Debreu?s Coefficient of Resource Utilization, the Solow Residual, and TFP: The Connection by Leontief Preferences

Debreu?s coefficient of resource allocation is freed from individual data requirements. The procedure is shown to be equivalent to the imposition of Leontief preferences. The rate of growth of the modified Debreu coefficient and the Solow residual are shown to add up to TFP growth. This decomposition is the neoclassical counterpart to the frontier analytic decomposition of productivity growth into technical change and efficiency change. The terms can now be broken down by sector as well as by factor input.

The vintage effect in TFP-growth: An analysis of the age structure of capital

The age structure of capital plays an important role in the measurement of productivity. It has been argued that the slowdown in the 1970?s can be ascribed to the aging of the stock of capital. In this paper we incorporate the age structure in productivity measurement. Our final proposition shows that inclusion of the vintage effect prompts an upward correction of measured productivity growth in times of an aging stock of capital. Here capital ages if the investment/capital ratio falls short of the inverse of the capital age, as a first proposition shows. The analysis rests on a rigorous accounting for vintages. We translate the Bureau of Economic Analysis? age of capital data into a measure of rates of obsolescence. Empirically, the correction of productivity growth for the vintage effect requires an estimate of the obsolescence and depreciation parameters on the basis of age data. The results indicate that the use of capital stock in efficiency units does cause some smoothing of Total Factor Productivity growth over time and does ameliorate somewhat the measured productivity slowdown of the 1970s.

Equilibrium and the Core in Alonso's Discrete Population Model of Land Use

Conventional wisdom tells us that with no market failure and local non- satiation of preferences, the core is at least as large as the collection of competitive equilibrium allocations. We confirm this for a standard model featuring land. Next we consider the public land ownership version of the model. If the role of land ownership and rent distribution is assumed by a government that ploughs back rent (at least in excess of its agricultural value) to its citizens, the equilibrium remains efficient, but no longer need be in the core.Publicly Provided Private Goods, Equilibrium, Core

Competition and Performance: The Different Roles of Capital and Labor

Neoclassical economists argue that competition promotes efficiency. They consider technology as given though. In the long run technological progress is an important determinant of the level of welfare and Schumpeter argued that monopoly rents help entrepreneurs to capture the gains of R&D and hence to invest in it. We investigate the overall effect of competition on performance. Performance is measured by TFP-growth. As a negative measure of competition we use rent. Rent is defined as the excess factor rewards over and above their perfectly competitive values (marginal productivities). Input-output analysis enables us to calculate rent for the Canadian sectors over a thirty-year period and to decompose it in its capital and labor components. In line with the literature we find that rent has no significant influence on productivity. We find an interesting result however: the components influence performance in opposite directions. Capital rent has a positive role and labor rent a negative one. The neoclassical economists and Schumpeter seem both right, but the mechanisms differ. The use of rent as a source of funding for R&D applies to capital and the argument that rent yields slack pertains to labor.mathematical economics and econometrics ;

The Location of Comparative Advantages on the Basis of Fundamentals Only

We locate the comparative advantages of Canada and Europe on the basis of their fundamentals only: endowments, technologies, and preferences. A linear program with an input-output core and an algorith for the balance of payments constraint will determine the efficient allocation of resources. The supporting allocations determine the optimum pattern of trade. The Canadian advantage compared to Europe is in minerals, machines and clothing & footwear. Gains to free bilateral trade are estimated to be negligible for the big economy, Europe, but significant for the small one, Canada. The pattern of comparative advantage persists when we allowfor free access to technology and consumption coefficients and, therefore, can be ascribed to the endowments. Nous détectons les avantages comparatifs au Canada et en Europe à partir des éléments fondamentaux d'une économie : les dotations, les technologies et les préférences. Par la programmation linéaire, en utilisant les tableaux entrée-sortie et un algorithme servant à imposer l'équilibre de la balance commerciale, nous déterminons l'allocation optimale des ressources, qui sous-tend les échanges optimaux. Le Canada a un avantage comparatif par rapport à l'Europe dans les miéraux, la machineries, les vêtements et les chaussures. Les gains à l'échange sont minimes pour la grande économie, l'Europe,0501s substantiels pour le petit pays, le Canada. La structure des avantages comparatifs persiste quand nous permettons le libre choix entre les technologies et les préférences des deux pays. Les dotations ressortent donc comme étant le facteur déterminant de la structure des avantages comparatifs.Comparative advantage, Gains to free trade, Avantages comparatifs, gains au libre-échange

Revised stochastic analysis of an input-output model

A main difficulty of regional analysis is the inaccuracy of regional input-output data. A natural framework for investigation is stochastic input-output analysis. In his study of Central Queensland, West (1986) assumes that input coefficients are normally distributed and derives formulas for the approximation of input-output multipliers means and variances. In his normality framework, these moments do not exits, however. Moreover, an inconsistency in the derivation will be exposed. We remedy these shortcomings by respecification of the stochastic structure and by direct evaluation of the moments through Monte Carlo calculations. West's formulas are quite accurate for an aggregated version of his data set. The leading terms of the formulas can be shown to be first order approximations to the means and the variances

Revised stochastic analysis of an input-output model.

A main difficulty of regional analysis is the inaccuracy of regional input-output data. A natural framework for investigation is stochastic input-output analysis. In his study of Central Queensland, West (1986) assumes that input coefficients are normally distributed and derives formulas for the approximation of input-output multipliers means and variances. In his normality framework, these moments do not exits, however. Moreover, an inconsistency in the derivation will be exposed. We remedy these shortcomings by respecification of the stochastic structure and by direct evaluation of the moments through Monte Carlo calculations. West's formulas are quite accurate for an aggregated version of his data set. The leading terms of the formulas can be shown to be first order approximations to the means and the variances.Leontief inverse; Existence of moments; Monte Carlo;

How to Estimate Unbiased and Consistent input-output Multipliers on the Basis of use and Make Matrices

In the literature, the construction of technical coefficients is linked to flow data (use and make matrices), but stochastics are imposed on the coefficients when multipliers are calculated, by means of the Leontief inverse. Due the nonlinearity of this operation, the multiplier estimates are biased (it is generally argued that the Leontief inverse underestimates input-output multipliers). By going back to the flow data, this paper provides unbiased and consistent employment and output multipliers estimates for the Andalusian economy. Rectangular use and make matrices are accommodated and technical coefficients, the Leontief inverse, and associated problems (such as negative coefficients) are circumvented.Stochastic input-output analysis, employment multipliers, output multipliers, use and make matrices.

The problem of negatives in input-output analysis: a review of the solutions

The main models to construct technical coefficients are the industry technology model and the commodity technology model. The former yields nonnegative coefficients and the latter fulfills nice theoretical properties, such as price invariance. Although the models are very different, this paper presents a flexible formula that encompasses both of them. Various solutions to the problem of negatives of the commodity technology model-including replacements by industry technology based coefficients-are reviewed in our framework.Input-output analysis; technical coefficients; use and make matrices

The Vintage Effect in TFP Growth: An Analysis of the Age Structure of Capital

The age structure of capital plays an important role in the measurement of productivity. It has been argued that the slowdown in the 1970's can be ascribed to the aging of the stock of capital. In this paper we incorporate the age structure in productivity measurement. A proposition proves that Nelson's (1964) formula is wrong. Our final proposition shows that inclusion of the vintage effect prompts an upward correction of measured productivity growth in times of an aging stock of capital. Here capital ages if the investment/capital ratio falls short of the inverse of the capital age, as a first proposition shows. The analysis rests on a rigorous accounting for vintages. We translate the Bureau of Economic Analysis' age of capital data into a measure of rates of obsolescence. Empirically, the correction of productivity growth for the vintage effect requires an estimate of the obsolescence and depreciation parameters on the basis of age data. The results indicate that the use of capital stock in efficiency units does cause some smoothing of Total Factor Productivity growth over time. In the 1950s, when investment accelerated, the vintage-adjusted capital growth rate well exceeded the BEA growth rate, and vintage-adjusted TFP growth is significantly lower than unadjusted TFP growth. The measured productivity slowdown of the 1970s is somewhat ameliorated.