Vertical diversity and equilbrium growth

This paper examines the effect of an increase in vertical diversity in workers' skill on the long run growth rate of an economy. It uses a two-secror model where the techonology of the consumption-good sector is supermodular and that of the R&D sector is submodular. By adopting Grossman and Maggi's(2000) model to a framework of growth based on R&D, it shows first that diversity is condutive to growth. As the main innovation, communication gap is introduced among workers. It is then shown that growth may not be increasing with diversity. There may be an inverse-U shaped relationship.Diversity, talent distribution, supermodular technology, submodular technology, growth, skill, R&D, innovations

Endogenous distribution, politics and the growth-equity tradeoff

In comparison to the standard literature on inequality and growth which assumes the former to be exogenous, we formulate a model in which inequality and growth are both endogenous. Furthermore, long-run distribution, at least locally, is shown to be independent of the initial distribution of factor ownership. It is shown that exogenous policy changes that are primarily targeted towards growth and foster less inequality do enhance growth. But those that are primarily redistributive and imply more equal distribution reduce growth. This is consistent with recent empirical work which shows that inequality and growth may be positively related.Median Voter, Endogenous Growth, Wealth Distribution, Distributive Conflict, Redistributive Policy

Endogenous trading bloc formation in a North-South global economy

Majority of the trading blocs to date are between similar countries, rather than between developed and developing countries. This paper provides a rationale for why trading blocs among similar countries may arise as an equilibrium phenomenon. It develops a model of an asymmetric world economy, in which there are at least four countries. The countries are differentiated with respect to their market size and market structure.

Deterrence, preemption and panic: A Common-enemy problem of terrorism

We develop a game-theoretic analysis of terrorism that examines the interaction between a terrorist organization and multiple target countries, and considers both pre-emption and deterrence as counterterrorist policies. The damage from terror includes not only the material cost of fatality, injury and loss of property, but also the resultant fear. The fear-effect leads to different kinds of equilibria and implications for counter-terrorism policies. In particular, the model identifies conditions under which greater pre-emption may be the rational response to an increase in terrorism, i.e., it analyzes the merit of the dictum: "offense is the best defense." Further, it examines the characteristics of cooperative behavior among target countries in dealing with the threat of terrorism.Terrorism; Preemption; Panic; Deterrence; Cooperation; Target Countries

Endogeneous Distribution and the Political Economy of Trade Policy

This paper examines the political economy of trade policy in the context of a small open economy, when factor ownerships are variable. The median voter hypothesis is used. In the long run, both trade protection and distribution of wealth and income are endogenous, and the paper investigates how these are affected by basic parameters like terms of trade and technology

Policies to combat child labor: A dynamic analysis

This paper analyzes child labor in a fully dynamic model with credit constraints. It considers the ong-run and short-run effects of an array of policies like lump-sum subsidy, enrollment subsidy, improvement in primary education and variations in loan market parameters. It is shown that some policies that reduce child labor in the long run may lead to an increase in child labor in the short run. Marginal changes in the borrowing rate or credit limit do not affect the long-run incidence of child labor if the rate of time preference is constant. Implications of variable rate of time preference are also examined.

Decreasing marginal impatience, income distribution and demand for money: Theory and evidence

This Paper develops a dynamic, theoretical model of demand for money under decreasing marginal impatience (DMI).Given certain conditions, the steady state is shown to be saddle-path stable and unique. It is shown that, under DMI, an increase in income inequality increases the aggregate demand for money. Empirical evidence supporting this hypothesis is provided in the context of the U.S. economy.

Persistence in nonequilibrium surface growth

Persistence probabilities of the interface height in (1+1)- and (2+1)-dimensional atomistic, solid-on-solid, stochastic models of surface growth are studied using kinetic Monte Carlo simulations, with emphasis on models that belong to the molecular beam epitaxy (MBE) universality class. Both the initial transient and the long-time steady-state regimes are investigated. We show that for growth models in the MBE universality class, the nonlinearity of the underlying dynamical equation is clearly reflected in the difference between the measured values of the positive and negative persistence exponents in both transient and steady-state regimes. For the MBE universality class, the positive and negative persistence exponents in the steady-state are found to be $\theta^S_{+} = 0.66 \pm 0.02$ and $\theta^S_{-} = 0.78 \pm 0.02$, respectively, in (1+1) dimensions, and $\theta^S_{+} = 0.76 \pm 0.02$ and $\theta^S_{-} =0.85 \pm 0.02$, respectively, in (2+1) dimensions. The noise reduction technique is applied on some of the (1+1)-dimensional models in order to obtain accurate values of the persistence exponents. We show analytically that a relation between the steady-state persistence exponent and the dynamic growth exponent, found earlier to be valid for linear models, should be satisfied by the smaller of the two steady-state persistence exponents in the nonlinear models. Our numerical results for the persistence exponents are consistent with this prediction. We also find that the steady-state persistence exponents can be obtained from simulations over times that are much shorter than that required for the interface to reach the steady state. The dependence of the persistence probability on the system size and the sampling time is shown to be described by a simple scaling form.Comment: 28 pages, 16 figure

Persistence of Randomly Coupled Fluctuating Interfaces

We study the persistence properties in a simple model of two coupled interfaces characterized by heights h_1 and h_2 respectively, each growing over a d-dimensional substrate. The first interface evolves independently of the second and can correspond to any generic growing interface, e.g., of the Edwards-Wilkinson or of the Kardar-Parisi-Zhang variety. The evolution of h_2, however, is coupled to h_1 via a quenched random velocity field. In the limit d\to 0, our model reduces to the Matheron-de Marsily model in two dimensions. For d=1, our model describes a Rouse polymer chain in two dimensions advected by a transverse velocity field. We show analytically that after a long waiting time t_0\to \infty, the stochastic process h_2, at a fixed point in space but as a function of time, becomes a fractional Brownian motion with a Hurst exponent, H_2=1-\beta_1/2, where \beta_1 is the growth exponent characterizing the first interface. The associated persistence exponent is shown to be \theta_s^2=1-H_2=\beta_1/2. These analytical results are verified by numerical simulations.Comment: 15 pages, 3 .eps figures include

Deterrence, Preemption and Panic: A Common-Enemy Problem of Terrorism

We develop a game-theoretic analysis of terrorism that examines the interaction between a terrorist organization and multiple target countries, and considers both pre-emption and deterrence as counter-terrorist policies. The damage from terror includes not only the material cost of fatality, injury and loss of property, but also the resultant fear. The fear-effect leads to different kinds of equilibria and implications for counter-terrorism policies. In particular, the model identifies conditions under which greater pre-emption may be the rational response to an increase in terrorism, i.e., it analyzes the merit of the dictum: ``offense is the best defense.'' Further, it examines the characteristics of cooperative behavior among target countries in dealing with the threat of terrorism