The results relating to globalisation were reported in a Special Issue of the Journal of Interdisciplinary Economics , Volume 13.) It is clear from the empirical work reported that the effects of technological innovation have been mixed. There is no doubt that some innovation has had a negative effect on employment, without the compensatingly positive effects that new technology usually brings in its wake. However, in high technology manufacturing sectors there is scope for boosting both productivity and employment. But this requires an appropriate policy environment, conducive to increased investment in capital, R&D and the workforce itself.