Carol Ann Rogers

Industrial Location and Public Infrastructure

Abstract This paper examines the impact of public infrastructure on industrial location when increasing returns are present. Trade integration implies that firms tend to locate in countries with better domestic infrastructure. High levels of international infrastructure and strong returns to scale magnify industrial relocation due to differentials in domestic infrastructure or capital endowments. Regional policies which finance domestic infrastructure in a poor country lead firms to relocate in this country. Regional policies which finance international infrastructure in a poor country will lead firms to leave this country. We also analyze the incentives for countries to inhibit industrial relocation.

Long-term growth and short-term economic instability

When learning-by-doing is at the origin of growth, we show that growth rates should be negatively related to the amplitude of the business cycle if the growth rate in human capital is increasing and concave in the cyclical component of production. Empirical evidence strongly supports this finding for industrialized countries and European regions. Using the standard control variables, we find that countries and regions that have higher standard deviations of growth and of unemployment have lower growth rates. The result does not come from an effect of instability on investment. The negative relation does not hold for non-industrialized countries, however, for which learning-by-doing may not to be the main engine of growth.

Does Child Labor Decrease When Parental Incomes Rise

When parents and children care about each other’s utility, increases in parental income need not always lead to decreases in child labor. Adults raised in poor families make altruistic transfers to their elderly parents, which the parents take as repayment for income lost when their children were young and spent some time in school instead of work. There is some sufficiently high level of parental income at which children cease to believe that parents need a transfer, whereas parents still would like repayment, so both transfers and the hours of extra education that the transfers made possible cease. Child labor rises.

Inequality, Productivity and Child Labor: Theory and Evidence

A recent theoretical literature has linked reductions in income inequality to reductions in child labor in countries that are relatively well-off, but has not explored how income distribution affects child labor in very poor countries. We show that while in higher-productivity countries with child labor, a more equal income distribution will reduce or eliminate child labor, in low productivity countries, a more equal distribution of income will exacerbate child labor. Econometric specifications studying child labor among 10- to-14 year olds yield results generally consistent with these predictions. Policy actions that aim to bring about more equality so as to reduce child labor will likely not have the desired effect unless a country in which they are taken is sufficiently wealthy.

A dynamic aggregative model of the AIDS epidemic with possible policy interventions

Abstract The primary goal of this article is to analyze long-term growth in the presence of the AIDs epidemic and its interaction with population dynamics and the macroeconomy. Health-sector policies for preventing the spread of HIV or helping AIDs patients to cope with the disease are considered. Policies aimed at reducing HIV transmission can significantly reduce the prevalence of AIDs and can even bring the economy to a no-AIDs steady state. Model simulations using parameters representing a typical sub-Saharan country show how powerful these policies could be: a rise in condom use from 0 to 10 percent cuts steady-state AIDs prevalence nearly in half, from 31 percent to 19 percent of the population.

Trade Effects of Regional Aid

This paper examines the impact of the EC regional aid policies to finance infrastructure investment in the poorest regions where large disparities in public infrastructure (transport, telecommunications, energy and education) exist. We show that in a model in which trade is based on increasing returns, increasing returns industries tend to locate in countries with better infrastructure. By decreasing the disparities in the levels of public infrastructure, the regional aid policies lead firms to relocate from rich to poor countries. In the context of this model, the regional aid policies can be interpreted as the price paid by the richest countries for the benefits of full trade integration. In the empirical section, we find that telecommunications and education infrastructures are well correlated with industry location and per capita GDP. However, transport infrastructure, on which EC regional aid programmes concentrate, is poorly correlated with either industry location or per-capita GDP.

The effect of distributive goals on the time inconsistency of optimal taxes

Abstract In the context of a two-period, N-consumer model of optimal wage and interest taxation, this paper asks whether the governments distributive goals can inhibit its incentives to renege on its announced policies. Inconsistent interest tax increases may be moderated by distributed goals if they create an unacceptable utility distribution in the economy. This result is developed for a general case. Its implications for welfare and savings are illustrated with numerical examples.

Expenditure taxes, income taxes, and time-inconsistency

Abstract Traditional welfare-based comparisons of different tax structures implicitly assume that the government can precommit to its future optimal policy. When optimal tax rates are time- inconsistent, however, such comparisons may be misleading. This paper uses a two-period representative-consumer optimal taxation model to study the implications of time-consistency for the welfare rankings of expenditure and income taxation. I show that the welfare rankings of optimal policies may not be preserved by time-consistent ones.

Optimal Stabilization Policy in the Presence of Learning by Doing

This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends critically on initial conditions: If stabilization starts during an expansion, it has a positive effect on long-term production. When stabilization starts during a recession, its long-term effect is negative. The paper makes a methodological contribution in its analytical derivation of the optimal policy along the transition path as well as in the steady state.