This document is a literature review of sustainable growth. Because there are many definitions of ... more This document is a literature review of sustainable growth. Because there are many definitions of sustainable growth, we use the following one that is very common in economics. Economic growth is sustainable, if it meets the needs of the present generations without compromising the ability of future generations to meet their own needs. This concerns both the availability of resources for future generations and the environmental impacts of current decisions on future activities. Section I, we consider issues and policy measures related to the resource problem. We introduce dynamic models in which exhaustible resources are used in production and apply them to several cases: an open economy, a backstop technology and the relationship of climate and economic growth. We also examine a transition of dirty to clean technology and the consequences of this to public finance and inter-generational equity. In Section II, we consider macroeconomic performance with natural resources: origins and e...
This modest book examines the world of petty entrepreneurs in a late medieval Italian town. It is... more This modest book examines the world of petty entrepreneurs in a late medieval Italian town. It is based on a rare collection of 46 account books from small tradesmen in the archives of Prato, a town better known for the extraordinarily rich archive of business and personal records left by the wealthy merchant Francesco Datini. The author was guided in his study by Richard Goldthwaite, a leading expert on late medieval account books. The ledgers provide a look at a little-studied social and economic group. They are especially revealing because they were used not only for business entries but also to record family events, including births, deaths, and marriages. As Marco Spallanzani points out in a preface to the book, most scholarship on medieval tradesmen centers on guilds and guild members. The people represented in these ledgers operated outside of economic corporations. They were not a homogeneous group but included a thirteenth-century moneylender, fourteenth-century druggists, cheese sellers, cloth sellers, a tailor, a doublet maker, a grain seller, a secondhand dealer, a broker, a cloth shearer, butchers, wallers, paper makers, and a family of innkeepers who were responsible for seventeen account books. As Marshall notes, the business atmosphere was casual, and this list is a bit deceptive because people's stated occupations were not always how they made their money. One man named as a secondhand dealer in fact used a broker to trade commodities, including 318 pounds of Sardinian cheese, bought one day and sold at a profit the next. This is a careful and useful descriptive study. It holds few surprises. After an introductory look at Prato and the nature of the account books, the author draws on the ledgers to describe their way of life. Some had meager resources, but on average their incomes allowed them a varied diet, adequate household goods, clothing, and even a few luxuries like silk or squirrel fur. Assessments of their net worth are speculative. Like wealthy merchants and bankers, they were quick to invest in farms and urban rental properties. It is not obvious how they accumulated their capital, a question that has been debated for elites as well. Marshall reasonably suggests that some were investing their wives' dowries. These tradesmen also liked to keep large amounts of cash on hand. Much of the book examines aspects of the conduct of business, including useful sketches of the roles of a petty broker, termed a sensale, and the operations of a successful inn. The entrepreneurs of Prato did not use notarial contracts but rather recorded their own accounts in single-entry ledgers, calculated in money of account. This suggests a high degree of literacy and mathematical competency. Business was conducted in a thoroughly monetized local economy. Marshall stresses the reliance on credit in daily transactions, though it should be noted that cash sales were not recorded in the ledgers and thus are not easily recoverable. Day-today reliance on credit was a way of life for the whole society. "Credit based on trust," he writes, "that same fiducia that Federigo Melis so passionately insisted was the essential element in merchant society at the highest ranks-sealed the close relations of these more modest operators with people of all walks of life. . ." Marshall argues that these shopkeepers, not pawnbrokers, were the primary source of small loans for the Pratesi. Credit purchases and loans were most commonly secured by third-party guarantors. He calculates that while collection was often slow, collection rates were high: the average rate for credit purchases was 95 percent; that for loans approached 98 percent.
SIGLEAvailable from British Library Lending Division - LD:D58053/85 / BLDSC - British Library Doc... more SIGLEAvailable from British Library Lending Division - LD:D58053/85 / BLDSC - British Library Document Supply CentreGBUnited Kingdo
In this paper, I study the political rationale for labor market regulation. Oligopolists employ r... more In this paper, I study the political rationale for labor market regulation. Oligopolists employ raw labor and human capital (i.e. key workers) for production and R&D. There are many jurisdictions, in each of which a self-interested policy maker can regulate/deregulate the local labor market. I show that the observed tendency to labor market deregulation results from labor market policies being set up at the local level. In small jurisdictions, the fall of income due to wage increases is so large that the labor markets are deregulated. With labor market integration, jurisdictions get larger and face less competition from outside. Then, the fall of income due to wage increases is reduced and labor market regulation becomes more attractive to workers' lobbies.
Heterogeneous countries produce goods from fixed resources and emitting inputs that cause simulta... more Heterogeneous countries produce goods from fixed resources and emitting inputs that cause simultaneous localized and global extenality problems (e.G. smog and global warming). Since there is no benevolent international government, the issue of emission permits is delegated to an international self-interested regulator whom the countries try to influence. A single country can exceed its emission permits with a fixed penalty. In this setup, this article shows that emission trading is welfare diminishing, because it grants less (more) permits to countries with realtively clean (dirty) localized technology.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
The Welfare Effects of Globalization with Labor Market Regulation I examine how globalization aff... more The Welfare Effects of Globalization with Labor Market Regulation I examine how globalization affects wages and welfare in a general equilibrium model of international trade with partly oligopolistic markets. Globalization is modeled as reducing trade costs or opening up shielded sectors to trade. There is a national or international common agency that determines minimum wages for the oligopolists, either directly or through supporting labor unions. The lobbies of employers and labor unions influence that agency, relating their prospective political contributions to the latter's decisions. Both a shift from national to international regulation and a decrease in trade costs promote aggregate welfare, but decrease open-sector relative wages.
Output is produced from labor and capital by technologies that differ in their emission intensity... more Output is produced from labor and capital by technologies that differ in their emission intensity and relative capital intensity. Aggregate emissions decrease every individual's health, but each individual can invest its own health. Population grows by the difference of fertility and exogenous mortality. Labor is used in production or child rearing. I construct a differential game where the benevolent government is a leader that determines taxes and subsidies, while the representative family is a follower that saves in capital and decides on its number of children. The main results are as follows. Without government intervention, population increases or decreases indefinitely. Capital should be taxed, if dirty technology, and subsidized, if clean technology is relatively capital intensive. Child rearing should be taxed, if dirty technology is relatively capital intensive or mildly labor intensive.
I examine the welfare effects of emission permit trading in an economy where the use of energy in... more I examine the welfare effects of emission permit trading in an economy where the use of energy in production generates welfare-harming emissions, there is a regulator that sets industry-specific emission permits and the industries influence the regulator by paying political contributions. I show that policy with nontraded emission permits establishes aggregate production efficiency. Emission permit trading hampers efficiency and welfare by increasing the use of emitting inputs in dirty and decreasing that in clean industries.
This article examines the following case. A set of countries produce goods from labor, government... more This article examines the following case. A set of countries produce goods from labor, government input and natural resources. Because the conservation of natural resources in any country yields utility (e.g. through biodiversity) in every country, and because there is no benevolent international government, a resident of the countries is chosen as the regulator to whom conservation policy is delegated. The countries influence the regulator by their political contributions. In this common agency setup, the following result is proven: as long as the minimum conservation standards are implemented, conservation subsidies are welfare decreasing, involving excessive conservation. This suggests that there should be no "co-financing" for designated conservation sites in the EU NATURA 2000 project.
In this paper, I examine the nature of optimal capital taxation in an economy where labor unions ... more In this paper, I examine the nature of optimal capital taxation in an economy where labor unions set wages. Wage contracts are called binding, if they protect investors against immediate expropriation after new machines are installed. I show that in order to maintain aggregate production efficiency the government needs a labor tax only in the presence and taxes on both labor and capital in the absence of binding contracts. In addition, I construct optimal tax rules for the cases of both binding and non-binding wage contracts.
I examine GHG emission policy in a world with a fixed number of regions. In each region, labor an... more I examine GHG emission policy in a world with a fixed number of regions. In each region, labor and emissions are complementary in production, total world-wide emissions decrease welfare, and total factor productivity can be improved by R&D. A subset of regions can establish an "abatement coalition", authorizing a central planner to grant them non-traded or traded GHG permits. The planner is self-interested, subject to lobbying, and has no budget of its own. The results are the following. The establishment of the "abatement coalition" enhances welfare, promotes economic growth and diminishes emissions both inside and outside the coalition. With technological change due to R&D, GHG permit trade decreases welfare. Furthermore, it increases emissions and slows down economic growth, if emissions are inelastic with respect to the price for permits. Without technological change, GHG permit trade does not make any difference.
This document is a literature review of sustainable growth. Because there are many definitions of ... more This document is a literature review of sustainable growth. Because there are many definitions of sustainable growth, we use the following one that is very common in economics. Economic growth is sustainable, if it meets the needs of the present generations without compromising the ability of future generations to meet their own needs. This concerns both the availability of resources for future generations and the environmental impacts of current decisions on future activities. Section I, we consider issues and policy measures related to the resource problem. We introduce dynamic models in which exhaustible resources are used in production and apply them to several cases: an open economy, a backstop technology and the relationship of climate and economic growth. We also examine a transition of dirty to clean technology and the consequences of this to public finance and inter-generational equity. In Section II, we consider macroeconomic performance with natural resources: origins and e...
Dynamic Modeling and Econometrics in Economics and Finance, 2009
The government in a small open economy uses both an old “dirty,” or “polluting,” technology and a... more The government in a small open economy uses both an old “dirty,” or “polluting,” technology and a new “clean” technology simultaneously. However, because of climate change, it should take into account that at some stage in the future it will be penalized for production based on the old technology. In this paper, pollution is alleviated through international agreements that restrict polluting activities. The government’s incentives to invest in cleaner technologies are based on productivity of the technology and randomly increasing abatement costs for pollution in future. In contrast to the Schumpeterian model of creative destruction, both technologies can be used simultaneously. The technologies are subject to AK production functions. Assuming that the exogenous environmental shock follows a Poisson process, we use Pontryagin’s maximum principle to find the optimal investment policy. We find conditions under which a rational government should invest all its resources in one technology, while the other is moderately run down, as well as conditions under which it should divide the investments between the technologies in a certain ratio.
Dynamic Modeling and Econometrics in Economics and Finance, 2009
I examine the implementation of emission policy in a union of countries. Production in any countr... more I examine the implementation of emission policy in a union of countries. Production in any country incurs emissions that pollute all over the union, but efficiency in production can be improved by research and development (R&D). I compare four cases: laissez-faire, Pareto optimal policy, lobbying with centrally-determined emission quotas and lobbying with emission trade. The main findings are as follows. With emission quotas, the growth rate is socially optimal, but welfare sub-optimal. Emission trade speeds up growth from the initial position of laissez-faire, but slows down from the initial position of centrally-determined emission quotas.
Economic Growth with Political Lobbying and Wage Bargaining * This paper examines an economy with... more Economic Growth with Political Lobbying and Wage Bargaining * This paper examines an economy with a large number of industries, each producing a different good. Technological change follows a Poisson process where firms improve their productivity through investment in R&D. The less there are firms in the economy or the more they can coordinate their actions, the higher their profits. Labor is used in production or R&D. All workers are unionized and their wages depend on relative union bargaining power. If this power is high enough, then there is involuntary unemployment. Both workers and firms lobby the central planner of the economy which affects firms' and unions' market power. The main findings of the paper can be summarized the follows. The central planner can increase its welfare either (a) by increasing the level of income or (b) by speeding up economic growth. If (a) is more effective than (b), then the central planner eliminates union power altogether to have full employment. On the other hand, if (b) is more effective than (a), then the central planner supports labor unions to promote cost-escaping R&D.
This paper examines inflationary finance in an open growing economy where the existence of an inf... more This paper examines inflationary finance in an open growing economy where the existence of an informal sector distorts ordinary taxation, and where either public services or capital in the public sector is used as an input to private production. Public input is assumed to be rival and non-excludable.
This paper analyzes the growth effects of competition in a productcycle model where R&D firms bot... more This paper analyzes the growth effects of competition in a productcycle model where R&D firms both innovate and imitate and households are subject to non-diversifiable risk. I prove that product market competition promotes growth when the initial level of competition is high enough. In contrast to the earlier product-cycle models with diversifiable risk, I show also the following. Some positive profits are necessary for technological change. The larger the proportion of industries subject to price competition, the slower economic growth.
Proceedings of the Steklov Institute of Mathematics, 2012
ABSTRACT We develop an optimal growth model of an open economy that uses both an old (“dirty” or ... more ABSTRACT We develop an optimal growth model of an open economy that uses both an old (“dirty” or “polluting”) technology and a new (“clean”) technology simultaneously. A planner of the economy expects the occurrence of a random shock that increases sharply abatement costs in the dirty sector. Assuming that the probability of an exogenous environmental shock is distributed according to the exponential law, we use Pontryagin’s maximum principle to find the optimal investment and consumption policies for the economy.
This study examines optimal emission policy in a union of countries. In each country, labor is al... more This study examines optimal emission policy in a union of countries. In each country, labor is allocated between production and R&D which generates Poisson technological change. Production incurs emissions that are spread all over the union and aggravates pollution. Utility in any country depends negatively on both emissions and pollution in the union. The central planner of the union sets emission taxes for the countries. This study constructs a Pareto-optimal emission policy for the union.
This document is a literature review of sustainable growth. Because there are many definitions of ... more This document is a literature review of sustainable growth. Because there are many definitions of sustainable growth, we use the following one that is very common in economics. Economic growth is sustainable, if it meets the needs of the present generations without compromising the ability of future generations to meet their own needs. This concerns both the availability of resources for future generations and the environmental impacts of current decisions on future activities. Section I, we consider issues and policy measures related to the resource problem. We introduce dynamic models in which exhaustible resources are used in production and apply them to several cases: an open economy, a backstop technology and the relationship of climate and economic growth. We also examine a transition of dirty to clean technology and the consequences of this to public finance and inter-generational equity. In Section II, we consider macroeconomic performance with natural resources: origins and e...
This modest book examines the world of petty entrepreneurs in a late medieval Italian town. It is... more This modest book examines the world of petty entrepreneurs in a late medieval Italian town. It is based on a rare collection of 46 account books from small tradesmen in the archives of Prato, a town better known for the extraordinarily rich archive of business and personal records left by the wealthy merchant Francesco Datini. The author was guided in his study by Richard Goldthwaite, a leading expert on late medieval account books. The ledgers provide a look at a little-studied social and economic group. They are especially revealing because they were used not only for business entries but also to record family events, including births, deaths, and marriages. As Marco Spallanzani points out in a preface to the book, most scholarship on medieval tradesmen centers on guilds and guild members. The people represented in these ledgers operated outside of economic corporations. They were not a homogeneous group but included a thirteenth-century moneylender, fourteenth-century druggists, cheese sellers, cloth sellers, a tailor, a doublet maker, a grain seller, a secondhand dealer, a broker, a cloth shearer, butchers, wallers, paper makers, and a family of innkeepers who were responsible for seventeen account books. As Marshall notes, the business atmosphere was casual, and this list is a bit deceptive because people's stated occupations were not always how they made their money. One man named as a secondhand dealer in fact used a broker to trade commodities, including 318 pounds of Sardinian cheese, bought one day and sold at a profit the next. This is a careful and useful descriptive study. It holds few surprises. After an introductory look at Prato and the nature of the account books, the author draws on the ledgers to describe their way of life. Some had meager resources, but on average their incomes allowed them a varied diet, adequate household goods, clothing, and even a few luxuries like silk or squirrel fur. Assessments of their net worth are speculative. Like wealthy merchants and bankers, they were quick to invest in farms and urban rental properties. It is not obvious how they accumulated their capital, a question that has been debated for elites as well. Marshall reasonably suggests that some were investing their wives' dowries. These tradesmen also liked to keep large amounts of cash on hand. Much of the book examines aspects of the conduct of business, including useful sketches of the roles of a petty broker, termed a sensale, and the operations of a successful inn. The entrepreneurs of Prato did not use notarial contracts but rather recorded their own accounts in single-entry ledgers, calculated in money of account. This suggests a high degree of literacy and mathematical competency. Business was conducted in a thoroughly monetized local economy. Marshall stresses the reliance on credit in daily transactions, though it should be noted that cash sales were not recorded in the ledgers and thus are not easily recoverable. Day-today reliance on credit was a way of life for the whole society. "Credit based on trust," he writes, "that same fiducia that Federigo Melis so passionately insisted was the essential element in merchant society at the highest ranks-sealed the close relations of these more modest operators with people of all walks of life. . ." Marshall argues that these shopkeepers, not pawnbrokers, were the primary source of small loans for the Pratesi. Credit purchases and loans were most commonly secured by third-party guarantors. He calculates that while collection was often slow, collection rates were high: the average rate for credit purchases was 95 percent; that for loans approached 98 percent.
SIGLEAvailable from British Library Lending Division - LD:D58053/85 / BLDSC - British Library Doc... more SIGLEAvailable from British Library Lending Division - LD:D58053/85 / BLDSC - British Library Document Supply CentreGBUnited Kingdo
In this paper, I study the political rationale for labor market regulation. Oligopolists employ r... more In this paper, I study the political rationale for labor market regulation. Oligopolists employ raw labor and human capital (i.e. key workers) for production and R&D. There are many jurisdictions, in each of which a self-interested policy maker can regulate/deregulate the local labor market. I show that the observed tendency to labor market deregulation results from labor market policies being set up at the local level. In small jurisdictions, the fall of income due to wage increases is so large that the labor markets are deregulated. With labor market integration, jurisdictions get larger and face less competition from outside. Then, the fall of income due to wage increases is reduced and labor market regulation becomes more attractive to workers' lobbies.
Heterogeneous countries produce goods from fixed resources and emitting inputs that cause simulta... more Heterogeneous countries produce goods from fixed resources and emitting inputs that cause simultaneous localized and global extenality problems (e.G. smog and global warming). Since there is no benevolent international government, the issue of emission permits is delegated to an international self-interested regulator whom the countries try to influence. A single country can exceed its emission permits with a fixed penalty. In this setup, this article shows that emission trading is welfare diminishing, because it grants less (more) permits to countries with realtively clean (dirty) localized technology.
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research pu... more Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.
The Welfare Effects of Globalization with Labor Market Regulation I examine how globalization aff... more The Welfare Effects of Globalization with Labor Market Regulation I examine how globalization affects wages and welfare in a general equilibrium model of international trade with partly oligopolistic markets. Globalization is modeled as reducing trade costs or opening up shielded sectors to trade. There is a national or international common agency that determines minimum wages for the oligopolists, either directly or through supporting labor unions. The lobbies of employers and labor unions influence that agency, relating their prospective political contributions to the latter's decisions. Both a shift from national to international regulation and a decrease in trade costs promote aggregate welfare, but decrease open-sector relative wages.
Output is produced from labor and capital by technologies that differ in their emission intensity... more Output is produced from labor and capital by technologies that differ in their emission intensity and relative capital intensity. Aggregate emissions decrease every individual's health, but each individual can invest its own health. Population grows by the difference of fertility and exogenous mortality. Labor is used in production or child rearing. I construct a differential game where the benevolent government is a leader that determines taxes and subsidies, while the representative family is a follower that saves in capital and decides on its number of children. The main results are as follows. Without government intervention, population increases or decreases indefinitely. Capital should be taxed, if dirty technology, and subsidized, if clean technology is relatively capital intensive. Child rearing should be taxed, if dirty technology is relatively capital intensive or mildly labor intensive.
I examine the welfare effects of emission permit trading in an economy where the use of energy in... more I examine the welfare effects of emission permit trading in an economy where the use of energy in production generates welfare-harming emissions, there is a regulator that sets industry-specific emission permits and the industries influence the regulator by paying political contributions. I show that policy with nontraded emission permits establishes aggregate production efficiency. Emission permit trading hampers efficiency and welfare by increasing the use of emitting inputs in dirty and decreasing that in clean industries.
This article examines the following case. A set of countries produce goods from labor, government... more This article examines the following case. A set of countries produce goods from labor, government input and natural resources. Because the conservation of natural resources in any country yields utility (e.g. through biodiversity) in every country, and because there is no benevolent international government, a resident of the countries is chosen as the regulator to whom conservation policy is delegated. The countries influence the regulator by their political contributions. In this common agency setup, the following result is proven: as long as the minimum conservation standards are implemented, conservation subsidies are welfare decreasing, involving excessive conservation. This suggests that there should be no "co-financing" for designated conservation sites in the EU NATURA 2000 project.
In this paper, I examine the nature of optimal capital taxation in an economy where labor unions ... more In this paper, I examine the nature of optimal capital taxation in an economy where labor unions set wages. Wage contracts are called binding, if they protect investors against immediate expropriation after new machines are installed. I show that in order to maintain aggregate production efficiency the government needs a labor tax only in the presence and taxes on both labor and capital in the absence of binding contracts. In addition, I construct optimal tax rules for the cases of both binding and non-binding wage contracts.
I examine GHG emission policy in a world with a fixed number of regions. In each region, labor an... more I examine GHG emission policy in a world with a fixed number of regions. In each region, labor and emissions are complementary in production, total world-wide emissions decrease welfare, and total factor productivity can be improved by R&D. A subset of regions can establish an "abatement coalition", authorizing a central planner to grant them non-traded or traded GHG permits. The planner is self-interested, subject to lobbying, and has no budget of its own. The results are the following. The establishment of the "abatement coalition" enhances welfare, promotes economic growth and diminishes emissions both inside and outside the coalition. With technological change due to R&D, GHG permit trade decreases welfare. Furthermore, it increases emissions and slows down economic growth, if emissions are inelastic with respect to the price for permits. Without technological change, GHG permit trade does not make any difference.
This document is a literature review of sustainable growth. Because there are many definitions of ... more This document is a literature review of sustainable growth. Because there are many definitions of sustainable growth, we use the following one that is very common in economics. Economic growth is sustainable, if it meets the needs of the present generations without compromising the ability of future generations to meet their own needs. This concerns both the availability of resources for future generations and the environmental impacts of current decisions on future activities. Section I, we consider issues and policy measures related to the resource problem. We introduce dynamic models in which exhaustible resources are used in production and apply them to several cases: an open economy, a backstop technology and the relationship of climate and economic growth. We also examine a transition of dirty to clean technology and the consequences of this to public finance and inter-generational equity. In Section II, we consider macroeconomic performance with natural resources: origins and e...
Dynamic Modeling and Econometrics in Economics and Finance, 2009
The government in a small open economy uses both an old “dirty,” or “polluting,” technology and a... more The government in a small open economy uses both an old “dirty,” or “polluting,” technology and a new “clean” technology simultaneously. However, because of climate change, it should take into account that at some stage in the future it will be penalized for production based on the old technology. In this paper, pollution is alleviated through international agreements that restrict polluting activities. The government’s incentives to invest in cleaner technologies are based on productivity of the technology and randomly increasing abatement costs for pollution in future. In contrast to the Schumpeterian model of creative destruction, both technologies can be used simultaneously. The technologies are subject to AK production functions. Assuming that the exogenous environmental shock follows a Poisson process, we use Pontryagin’s maximum principle to find the optimal investment policy. We find conditions under which a rational government should invest all its resources in one technology, while the other is moderately run down, as well as conditions under which it should divide the investments between the technologies in a certain ratio.
Dynamic Modeling and Econometrics in Economics and Finance, 2009
I examine the implementation of emission policy in a union of countries. Production in any countr... more I examine the implementation of emission policy in a union of countries. Production in any country incurs emissions that pollute all over the union, but efficiency in production can be improved by research and development (R&D). I compare four cases: laissez-faire, Pareto optimal policy, lobbying with centrally-determined emission quotas and lobbying with emission trade. The main findings are as follows. With emission quotas, the growth rate is socially optimal, but welfare sub-optimal. Emission trade speeds up growth from the initial position of laissez-faire, but slows down from the initial position of centrally-determined emission quotas.
Economic Growth with Political Lobbying and Wage Bargaining * This paper examines an economy with... more Economic Growth with Political Lobbying and Wage Bargaining * This paper examines an economy with a large number of industries, each producing a different good. Technological change follows a Poisson process where firms improve their productivity through investment in R&D. The less there are firms in the economy or the more they can coordinate their actions, the higher their profits. Labor is used in production or R&D. All workers are unionized and their wages depend on relative union bargaining power. If this power is high enough, then there is involuntary unemployment. Both workers and firms lobby the central planner of the economy which affects firms' and unions' market power. The main findings of the paper can be summarized the follows. The central planner can increase its welfare either (a) by increasing the level of income or (b) by speeding up economic growth. If (a) is more effective than (b), then the central planner eliminates union power altogether to have full employment. On the other hand, if (b) is more effective than (a), then the central planner supports labor unions to promote cost-escaping R&D.
This paper examines inflationary finance in an open growing economy where the existence of an inf... more This paper examines inflationary finance in an open growing economy where the existence of an informal sector distorts ordinary taxation, and where either public services or capital in the public sector is used as an input to private production. Public input is assumed to be rival and non-excludable.
This paper analyzes the growth effects of competition in a productcycle model where R&D firms bot... more This paper analyzes the growth effects of competition in a productcycle model where R&D firms both innovate and imitate and households are subject to non-diversifiable risk. I prove that product market competition promotes growth when the initial level of competition is high enough. In contrast to the earlier product-cycle models with diversifiable risk, I show also the following. Some positive profits are necessary for technological change. The larger the proportion of industries subject to price competition, the slower economic growth.
Proceedings of the Steklov Institute of Mathematics, 2012
ABSTRACT We develop an optimal growth model of an open economy that uses both an old (“dirty” or ... more ABSTRACT We develop an optimal growth model of an open economy that uses both an old (“dirty” or “polluting”) technology and a new (“clean”) technology simultaneously. A planner of the economy expects the occurrence of a random shock that increases sharply abatement costs in the dirty sector. Assuming that the probability of an exogenous environmental shock is distributed according to the exponential law, we use Pontryagin’s maximum principle to find the optimal investment and consumption policies for the economy.
This study examines optimal emission policy in a union of countries. In each country, labor is al... more This study examines optimal emission policy in a union of countries. In each country, labor is allocated between production and R&D which generates Poisson technological change. Production incurs emissions that are spread all over the union and aggravates pollution. Utility in any country depends negatively on both emissions and pollution in the union. The central planner of the union sets emission taxes for the countries. This study constructs a Pareto-optimal emission policy for the union.
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