Human capital in a global and knowledge-based economy

This document is a report prepared for the DG for Employment and Social Affairs of the European Commission. It surveys the available evidence on the contribution of investment in human capital to aggregate productivity growth and on its impact on wages and other labour outcomes at the individual level. It also draws some tentative policy conclusions for an average European country.

Can genetic algorithms explain experimental anomalies? An application to common property resources

It is common to find in experimental data persistent oscillations in the aggregate outcomes and high levels of heterogeneity in individual behavior. Furthermore, it is not unusual to find significant deviations from aggregate Nash equilibrium predictions. In this paper, we employ an evolutionary model with boundedly rational agents to explain these findings. We use data from common property resource experiments (Casari and Plott, 2003). Instead of positing individual-specific utility functions, we model decision makers as selfish and identical. Agent interaction is simulated using an individual learning genetic algorithm, where agents have constraints in their working memory, a limited ability to maximize, and experiment with new strategies. We show that the model replicates most of the patterns that can be found in common property resource experiments.

Human capital in growth regressions: how much difference does data quality make? An update and further results

We construct estimates of educational attainment for a sample of OECD countries using previously unexploited sources. We follow a heuristic approach to obtain plausible time profiles for attainment levels by removing sharp breaks in the data that seem to reflect changes in classification criteria. We then construct indicators of the information content of our series and a number of previously available data sets and examine their performance in several growth specifications. We find a clear positive correlation between data quality and the size and significance of human capital coefficients in growth regressions. Using an extension of the classical errors in variables model, we construct a set of meta-estimates of the coefficient of years of schooling in an aggregate Cobb-Douglas production function. Our results suggest that, after correcting for measurement error bias, the value of this parameter is well above 0.50.

Can competition in the credit market be excessive?

We study how market power affects investment and welfare when banks choose between restricting loan sizes and monitoring, in order to alleviate an underlying moral hazard problem. The impact of market power on aggregate welfare is the result of two countervailing effects. An increase in banks' market power results in: (i) higher lending rates, which worsens the borrower's incentive problem and reduces investment by unmonitored firms, (ii) higher monitoring effort, which reduces the proportion of credit-constrained firms. Whenever the second effect dominates, it is optimal to provide banks with some degree of market power.

Classical horizontal inequity and reranking: an integrated approach

The last 20 years have seen a significant evolution in the literature on horizontal inequity (HI) and have generated two major and "rival" methodological strands, namely, classical HI and reranking. We propose in this paper a class of ethically flexible tools that integrate these two strands. This is achieved using a measure of inequality that merges the well-known Gini coefficient and Atkinson indices, and that allows a decomposition of the total redistributive effect of taxes and transfers in a vertical equity effect and a loss of redistribution due to either classical HI or reranking. An inequality-change approach and a money-metric cost-of-inequality approach are developed. The latter approach makes aggregate classical HI decomposable across groups. As in recent work, equals are identified through a nonparametric estimation of the joint density of gross and net incomes. An illustration using Canadian data from 1981 to 1994 shows a substantial, and increasing, robust erosion of redistribution attributable both to classical HI and to reranking, but does not reveal which of reranking or classical HI is more important since this requires a judgement that is fundamentally normative in nature.

Absolute and relative deprivation and the measurement of poverty

This paper develops the link between poverty and inequality by focussing on a class of poverty indices (some of them well-known) which aggregate normative concerns for absolute and relative deprivation. The indices are distinguished by a parameter that captures the ethical sensitivity of poverty measurement to ``exclusion'' or ``relative-deprivation'' aversion. We also show how the indices can be readily used to predict the impact of growth on poverty. An illustration using LIS data finds that he United States show more relative deprivation than Denmark and Belgium whatever the percentiles considered, but that overall deprivation comparisons of the four countries considered will generally necessarily depend on the intensity of the ethical concern for relative deprivation. The impact of growth on poverty is also seen to depend on the presence of and on the attention granted to concerns over relative deprivation. }

Asymmetries in the capacity-inflation trade-off

This paper analyzes the joint dynamics of two key macroeconomic variables for the conduct of monetary policy: inflation and the aggregate capacity utilization rate. An econometric procedure useful for estimating dynamic rational expectation models with unobserved components is developed and applied in this context. The method combines the flexibility of the unobserved components approach, based on the Kalman recursion, with the power of the general method of moments estimation procedure. A 'hyb id' Phillips curve relating inflation to the capacity utilization gap and incorporating forward and backward looking components is estimated. The results show that such a relationship in non-linear: the slope of the Phillips curve depends significantly on the magnitude of the capacity gap. These findings provide support for studying the implications of asymmetricmonetary policy rules.

Factor decomposition of spatial income inequality: a revision

Duro and Esteban (1998) proposed an additive decomposition of Theil populationweighted index by four income multiplicative factors (in spatial contexts). This note makes some additional methodological points: first, it argues that interaction effects are taken into account in the factoral indexes although only in a fairly restrictive way. As a consequence, we suggest to rewrite the decomposition formula as a sum of strict Theil indexes plus the interactive terms; second, it might be instructive to aggregate some of the initial factors; third, this decomposition can be immediately extended to the between- and within-group components.

On the regional impact of public capital formation in Spain

The objective of this paper is to investigate, in a methodologically consistent manner, the regional effects of public capital formation and the possible existence of regional spillover effects in Spain. The empirical results are based on VAR estimates at both the aggregate and regional levels using output, employment, and private capital, as well as different measures of public capital. Empirical results suggest that public capital affects output positively at the aggregate level as well as in all but one region. For most regions, the effects of public capital installed in the region itself are important but the spillover effects induced from public capital installed elsewhere are also very important. In fact, the spillover effects account for over half of the total effects of public capital formation in Spain. Furthermore, these spillover effects have a clear geographical pattern in that they tend to be more important in the peripheral regions of the country. We also find that relative to their share of the Spanish output, the biggest beneficiaries of public capital formation are the largest regions in the country. This suggests that public capital formation has contributed to concentration of output in these regions. Finally, in terms of the effects of public capital formation on the private inputs we find that both private capital and employment are affected positively at the aggregate level as well as for most of the regions. Nevertheless, the effects on private capital seem to be larger. Also, the spillover effects are very important for private capital but not for employment. This reflects a great degree of dynamism and mobility in the capital markets as opposed to the labor markets.

Unemployment, growth and fiscal policy: new insights on the hysteresis hypothesis

We develop a growth model with unemployment due to imperfections in the labor market. In this model, wage inertia and balanced budget rules cause a complementarity between capital and employment capable of explaining the existence of multiple equilibrium paths. Hysteresis is viewed as the result of a selection between these diferent equilibrium paths. We use this model to argue that, in contrast to the US, those fiscal policies followed by most of the European countries after the shocks of the 1970’s may have played a central role in generating hysteresis.

Spillover effects of public capital formation: evidence from the spanish regions

Maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level, the issue of the possible existence of the regional spillovers from public capital formation has received little attention. The objective of this paper is to provide evidence on the possible existence of such spillovers. We consider the case of Spain and its seventeen regions. Our methodological approach consists in estimating an aggregate VAR model for Spain as well as seventeen region-specific VAR models in which both capital installed in the region and capital installed outside the region are allowed to play a role in enhancing regional output. The estimation results can be summarized as follows. The aggregate effects of public capital formation in Spain are important. They cannot, however, be captured in their entirety by the direct effects in each region from public capital installed in the region itself. When for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results. Furthermore, the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation. Ultimately, this paper establishes the relevance of both capital installed in each region and spillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation. In doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects.

Demand and revenue implications of an integrated public transport policy: the case of Madrid

One of the most popular options for promoting public transport use is the provision of an integrated and high quality public transport system. This was the strategy adopted by the regional government in Madrid in 1986 and since then public transport patronage has increased by more than 50%. This paper has two objectives. The first is to identify the factors underlying the significant increase in the demand for public transport in Madrid. To do this we estimate an aggregate demand function for bus and underground trips, which allows us to obtain the demand elasticities with respect to the main attributes of public transport services and also to calculate the long-term impact of changes in those explanatory variables on patronage. The second objective is to evaluate the impact on revenue derived from the introduction of the travel card scheme, and to discuss the consequences on revenue of changes in the relative fare levels of different types of ticket without substantially affecting patronage. This latter issue is addressed by estimating a matrix of own and cross-price elasticities for different ticket types.

Land, technical progress and the falling rate of profit

The paper sets out a one sector growth model with a neoclassical production function in land and a capital-labour aggregate. Capital accumulates through capitalist saving, the labour supply is infinitely elastic at a subsistence wage and all factors may experience factor augmenting technical progress. The main result is that, if the elasticity of substitution between land and the capital-labour aggregate is less than one and if the rate of caital augmenting technical progress is strictly positive, then the rate of profit will fall to zero. The surprise is that this result holds regardless of the rate of land augmenting technical progress; that is, no amount of technical advance in agriculture can stop the fall in the rate of profit. The paper also discusses the relation of this result to the classical and Marxist literature and sets out the path of the relative price of land.

The short and long-run determinants of the real exchange rate in Mexico

This paper explores the real exchange rate behavior in Mexico from 1960 until 2005. Since the empirical analysis reveals that the real exchange rate is not mean reverting, we propose that economic fundamental variables affect its evolution in the long-run. Therefore, based on equilibrium exchange rate paradigms, we propose a simple model of real exchange rate determination which includes the relative labor productivity, the real interest rates and the net foreign assets over a long period of time. Our analysis also considers the dynamic adjustment in response to shocks through impulse response functions derived from the multivariate VAR model.

Research work in Tokyo Institute of Technology

Research carried out in Tokyo Institute of Technology. The objective is to determine the influence of Interfacial Transition Zone (ITZ) around Lightweight aggregate in concrete on Chloride ion diffusivity. The ITZ of conventional concretes is the weakest point of concrete. The accumulating water on ITZ zone forms the most permeable area inside the concrete. Hence ITZ paves the way for chloride ion diffusion. The quality of ITZ depends on type and quality of aggregates used, water-cement ratio and also the method used for the production of concrete. It has been used two types of lightweight aggregates will be used, Chinese and Japanese, with different absorption capacities. The idea is to produce concrete with same effective water - cement ratio, using the same aggregates in two different conditions, dry and saturated, and compare the chloride ion diffusivity in these concretes (by diffusion test). A comparison of ITZ thickness of these concretes by SEM and EDAX-maps is also proposed. The chloride ion diffusion of concretes produced with the same effective water – cement ratio and same aggregates (dry and ssd) will depend, mainly, on ITZ.