Productivity shocks and aggregate fluctuations in an estimated endogenous growth model with human capital

Employing an endogenous growth model with human capital, this paper explores how productivity shocks in the goods and human capital producing sectors contribute to explaining aggregate fluctuations in output, consumption, investment and hours. Given the importance of accounting for both the dynamics and the trends in the data not captured by the theoretical growth model, we introduce a vector error correction model (VECM) of the measurement errors and estimate the model’s posterior density function using Bayesian methods. To contextualize our findings with those in the literature, we also assess whether the endogenous growth model or the standard real business cycle model better explains the observed variation in these aggregates. In addressing these issues we contribute to both the methods of analysis and the ongoing debate regarding the effects of innovations to productivity on macroeconomic activity.

Endogenous opioid peptides in parasympathetic, sympathetic and sensory nerves in the guinea-pig heart.

Research has suggested that exogenous opioid substances can have direct effects on cardiac muscle or influence neurotransmitter release via presynaptic modulation of neuronal inputs to the heart. In the present study, multiple-labelling immunohistochemistry was employed to determine the distribution of endogenous opioid peptides within the guinea-pig heart. Approximately 40% of cardiac ganglion cells contained immunoreactivity for dynorphin A (1-8), dynorphin A (1-17) and dynorphin B whilst 20% displayed leu-enkephalin immunoreactivity. Different populations of opioid-containing ganglion cells were identified according to the co-existence of opioid immunoreactivity with immunoreactivity for somatostatin and neuropeptide Y. Immunoreactivity for prodynorphin-derived peptides was observed in many sympathetic axons in the heart and was also observed, though to a lesser extent, in sensory axons. Leu-enkephalin immunoreactivity was observed in occasional sympathetic and sensory axons. No immunoreactivity was observed for met-enkephalin-arg-gly-leu or for beta-endorphin. These results demonstrate that prodynorphin-derived peptides are present in parasympathetic, sympathetic and sensory nerves within the heart, but suggest that only the prodynorphin gene is expressed in guinea-pig cardiac nerves. This study has shown that endogenous opioid peptides are well placed to regulate cardiac function via both autonomic and sensory pathways.

Pecuniary Externality through Credit Constraints: Two Examples without Uncertainty

This paper is a contribution to the growing literature on constrained inefficiencies in economies with financial frictions. The purpose is to present two simple examples, inspired by the stochastic models in Gersbach-Rochet (2012) and Lorenzoni (2008), of deterministic environments in which such inefficiencies arise through credit constraints. Common to both examples is a pecuniary externality, which operates through an asset price. In the second example, a simple transfer between two groups of agents can bring about a Pareto improvement. In a first best economy, there are no pecuniary externalities because marginal productivities are equalised. But when agents face credit constraints, there is a wedge between their marginal productivities and those of the non-credit-constrained agents. The wedge is the source of the pecuniary externality: economies with these kinds of imperfections in credit markets are not second-best efficient. This is akin to the constrained inefficiency of an economy with incomplete markets, as in Geanakoplos and Polemarchakis (1986).

Optimal progressive taxation in a model with endogenous skill supply.

This paper examines whether efficiency considerations require that optimal labour income taxation is progressive or regressive in a model with skill heterogeneity, endogenous skill acquisition and a production sector with capital-skill complementarity. We find that wage inequality driven by the resource requirements of skill-creation implies progressive labour income taxation in the steady-state as well as along the transition path from the exogenous to optimal policy steady-state. We find that these results are explained by a lower labour supply elasticity for skilled versus unskilled labour which results from the introduction of the skill acquisition technology.

Picking the Right Budget Constraint for Scotland

This position paper considers the devolution of further fiscal powers to the Scottish Parliament in the context of the objectives and remit of the Smith Commission. The argument builds on our discussion of fiscal decentralization made in our previous published work on this topic. We ask what sort of budget constraint the Scottish Parliament should operate with. A soft budget constraint (SBC) allows the Scottish Parliament to spend without having to consider all of the tax and, therefore, political consequences, of that spending, which is effectively the position at the moment. The incentives to promote economic growth through fiscal policy – on both the tax and spending sides are weak to non-existent. This is what the Scotland Act, 1998, and the continuing use of the Barnett block grant, gave Scotland. Now other budget constraints are being discussed – those of the Calman Commission (2009) and the Scotland Act (2012), as well as the ones offered in 2014 by the various political parties – Scottish Conservatives, Scottish Greens, Scottish Labour, the Scottish Liberal Democrats and the Scottish Government. There is also the budget constraint designed by the Holtham Commission (2010) for Wales that could just as well be used in Scotland. We examine to what extent these offer the hard budget constraint (HBC) that would bring tax policy firmly into the realm of Scottish politics, asking the Scottish electorate and Parliament to consider the costs to them of increasing spending in terms of higher taxes; or the benefits to them of using public spending to grow the tax base and own-sourced taxes? The hardest budget constraint of all is offered by independence but, as is now known, a clear majority of those who voted in the referendum did not vote for this form of budget constraint. Rather they voted for a significant further devolution of fiscal powers while remaining within a political and monetary union with the rest of the UK, with the risk pooling and revenue sharing that this implies. It is not surprising therefore that none of the budget constraints on offer, apart from the SNP’s, come close to the HBC of independence. However, the almost 25% fall in the price of oil since the referendum, a resource stream so central to the SNP’s economic policy making, underscores why there is a need for a trade off between a HBC and risk pooling and revenue sharing. Ranked according to the desirable characteristic of offering something approaching a HBC the least desirable are those of the Calman Commission, the Scotland Act, 2012, and Scottish Labour. In all of these the ‘elasticity’ of the block grant in the face of failure to grow the Scottish tax base is either not defined or is very elastic – meaning that the risk of failure is shuffled off to taxpayers outside of Scotland. The degree of HBC in the Scottish Conservative, Scottish Greens and Scottish Liberal Democrats proposals are much more desirable from an economic growth point of view, the latter even embracing the HBC proposed by the Holtham Commission that combines serious tax policy with welfare support in the long-run. We judge that the budget constraint in the SNP’s proposals is too hard as it does not allow for continuation of the ‘welfare union’ in the UK. We also consider that in the case of a generalized UK economic slow requiring a fiscal stimulus that the Scottish Parliament be allowed increased borrowing to be repaid in the next economic upturn.

Unemployment and Endogenous Reallocation over the Business Cycle

This paper studies unemployed workers’ decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogenous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers’ gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.

Small firms, growth and financial constraints

This paper analyses the impact of different sources of finance on the growth of firms. Using panel data from Spanish manufacturing firms for the period 2000-2006, we investigate the effects of internal and external finances on firm growth. In particular, we examine three dimensions of these financial sources: a) the performance of the firms’ capital structure in accordance with firm size; b) the effects of internal and external financial sources on growth performance; c) the combined effect of equity, external debt and cash flow on firm growth. We find that low-growth firms are sensitive to cash flow and short-term bank debt, while high-growth firms are more sensitive to long-term debt. Furthermore, equity capital seems to reduce barriers to external finance. Our main conclusion is that during the start-up phase, firms are unable to increase their financial leverage and so their capital structure fails to promote correct investment strategies. However, as their equity capital increases, alternative financial mechanisms, in particular long-term debt, become available, which have a positive impact on firm growth.

Effects of infused fructose on endogenous glucose production, gluconeogenesis, and glycogen metabolism.

To determine the mechanisms that prevent an increase in gluconeogenesis from increasing hepatic glucose output, six healthy women were infused with [1-13C]fructose (22 mumol.kg-1.min-1), somatostatin, insulin, and glucagon. In control experiment, non-13C-enriched fructose was infused at the same rate without somatostatin, and [U-13C]glucose was infused to measure specifically plasma glucose oxidation. Endogenous glucose production (EGP, [6,6-2H]glucose), net carbohydrate oxidation (CHOox, indirect calorimetry), and fructose oxidation (13CO2) were measured. EGP rate did not increase after fructose infusion with (13.1 +/- 1.2 vs. 12.9 +/- 0.3 mumol.kg-1.min-1) and without (10.3 +/- 0.5 vs. 9.7 +/- 0.5 mumol.kg-1.min-1) somatostatin, despite the fact that gluconeogenesis increased. Nonoxidative fructose disposal, corresponding mainly to glycogen synthesis, was threefold net glycogen deposition, the latter calculated as fructose infusion minus CHOox (14.8 +/- 1.1 and 4.3 +/- 2.0 mumol.kg-1.min-1). It is concluded that 1) the mechanism by which EGP remains constant when gluconeogenesis from fructose increases is independent of changes in insulin and 2) simultaneous breakdown and synthesis of glycogen occurred during fructose infusion.

Benzodiazepine receptor ligand influences on learning: an endogenous modulatory mechanism mediated by benzodiazepines possibly of alimentary origin

In rats pre-but not post-training ip administration of either flumazenil, a central benzodiazepine (BSD) receptor antagonist, or of n-butyl-B-carboline-carboxylate (BCCB), an inverse agonist, enhanced retention of inhibitory avoidance learning. Flumazenil vlocked the enhancing effect of BCCB, and the inhibitory effect of the BZD agonists clonazepam and diazepam also given pre-training. Post-training administration of these drugs had no effects. The peripheral BZD receptor agonist/chloride channel blocker Ro5-4864 had no effect on the inhibitory avoidance task when given ip prior to training, buth it caused enhancement when given immediately post-training either ip or icv. This effect was blocked by PK11195, a competitive antagonist of Ro5-4864. These results suggest that ther is an endogenous mechanism mediated by BZD agonists, which is sensitive to inverse agonists and that normally down-regulates the formation of memories through a mechanism involving GABA-A receptors and the corresponding chloride channels. The most likely agonists for the endogenous mechanism suggested are the diazepam-like BZDs found in brain whose origin is possibly alimentary. Levels of these BZDs in the cortex were found to sharply decrease after inhibitory acoidance training or mere exposure to the training apparatus.

Traffic forecasts under uncertainty and capacity constraints

Traffic forecasts provide essential input for the appraisal of transport investment projects. However, according to recent empirical evidence, long-term predictions are subject to high levels of uncertainty. This paper quantifies uncertainty in traffic forecasts for the tolled motorway network in Spain. Uncertainty is quantified in the form of a confidence interval for the traffic forecast that includes both model uncertainty and input uncertainty. We apply a stochastic simulation process based on bootstrapping techniques. Furthermore, the paper proposes a new methodology to account for capacity constraints in long-term traffic forecasts. Specifically, we suggest a dynamic model in which the speed of adjustment is related to the ratio between the actual traffic flow and the maximum capacity of the motorway. This methodology is applied to a specific public policy that consists of suppressing the toll on a certain motorway section before the concession expires.

Endogenous steroid profiling in the athlete biological passport.

The Athlete Biological Passport (ABP) is an individual electronic document that collects data regarding a specific athlete that is useful in differentiating between natural physiologic variations of selected biomarkers and deviations caused by artificial manipulations. A subsidiary of the endocrine module of the ABP, that which here is called Athlete Steroidal Passport (ASP), collects data on markers of an altered metabolism of endogenous steroidal hormones measured in urine samples. The ASP aims to identify not only doping with anabolic-androgenic steroids, but also most indirect steroid doping strategies such as doping with estrogen receptor antagonists and aromatase inhibitors. Development of specific markers of steroid doping, use of the athlete's previous measurements to define individual limits, with the athlete becoming his or her own reference, the inclusion of heterogeneous factors such as the UDPglucuronosyltransferase B17 genotype of the athlete, the knowledge of potentially confounding effects such as heavy alcohol consumption, the development of an external quality control system to control analytical uncertainty, and finally the use of Bayesian inferential methods to evaluate the value of indirect evidence have made the ASP a valuable alternative to deter steroid doping in elite sports. The ASP can be used to target athletes for gas chromatography/combustion/ isotope ratio mass spectrometry (GC/C/IRMS) testing, to withdraw temporarily the athlete from competing when an abnormality has been detected, and ultimately to lead to an antidoping infraction if that abnormality cannot be explained by a medical condition. Although the ASP has been developed primarily to ensure fairness in elite sports, its application in endocrinology for clinical purposes is straightforward in an evidence-based medicine paradigm.

The Role of supply constraints in multiplier analysis

Multiplier analysis based upon the information contained in Leontief's inverse is undoubtedly part of the core of the input-output methodology and numerous applications an extensions have been developed that exploit its informational content. Nonetheless there are some implicit theoretical assumptions whose implications have perhaps not been fully assessed. This is the case of the 'excess capacity' assumption. Because of this assumption resources are available as needed to adjust production to new equilibrium states. In real world applications, however, new resources are scarce and costly. Supply constraints kick in and hence resource allocation needs to take them into account to really assess the effect of government policies. Using a closed general equilibrium model that incorporates supply constraints, we perform some simple numerical exercises and proceed to derive a 'constrained' multiplier matrix that can be compared with the standard 'unrestricted' multiplier matrix. Results show that the effectiveness of expenditure policies hinges critically on whether or not supply constraints are considered.

Work values, endogenous sentiments and redistribution

We examine the interactions between individual behavior, sentiments and the social contract in a model of rational voting over redistribution. Agents have moral "work values". Individuals' self-esteem and social consideration of others are endogenously determined comparing behaviors to moral standards. Attitudes toward redistribution depend on self-interest and social preferences. We characterize the politico-economic equilibria in which sentiments, labor supply and redistribution are determined simultaneously. The equilibria feature different degrees of "social cohesion" and redistribution depending on pre-tax income inequality. In clustered equilibria the poor are held partly responsible for their low income since they work less than the moral standard and hence redistribution is low. The paper proposes a novel explanation for the emergence of different sentiments and social contracts across countries. The predictions appear broadly in line with well-documented differences between the United States and Europe.

Implementation of IPM programs on European greenhouse tomato production areas: Tools and constraints

Whiteflies and whitefly-transmitted viruses are some of the major constraints on European tomato production. The main objectives of this study were to: identify where and why whiteflies are a major limitation on tomato crops; collect information about whiteflies and associated viruses; determine the available management tools; and identify key knowledge gaps and research priorities. This study was conducted within the framework of ENDURE (European Network for Durable Exploitation of Crop Protection Strategies). Two whitefly species are the main pests of tomato in Europe: Bemisia tabaci and Trialeurodes vaporariorum. Trialeurodes vaporariorum is widespread to all areas where greenhouse industry is present, and B. tabaci has invaded, since the early 1990’s, all the subtropical and tropical areas. Biotypes B and Q of B. tabaci are widespread and especially problematic. Other key tomato pests are Aculops lycopersici, Helicoverpa armigera, Frankliniella occidentalis, and leaf miners. Tomato crops are particularly susceptible to viruses causingTomato yellow leaf curl disease (TYLCD). High incidences of this disease are associated to high pressure of its vector, B. tabaci. The ranked importance of B. tabaci established in this study correlates with the levels of insecticide use, showing B. tabaci as one of the principal drivers behind chemical control. Confirmed cases of resistance to almost all insecticides have been reported. Integrated Pest Management based on biological control (IPM-BC) is applied in all the surveyed regions and identified as the strategy using fewer insecticides. Other IPM components include greenhouse netting and TYLCD-tolerant tomato cultivars. Sampling techniques differ between regions, where decisions are generally based upon whitefly densities and do not relate to control strategies or growing cycles. For population monitoring and control, whitefly species are always identified. In Europe IPM-BC is the recommended strategy for a sustainable tomato production. The IPM-BC approach is mainly based on inoculative releases of the parasitoids Eretmocerus mundus and Encarsia formosa and/or the polyphagous predators Macrolophus caliginosus and Nesidiocoris tenuis. However, some limitations for a wider implementation have been identified: lack of biological solutions for some pests, costs of beneficials, low farmer confidence, costs of technical advice, and low pest injury thresholds. Research priorities to promote and improve IPM-BC are proposed on the following domains: (i) emergence and invasion of new whitefly-transmitted viruses; (ii) relevance of B. tabaci biotypes regarding insecticide resistance; (iii) biochemistry and genetics of plant resistance; (iv) economic thresholds and sampling techniques of whiteflies for decision making; and (v) conservation and management of native whitefly natural enemies and improvement of biological control of other tomato pests.

Strategic mass killings

Since World War II there have been about fifty episodes of large-scale mass killings of civilians and massive forced displacements. They were usually meticulously planned and independent of military goals. We provide a model where conflict onset, conflict intensity and the decision to commit mass killings are all endogenous, with two main goals: (1) to identify the key variables and situations that make mass killings more likely to occur; and (2) to distinguish conditions under which mass killings and military conflict intensity reinforce each other from situations where they are substitute modes of strategic violence. We predict that mass killings are most likely in societies with large natural resources, significant proportionality constraints for rent sharing, low productivity and low state capacity. Further, massacres are more likely in a civil than in an interstate war, as in the latter group sizes matter less for future rents. In non polarized societies there are asymmetric equilibria with only the larger group wanting to engage in massacres. In such settings the smaller group compensates for this by fighting harder in the first place. In this case we can talk of mass killings and fighting efforts to be substitutes. In contrast, in polarized societies either both or none of the groups can be ready to do mass killings in case of victory. Under the "shadow of mass killings" groups fight harder. Hence, in this case massacres and fighting are complements. We also present novel empirical results on the role of natural resources in mass killings and on what kinds of ethnic groups are most likely to be victimized in massacres and forced resettlements, using group level panel data.