Showing papers in "The Scandinavian Journal of Economics in 1992"
TL;DR: The authors reviewed the basic model of R&D spillovers and then focused on the empirical evidence for their existence and magnitude, with special attention to the economic difficulties of actually coming up with convincing evidence on this topic.
Abstract: R&D spillovers are, potentially, a major source of endogenous growth in various recent "new growth theory" models. This paper reviews the basic model of R&D spillovers and then focuses on the empirical evidence for their existence and magnitude. It surveys the older empirical literature with special attention to the economic difficulties of actually coming up with convincing evidence on this topic. Taken individually, many of the studies are flawed and subject to a variety of reservations, but the overall impression remains that R&D spillovers are both prevalent and important. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
1,181 citations
TL;DR: In this article, the authors studied the productivity growth during the deregulation of the Norwegian banking industry and found that productivity regress at the average bank prior to the deregulation, but rapid growth when deregulation took place.
Abstract: Productivity growth during the deregulation of the Norwegian banking industry is studied within the framework of Data Envelopment Analysis, which explicitly allows for multiple outputs. Introducing Malmquist indices for productivity growth, total growth can be decomposed into frontier growth and change in each bank's distance to the frontier. Both the total growth index and its components can be consistently chained over time. We find productivity regress at the average bank prior to the deregulation, but rapid growth when deregulation took place. Deregulation also led to less dispersion of productivity levels within the industry.
625 citations
TL;DR: This article measured the impact of investment in education on U.S. economic growth and found that education is treated as an investment in human capital, since benefits accrue to an educated individual over a lifetime of activities.
Abstract: The purpose of this paper is to measure the impact of investment in education on U.S. economic growth. Education is treated as an investment in human capital, since benefits accrue to an educated individual over a lifetime of activities. One of the most important benefits is higher income from labor market participation. This is the key to understanding the link between investment in education and economic growth. Our most important finding is that investment in human and nonhuman capital accounts for an overwhelming proportion of the growth of the U.S. economy during the postwar period. Educational investment will continue to predominate in the investment requirements for more rapid growth.
297 citations
TL;DR: In this paper, the authors consider the theory of consumption under uncertainty when there is no or limited borrowing, the case where some borrowing is allowed is also examined, and the results suggest that "hump" lifecycle saving is not likely to be a very important generator of wealth in LDCs and provide further evidence on the limited role of credit markets.
Abstract: Some ways in which farmers in LDCs can protect their living standards against fluctuations in income are discussed After considering the theory of consumption under uncertainty when there is no or limited borrowing, the case where some borrowing is allowed is also examined Empirical evidence from some LDCs is used to look at (i) household borrowing and lending, their importance and timing, and their role in smoothing consumption, and (ii) the life-cycle behavior of consumption and income The results suggest that 'hump" lifecycle saving is not likely to be a very important generator of wealth in LDCs and provide further evidence on the limited role of credit markets
235 citations
TL;DR: In this paper, the authors examine ways of evaluating and measuring the contribution of public infrastructure capital to private sector output and productivity growth in Sweden by specifying and implementing empirically a number of alternative econometric models, using annual data for Sweden from 1960 to 1988.
Abstract: The authors purpose is to examine ways of evaluating and measuring the contribution of public infrastructure capital to private sector output and productivity growth in Sweden. They do this by specifying and implementing empirically a number of alternative econometric models, using annual data for Sweden from 1960 to 1988. Applying a dual cost function approach, they find that increases in public infrastructure capital, ceteris paribus, reduce private sector costs. The authors compute that amount of public infrastructure capital that would rationalize the cost savings incurred by the private business and manufacturing sectors, and find that the amount that can be rationalized in this manner is less than what was in fact available in 1988, but that the extent of excess public infrastructure capital has been falling in the 1980s. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
224 citations
TL;DR: In this article, historical estimates of long-run gross savings rates for 11 countries, which represent about 48 percent of world product in real terms and close to half of world savings, are provided.
Abstract: Historical estimates of long-run gross savings rates are provided for 11 countries, which represent about 48 per cent of world product in real terms and close to half of world savings. Even though savings rates declined over the past decade in nine of the 11 countries, present rates are usually well above their prewar levels. Factors which influence savings rates are also examined.
196 citations
Abstract: This paper examines productivity growth in electricity retail distribution in Sweden in a multiple output-multiple input framework The approach used is nonparametric Data Envelopment Analysis (DEA) Productivity is measured by means of the Malmquist index Productivity comparisons are made between different types of ownership and between different service areas The study indicates a high rate of productivity growth, due to economies of density, when measured over a period of 17 years The results show no significant differences in productivity growth between different types of ownership or economic organization
177 citations
TL;DR: Auerbach, Gokhale, and Kotlikoff as mentioned in this paper presented a new approach for understanding the effects of federal tax policies on saving, which was called generational accounting. But the approach was limited to the United States.
Abstract: Working Pa~er 9107 GENERATIONAL ACCOUNTING: A NEW APPROACH FOR UNDERSTANDING THE EFFECTS OF FISCAL POLICY ON SAVING by Alan J. Auerbach, Jagadeesh Gokhale, and Laurence J. Kotlikoff Alan J. Auerbach is a professor of economics at the University of Pennsylvania and an associate of the National Bureau of Economic Research; Jagadeesh Gokhale is an economist at the Federal Reserve Bank of Cleveland; and Laurence J. Kotlikoff is a professor of economics at Boston University and an asso- ciate of the National Bureau of Economic Research. Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circu- lated to stimulate discussion and critical comment. The views stated herein are those of the authors and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve Sys tem. May 1991
154 citations
TL;DR: In this paper, the authors surveyed the empirical literature on bank productivity and the concept of banking output, and the DEA and parametric approaches to the latter were compared. But it was also suggested that measurement techniques have often outpaced the theory of what is to be measured, notably in fields such as joint production, risk and competition.
Abstract: Concepts in banking output and the empirical literature on bank productivity - which employs output concepts - are critically surveyed. For output, the national accounts, production and intermediation approaches are compared. As regards productivity, both partial and total factor productivity measures, and the DEA and parametric approaches to the latter are assessed. Among the most striking results is the prevalence of technical inefficiency in banking. But it is also suggested that measurement techniques have often outpaced the theory of what is to be measured, notably in fields such as joint production, risk and competition. Alternative approaches to address these issues are suggested.
146 citations
TL;DR: In this paper, the effects of severance benefits on the behavior of unemployment and vacancies are explored in a framework developed by Pissarides (1985) to analyze the effect of employment subsidies and unemployment benefits under various financing assumptions.
Abstract: The effects of severance benefits on the behavior of unemployment and vacancies are explored in a framework developed by Pissarides (1985) to analyze the effects of employment subsidies and unemployment benefits under various financing assumptions. In this setup, the key determinant of the effect of firing costs incurred by the firm and severance benefits received by the worker is the difference between the two. When this difference is positive, an exogenous increase in the separation rate leads to an increase in the equilibrium unemployment rate and the unemploymentvacancy ratio. An increase in the burden to the firm beyond the benefit received by the worker has similar effects. The sensitivity of the unemployment/vacancy ratio and, under certain conditions, the unemployment rate, to the separation rate is positively related to the excess of firing costs over severance benefits.
130 citations
TL;DR: A multisector computable general equilibrium model is used to study economic development perspectives in Norway if carbon dioxide emissions were stabilized as mentioned in this paper, and the effects discussed include impacts on main macroeconomic indicators and economic growth, sectoral allocation of production and effects on the market for energy.
Abstract: A multisector computable general equilibrium model is used to study economic development perspectives in Norway if carbon dioxide emissions were stabilized The effects discussed include impacts on main macroeconomic indicators and economic growth, sectoral allocation of production, and effects on the market for energy The impact of pollutants other than carbon dioxide on emissions is assessed along with the related impact on noneconomic welfare The results indicate that carbon dioxide emissions might be stabilized in Norway without dramatically reducing economic growth Sectoral allocation effects are much larger A substantial reduction in emissions to air other than carbon dioxide is found, yielding considerable gains in noneconomic welfare Copyright 1992 by The editors of the Scandinavian Journal of Economics
TL;DR: In this article, the authors examined the differences in efficiency between day care centers and productivity over time using nonparametric frontiers calculated using the DEA methodology and applied a Tobit model to explain the differences.
Abstract: Efficiency differences among day care centers and productivity change over time are examined on the basis of nonparametric frontiers calculated using the DEA methodology. The data consist of approximately 200 public day care centers in Gothenburg, Sweden, for the years 1988 and 1989. The findings indicate a potential output increase of about 10 to 15 per cent each year, and a productivity decrease of 3 per cent between the years. An attempt is also made to explain the differences in inefficiency by applying a Tobit model.
TL;DR: In this article, the authors examine the relationship between the first two areas, i.e., analysis of firm and industry programming models of technology and performance, and compare the industry and firm models in a general programming form.
Abstract: Programming models of technology are enjoying a revival in several strands of literature. One such strand is the growing literature devoted to the assessment of firm performance based on the work of Farrell (1957) and the later popularized by Charnes, Cooper and Rhodes (1978) under the name of data envelopment analysis (DEA); for an early programming model, see Boles (1966). A second strand of literature seeks to model the industry production function and is associated with Johansen (1972), Fbrsund and Hjalmarsson (1987) and Aigner and Chu (1968). A third strand of literature uses programming techniques such as nonparametric tests of regularity conditions in production; see Afriat (1972), Hanoch and Rothschild (1972), Diewert and Parkan (1983) and Varian (1984). One of the purposes of this paper is to examine the relationship between the first two areas, i.e., analysis of firm and industry programming models of technology and performance. In order to compare the industry and firm models, we restate them in a general programming form, and ignore issues of functional form. Examination of these models in primal and dual form reveals that the industry approach constructs technology from firm data but allows (hypothetical) reallocation of aggregate resources across firms to yield an industry function. The firm models also construct technology from the data on all firms in the sample/industry, but do not allow for reallocation of inputs across firms. This suggests a natural hybrid: an industry model which allows for both firm specific inputs and inputs which can be reallocated across firms.' The paper unfolds as follows. We begin by presenting a stylized version of the Aigner and Chu and Johansen models of industry production. We
TL;DR: How the demographic transition may also affect national saving through changes in government behavior is considered, along with ways in which the composition of household saving might change as individuals age.
Abstract: The population of the United States is aging We review a variety of the implications this has for US national saving rates and discuss the policy issues that they raise After reviewing what different models would predict for household saving over the next several decades we consider how the demographic transition may also affect national saving through changes in government behavior Ways in which the composition of household saving might change as individuals age are also analyzed along with the implications of changes in government fiscal policy for asset composition (EXCERPT)
TL;DR: In this article, the authors argue that the two measures are not substitutes, but complements which reveal different aspects of the growth process: gross product is the correct output concept for estimating the structure of production, while net product is correct concept for measuring the welfare consequences of economic growth.
Abstract: There has been a longstanding controversy over the use of net versus gross measures of national product in accounting for economic growth, most recently reflected in several papers which have examined.the role of environmental variables. It is argued in this paper that the two measures are not substitutes, but complements which reveal different aspects of the growth process: gross product is the correct output concept for estimating the structure of production, while net product is the correct concept for measuring the welfare consequences of economic growth. An alternative to the conventional Solow growth accounting framework is then presented in which the change in national wealth is decomposed into its component elements. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
TL;DR: In this article, a review of recent work on the relationship between saving, investment and the current account is presented, focusing on national saving and investment behavior and modeling these in a modern intertemporal optimization framework.
Abstract: In this review of recent work on the relationship between saving, investment and the current account, it is shown that focusing on national saving and investment behavior and modeling these in a modern intertemporal optimization framework will modify some conventional results regarding the relationship between the current account and the terms of trade, the exchange rate and fiscal policy. It is also shown that such a framework can explain the close empirical correlation between national saving and investment rates without relying on limited international capital mobility. It is conjectured that a better empirical understanding of current account developments could be gained if modem theories of investment and saving behavior were used more systematically in applied studies.
TL;DR: In this article, the main trends in world-wide and OECD-area saving over the last two to three decades are reviewed and the appropriateness of the saving concept used in traditional national accounts is discussed.
Abstract: Saving has attracted increasing attention in recent years. Research has focused on questions about its adequacy, determinants and measurement. This paper considers the latter issue. The main trends in world-wide and OECD-area saving over the last two to three decades are reviewed. Subsequently, the appropriateness of the saving concept used in traditional national accounts is discussed. To examine the size of some of the potential problems, a number of adjustments to traditionally measured saving are made. The concluding section raises some questions about appropriate measurement of saving, saving behaviour and policy responses to perceived lack of saving ...
TL;DR: In this paper, the authors evaluated the benefits of bilateral cooperation between Finland and the former Soviet Union on reducing sulphur emissions for both parties based on a sulphur transportation model and on estimated abatement cost functions.
Abstract: The net benefits of bilateral cooperation between Finland and the former Soviet Union on reducing sulphur emissions are evaluated for both parties. The analysis is based on a sulphur transportation model and on estimated abatement cost functions. It is shown that efficient cooperation may entail financial transfers from Finland to the Soviet Union
TL;DR: The authors argue that credit and insurance market imperfections provide a plausible explanation for the high Italian saving rate, and reject the potential roles of the public sector, informal financial arrangements, bequests and the slope of the earnings profile as alternative explanations of the evidence.
Abstract: Italy's saving rate is high by international standards, even when differences in growth are taken into account. We argue that credit and insurance market imperfections provide a plausible explanation for the high Italian saving rate. We also reject the potential roles of the public sector, informal financial arrangements, bequests and the slope of the earnings profile as alternative explanations of the evidence.
TL;DR: A survey of the state of the art can be found in this paper, where the authors briefly survey the state-of-the-art before 1960 and then show some of the ways by which Coase's paper changed economic thinking.
Abstract: Thirty years ago "'The Problem of Social Cost" [I19601' was published. It transformed the field of Industrial Organization and greatly expanded its scope. We briefly survey the state of the field before 1960. and then show some of the ways by which Coase's paper changed economic thinking. Early Developments In one way or another, transaction costs have always played a role in economics: Economists have long been aware that in a specialized economy the transformation of factors of production into utility involves more than manufacturing and transportation. They have been aware that exchanges are subject to "friction", that the "cost of doing business" is positive, and that buy-sell differentials exist. For a long time, transaction cost problems had not been a subject of analysis. In Walras' model, these costs are implicitly assumed to be zero; in other models these costs are implicitly assumed to be infinite. In Risk, Uncertainty and Profit (1921), Knight implicitly introduced significant transaction cost considerations to the analysis of the firm. His uncertainty - the driving force in his theory of the firm - is best understood as being like risk except that it is too costly to transact in the market; see Barzel (1987). The transaction cost basis of the distinction between risk and uncertainty is not explicit in Knight's analysis and the controversies surrounding Knight's uncertainty did not attempt an analysis of the cost of transacting, nor even of the costs that are specifically related to uncertainty.
TL;DR: Wicksell's famous cumulative process analysis as discussed by the authors relies on the assumption that price level changes stem from discrepancies between market and natural rates of interest, and the central bank should adjust the market rate in response to general prices instead.
Abstract: Knut Wicksell's renown as a monetary theorist rests on his famous cumulative process analysis according to which price level changes stem from discrepancies between market and natural rates of interest. From his analysis emerges his celebrated policy proposal that calls for the central bank to stabilize the price level by equating the market with the natural rate. Because the natural rate is an unobservable variable impossible to target, however, Wicksell suggested that the central bank adjust the market rate in response to general prices instead. In a review of Wicksell's policy analysis, Jonung (1979) shows that he prescribed not one but rather two feedback rules for central bankers to follow in stabilizing the general level of prices. One rule, which Wicksell stated in his 1898 Interest and Prices, directs policymakers to adjust the market rate of interest in the same direction prices are moving, stopping only when those price movements cease. In Wicksell's own words:
TL;DR: In this article, the price of credit in a world of integrated capital markets is determined by short-term expected real interest rates, which is defined as the ratio of the world aggregate investment demand to the desired national saving, and implemented empirically by approximately the world by aggregates for ten major developed countries.
Abstract: In a world of integrated capital markets, the price of credit - which is measured by shortterm expected real interest rates - is determined to equate the world aggregate of investment demand to the world aggregate of desired national saving. This approach is implemented empirically by approximately the world by aggregates for ten major developed countries. For the period since 1959, the common component of expected real interest rates for these countries relates especially to developments on world stock and oil markets and secondarily, to world monetary and fiscal policies.
TL;DR: In this article, the authors studied the development of household saving behavior over time in the Nordic countries and found that the household saving ratio responds positively to both the inflation rate and real income growth.
Abstract: Household saving ratios in the Nordic countries are very low by international standards and have declined markedly during the 1980s. Aggregate quarterly time-series data for the period 1970-89 are used to study the development of household saving behavior over time. The evidence suggests that the household saving ratio responds positively to both the inflation rate and real income growth. There is also some weak evidence to support the view that the rate of change in real housing prices has a negative effect on household saving ratios. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
TL;DR: In this article, a reformulation of the basic Sneessens-Dreze type model by treating employment and working hours as separate inputs is presented, where non-wage labor costs serve a double purpose: they represent a restriction in the profit maximizing process and, second, they serve as a proxy for the fixity of labor.
Abstract: The literature on labor utilization and nonwage labor costs is extended to incorporate recent approaches to macroeconomic disequilibrium modeling based on the "smoothing by aggregation" principle. This leads to a reformulation of the basic Sneessens-Dreze type model by treating employment and working hours as separate inputs. The inclusion of nonwage labor costs serves a double purpose: first, they represent a restriction in the profit maximizing process and, second, they serve as a proxy for the fixity of labor. The results differ substantially from simulation studies that disregard the utilization of labor and the nonlinear structure of labor costs.
TL;DR: In this paper, the effects of government relief on ex ante incentives and risk bearing were examined using a model in which private insurance is available, and it was demonstrated that government relief is inefficient, even when private insurance was subject to moral hazard.
Abstract: A significant source of risk arises from uncertainty concerning future government policy. Government action - tax reform, deregulation, judicial decisions, budgetary shifts produces gains and losses for those who invested under preexisting rules. The effects of government relief - compensation, grandfathering, phase-ins - on ex ante incentives and risk bearing are examined using a model in which private insurance is available. It is demonstrated that government relief is inefficient, even when private insurance is subject to moral hazard, because relief shields individuals from some of the effects of their actions. I. Introduction A significant source of risk arises from uncertainty concerning future government action. Government action produces gains and losses for those who invested under preexisting rules.' Government policy with regard to these effects ("transition policy") varies widely: full compensation for takings of real property in many jurisdictions, partial relief through grandfathering and phase-ins for tax reform and deregulation (in some instances but not others), and no relief for most budgetary shifts and
TL;DR: In this paper, a general equilibrium model of a small open economy with traded and nontraded goods and sector specific trade unions is set up, and the welfare and employment effects of bargaining cooperation compared to simple cooperation are ambiguous.
Abstract: A general equilibrium model of a small open economy with traded and nontraded goods and sector specific trade unions is set up. Wage formation is either noncooperative or cooperative. Egalitarian union wage policy is shown to be the equilibrium under cooperation. Important asymmetries are encountered and an alternative model of cooperative behavior called bargaining cooperation is proposed. Bargaining cooperation is shown to have qualitatively different implications than simple cooperation. The welfare and employment effects of bargaining cooperation compared to simple cooperation are ambiguous.
TL;DR: In this paper, the potential gains from international portfolio diversification for different Nordic investors (Danish, Finnish, Norwegian and Swedish) if they invest in all the Nordic equity markets were analyzed.
Abstract: Empirical examination of the ex post potential gains of risk reduction through international portfolio diversification started with Grubel (1968), Levy and Sarnat (1970), Solnik (1974) and Lessard (1974). In their survey of international finance, Adler and Dumas (1983, p. 938) summed up the results: "The potential for international diversification to reduce risk seems unquestionable". In the wake of increasing liberalization for international portfolio investment, more recent contributions include Jorion (1985, 1989), Grauer and Hakansson (1987) and Levy and Lerman (1988). The results of the pioneers have been corroborated by contemporary research and, according to Jorion (1989, p. 54): "International diversification, extolled by Grubel as early as 1968, seems to have delivered on its promises". Despite the long tradition of studies in international portfolio diversification, there has been no such work regarding the Nordic markets. This paper fills the gap through an analysis of potential gains from international diversification for different Nordic investors (Danish, Finnish, Norwegian and Swedish) if they invest in all the Nordic equity markets. Until the beginning of the 1980s, Nordic investors, particularly in Finland and Sweden, faced legal restrictions on investment abroad; see Nordiska Radet (1987). Adler and Dumas (1983) have pointed out that such restrictions would lead to partially or fully segmented markets, and Hietala (1989) has shown the existence of premiums in the Finnish stock market. In our study we do not make any direct test of whether the Nordic equity markets have been segmented or integrated, but our results might provide some indirect evidence. The Nordic countries are generally viewed as fairly homogeneous from a social, political and economic point of view, while international diversifi-
TL;DR: In this article, it is shown that increased uncertainty concerning monetary and real aggregates gives rise to a higher equilibrium unemployment rate and that the equilibrium inflation rate depends on the choice of monetary policy regime, as this choice affects the uncertainty wage setters face when setting the nominal wage rate.
Abstract: In a wage bargaining model, increased uncertainty concerning monetary and real aggregates is shown to give rise to a higher equilibrium unemployment rate. Moreover, the equilibrium unemployment rate is found to depend on the choice of monetary policy regime, as this choice affects the uncertainty wage setters face when setting the nominal wage rate. It is also shown that the equilibrium inflation rate may depend on uncertainty in such a way that increased uncertainty gives rise to a higher equilibrium unemployment rate as well as a higher equilibrium inflation rate - or what has been called stagflation.
TL;DR: In this paper, Bhaduri et al. discuss the evolution of traditional economies from medieval craft guilds to modern economies and the transition from traditional economies to modern ones, focusing on the origins of capitalist hierarchies.
Abstract: Contents: Part I: Traditional Economies 1. Economic Power and Productive Efficiency in Traditional Agriculture (A. Bhaduri) 2. The Rise and Economic Behaviour of Medieval Craft Guilds (B. Gustafsson) 3. Transaction Costs, Whig History and the Common Fields (S. Fenoaltea) Part II: Transitions to Capitalism 4. On the Origins of Capitalist Hierarchy (M. Berg) 5. From Verlag to Factory: The Contest for Efficient Property Rights (L. Magnusson) Part III: Capitalism 6. Understanding Capitalism: Control versus Efficiency (S.A. Marglin) 7. Organizations and Markets in Capitalist Development (W. Lazonick) 8. Taylorism and the Rise of Organized Labour: United States and Sweden (A. Johansson)