A.B.T.M. van Schaik

Trust and Economic Growth

Economists increasingly pay attention to social capital as an important determinant of macroeconomic growth performance. At the same time, there is discussion regarding the robustness of the results of empirical growth studies. In a seminal paper, Knack and Keefer (1997) assess the effect of trust on growth. This paper analyses the robustness of their results along several dimensions, acknowledging the complexity of therobustness concept. Our findings show that the robustness of the relationship between trust and growth in terms of both the size and the significance of the estimated effect, is highly dependent on the set of conditioning variables. An answer to the question whether there is an economic payoff of trust - and if so, how large this payoff actually is - is therefore difficult to provide on the basis of cross sectional empirical growth studies.

Unemployment and Endogenous Growth

In this paper we develop a two-sector endogenous growth model with a dual labour market, based on efficiency wages. Growth is driven by intentional R&D performed in the high-tech and high-wage sector. It is examined how a change in rivalry among firms affects simultaneously growth and unemployment. On the one hand, an increase of the elasticity of substitution between the product varieties of different high-tech firms reduces market power and leads to higher growth but reduces job prospects. On the other hand, if barriers to entry exist, an increase of the number of rivals in the market (due to removal of entry barriers) leads to lower growth, whereas the effect on aggregate employment is ambiguous.

Durable capital and economic growth

SummaryInCapital and Time Hicks explores Neo-Austrian capital theory. It is shown here that this approach is a special case of the more general method of treating fixed capital as introduced by Von Neumann. In the Neo-Austrian model the path of balanced growth is analysed with reduced form equations. The second part of this article discusses paths of non-balanced growth. If the steady state is disturbed by the introduction of a superior technique Hicks needs a three-stage dynamic model for a full description of subsequent developments. Special attention is given to the Full Employment path.

Reproduction and fixed capital

1. Single Production.- 1.1. Pure reproduction.- 1.2. Surpluses.- 1.2.1. Balanced growth.- 1.2.2. Non-basics.- 1.3. The distribution of surpluses.- 1.3.1. Labour.- 1.3.2. The solution of the quantity system.- 1.3.3. The solution of the price system.- Appendix 1.a. Lemmas.- 2. Joint Production.- 2.1. Processes and commodities.- 2.1.1. Introduction.- 2.1.2. Non-basics.- 2.2. Weak joint production.- 2.2.1. Identification and process-dependency.- 2.2.2. Cost functions.- 2.3. Strong joint production.- 2.3.1. Negative embodied labour coefficients.- 2.3.2. The numeraire-question.- 2.3.3. Corner-point solutions.- Appendix 2.a. Model 2.1.- Appendix 2.b. Equal input proportions.- Appendix 2.c. Non-basics and equilibrium.- 3. Fixed Capital.- 3.1. Profiles of vintages.- 3.2. The Simple Sraffa model.- 3.2.1. The point-input-flow-output profile.- 3.2.2. Book-values and depreciations.- 3.2.3. The core system.- 3.2.4. The rest-value problem.- 3.2.5. Scrappage and replacement.- 3.2.6. A corner-point solution.- 3.2.7. The equilibrium between savings and investments.- 3.3. The Austrian reproduction model.- 3.3.1. Introduction.- 3.3.2. The flow-input-point-output profile.- 3.3.3. The solution.- 3.3.4. The flow-input-flow-output profile.- 3.4. Unequal life-spans.- 3.4.1. Several machines with a life-span of T years.- 3.4.2. Machines with an unequal life-span.- 3.4.3. Variable coefficients.- 3.5. The Leontief model with fixed capital.- 3.5.1. Misconceptions.- 3.5.2. Morishimas opinion.- 3.5.3. Comparison with the Sraffa model.- 3.5.4. The opinion of Domar and Lange.- 3.5.5. Brodys opinion.- 3.5.6. Generalization.- Appendix 3.a. Generalization of the Simple Sraffa model.- Appendix 3.b. Superimposed joint production.- Appendix 3.c. Unequal life-spans.- 4. Unequal Efficiency.- 4.1. Forms of unequal efficiency.- 4.2. A model with three industries.- 4.3. Loss of productivity.- 4.3.1. Introduction.- 4.3.2. Uniform loss of productivity determined by conditions on the demand side.- 4.3.3. Differentiated loss of productivity determined by conditions on the demand side.- 4.3.4. A corner-point solution.- 4.3.5. Loss of productivity determined by conditions on the supply side.- 4.4. Higher operating costs.- 4.4.1. Introduction.- 4.4.2. Economic life-span.- 4.4.3. Uniform higher operating costs.- 4.4.4. Inefficiency and reswitching of techniques.- 4.5. Conclusion.- Appendix 4.a. The opinions of Burmeister and Dobell.- Appendix A. Outline of the Transformation Problem.- A.1. The surpluses.- A.2. The disposal of surpluses.- A.3. The distribution of surpluses.- Appendix B. International Trade.- B.1. Introduction.- B.2. Assumptions.- B.3. Autarchy.- B.4. Free trade.- B.5. Consequences of free trade.- B.6. Trade without specialization.- Appendix C. The traditional vintage model.- C.1. Introduction.- C.2. The quantity system.- C.3. The price system.- Appendix D. The traverse.- D.1. The Simple Sraffa model.- D.2. Planned traverse.- D.3. Non-planned traverse.- D.4. The neo-Austrian model.

Productivity Growth and the Labour Market

The productivity slowdown in Europe since the mid-1990s is a reason for concern. Labour market rigidity, hampering innovation, may be a cause of the slowdown. In the paper this argument is placed in a broader perspective. Labour force participation is an important factor in explaining differences in productivity and welfare over time and across regions as can be illustrated by comparing the US and the EU-15. Moreover, technological change is not entirely exogenous. Dynamic increasing returns as introduced by Kaldor and Verdoorn may boost productivity. For countries other than the US catching up appears to be of importance. The question is then to what extent labour market institutions account for productivity growth. Regression analysis on a panel of 21 OECD countries covering the period 1960-2005 reveals that employment protection is relevant but that the impact is qualitatively different before and after 1980. The reason is that in the first sub-period technological change is driven in most countries by imitation, whereas in the second sub-period innovation becomes the predominant factor everywhere.

On superimposed recurrent cycles

In the course of time the study of business cycles developed from the theories of selfsustaining cycles into the theories of cyclical response to exogenous shocks, mainly of monetary origin. The older theories from the thirties and forties had the common feature of being based on an endogenous dynamism, resulting from the interaction between the multiplier and some form of acceleration principle. Especially according to the range of values in which the parameters of the investment function were chosen, these models produced explosive, damped or constant cycles. After World War II there was a rise of interest in the case of explosive fluctuations, in the meantime neglecting expectational and other important aspects of economic reality. Afterwards it is quite understandable that these theories of endogenous instability induced strong reactions, by monetarism but also by macroeconometric modelbuilding. But after the disappointing experience of the early seventies, there arose a new chain of theories, now based on the hope to reconcile business cycles with the postulates of microeconomic (competitive) theory. Initially this approach relied upon random monetary and related shocks that were held to be responsible for cyclical fluctuations that after the stable sixties proved to be well alive. Later on rational expectationists tried to introduce more identifiable exogenous factors into this view, that actually was as one-sided as the older theories of predominantly endogenous cycles.

Theo van de Klundert : A frontier economist

SummaryTwenty-five years ago, Dr. Theo van de Klundert was appointed as Professor of Economics at Tillburg University. On the occassion of this jubilee the authors review Van de Klunderts contribution to the study of economic science in the The Netherlands. The article focuses on four topics: (1) growth and income distribution, (2) capital theory, resource economics and trade, (3) controversies between Keynesians and (4) open economy macroeconomics. A short remark is made about his teaching. Van de Klundert is praised for the quality and the comprehension of his scientific work.