A computational general equilibrium model with vintage capital

This paper presents a vintage capital model assuming putty–clay investment and perfect foresight. The model is written in discrete time and is simulated by using a second order relaxation algorithm. By computing the eigenvalues of the dynamic system, we have checked the conditions of existence and uniqueness of a solution (Blanchard and Kahn's conditions) and identified the echo effect that characterizes vintage capital models and the related dynamics of creation and destruction. By calibrating the model on French data, it has been proved useful to explain the medium-term movements in the distribution of income in France during the last three decades.     

Mixed Duopoly,Merger and Multiproduct Firms

The literature on mergers has extensively analyzed the decision to merge by private firms, but it has not considered the decision to merge by private and public firms. We assume that when a private firm and a public firm merge (or when one of them acquires the other), they set up a multiproduct firm in which the government owns an exogenous percentage stake. In this framework, we show that the decision to merge by firms depends on the degree to which goods are substitutes and on the percentage of the shares owned by the government in the multiproduct firm.     

Perpetual youth and endogenous labor supply: A problem and a possible solution

In the “perpetual youth” overlapping-generations model of Blanchard and Yaari, if leisure is a “normal” good then some agents will have negative labor supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman’s utility function. The modification incorporates real money balances, so that the model may be used to analyze monetary as well as fiscal policy. In a Walrasian version of the economy, we show that increased government debt and increased government spending raise the interest rate and lower output, while an open-market operation to increase the money supply lowers the interest rate and raises output.     

The refoundation of the symmetric equilibrium in Schumpeterian growth models

We provide a refoundation of the symmetric growth equilibrium characterizing the research sector of vertical R&D-driven growth models. We argue that the usual assumptions made in this class of models leave the agents indifferent as to where targeting research: hence, the problem of the allocation of R&D investment across sectors is indeterminate. By introducing an “?-contamination of confidence” in the expected distribution of R&D investment, we prove that the symmetric structure of R&D investment is the unique rational expectations equilibrium compatible with ambiguity-averse agents adopting a maxmin strategy.     

Conditional mean functions of non-linear models of US output

We compare a number of models of post War US output growth in terms of the degree and pattern of non-linearity they impart to the conditional mean, where we condition on either the previous period's growth rate, or the previous two periods' growth rates. The conditional means are estimated non-parametrically using a nearest-neighbour technique on data simulated from the models. In this way, we condense the complex, dynamic, responses that may be present in to graphical displays of the implied conditional mean. First version received: Feb. 1999/Final version received: June 2001     

Interindustry Linkages: Virtuous and Vicious?

Although overall linkages are steadily increasing in growth processes, em-pirical data supply strong evidence of large intercountry and intertemporal fluctuations of the domestic-to-overall linkages ratio. This paper tries to explain this phenomenon by modelling a producers' behaviour which appears more realistic than that usually assumed in interindustry or computable general equilibrium models. The main novelty of the results is that the same causes that generate interindustry multipliers can also ‘trap’ domestic linkages into reinforcing (‘virtuous’) or weakening (‘vicious’) circles, depending on whether the price competitiveness of domestic activities is above or below a threshold related to the non-price competitiveness of those activities. These results can help to explain the fluctuations of domestic linkages with respect to overall linkages by spatial and temporal shifts of the threshold between the vicious and the virtuous ‘areas’. Moreover, they emphasize the importance of supply policies-mainly R&D policies—because of their ‘pushing down’ effect on this threshold.     

Sectoral and aggregate technology growth in Spain

In this paper we analyze technological change in the Spanish economy by constructing adjusted Solow residuals, where the adjustment attempts to correct for the bias associated with the potential presence of imperfect competition, increasing returns, variable input utilization and, especially, sectoral reallocation of inputs across sectors. We refer to this modified Solow residual as a technology index. Sectoral reallocations and variable input utilization are key determinants of the differences between the aggregate Solow residual and the technology index resulting from the aggregation of estimated sectoral technological growth. We show that starting in the mid nineties, there has been a deceleration in the aggregate growth rate of technology which is basically due to the behaviour of the manufacturing sectors. Finally, our results imply that aggregate technology growth is less volatile than aggregate productivity as measured by the Solow residual.     

Rat race, redistribution, and growth

Introducing locally negatively interdependent preferences into a simple AK growth model easily explains the often observed insignificant or positive correlation between distortionary redistribution and growth rates. Positive capital income taxes and lump sum transfers are harmful for growth, but people rationally vote for them in order to reduce “rat race” overaccumulation. A “neutrality proposition” holds if the pivotal voter is the mean voter, as in a representative agent case, but it fails if the pivotal voter is poorer than the average citizen.