Knowledge that Transforms

This paper develops a computable general equilibrium model in which endogenous agency costs can potentially alter business-cycle dynamics. A principal conclusion is that the agency-cost model replicates the empirical fact that output growth displays positive autocorrelation at short horizons. This hump-shaped output behavior arises because households delay their investment decisions until agency costs are at their lowest--a point in time several periods after the initial shock.

In this paper I try to move away from the Extreme Bounds method of identifying robust empirical relations in the economic growth literature. Instead of analyzing the extreme bounds of the estimates of the coefficient of a particular variable, I analyze the entire distribution. My claim in this paper is that, if we do this, the picture emerging from the empirical growth literature is not the pessimistic Nothing is Robust that we get with the extreme bound analysis. Instead, we find that a substantial number of variables can be found to be strongly related to growth.

The authors investigate the productivity effects of innovative employment practices using data from a sample of thirty-six homogeneous steel production lines owned by seventeen companies. The productivity regressions demonstrate that lines using a set of innovative work practices, which include incentive pay, teams, flexible job assignments, employment security, and training, achieve substantially higher levels of productivity than do lines with the more traditional approach, which includes narrow job definitions, strict work rules, and hourly pay with close supervision. Their results are consistent with recent theoretical models which stress the importance of complementarities among work practices.

A wide range of public policies which affect rural-urban migration is surveyed and evaluated. Direct controls upon migration are the least significant except under strong authoritarian regimes. However policies which reduce the natural rate of population growth can have major impacts upon rural-urban migration and urban population growth. Efforts to promote secondary cities and market towns in hopes of redirecting rural-urban migration have been constrained by the large infrastructure investments they demand. It has been extremely expensive to relocate capital cities and tax incentives to affect the location of private firms have been problematic. Policies which decentralize government hold greater promise but they are not likely to be welcomed by central government officials. Policies which target the rural or urban sector can have a major impact upon rural-urban migration. The most important determinants of rural-urban migration however are macroeconomic policies. It remains to be seen whether structural adjustment programs implemented in Latin America will slow the pace of rural-urban migration.

In this paper, I structurally estimate a stochastic bargaining model of government formation in a multiparty parliamentary democracy, and I conduct policy experiments to evaluate the effects of changes in the bargaining procedure. I show that the model fits well data on the duration of negotiations and government durations in postwar Italy. Also, I show that changes in the proposer selection process would not affect either the duration of negotiations or government durations, whereas the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations.

We test whether the time-series positive correlation of inflation and intermarket relative price variability is also present in a cross-section of US cities. We find this correlation to be a robust empirical regularity: cities which have higher than average inflation also have higher than average relative price dispersion, ceteris paribus, This result holds for different periods of time, different classes of goods, and across different time horizons. Our results suggest that at least part of the relationship between inflation and relative price variability cannot be explained by moneta~factors.

Regulation regimes subject to the influence of interest groups are compared. It is shown that the allocation of the regulated commodity varies with the implemented control and that the advantage of prices (vs. quotas) increases with the elasticity of the demand for or the supply of the commodity and decreases with the number of organized producers in the regulated industry. Control regimes can be ranked for negative, but not positive, externalities. Finally, a control regime leading to a more efficient commodity allocation also entails using fewer resources in rent-seeking activities.