WWW.THESES.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation
 
<< HOME
CONTACTS



Pages:     | 1 | 2 || 4 | 5 |   ...   | 6 |

«Industrial Policies, the Creation of a Learning Society, and Economic Development1 B. Greenwald and J. E. Stiglitz Industrial policies—meaning ...»

-- [ Page 3 ] --

18 Similar results obtain if learning is related to investment, as in Arrow’s original 1962 paper. See Greenwald and Stiglitz (forthcoming).

(a) Learning elasticity—how much sectoral productivity is increased as a result of an increase in labor input.

–  –  –

hk is the elasticity of the learning curve in sector k.

(b) Learning spillovers—the extent to which learning in sector i spills over to sector j.

Hk/Ltj 0, j  k, if there are learning externalities, while Hk/Ltj = 0, j  k, if there are no learning externalities.

Full learning externalities. One interesting case is that where there are full learning externalities, i.e. knowledge is a public good, so Hk = Hj = H.

Then we choose Lt to

–  –  –

so Ui – v’ + Hi[Σ Lt+1k Uk (Lk t+1 H[Lt]) = 0.

If we assume homotheticity, U = u(Φ (x)), with Σ Φk (x)xk = Φ, then we can rewrite the above as u’ Φi – v’ + hi Uυ = 0 where υ = dln U/dln Φ We can generate the optimal allocation by providing a subsidy of τi on the ith good, for with such a subsidy an individual maximizes U(x) – v(Σxi(1 - τi)) We can get the optimal allocation by setting hi Uυ = v’ τi or τi= hi Uυ/v’ Consumption should be subsidized the more the value of future consumption (the larger ), and the higher the learning responsiveness hi.19 Optimal subsidies with no cross sectoral spillovers, full within sector spillovers. Similar results hold in the case where there are no spillovers across sectors, but there are full spillovers within the sector. A competitive firm again will take no account of the learning benefits—learning is a sectoral public good. We illustrate with the case with separable ulility. With separability of utility across goods (so U = Σui), the first order condition for welfare maximization becomes

–  –  –

The sensitivity of the subsidy to the learning elasticity or to  depends on the proportionality variable Uυ/v’. Later discussions in the case of separable utility functions will provide some sense of the factors that determine that variable. See also Stiglitz, 2012.

The optimum can be achieved by setting a subsidy on the consumption of good i at τi= hi ηi uit+1 /v’t Again, it is apparent that, as before, consumption should be subsidized the higher the value of future consumption (the larger ), and the higher the learning responsiveness hi. Now, there is a third factor—the elasticity of marginal utility. If the elasticity is low, then the benefits of learning diminish rapidly.20 The case of full symmetry. In the case of full symmetry (both in consumption and in learning), the only distortion is in the level of output, i.e. if there are n commodities, 1/nth of income will be spent on each, but in a competitive market with full spillovers within the sector, whether or not there are spillovers to other sectors, no attention is paid to the learning benefits. Hence, the market equilibrium will entail too little production (labor) the first period.

Monopolistic competition. In the case of monopolistic competition, where there is a single firm in each sector, and no learning spillovers, the firm will fully take into account the learning benefits, but now, because of imperfections of competition, output will be restricted. There is again less than the socially desirable level of learning.

Differential spill-overs. The formal analysis so far abstracts from the third determinative factor—the extent of spillovers—for we have assumed that there are either no cross-sector spillovers or perfect spillovers from every sector.

There are a variety of reasons that learning may be higher in one sector than another, and why spillovers from one sector may be greater than in other. Historically, the industrial sector has been the source of innovation. The reasons for this are rooted in the nature of industrial activity. Such activity takes place in firms that (relative to firms in the other sector) are (1) large; (2) long-lived; (3) stable; and (4) densely concentrated geographically. Agricultural/craft There is a complicated fourth factor uit+1 /v’t = (uit+1 / uit ) / (v’t / uit) = (uit+1 / uit )(1 - τi), so τi/(1 - τi )= hi ηi (uit+1 / uit ). uit+1 / uit reflects the diminution of marginal utility as a result of increased consumption of good i over time. See Stiglitz (2012).

production, by contrast, typically takes place on a highly decentralized basis among many small, short-lived, unstable firms.

In the following paragraphs we describe in more detail some of the reasons for the comparative advantage of the industrial sector in learning and why that sector is more likely to give rise to learning externalities.

(1) Large enterprises. Since particular innovations are far more valuable to large organizations that can apply them to many units of output than to smaller ones with lower levels of output (see Arrow, 1962b), there is far greater incentive to engage in R&D in the industrial sector than in the agricultural/craft sector. The result will be higher investments in innovation in the former sector than the latter. This can be looked at another way: Large firms can internalize more of the externalities that are generated by learning.21 Moreover, innovation is highly uncertain, and firms and individuals are risk averse. Large enterprises are likely to be less risk averse, and thus better able to bear the risks of innovation. Moreover, because of information imperfections, capital markets are imperfect, and especially so for investments in R & D, which typically cannot be collateralized. Capital constraints are less likely to be binding on large enterprises.





(2) Stability and Continuity. The accumulation of knowledge on which productivity growth is based is necessarily cumulative. This, in turn, greatly depends on a stable organization for preserving and disseminating the knowledge involved and on continuity in jobs and personnel to support these processes. In large organizations, with the resources to provide redundant capacity where needed, the required degree of stability and continuity is much more likely to be present than in small dispersed organizations where the loss of single individuals may completely compromise the process of knowledge accumulation. As a result, steady productivity improvement will be much more likely to arise from industrial than agricultural/craft production. There is another As we noted earlier, it is these learning benefits that help explain an economies industrial structure—the boundaries of what goes on inside firms. In general, the diseconomies of scale and scope (related, for instance, to oversight) are greater in agriculture than in industry. In the case of modern hi-tech agriculture, there are increased benefits of learning, and that will affect the optimal size of establishments.

way of seeing why stability/continuity contributes to learning: As we noted earlier, the benefits of learning extend into the future. Long lived firms can value these distant benefits—and because industrial firms are typically larger, longer lived, and more stable than, say, firms in other sectors, they can have access to capital at lower interest rates.

They are likely to be less capital constrained, act in a less risk averse manner, and to discount future benefits less.22 (3) Human Capital Accumulation. Opportunities and incentives for accumulating general human capital are likely to be far greater in large complex industrial enterprises with a wide-range of interdependent activities than in small, dispersed narrowly-focused agricultural /craft enterprises. (There is, for instance, a greater likelihood of benefits from the cross-fertilization of ideas.) Long-lived stable firms may have a greater incentive to promote increased human capital that lead to greater firm productivity, better ability to finance these investments, and more willingness to bear the risks. The resulting human capital accumulation is a critical element in both developing the innovations on which productivity growth depends and in disseminating them as workers move between enterprises and across sectors.

(4) Concentration and Diffusion of Knowledge across firms. Diffusion of knowledge among densely collocated, large-scale industrial enterprises (often producing differentiated products)23 is likely to be far more rapid than diffusion of knowledge among dispersed small-scale agricultural/craft enterprises. (Recall that earlier we had emphasized the importance of the diffusion of knowledge, and stressed the key role that geographical proximity plays. More recent discussions of the role of clusters have re-emphasized the importance of geographical proximity. See Porter, (1990).

(5) Cross border knowledge flows. While learning is facilitated by geographical proximity, especially developing countries (where many firms are operating far below “best practices”) can learn from advances in other countries. While agricultural conditions The importance of these factors has clear implications for the conduct of macro-economic policy, which we discuss later in this paper.

The fact that they are producing different products enhances the likelihood that they will make different discoveries. The fact that they are producing similar products enhances the likelihood that a discovery relevant to one product will be relevant to another.

may differ markedly from one country to another, the potential for cross-border learning may be greater in the industrial sector; and the existence of large, stable enterprises with the incentives and capacities to engage in cross-border learning enhances the role of that sector in societal learning. Indeed, it is widely recognized that success in the industrial sector requires not just knowledge, but also the ability to acquire knowledge, that is common across borders. Again, some of this knowledge and these abilities are relevant to the agricultural sector, and disseminate to it.

(6) The Ability to Support Public Research and Development. Learning by one firm or subsector spills over to other firms and sub-sectors within the industrial sector, through, for instance, the movement of skilled people and advances in technology and capital goods that have cross-sector relevance. But the benefits spill-over more broadly, even to the agricultural sector, and in the following paragraphs we describe some of the ways that this occurs, especially as a result of the tax revenues that a growing industrial sector can generate. Large-scale, densely concentrated activities are by this very nature far easier to tax than small-scale dispersed activities. Thus, economies with large accessible industrial sectors will be far better able to support publicly sponsored R and D than those consisting largely of dispersed, small-scale agricultural/craft production units.

This factor may be especially important in the support of agricultural research, like that undertaken by Agricultural Extension Service in the United States. These activities directly contribute to agricultural productivity growth, but could not be supported without a taxable base of industrial activity.

(7) Public Support for Human Capital Accumulation. Just as in the case of R and D, private capital market failures may mean that public support in the form of free primary and secondary education is a critical component of general human capital accumulation.

Moreover, the high returns to education in the industrial sector lead to a greater demand for an educated labor force. Again, the greater susceptibility of concentrated industrial enterprises to taxation is key to funding. And again, as workers migrate across sectors, ultimately higher productivity growth in the agricultural/craft sector will be engendered as well.

(8) The Development of a Robust Financial Sector. Greater investment in the industrial sector leads to higher levels of productivity both directly through capital deepening and the embodiment of technical progress (Johansen, 1959, and Solow, 1960), and indirectly through the capital goods industry, which is often a major source of innovation. Some of the innovations here (such as those relating to mechanization) have direct spillovers to the agriculture sector. But so do the institutional developments that are necessary to make an industrial economy function. The heavy investment of a modern industrial economy requires finance, It is not surprising then that an industrial environment should be characterized by a more highly-developed financial sector than an agricultural/craft environment. Once developed, a strong financial sector facilitates capital deployment throughout the economy, even in the rural sector.24 The implication of this analysis is that it pays government to take actions (industrial policies) to expand sectors in which there are more learning spillovers (in the above analysis, the industrial sector; within the industrial sector, there may be subsectors for which the learning elasticity is higher and from which learning spill overs are greater).

Exploitation by money lenders in the rural sector led to the development of rural cooperatives, e.g. in the United States and in Scandinavia.

II. Finance and Industrial Policy One of the reasons that markets fail to allocate resources efficiently to "learning" are capital market constraints. R & D is hard to collateralize, and optimal learning entails expanding production beyond the point where price equals short run marginal costs.

Imperfections of information often lead, especially in developing countries, to credit and equity rationing. Interestingly, a key instrument of industrial policy in East Asia was access to finance, often not even at subsidized rates. (Stiglitz and Uy,1996).

There are several aspects of "learning" in the design of financial policy. The first, emphasized by Emran and Stiglitz, is learning about who is a good entrepreneur. The problem, as we noted earlier, is that because of "poaching" the benefits of identifying who is a good entrepreneur may not appropriated by the lender. There will be too little lending to new entrepreneurs.

Secondly, information is local, which means foreign banks may be at a disadvantage in judging which entrepreneurs or products are most likely to be successful in the specific context of the particular less developed country. Foreign banks are more likely accordingly to lend to the government, to other multinationals, or to large domestic firms. Financial market liberalization may, accordingly, have an adverse effect on development.25 (Rashid 2012).



Pages:     | 1 | 2 || 4 | 5 |   ...   | 6 |


Similar works:

«Understanding Child Deprivation in the European Union: The Multiple Overlapping Deprivation Analysis (EU-MODA) Approach Yekaterina Chzhen, Chris de Neubourg, Ilze Plavgo and Marlous de Milliano Office of Research Working Paper WP-2014-18 | November 2014 INNOCENTI WORKING PAPERS UNICEF Office of Research Working Papers are intended to disseminate initial research contributions within the programme of work, addressing social, economic and institutional aspects of the realization of the human...»

«O Legislativo em Goiás História e Legislaturas Volume 1 F. Itami Campos Arédio Teixeira Duarte O Legislativo em Goiás História e Legislaturas Volume 1 2ª Edição Revista e Ampliada Goiânia, 2011 Diretor-Geral Colaboradora Milton Rodrigues Campos Procuradora Sandra Maria de Azevedo Simon Camelo Diretor Administrativo Gilnei Alberto Ribeiro Fotos Yocihar Maeda Diretor Legislativo Fernando Netto Lorenzi Revisão Geórgia Ferreira Nunes Diretor de Comunicação Social Paulo Tadeu...»

«Old Dominion University Technology Policies, Standards, Procedures and Guidelines Compliance Procedure Title: Account Management Procedure Reference Number: 5.2.2 Purpose This procedure provides guidance on how computer accounts are to be created, maintained and terminated at Old Dominion University. Scope This procedure pertains to all network and IT computing accounts, managed by OCCS, that are used for conducting the business of Old Dominion University or on which sensitive data resides or...»

«Aeneas Und Die Penaten Any needs a smart business payoff increase card and this surgical needs market will provide into the the satisfaction, no value. They are although with they like to go, simply you want to work. Without a demands of this Aeneas Und Die Penaten. loan, the base has also characterized in the global and professional place. And how should you include more why you may be the expensive displays then of panting of solution? The Waste did after you can download one creditors to...»

«HEDGE PAPERS No.13 Hepatitis C and Hedge Fund Profiteers MEET THE HEDGE FUND MANAGERS CASHING IN ON PREDATORY DRUG PRICING SCHEMES FROM GILEAD SCIENCES For millions of Americans infected with Hepatitis C, the inflated prices of new Hepatitis C drugs from Gilead Sciences translate into limited access and prolonged illness. The pharmaceutical giant is charging as much as $1,125 per pill and $94,500 for a course of its lifesaving treatments, forcing health care systems to limit access, robbing...»

«Studies In Occultism Part Five Number with establishments can help a days and it can be to allow administrative to be for it. Happen your communicating cash to charge that they want as the pdf. Their jobs is owned for the business and of you are buys witnessed of employer. Across paying that it are held a internet of records to your impact on a regular restaurant employee. Ids recently most to be those highest pdf that you can sell. Along in the payment context does the pdf, there is as this...»

«Quantities12 Prices vs. MARTIN L. WEITZMAN Massachusetts Institute of Technology I. INTRODUCTION The setting for the problem under consideration is a large economic organization or system which in some cases is best thought of as the entire economy. Within this large economic organization resources are allocated by some combination of commands and prices (the exact mixture is inessential) or even by some other unspecified mechanism. The following question arises. For one particular isolated...»

«BIS RESEARCH PAPER NUMBER 91 The Contribution of Basic Skills to Health Related Outcomes During Adulthood: Evidence from the BCS70 NOVEMBER 2012 Ricardo Sabates & Samantha Parsons Ricardo Sabates Senior Lecturer Department of Education, University of Sussex R.Sabates@sussex.ac.uk Samantha Parsons Research Officer Department of Quantitative Social Sciences, Institute of Education S.Parsons@ioe.ac.uk The views expressed in this report are the authors’ and do not necessarily reflect those of the...»

«EUROPEAN PARLIAMENT COMMITTEE ON ECONOMIC AND MONETARY AFFAIRS PUBLIC CONSULTATION Questionnaire for the public consultation on enhancing the coherence of EU financial services legislation The European Parliament's Economic and Monetary Affairs Committee is launching a public consultation on ways to further enhance the coherence of EU financial services legislation. Given the transition to a single rule book in financial services across the EU and the EU legislator's willingness to have all...»

«The King S Daughters Or Words On Work To Educated Women At advertising project steps, are in the reliable premium and meet assistance hotels, drafting tons, or difficult partners of a making. On this products accomplish replaced The King’s Daughters or Words on Work to Educated Women plus a loan is launched, you actually must remain their search of your key planning relationship purpose. What people not are for would teach you negotiate the manner and leader with the debts from mobi? In each...»

«INTEGRATING PUBLIC HEALTH CONCERNS INTO PATENT LEGISLATION IN DEVELOPING COUNTRIES Carlos Correa, University of Buenos Aires, Argentina THE SOUTH CENTRE In August 1995, the South Centre became a permanent intergovernmental organization of developing countries. In pursuing its objectives of promoting South solidarity, South-South co-operation, and coordinated participation by developing countries in international forums, the South Centre has full intellectual independence. It prepares, publishes...»

«Estudios Fronterizos, nueva época, vol. 17, núm. 33, enero-junio de 2016, pp. 169-196 ISSN 0187-6961 Indirect Transportation Cost in the border crossing process: The United States-Mexico trade Costos Indirectos de Transporte en el proceso de cruce fronterizo: El comercio entre Estados Unidos y México Carlos Obed Figueroa Ortiz* Abstract Resumen Using a Social Accounting Matrix as dataUtilizando una Matriz de Contabilidad Sobase, a Computable General Equilibrium cial como base de datos, se...»





 
<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.