On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century

Lucas (1987) has shown a surprising result in business-cycle research: the welfare cost of business cycles are very small. Our paper has several original contributions. First, in computing welfare costs, we propose a novel setup that separates the effects of uncertainty stemming from business-cycle fluctuations and economic-growth variation. Second, we extend the sample from which to compute the moments of consumption: the whole of the literature chose primarily to work with post-WWII data. For this period, actual consumption is already a result of counter-cyclical policies, and is potentially smoother than what it otherwise have been in their absence. So, we employ also pre-WWII data. Third, we take an econometric approach and compute explicitly the asymptotic standard deviation of welfare costs using the Delta Method. Estimates of welfare costs show major differences for the pre-WWII and the post-WWII era. They can reach up to 15 times for reasonable parameter values -β=0.985, and ∅=5. For example, in the pre-WWII period (1901-1941), welfare cost estimates are 0.31% of consumption if we consider only permanent shocks and 0.61% of consumption if we consider only transitory shocks. In comparison, the post-WWII era is much quieter: welfare costs of economic growth are 0.11% and welfare costs of business cycles are 0.037% - the latter being very close to the estimate in Lucas (0.040%). Estimates of marginal welfare costs are roughly twice the size of the total welfare costs. For the pre-WWII era, marginal welfare costs of economic-growth and business- cycle fluctuations are respectively 0.63% and 1.17% of per-capita consumption. The same figures for the post-WWII era are, respectively, 0.21% and 0.07% of per-capita consumption.

On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century

Lucas(1987) has shown a surprising result in business-cycle research: the welfare cost of business cycles are very small. Our paper has several original contributions. First, in computing welfare costs, we propose a novel setup that separates the effects of uncertainty stemming from business-cycle uctuations and economic-growth variation. Second, we extend the sample from which to compute the moments of consumption: the whole of the literature chose primarily to work with post-WWII data. For this period, actual consumption is already a result of counter-cyclical policies, and is potentially smoother than what it otherwise have been in their absence. So, we employ also pre-WWII data. Third, we take an econometric approach and compute explicitly the asymptotic standard deviation of welfare costs using the Delta Method. Estimates of welfare costs show major diferences for the pre-WWII and the post-WWII era. They can reach up to 15 times for reasonable parameter values = 0:985, and = 5. For example, in the pre-WWII period (1901-1941), welfare cost estimates are 0.31% of consumption if we consider only permanent shocks and 0.61% of consumption if we consider only transitory shocks. In comparison, the post-WWII era is much quieter: welfare costs of economic growth are 0.11% and welfare costs of business cycles are 0.037% the latter being very close to the estimate in Lucas (0.040%). Estimates of marginal welfare costs are roughly twice the size of the total welfare costs. For the pre-WWII era, marginal welfare costs of economic-growth and business-cycle uctuations are respectively 0.63% and 1.17% of per-capita consumption. The same gures for the post-WWII era are, respectively, 0.21% and 0.07% of per-capita consumption.

Isolated capital cities and misgovernance: theory and evidence

Motivated by a novel stylized fact { countries with isolated capital cities display worse quality of governance { we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less e ective by distance from the seat of political power. In established democracies, the threat of insurgencies is not a binding constraint, and the model predicts no correlation between isolated capitals and misgovernance. In contrast, a correlation emerges in equilibrium in the case of autocracies. Causality runs both ways: broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city; conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite, in terms of rents that would have to be shared, are larger. We show evidence that this pattern holds true robustly in the data. We also show that isolated capitals are associated with less power sharing, a larger income premium enjoyed by capital city inhabitants, and lower levels of military spending by ruling elites, as predicted by the theory.

On the welfare costs of business-cycle fluctuations and economic-growth variation in the 20th century and beyond

The main objective of this paper is to propose a novel setup that allows estimating separately the welfare costs of the uncertainty stemming from business-cycle uctuations and from economic-growth variation, when the two types of shocks associated with them (respectively,transitory and permanent shocks) hit consumption simultaneously. Separating these welfare costs requires dealing with degenerate bivariate distributions. Levis Continuity Theorem and the Disintegration Theorem allow us to adequately de ne the one-dimensional limiting marginal distributions. Under Normality, we show that the parameters of the original marginal distributions are not afected, providing the means for calculating separately the welfare costs of business-cycle uctuations and of economic-growth variation. Our empirical results show that, if we consider only transitory shocks, the welfare cost of business cycles is much smaller than previously thought. Indeed, we found it to be negative - -0:03% of per-capita consumption! On the other hand, we found that the welfare cost of economic-growth variation is relatively large. Our estimate for reasonable preference-parameter values shows that it is 0:71% of consumption US$ 208:98 per person, per year.

Development, progress and economic growth

Progress was an idea of the 18th century; development, a project of the 20th century that continues into the 21st century. Progress was associated with the advance of reason, development with the fulfillment of the five political objectives that modern societies set for themselves: security, freedom, economic well-being, social justice and protection of the environment. Today we can view progress and development as equivalent. Both were products of the capitalist revolution, and of the economic development that began with it. Economic development or growth, in its turn, is the process of capital accumulation with the incorporation of technical progress that, mainly through productive sophistication and the increase of the value of labor, increases wages and improves standards of living. The five objectives that define development, as well as the three social instances existing in society change in an interdependent way.

Uncertainty of aid inflows and the growth relationship

This paper contributes to the literature on aid and economic growth. We posit that it is not the levei of aid flows per se but the stability of such flows that determines the impact of aid on economic growth. Three measures of aid instability are employed. One is a simple deviation from trend, and measures overall instability. The other measures are based on auto-regressive estimates to capture deviations from an expected trend. These measures are intended to proxy for uncertainty in aid receipts. We posit that such uncertainty will influence the relationship between aid and investment and how recipient governments respond to aid, and will therefore affect how aid impacts on growth. We estimate a standard cross-country growth regression including the leveI of aid, and find aid to be insignificant (in line with other results in the literature). We then introduce measures of instability. Aid remains insignificant when we account for overall instability. However, when we account for uncertainty (which is negative and significant), we find that aid has a significant positive effect on growth. We conduct stability tests that show that the significance of aid is largely due to its effect on the volume of investment. The finding that uncertainty of aid receipts reduces the effectiveness of aid is robust. When we control for this, aid appears to have a significant positive influence on growth. When the regression is estimated for the sub-sample of African countries these findings hold, although the effectiveness of aid appears weaker than for the full sample.

Monopolies life cycle, bureaucratization, and Schumpeterian growth

This paper analyzes the links between the internaI organization of firms and macroeconomic growth. We present a Schumpeterian growth model in which firms face dynamic agency costs. These agency costs are due to the formation of vertical collusions within the organization. To respond to the opportunity of internaI collusion, firms go through a whole life cycle, getting more bureaucratized and Iess efficient over time. vVeak creative destruction in the economy facilitates informal collusion inside firms and exacerbates bureaucratization. As bureaucratization affects the firms' profitability and the return to innovation, stationary equilibrium growth depends in turn on the efficiency of collusive side-contracts within firms.

Financial globalization and economic growth

Capital mobility leads to a speed of convergence smaller in an open economy than in a closed economy. This is related to the presence of two capitals, produced with specific technologies, and where one of the capitals is nontradable, like infrastructures or human capital. Suppose, for example, that the economy is relatively less abundant in human capital, leading to a decrease of the remuneration of this capital during the transition. In a closed economy, the remuneration of physical capital will be increasing during the transition. In the open economy, the alternative investment yields the international interest rate, corresponding to the steady state net remuneration of physical capital in the closed economy. The nonarbitrage condition shows a larger difference in the remuneration of the two capitals in the closed economy. It leads to a higher accumulation of human capital and thus to a faster speed of convergence in the closed economy. This result stands in sharp contrast with that of the one-sector neoclassical growth model, where the speed of convergence is smaller in the closed economy.

Skilled labor, unskilled labor, and economic growth

We assess the effects of the imperfect substitution between skilled and unskilled labor on economic growth in a model in which physical capital and skilled labor can be accumulated. It is shown that economies with higher substitutability between skilled and unskilled labor have higher levels of income per capita in the transition and in the long-run equilibrium. Furthermore, these economies have a higher level of skilled labor and a higher level of capital intensity in the long-run equilibrium. For certain parameters values, the speed of convergence depends positively on the elasticity of substitution between skilled and unskilled labor.

Import substitution and economic growth

In spite of Latin America s dismal economic performance between the 1950s and 1980s, the region experienced strong capital deepening. Furthermore, pro- ductivity (measured as TFP) grew at low rates in comparison with the U.S. In this paper, we suggest that all these facts can be explained as a consequence of the restrictive trade regime adopted at that time. Our analytical framework is based on a dynamic Heckscher-Ohlin model, with scale economies in the capital- intensive sector. We assume an economy that is initially open and specialized in the production of labor-intensive goods. The trade regime is modeled as a move to a closed economy. The model produces results consistent with the Latin American experience. Speci cally, for a su¢ ciently small country, there will be no long-run growth in income per capita, but capital per capita will increase. As a result, measured TFP will fall.

Banks, liquidity crises and economic growth

How do the liquidity functions of banks affect investment and growth at different stages of economic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies.

Germination and mycelial growth of Bipolaris euphorbiae Muchovej & Carvalho as influenced by herbicides and surfactants

Bipolaris euphorbiae Muchovej & Carvalho é um forte candidato para o controle de Euphorbia heterophylla L. (amendoim bravo). Este fungo pode ser aplicado em combinação com herbicidas para controlar um maior espectro de espécies daninhas. Para tanto, experimentos laboratoriais foram realizados para verificar a possibilidade da utilização de mistura de tanque de esporos de B. euphorbiae e herbicidas ou surfatantes recomendados para a cultura da soja. Crescimento micelial e germinação de conídios foram avaliados em meio BDA acrescido dos herbicidas, nas concentrações recomendadas dos produtos comerciais, oxasulfuron (80 g/ha), glifosato (4 L/ha), bentazon (1.5 L/ha), fomesafen (1 L/ha), chlorimuron-ethyl (80 g/ha), lactofen (1 L/ha) e imazetaphyr (1 L/ha) e dos surfatantes Energic (2 ml/L), Aterbane (2,5 ml/L), Silwet L-77Ag (1 ml/L), Herbitensil (2 ml/L) e Natur L'óleo (10 ml/L). Diluições dos herbicidas de 50% e 25% foram avaliadas com um consumo de calda equivalente a 300 L/ha. Os surfatantes foram somente utilizados nas concentrações recomendadas. O crescimento micelial não foi afetado por bentazon e fomesafen e apenas levemente por oxasulfuron. Porém, glifosato, chlorimuron-ethyl, lactofen, Energic, Herbitensil, Silwet, e Aterbane o reduziram drasticamente. A redução observada com imazetaphyr foi intermediária e Natur L' óleo promoveu o crescimento micelial. Na presença dos surfatantes, observou-se que todos permitiram uma porcentagem de germinação equivalente àquela alcançada na presença de água. Energic e Herbitensil causaram um retardamento expressivo. Com Herbitensil, o processo germinativo iniciou somente aos 120 minutos. Com herbicidas, foi observado que somente na presença de glifosato e imazetaphyr a germinação dos conídios não seguiu a tendência observada com água, como ocorreu com os outros produtos testados.

Cotton root and shoot growth as affected by application of mepiquat chloride to cotton seeds

Estudou-se o efeito do tratamento de sementes de algodão com cloreto de mepiquat sobre o crescimento inicial de raízes e parte aérea. O experimento, realizado em casa de vegetação, utilizou vasos de PVC adaptados com uma parede frontal de vidro e os tratamentos foram constituídos por cinco doses do cloreto de mepiquat (CM) do ingrediente ativo (i.a.): 0, 3, 6, 9 e 12 g kg-1 de sementes, pulverizado sobre as sementes, e a cultivar FM 993. Massa de matéria seca da parte aérea (folhas, pecíolos e haste), massa de matéria seca da raiz, área foliar, relação parte aérea:raiz, relação área foliar:crescimento radicular, o comprimento da parte aérea foram avaliados aos 21 dias após a semeadura. Crescimento radicular foi avaliado a cada três dias até os 18 dias. O CM aplicado às sementes do algodão promove redução da altura da planta e da área foliar, sem, contudo, afetar produção de massa de matéria seca da parte aérea e raiz, relação parte aérea:raiz, relação área foliar:crescimento radicular e comprimento total de raízes do algodoeiro. Assim, no presente experimento não foi observado efeito negativo do CM aplicado às sementes do algodoeiro na absorção de água pela planta.

Germination and early growth of soybean, dry bean and turnip grown under Digitaria horizontalis straw

The study aimed to evaluate the possible inhibitory effects of different concentrations of crabgrass (Digitaria horizontalis Willd.) dry mass incorporated to the soil over the germination and early growth of soybean (Glycine max (L.) Merril.), dry bean (Phaseolus vulgaris L.), and turnip (Raphanus raphanistrum L.). The experimental design adopted was completely random, with four replications where, each one was consisted of a 2.5 L capacity pot. Dry mass of crabgrass at equivalent amounts of 0, 2.5, 5.0 and 10 t ha(-1) were incorporated into the soil. Crops seedling emergence was checked daily, and germination, speed germination index, mean germination time, relative frequency and synchronization index of germination were computed at the final of 10 days. The height and dry mass of plants were evaluated at 35 days after sowing. The incorporation to the soil of D. horizontalis dry mass caused significant reduction of the height and dry weight of soybean, dry bean and turnip, but were not observed consistent influence over the germination of these species.