Journal Article Market Distortions and Gradual Reform Get access Michael Bruno Michael Bruno The Hebrew University, Jerusalem Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 39, Issue 3, July 1972, Pages 373–383, https://doi.org/10.2307/2296365 Published: 01 July 1972 Article history Received: 01 July 1971 Revision received: 01 October 1971 Published: 01 July 1972

Journal Article Raw Materials, Profits, and the Productivity Slowdown: A Complementary Note Get access Michael Bruno Michael Bruno The Hebrew University of Jerusalem Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 101, Issue 1, February 1986, Pages 197–200, https://doi.org/10.2307/1884649 Published: 01 February 1986

A factor-price frontier framework is used to clarify the analogy of an increase (decrease) in raw material prices with autonomous technological regress (progress). Factor-price profiles are estimated for the manufacturing sector of the United States, the United Kingdom, Germany, and Japan. The production model, in conjunction with estimates obtained from the factor-price frontier, attributes much of the slowdown in manufacturing productivity to the rise in relative raw material prices. Part of the apparent productivity riddle may have to do with the use of double-deflated national accounting measures of value added, which have an inherent measurement bias.

The concepr of Economic Reform ia described as a planned shift from one, Pareto inefficient, but quasi-stable, equilibrium (or 'trap') to a new Pareto superior equilibrium which is, or is designed to become, stable too. The concept is applied to recent 'shock' stabilization programs, with special reference to Israel, where the economy was credibiy shifted from a 3-digit inflationary process with considerable inertia, to relative price stability with higher real growth, at only small adjustment costs, by means of a 'heterodox' plan. This two-pronged stabilization program consisted of a substantial correction of budget and external account 'fundamentals' together with a synchronized, wage-price-exchange rate freeze. The idea is theoretically rationalized within a simple dual equilibrium inflation model, for which some econometric estimates are also given.

The study analyzes the wage and price adjustment process in open economies in response to changes in exchange rates and import price. It distinguishes between the impact or cost-push effect, in which the system may exhibit temporary nonneutrality, and the lagged response of excess demand in labor and home-goods markets, which determines the stability of neutrality of long-run equilibria. An empirical illustration is given of the importance of the cost-push effect in explaining differential price behavior of OECD countries during 1972-76.

The study analyzes the wage and price adjustment process in open economies in response to changes in exchange rates and import price. It distinguishes between the impact or cost-push effect, in which the system may exhibit temporary nonneutrality, and the lagged response of excess demand in labor and home-goods markets, which determines the stability of neutrality of long-run equilibria. An empirical illustration is given of the importance of the cost-push effect in explaining differential price behavior of OECD countries during 1972-76.