Technological Transitions and Educational Policies

This paper presents an out-of-equilibrium model to explain cross-country dierences in the capacity to absorb new skill-biased technologies. The usual mainstream viewpoint stressing the role of labour markets will be re-examined in a context characterized by a sequential structure of both the process of production and the skill formation, whose interaction brings about coordination failures harming the viabiity of the innovation process. In this light, educational policies play a crucial role in restoring the required coordination. The robust results of the simulations show that educational policies appear to be important both in rigid and in exible systems. In the former case, educational policies nanced by taxation allow the system to escape a low productivity nal equilibrium. In the latter, they contrast the nancial constraint associated to a large decrease in the unskilled wage. Altogether, a moderate degree of rigidity seems the most appropriate institutional environment to reach the targets of viability and of a full exploitation of the technological potential.Skill-Biased Technical Change, Labour Markets, Educational Policies, Out-of-Equilibrium Models

Unemployment as a Disequilibrium Phenomenon: the economics of Keynes and how to go ahead from Patinkin, Leijonhufvud and Hicks

Keynes' theory can be interpreted as dealing with unemployment as a disequilibrium phenomenon in an essentially dynamic context. In this perspective, it is much more important to explain why unemployment changes than to identify a presumed level of equilibrium for this variable. Patinkin, an artisan of the so-called neo-classical synthesis, had the same intuition when maintaining that price and wage flexibility is not a cure for unemployment, and hence there is no unemployment equilibrium. However, two essential aspects of a thorough sequential analysis are missing in both authors: co-ordination failures and time. Leijonhufvud takes co-ordination failures due to imperfect knowledge into account by focussing on financial markets incapable of providing for the consistency of long-term production and consumption plans. The time dimension in the real side of the economy is introduced by Hicks who maintains that productive capacity must be built up before being used, and hence, by fossilising past events, appears as a factor of propagation of disequilibria. Coupling this time dimension of production with the imperfect knowledge that engenders co-ordination issues allows building-up a true dynamic analysis, which appears as the prolongation or the complement of Keynes' analysis. Within such an analytical framework, it becomes evident, that a fall not only in money wages but also in real wages, far from re-establishing full employment, is a source of global instability and threats the viability of the economy. And above all, it becomes evident that understanding the role of money and financial behaviours is essential for explaining the ongoing crisis as the previous ones.co-ordination, disequilibrium, money, production, time, unemployment, wage

Wage Flexibility and Unemployment: The Keynesian Perspective Revisited

Keynes' main concern in the General Theory is about the capacity of an economy to return to a full employment equilibrium when subject to a (negative) demand shock. He maintains that money wages cuts may not help reabsorb unemployment, as they do not necessarily imply a fall in real wages. On the contrary, wage rigidity may be necessary for avoiding that a cumulative process propels the economy far away the full employment equilibrium. The consideration of co-ordination failures in the investment-saving market is behind this conclusion. However, the analysis is carried out within a static equilibrium framework.This paper is an attempt to focus on the problems of intertemporal co-ordination arising within the context of a sequential economy. Our analysis of the out-of-equilibrium process of adjustment stirred by a shock of whatever nature allows to generalize the original Keynesian intuition. It shows in fact that unemployment emerges as the result of a lack of co-ordination due to irreversibly constrained choices, and that not only nominal but also real wage flexibility does not necessarily help to restore equilibrium. As a matter of fact, it may even be harmful, by triggering processes that make the economy diverge from equilibrium. The analysis carried out has important analytical implications as regards the role of market imperfections and the interpretation of the effects of monetary policy.co-ordination, unemployment, wage rigidity, Keynesian economics

Innovation and Competition: The Role of Finance Constraints in a Duopoly Case.

In this paper we analyse the role of financial resources in a process of competition interpreted as a continuous restructuring of productive capacities. Financial constraints appear an essential means of co-ordination. Co-ordination with the environment where this process of restructuring takes place for the process itself to be viable and co-ordination between firms for the survival of competition.Competition;Co-ordination;Finance;Innovation;

Innovation, productivity gains and the evolution of market structure

The paper analyses the co-ordinating role that markets and organisations are called on to play in determining productivity gains. In fact, the viability of innovation processes cannot be dissociated from the way market structures emerge and evolve. The success (or not) of the introduction of new technologies and the emergence and evolution of given market structures does not depend on the properties of technology, but on the capacity to coordinate the activity of the different firms participating in the restructuring process, which results in a certain degree of stability of the market structure

Technological Shocks and the Conduct of Monetary Policy

This paper analyses the impact of alternative monetary policies on the performances of an economy facing technological changes. It shows that the restructuring of productive capacity necessary to embed the new technologies usually implies initial drops in employment and productivity, that are reabsorbed only if the transition is successful. Furthermore, it shows that the process disrupts the financial structure of firms (the coordination over time of costs and revenues), and makes external financing crucial for a successful restructuring. An “optimal” monetary policy, in this framework, should then be expansionary during the transition, and tighten once the technological advance is embedded in the system. Thus, we reach conclusions that are in sharp contrast with the policy prescriptions of the New Keynesian approach.L’article analyse l’impact de politiques monétaires alternatives sur les performances d’une économie soumise à des changements technologiques. Il montre que la structuration de la capacité productive nécessaire pour incorporer les nouvelles technologies implique une diminution initiale de l’emploi et de la productivité, seulement réabsorbée si la transition est réussie. Au-delà, il montre que le processus introduit une rupture dans la structure financière des firmes (dans la coordination intertemporelle des coûts et des revenus), et rend crucial le financement externe dans le succès de la restructuration. Une politique monétaire “optimale”, dans ce contexte analytique, devrait, alors, être expansionniste pendant la transition et restrictive une fois que le changement technologique a été incorporé dans le système. Ainsi, l’on obtient des conclusions qui sont en opposition stricte avec les prescriptions de politique économique de l’approche de la Nouvelle Économie Keynesienne

Production process heterogeneity, time to build, and macroeconomic performance

This paper describes the out-of-equilibrium approach to the analysis of economic processes. We argue that such an approach is adapted to study qualitative (or structural) changes, like technical progress or changes in preferences. Truly sequential analyses manage to capture the essential features of qualitative change. In particular, we show how this approach shifts the focus from the issue of optimality to the one of viability of the processes of change. The objective of the paper is, first, to highlight the analytical elements of an out-of-equilibrium approach, so as to serve as a guide for the construction of this type of models; second to show, how this analysis allows to see controversial phenomena, like for example the debate on wage rigidity or the productivity paradox in a new and different light ; third to identify the real causes of the on-going crisis