Uncertainty and economic growth in a stochastic R&D model

The paper examines an R&D model with uncertainty from the population growth, which is a stochastic cooperative Lotka-Volterra system, and obtains a suciently condition for the existence of the globally positive solution. The long-run growth rate of the economic system is ultimately bounded in mean and fluctuation of its growth will not be faster than the polynomial growth. When uncertainty of the population growth, in comparison with its expectation, is suciently large, the growth rate of the technological progress andthe capital accumulation will converge to zero. Inversely, when uncertainty of the population growth is suciently small or its expected growth rate is suciently high, the economic growth rate will not decay faster than the polyno-mial speed. The paper explicitly computes the sample average of the growth rates of both the technology and the capital accumulation in time and compares them with their counterparts in the corresponding deterministic model

ON KNOWLEDGE-BASED ECONOMIC GROWTH

International Development,

Attainability in Repeated Games with Vector Payoffs

We introduce the concept of attainable sets of payoffs in two-player repeated games with vector payoffs. A set of payoff vectors is called {\em attainable} if player 1 can ensure that there is a finite horizon $T$ such that after time $T$ the distance between the set and the cumulative payoff is arbitrarily small, regardless of what strategy player 2 is using. This paper focuses on the case where the attainable set consists of one payoff vector. In this case the vector is called an attainable vector. We study properties of the set of attainable vectors, and characterize when a specific vector is attainable and when every vector is attainable.Comment: 28 pages, 2 figures, conference version at NetGCoop 201

Finite Lifetimes, Borrowing Constraints, and Short-Run Fiscal Policy

Recent developments in public finance in the analysis of dynamic government debt policies have emphasized effects on the distribution of real resources across generations. At the same time, macroeconomists have emphasized the importance of the length of the time horizon over which agents optimize their decisions about consumption for judging the effects of fiscal policy on aggregate demand. Much of the discussion of these issues has focused on whether linkages among generations are sufficient to give consumers infinite horizons. To the extent that horizons are finite, debt burdens can be shifted to future generations, and substitutions of debt for taxes have real effects. This paper argues that, as a matter of quantitative significance, theoretical and empirical emphasis on the importance of finite horizons for the analysis of many fiscal policies is misplaced. Studies of the role of finite horizons in determining the effects of short-run fiscal policies on consumption have been conducted largely under the assumption of perfect capital markets. We show that while the marginal propensity to consume (MPC) out of temporary tax changes is nonzero in finite- horizon models, it is not very large. We demonstrate that the MPC is, however, quite sensitive to the importance of restrictions on borrowing in the economy. The clear implication is that shifting emphasis from the length of the planning horizon to the structure of capital markets is an important step for empirical research.

Dynamic efficiency of enviromental policy: the case of intertemporal emissions trading

In this paper we analyze the effects of dynamic environmental policies on firms' optimal investment behavior within finite time horizons. We show that when finns are allowed to intertemporally trade their emissions, they invest in abatement in earlier periods, advancing compliance with future environmental standards. Therefore, policies such us emissions banking" enhances the dynamic efficiency of the marketable permits and derives substantial cost-savings by itself. We show the dynamics of banking policy and emissions trading when the firm faces a two step emission standard with strict requirements at the end of the programo The firm's optimaI trajectory under apure banking program is compared to command-and-control (CAC), Pigouvian taxes and emissions borrowing, aH for a finite time horizon. Banking introduces time flexibility, inducing the firm to over-comply with environmental standards in earlier periods, thus buying a delay in adjustment to future tighter policies. Finally, we analyze the dynamics of a pure emission trading program, where permits are available in a perfect competitive market, but do not last forever. Our results justify the current low trading in the U.S. Acid Rain Program (ARP) alld link firm's cost savings to the success of the banking policy

Liquidity Constraints, Fiscal Policy, and Consumption

macroeconomics, liquidity constraints, fiscal policy, and consumption

Dynamic Accumulation in Bargaining Games

In many bargaining situations the decisions that parties take at one point in time affect their future bargaining opportunities. We consider an ultimatum bargaining game in which parties can decide not only how to share a current surplus but also how much to invest in order to generate future surpluses. We show that there is a unique Markov perfect equilibrium (MPE) in which a proposer consumes the whole surplus not invested. Moreover, when the proposer has a sufficiently high discount factor, his MPE investment level is higher than his opponent’s, for a given capital stock. Finally, we show that bargaining can lead to overinvestment.

The Timing of Childbearing among Heterogeneous Women in Dynamic General Equilibrium

We develop a tractable framework with a fully specified dynamic process of demographic and labor decisions over an individual female's life span to determine the timing of childbearing. Fertility affects women's behavior through three channels: its tradeoff with leisure, its interactions with human capital investment, and its cost in terms of lost market productivity. Instead of numerically solving a discrete-time version of the model, we propose an alternative solution technique that provides analytic, closed-form solutions for the continuous-time dynamic optimization problem with (discrete) time-line variables. The analytic results indicate that (i) increased impatience has an ambiguous effect on childbearing timing; (ii) the age at first birth rises at an increasing rate with the productivity loss from children; and (iii) women of greater ability have births at later ages and are more sensitive to parameter changes. Calibration exercises suggest that focusing on the median female's response to changes in the preference, cost, and technology parameters fails to capture their important distributional effects.