Horizontal innovation in the theory of growth and development

We analyze recent contributions to growth theory based on the model of expanding variety of Romer (1990). In the first part, we present different versions of the benchmark linear model with imperfect competition. These include the labequipment model, labor-for-intermediates and directed technical change . We review applications of the expanding variety framework to the analysis of international technology diffusion, trade, cross-country productivity differences, financial development and fluctuations. In many such applications, a key role is played by complementarities in the process of innovation.

Financial development, financial fragility and growth

This paper studies the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g., Kaminski and Reinhart 1999). The paper accounts for these contrasting effects based on the distinction between the short- and long-run impacts of financial intermediation. Working with a panel of cross-country and time-series observations, the paper estimates an encompassing model of short- and long-run effects using the Pooled Mean Group estimator developed by Pesaran, Shin, and Smith (1999). The conclusion from this analysis is that a positive long-run relationship between financial intermediation and output growth co-exists with a, mostly, negative short-run relationship. The paper further develops an explanation for these contrasting effects by relating them to recent theoretical models, by linking the estimated short-run effects to measures of financial fragility(namely, banking crises and financial volatility), and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions.

In vivo targeting of an anti-tumor antibody coupled to antigenic MHC class I complexes induces specific growth inhibition and regression of established syngeneic tumor grafts.

The concept of antibody-mediated targeting of antigenic MHC/peptide complexes on tumor cells in order to sensitize them to T-lymphocyte cytotoxicity represents an attractive new immunotherapy strategy. In vitro experiments have shown that an antibody chemically conjugated or fused to monomeric MHC/peptide can be oligomerized on the surface of tumor cells, rendering them susceptible to efficient lysis by MHC-peptide restricted specific T-cell clones. However, this strategy has not yet been tested entirely in vivo in immunocompetent animals. To this aim, we took advantage of OT-1 mice which have a transgenic T-cell receptor specific for the ovalbumin (ova) immunodominant peptide (257-264) expressed in the context of the MHC class I H-2K(b). We prepared and characterized conjugates between the Fab' fragment from a high-affinity monoclonal antibody to carcinoembryonic antigen (CEA) and the H-2K(b) /ova peptide complex. First, we showed in OT-1 mice that the grafting and growth of a syngeneic colon carcinoma line transfected with CEA could be specifically inhibited by systemic injections of the conjugate. Next, using CEA transgenic C57BL/6 mice adoptively transferred with OT-1 spleen cells and immunized with ovalbumin, we demonstrated that systemic injections of the anti-CEA-H-2K(b) /ova conjugate could induce specific growth inhibition and regression of well-established, palpable subcutaneous grafts from the syngeneic CEA-transfected colon carcinoma line. These results, obtained in a well-characterized syngeneic carcinoma model, demonstrate that the antibody-MHC/peptide strategy can function in vivo. Further preclinical experimental studies, using an anti-viral T-cell response, will be performed before this new form of immunotherapy can be considered for clinical use.

Why England? Demand, growth and inequality during the Industrial Revolution

Why was England first? And why Europe? We present a probabilistic model that builds on big-push models by Murphy, Shleifer and Vishny (1989), combined with hierarchical preferences. The interaction of exogenous demographic factors (in particular the English low-pressure variant of the European marriage pattern)and redistributive institutions such as the old Poor Law combined to make an Industrial Revolution more likely. Essentially, industrialization is the result of having a critical mass of consumers that is rich enough to afford (potentially) mass-produced goods. Our model is then calibrated to match the main characteristics of the English economy in 1750 and the observed transition until 1850.This allows us to address explicitly one of the key features of the British IndustrialRevolution unearthed by economic historians over the last three decades the slowness of productivity and output change. In our calibration, we find that the probability of Britain industrializing is 5 times larger than France s. Contrary to the recent argument by Pomeranz, China in the 18th century had essentially no chance to industrialize at all. This difference is decomposed into a demographic and a policy component, with the former being far more important than the latter.

Forecasting and turning point predictions in a Bayesian panel VAR model

We provide methods for forecasting variables and predicting turning points in panel Bayesian VARs. We specify a flexible model which accounts for both interdependencies in the cross section and time variations in the parameters. Posterior distributions for the parameters are obtained for a particular type of diffuse, for Minnesota-type and for hierarchical priors. Formulas for multistep, multiunit point and average forecasts are provided. An application to the problem of forecasting the growth rate of output and of predicting turning points in the G-7 illustrates the approach. A comparison with alternative forecasting methods is also provided.

Shocks and institutions in a job matching model

This paper explains the divergent behavior of European an US unemploymentrates using a job market matching model of the labor market with aninteraction between shocks an institutions. It shows that a reduction inTF growth rates, an increase in real interest rates, and an increase intax rates leads to a permanent increase in unemployment rates when thereplacement rates or initial tax rates are high, while no increase inunemployment occurs when institutions are "employment friendly". The paperalso shows that an increase in turbulence, modelle as an increase probabilityof skill loss, is not a robust explanation for the European unemploymentpuzzle in the context of a matching model with both endogenous job creationand job estruction.

Human capital distribution, growth and convergence

This paper studies the dynamic relationship between distribution and endogenous growth in an overlapping generations model with accumulation of human and physical capital. It is shown how human capital can determine a relationship between per capita growth rates and inequality in the distribution of income. Family background effects and spillovers in the transmission of human capital generate a dynamics in which aggregate variables depend not only on the stock, but also on the distribution of human capital. The evolution of this distribution over time is then characterized under different assumptions on private returns and the form of the externality in the technology for humancapital. Conditions for existence, uniqueness and stability of a constant growth equilibrium with a stationary distribution are derived. Increasing returns, idiosyncratic abilities and the possibility of poverty traps are explicitely characterized in a closed form solution of the equilibrium dynamics, showing the role played by technology and preferences parameters.

Systemic crises and growth

In this paper, we document the fact that countries that have experienced occasional financial crises have on average grown faster than countries with stable financial conditions. We measure the incidence of crisis with the skewness of credit growth, and find that it has a robust negative effect on GDP growth. This link coexists with the negative link between variance and growth typically found in the literature. To explain the link between crises and growth we present a model where weak institutions lead to severe financial constraints and low growth. Financial liberalization policies that facilitaterisk-taking increase leverage and investment. This leads to higher growth, but also toa greater incidence of crises. Conditions are established under which the costs of crises are outweighed by the benefits of higher growth.

Effects of uncertain lifetime and annuity insurance on capital accumulation and growth

This paper studies the effects of uncertain lifetime on capitalaccumulation and growth and also the sensitivity of thoseeffects to the existence of a perfect annuities market. Themodel is an overlapping generations model with uncertainlifetimes. The technology is convex and such that the marginalproduct of capital is bounded away from zero. A contribution ofthis paper is to show that the existence of accidental bequestsmay lead the economy to an equilibrium that exhibits asymptoticgrowth, which is impossible in an economy with a perfect annuitiesmarket or with certain lifetimes. This paper also shows that ifindividuals face a positive probability of surviving in everyperiod, they may be willing to save at any age. This effect ofuncertain lifetime on savings may also lead the economy to anequilibrium exhibiting asymptotic growth even if there exists aperfect annuities market.

Externalities and interdependent growth: Theory and evidence

I formulate and estimate a model of externalities within countriesand technological interdependence across countries. I find that externalreturns to scale to physical capital within countries are 8 percent; thata 10 percent increase of total factor productivity of a country's neighborsraises its total factor productivity by 6 percent; and that a 2 percentannual growth rate of labor productivity can be explained as an endogenousresponse to an exogenous 0.2 percent annual growth rate of total factorproductivity in the steady--state.

The growth and diffusion of knowlegde and the theory of the firm

We analyze the implications of a market imperfection related to the inability to establish intellectual property rights, that we label {\it unverifiable communication}. Employees are able to collude with external parties selling ``knowledge capital'' of the firm. The firm organizer engages in strategic interaction simultaneously with employees and competitors, as she introduces endogenous transaction costs in the market for information between those agents. Incentive schemes and communication costs are the key strategic variables used by the firm to induce frictions in collusive markets. Unverifiable communication introduces severe allocative distortions, both at internal product development and at intended sale of information (technology transfer). We derive implications of the model for observable decisions like characteristics of the employment relationship (full employment, incompatibility with other jobs), firms' preferences over cluster characteristics for location decisions, optimal size at entry, in--house development vs sale strategies for innovations and industry evolution.

Determinants of Corporate Disclosure : A Multicountry, Multilevel Model

Abstract The complexity of the current business world is making corporate disclosure more and more important for information users. These users, including investors, financial analysts, and government authorities rely on the disclosed information to make their investment decisions, analyze and recommend shares, and to draft regulation policies. Moreover, the globalization of capital markets has raised difficulties for information users in understanding the differences incorporate disclosure across countries and across firms. Using a sample of 797 firms from 34 countries, this thesis advances the literature on disclosure by illustrating comprehensively the disclosure determinants originating at firm systems and national systems based on the multilevel latent variable approach. Under this approach, the overall variation associated with the firm-specific variables is decomposed into two parts, the within-country and the between-country part. Accordingly, the model estimates the latent association between corporate disclosure and information demand at two levels, the within-country and the between-country level. The results indicate that the variables originating from corporate systems are hierarchically correlated with those from the country environment. The information demand factor indicated by the number of exchanges listed and the number of analyst recommendations can significantly explain the variation of corporate disclosure for both "within" and "between" countries. The exogenous influences of firm fundamentals-firm size and performance-are exerted indirectly through the information demand factor. Specifically, if the between-country variation in firm variables is taken into account, only the variables of legal systems and economic growth keep significance in explaining the disclosure differences across countries. These findings strongly support the hypothesis that disclosure is a response to both corporate systems and national systems, but the influence of the latter on disclosure reflected significantly through that of the former. In addition, the results based on ADR (American Depositary Receipt) firms suggest that the globalization of capital markets is harmonizing the disclosure behavior of cross-boundary listed firms, but it cannot entirely eliminate the national features in disclosure and other firm-specific characteristics.

Intangible Capital: four years of growth as an open-access scientific publication

Con este nuevo número, la revista Intangible Capital, inicia el cuarto volumen avanzando hacia el quinto año de publicación. Como ya es tradición en la revista, iniciamos este nuevo volumen evaluando el anterior y presentando las nuevas direcciones. Como principales aportaciones del 2007, se destacan hechos relevantes como la renovación de convenios para la indexación científica de la revista, el cambio de plataforma a OJS, la inclusión de un nuevo editor, la nueva composición del editorial board, el equipo de revisores, el cambio a un modelo bilingüe de revista, la nueva financiación obtenida y el trabajo que estamos realizando gran número de editores científicos de acceso abierto en España para el reconocimiento por parte de la Comisión Nacional Evaluadora de la Actividad Investigadora.This issue opens the fourth volume of the Intangible Capital journal, which makes its way towards the fifth year of publication. As usually, we start this volume by evaluating the previous one and tracing new directions. Among the main contributions during the year 2007, we consider important to highlight the following aspects: the renewal of the scientific indexation agreements, the platform change to OJS, the appointment of a new editor, new members included in the editorial board, the board of reviewers, the change towards a bilingual model, the new financing obtained and, the last but not the least, the work undertaken together with many scientific editors of open access Spanish journals for obtaining the positive evaluation of the CNEAI (National Commission for the Evaluation of the Research Activity) and thus, being a proof of scientific excellence

Plasma membrane H+-ATPase regulation is required for auxin gradient formation preceding phototropic growth.

Phototropism is a growth response allowing plants to align their photosynthetic organs toward incoming light and thereby to optimize photosynthetic activity. Formation of a lateral gradient of the phytohormone auxin is a key step to trigger asymmetric growth of the shoot leading to phototropic reorientation. To identify important regulators of auxin gradient formation, we developed an auxin flux model that enabled us to test in silico the impact of different morphological and biophysical parameters on gradient formation, including the contribution of the extracellular space (cell wall) or apoplast. Our model indicates that cell size, cell distributions, and apoplast thickness are all important factors affecting gradient formation. Among all tested variables, regulation of apoplastic pH was the most important to enable the formation of a lateral auxin gradient. To test this prediction, we interfered with the activity of plasma membrane H(+)-ATPases that are required to control apoplastic pH. Our results show that H(+)-ATPases are indeed important for the establishment of a lateral auxin gradient and phototropism. Moreover, we show that during phototropism, H(+)-ATPase activity is regulated by the phototropin photoreceptors, providing a mechanism by which light influences apoplastic pH.

Tumor necrosis factor-alpha mediates changes in tissue protein turnover in a rat cancer cachexia model.

Rats bearing the Yoshida AH-130 ascites hepatoma showed enhanced fractional rates of protein degradation in gastrocnemius muscle, heart, and liver, while fractional synthesis rates were similar to those in non-tumor bearing rats. This hypercatabolic pattern was associated with marked perturbations of the hormonal homeostasis and presence of tumor necrosis factor in the circulation. The daily administration of a goat anti-murine TNF IgG to tumor-bearing rats decreased protein degradation rates in skeletal muscle, heart, and liver as compared with tumor-bearing rats receiving a nonimmune goat IgG. The anti-TNF treatment was also effective in attenuating early perturbations in insulin and corticosterone homeostasis. Although these results suggest that tumor necrosis factor plays a significant role in mediating the changes in protein turnover and hormone levels elicited by tumor growth, the inability of such treatment to prevent a reduction in body weight implies that other mediators or tumor-related events were also involved.