Output Externalities on Total Factor Productivity

The impact that output has on future total factor productivity -i.e. the dynamic complementarities shown to be empirically relevant in Cooper and Johri (1997)- is not internalized by competitive agents. As a result, the allocation that a planner would choose cannot be reached as a competitive equilibrium outcome (neither for infinitely-lived agents nor for overlapping generations): the market remuneration to capital and labor are too low. The planner's allocation can nonetheless be implemented by a fiscal policy subsidizing as needed the returns to savings and the wage rate. The exact policy differs depending on whether just past investment or total output influences productivity: in the first case only capital returns need to be subsidized, while in the second case labor income needs to be subsidized too. The policy is balanced period-by-period by means of a lump-sum tax.

[1]  Vladimir Shikhman,et al.  Convergent subgradient methods for nonsmooth convex minimization , 2014 .

[2]  Thierry Bréchet,et al.  Modeling of environmental adaptation versus pollution mitigation , 2014 .

[3]  Yukihiro Nishimura,et al.  A note on equilibrium leadership in tax competition models , 2015 .

[4]  Juan D. Moreno-Ternero,et al.  Normative foundations for equity-sensitive population health evaluation functions , 2014 .

[5]  Tom Truyts,et al.  Auctions with Prestige Motives , 2014 .

[6]  Henry Tulkens,et al.  Transferable and non transferable utility implementations of coalitional stability in integrated assessment models , 2014 .

[7]  Jacques-François Thisse,et al.  Monopolistic competition and income dispersion , 2014 .

[8]  Paul Belleflamme,et al.  Digital Piracy: an Update Digital Piracy: an Update* , 2014 .

[9]  Laurence A. Wolsey,et al.  The continuous knapsack set , 2016, Math. Program..

[10]  K. Arrow The Economic Implications of Learning by Doing , 1962 .

[11]  P. Romer Increasing Returns and Long-Run Growth , 1986, Journal of Political Economy.

[12]  D. Levhari Further Implications of Learning by Doing , 1966 .

[13]  Federico Grigis de Stefano Strategic stability of equilibria: the missing paragraph , 2014 .

[14]  Mathieu Van Vyve,et al.  A conic optimization approach for SKU rationalization , 2014 .

[15]  D. Levhari Extensions of Arrow's “Learning by Doing” , 1966 .

[16]  W. Easterly,et al.  What Have We Learned from a Decade of Empirical Research on Growth? It's Not Factor Accumulation: Stylized Facts and Growth Models , 2001 .

[17]  Thierry Bréchet,et al.  Modeling of Environmental Adaptation versus Pollution Mitigation Modeling of Environmental Adaptation versus Pollution Mitigation , 2014 .

[18]  François Maniquet,et al.  Equality Of Opportunity: The Economics Of Responsibility , 2012 .

[19]  Pierre Pestieau,et al.  Aging, Social Security Design, and Capital Accumulation , 2015, SSRN Electronic Journal.

[20]  Juan-Pablo Ortega,et al.  Estimation and Empirical Performance of Non-Scalar Dynamic Conditional Correlation Models , 2014, Comput. Stat. Data Anal..

[21]  Russell Cooper,et al.  Dynamic Complementarities: A Quantitative Analysis , 1996 .

[22]  Edward C. Prescott,et al.  Needed: a theory of total factor productivity , 1998 .

[23]  N. Baris Vardar,et al.  Imperfect resource substitution and optimal transition to clean technologies , 2013 .

[24]  Xavier Wauthy,et al.  From Bertrand to Cournot via Kreps and Scheinkman: a hazardous journey , 2014 .

[25]  Steven N. Durlauf Multiple Equilibria and Persistence in Aggregate Fluctuations , 1991 .