This article provides direct empirical evidence on the relationship between technology and firms’ global sourcing strategies. Using new data on U.S. firms’ decisions to contract for manufacturing services from domestic or foreign suppliers, I show that a firm’s adoption of communication technology between 2002 and 2007 is associated with a 3.1 point increase in its probability of fragmentation. The effect of firm technology also differs significantly across industries; in 2007, it is 20% higher, relative to the mean, in industries with production specifications that are easier to codify in an electronic format. These patterns suggest that technology lowers coordination costs, though its effect is disproportionately higher for domestic rather than foreign sourcing. The larger impact on domestic fragmentation highlights its importance as an alternative to offshoring, and can be explained by complementarities between technology and worker skill. High technology firms and industries are more likely to source from high human capital countries, and the differential impact of technology across industries is strongly increasing in country human capital.

This paper presents a dynamic, choice-theoretic general equilibrium model of capital accumulation in an open economy. Equilibria with and without capital mobility are described and compared. It is shown that neither is necessarily Pareto optimal and that an equilibrium with free trade in capital does not Pareto-dominate an equilibrium with autarky. The effects of restricting capital flows by taxing foreign investment earnings are discussed. It is seen that there will be no agreement within a country as to what constitutes an optimal tax. 1.

Proof for a Case where Discounting Advances the Doomsday Get access Tjalling C. Koopmans Tjalling C. Koopmans International Institute for Applied Systems Analysis Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 5, December 1974, Pages 117–120, https://doi.org/10.2307/2296375 Published: 01 December 1974

Difference-in-differences (DID) is a method to evaluate the effect of a treatment. In its basic version, a “control group” is untreated at two dates, whereas a “treatment group” becomes fully treated at the second date. However, in many applications of the DID method, the treatment rate only increases more in the treatment group. In such fuzzy designs, a popular estimator of the treatment effect is the DID of the outcome divided by the DID of the treatment. We show that this ratio identifies a local average treatment effect only if the effect of the treatment is stable over time, and if the effect of the treatment is the same in the treatment and in the control group. We then propose two alternative estimands that do not rely on any assumption on treatment effects, and that can be used when the treatment rate does not change over time in the control group. We prove that the corresponding estimators are asymptotically normal. Finally, we use our results to reassess the returns to schooling in Indonesia.

We derive a closed-form solution for Tobin's Q in a stochastic dynamic framework. We show analytically that investment is positively related to Tobin's Q and cash flow, even in the absence of adjustment costs or financing frictions. Both Q and investment move in the same direction as expected revenue growth, so changes in expected revenue growth induce Q and investment to comove positively. Similarly, shocks to current cash flow, arising from shocks to the user cost of capital in our model, cause investment and cash flow per unit of capital to comove positively. Furthermore, we show that this alternative mechanism for the relationship among investment, Q, and cash flow delivers larger cash flow effects for smaller- and faster-growing firms, as observed in the data. Moreover, the empirically small sensitivity of investment to Tobin's Q does not imply implausibly large adjustment costs in our model (since there are no adjustment costs). Calibrating the model generates values of Q similar to those in the data; investment is more sensitive to cash flow than it is to Q, and both responses are of empirically plausible magnitudes.

We present some examples of Nash equilibria that are independent of the distribution of some parameter across the economic agents and describe a general theorem that characterizes this phenomenon.

J. Aitchison, J. A. C. Brown; A Synthesis of Engel Curve Theory1, The Review of Economic Studies, Volume 22, Issue 1, 1 January 1954, Pages 35–46, https://

The resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others' preferences. This paper explores, within the context of an infinite-horizon bargaining model with two-sided uncertainty, how timing and information affect the rational behaviour of agents when commitment is not possible. Since the bargainers are uncertain about whether trade is desirable, they must communicate some of their private information before an agreement can be reached. This need for learning, due to incomplete information about preferences, results in bargaining inefficiencies: trade often occurs after costly delay. Thus, the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice.

This paper explores tests of the hypothesis that the tail thickness of a distribution is constant over time. Using Hill's conditional maximum likelihood estimator for the tail index of a distribution, tests of tail shape constancy are constructed that allow for an unknown breakpoint. The recursive test is shown to be inconsistent in one direction, and only a one-sided test is recommended. Specifically, the test can be used when the alternative hypothesis is that the tail index decreases over time. A rolling and sequential version of the test is consistent in both directions. The methods are illustrated on recent stock price data for Thailand, Malaysia and Indonesia. The period covers the recent Asian financial crisis and enables us to assess whether breakpoints in domestic asset return distributions are related to known changes in institutional arrangements in the foreign currency markets of these countries.

Journal Article Reciprocal Demand and Increasing Returns Get access R. C. O. Matthews R. C. O. Matthews Cambridge Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 17, Issue 2, 1949, Pages 149–158, https://doi.org/10.2307/2295870 Published: 01 January 1949