Journal Article The Dynamic Effects of Fiscal Policy in an Economy with Foresight Get access R. E. Hall R. E. Hall University of California, Berkeley Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 38, Issue 2, April 1971, Pages 229–244, https://doi.org/10.2307/2296781 Published: 01 April 1971

Journal Article Technical Change and Capital from the Point of View of the Dual Get access R. E. Hall R. E. Hall Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 35, Issue 1, January 1968, Pages 35–46, https://doi.org/10.2307/2974405 Published: 01 January 1968

I estimate adjustment costs for labor and capital from the Euler equations for factor demand. For both factors, I find relatively strong evidence against substantial adjustment costs. My estimates use annual data from two-digit industries. My results support the view that rents arising from adjustment costs are relatively small and are not an important part of the explanation of the large movements of the values of corporations in relation to the reproduction costs of their capital. I investigate the potential effects of three types of specification error: (1) aggregation over time, (2) aggregation over firms with heterogeneous demand shocks, and (3) estimation of a convex adjustment-cost technology in the presence of nonconvex discrete adjustment costs. I find that the likely biases from these specification errors are relatively small. I.

Over the past half century, Americans spent a rising share of total economic resources on health and enjoyed substantially longer lives as a result. Debate on health policy often focuses on limiting the growth of health spending. We investigate an issue central to this debate: Is the growth of health spending a rational response to changing economic conditions—notably the growth of income per person? We develop a model based on standard economic assumptions and argue that this is indeed the case. Standard preferences—of the kind used widely in economics to study consumption, asset pricing, and labor supply—imply that health spending is a superior good with an income elasticity well above one. As people get richer and consumption rises, the marginal utility of consumption falls rapidly. Spending on health to extend life allows individuals to purchase additional periods of utility. The marginal utility of life extension does not decline. As a result, the optimal composition of total spending shifts toward health, and the health share grows along with income. In projections based on the quantitative analysis of our model, the optimal health share of spending seems likely to exceed 30 percent by the middle of the century.

Output per worker varies enormously across countries. Why? On an accounting basis our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker—we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language.