Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

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Endogenous Technological Change

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported, and instead, the equilibriumis one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

https://papers.ssrn.com/sol3/Delivery.cfm/nber_w3210.pdf?abstractid=226703&mirid=1

A model of endogenous growth is developed in which vertical innovations, generated by a competitive research sector, constitute the underlying source of growth. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends upon the expected amount of research next period. One source of this intertemporal relationship is creative destruction. That is, the prospect of more future research discourages current research by threatening to destroy the rents created by current research. The paper analyzes the positive and normative properties of stationary equilibria, in which research employment is constant and GNP follows a random walk with drift, although under some circumstances cyclical equilibria also exist. Both the average growth rate and the variance of the growth rate are increasing functions of the size of innovations, the size of the skilled labor force, and the productivity of research as measured by a parameter indicating the effect of research on the Poisson arrival rate of innovations; and decreasing functions of the rate of time preference of the representative individual. Under laissez faire the economy's growth rate may be more or less than optimal because, in addition to the appropriability and intertemporal spillover effects of other endogenous growth models, which tend to make growth slower than optimal, the model also has effects that work in the opposite direction. In particular, the fact that private research firms do not internalize the destruction of rents generated by their innovations introduces a business-stealing effect similar to that found in the partial-equilibrium patent race literature. When we endogenize the size of innovations we find that business stealing also makes innovations too small.

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A Model of Growth Through Creative Destruction

Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern theory and nonlinear techniques of estimation. One theme of the text is the use of artificial regressions for estimation, reference, and specification testing of nonlinear models, including diagnostic tests for parameter constancy, serial correlation, heteroscedasticity, and other types of mis-specification. Explaining how estimates can be obtained and tests can be carried out, the authors go beyond a mere algebraic description to one that can be easily translated into the commands of a standard econometric software package. Covering an unprecedented range of problems with a consistent emphasis on those that arise in applied work, this accessible and coherent guide to the most vital topics in econometrics today is indispensable for advanced students of econometrics and students of statistics interested in regression and related topics. It will also suit practising econometricians who want to update their skills. Flexibly designed to accommodate a variety of course levels, it offers both complete coverage of the basic material and separate chapters on areas of specialized interest.

Estimation and Inference in Econometrics

Cause, conseguenze e strategie di mitigazione Proponiamo il primo di una serie di articoli in cui affronteremo l’attuale problema dei mutamenti climatici. Presentiamo il documento redatto, votato e pubblicato dall’Ipcc - Comitato intergovernativo sui cambiamenti climatici - che illustra la sintesi delle ricerche svolte su questo tema rilevante.

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Climate Change 2007: The Physical Science Basis.

Computer technology presents economists with new tools, but also raises novel methodological issues. This essay discusses the challenges faced by computational researchers, and proposes some solutions.

Chapter 17 Computationally Intensive Analyses in Economics

Dynamic programming is the essential tool in dynamic economic analysis. Problems such as portfolio allocation for individuals and optimal growth of national economies are typical examples. Numerical methods typically approximate the value function and use value function iteration to compute the value function for the optimal policy. Polynomial approximations are natural choices for approximating value functions when we know that the true value function is smooth. However, numerical value function iteration with polynomial approximations is unstable because standard methods such as interpolation and least squares fitting do not preserve shape. We introduce shape-preserving approximation methods that stabilize value function iteration, and are generally faster than previous stable methods such as piecewise linear interpolation.

/pdf/shape-preserving-dynamic-programming-52qki9e7jk.pdf

Shape-preserving dynamic programming

There is great uncertainty about the impact of anthropogenic carbon on future economic wellbeing. We use DSICE, a DSGE extension of the DICE2007 model of William Nordhaus, which incorporates beliefs about the uncertain economic impact of possible climate tipping events and uses empirically plausible parameterizations of Epstein-Zin preferences to represent attitudes towards risk. We find that the uncertainty associated with anthropogenic climate change imply carbon taxes much higher than implied by deterministic models. This analysis indicates that the absence of uncertainty in DICE2007 and similar models may result in substantial understatement of the potential benefits of policies to reduce GHG emissions.

The Social Cost of Stochastic and Irreversible Climate Change

This paper contains an analysis of incomplete market models with finitely but arbitrarily many heterogeneous agents. We discuss the mathematical foundation for equilibrium conditions which leads to two findings. First, we establish existence of recursive equilibria for small and large risks. Second, we develop a simple but general solution technique which handles many state and choice variables for each agent and thus an extremely high-dimensional state space. The method is based on perturbations around a point at which the solution is known. The novel idea is to exploit the symmetry of the problem to overcome the curse of dimensionality. We use the analysis to demonstrate the impact of heterogeneity on macroeconomic quantities and the pricing of risk. Furthermore, we set our technique apart from the standard method used in the literature.

/pdf/equilibrium-existence-and-approximation-for-incomplete-50c1rhnuud.pdf

Equilibrium Existence and Approximation for Incomplete Market Modelswith Substantial Heterogeneity

Efficient, accurate, multi-dimensional, numerical integration has become an important tool for approximating the integrals which arise in modern economic models built on unobserved heterogeneity, incomplete information, and uncertainty. This paper demonstrates that polynomialbased rules out-perform number-theoretic quadrature (Monte Carlo) rules both in terms of efficiency and accuracy. To show the impact a quadrature method can have on results, we examine the performance of these rules in the context of Berry, Levinsohn, and Pakes (1995)'s model of product differentiation, where Monte Carlo methods introduce considerable numerical error and instability into the computations. These problems include inaccurate point estimates, excessively tight standard errors, instability of the inner loop 'contraction' mapping for inverting market shares, and poor convergence of several state of the art solvers when computing point estimates. Both monomial rules and sparse grid methods lack these problems and provide a more accurate, cheaper method for quadrature. Finally, we demonstrate how researchers can easily utilize high quality, high dimensional quadrature rules in their own work.

Kenneth L. Judd

Papers

Chapter 17 Computationally Intensive Analyses in Economics

Shape-preserving dynamic programming

The Social Cost of Stochastic and Irreversible Climate Change

Equilibrium Existence and Approximation for Incomplete Market Modelswith Substantial Heterogeneity

High performance quadrature rules: how numerical integration affects a popular model of product differentiation