Short-Run Analysis of Income Fluctuation and Optimum Foreign Borrowing in the Bardhan-Pitchford Model

This paper utilizes the technique developed by Kenneth Judd to quantify the short-run effects of temporal income falls on the current account. It is found that (a) for both a fixed time discount rate and an endogenous discount rate, a future, temporal fall in income improves the initial current account; (b) with a current income fall and with no future income change, the initial current account deteriorates; (c) but when a current income fall is combined with a future income fall, the effect on the initial current account is ambiguous.

Taxes, Federal Grants, Local Public Spending, and Growth

In a dynamic model with both private and local public capital accumulation, this paper examines how federal and local income taxes, local consumption tax, and federal matching grants for local public consumption and local public investment affect the long-run equilibrium Eqequilibria. of private consumption, private capital accumulation, local public consumption, and local public capital stock.

The spirit of capitalism and savings behavior

This paper presents a capitalist-spirit model of savings by including wealth in the intertemporal utility function. While this model includes the life-cycle model and bequest model as two special cases, it sheds light on why wealth holding has tended to increase with age, why decumulation of wealth after retirement has not happened, and why households with and without children have not shown significant differences in their savings behavior. The capitalist-spirit approach is especially useful for understanding savings by the rich and savings across countries and over time.Savings puzzle, Capitalist spirit, Wealth accumulation

The spirit of capitalism and long-run growth

Why do different countries have different long-term savings and growth rates? Why is the productivity rate not the same around the world? Recent new theories of endogenous growth have tried to answer these questions by replacing the usual assumption of diminishing returns in production. The author offers an alternative: he introduces"the spirit of capitalism"into the model. In the long run, countries with different degrees of capitalist spirit will have different consumption, capital stock, and endogenous growth rates. In his model, inflation is no longer superneutral in relation to long-run growth. The author provides a formal model that is supported by many empirical and historical studies on cultural attributes and economic development. His model helps explain: (a) why Japan and four East Asian countries, South Korea, Taiwan, Hong Kong and Singapore have succeeded; (b) why nations that had an established Protestant religion in 1870 had a per capita income in 1979 that was more than a third higher than in Catholic nations; and (c) why British industry has declined since 1850.Economic Theory&Research,Economic Growth,Inequality,Achieving Shared Growth,Economic Conditions and Volatility

On the dynamics of privatization

In this paper, we answer two questions about how privatization should proceed. First, we assume an exogenously given time span of privatization and study how the rate of privatization is related to the initial total state capital, the adjustment cost of privatization, the efficiency difference between the private sector and the state sector. the income discount rate and the exogenous terminal time fur privatization. Second, from the perspective of income maximization and adjustment cost minimization, we endogenize the choice of the time span of privatization and offer a solution to the optimal terminal time for the completion of the privatization process.

Dynamic analysis in the Viner model of mercantilism

This paper models the central theme of mercantilism in Jacob Viner's interpretation-power vs plenty-in a framework of modern theory of international finance. It is shown that, in the Viner model of mercantilism, a nation with strong mercantilist sentiment ends up with large foreign asset accumulation and high consumption in the long run; an import tariff leads to more foreign asset holding and more total consumption; furthermore, in the Viner model, the Harberger-Laursen-Metzler effect exists unambiguously: a permanent terms-of-trade deterioration causes a current account deficit in the short run.spirit of capitalism, social status, money, growth

Short-run analysis of fiscal policy and the current account in a finite horizon model

This paper utilizes a technique developed by Judd to quantify the short-run effects of fiscal policies and income shocks on the current account in a small open economy. It is found that: (1) a future increase in government spending improves the short-run current account; (2) a future tax increase worsens the short-run current account; (3) a present increase in the government spending worsens the short-run current account dollar by dollar, while a present increase in the income improves the current account dollar by dollar; (4) when government budget is balanced in the long run, a tax cut accompanied by an equal government spending cut in the future always leads to a deterioration in the short-run current account.

A dynamic model of capital and arms accumulation

How does competitive arms accumulation affect investment and capital accumulation? In a dynamic optimization framework including both investment and military spending, we find that, when the utility function is separable between consumption and the weapon stocks, an unanticipated rise in current military threat reduces current investment and an anticipated rise in future military threat stimulates current investment. But when the utility function is nonseparable between consumption and the weapon stocks, a current military threat may not decrease the short-run investment. In the long run, capital accumulation is independent of the military conflicts among countries regardless of the form of the utility function.Capital accumulation, Military spending, Economic growth, Arms race