Ching-Chong Lai

The impact of military burden on long-run growth and welfare

Abstract This paper presents an endogenous growth model to examine how a governments resource allocation between the defense and non-defense sectors will govern both economic growth and social welfare. We demonstrate that there exists an optimal defense expenditure share that maximizes the economic growth rate, but this rate is smaller than the welfare-maximizing share. This result can be viewed as a possible vehicle to explain why in many developing countries arms limitation and disarmament negotiations usually have low performance (even failing).

Social status, inflation, and endogenous growth in a cash-in-advance economy

Abstract This paper examines the effects of wealth-enhanced social status on capital accumulation in an optimizing monetary growth model with liquidity constrained consumption. We find that inflation positively affects the steady-state level of the capital stock. Further, when the production function takes the ‘AK’ technology form as the engine of sustained growth, an increase in the rate of money growth raises the long-run growth rate of the economy.

Is It Worthwhile to Pay Referees

There are puzzles in refereeing scholarly articles: Why are referees willing to review a paper without payment, and is it worthwhile to pay referees in order to raise the review rate? Two interesting results are found in this article. First, when reviewing services are driven by reciprocity, the equilibrium participation of referees may exhibit the so-called self-fulfilling feature. Second, the optimal payment may not be zero if the referee receives the benefit of reputation gained by refereeing an article. In particular, this article will show that those journals whose status quo review rate is lower tend to pay reviewers more while journals whose status quo review rate is higher do not find it worthwhile to pay referees enough. This result implies that, in order to raise its quality, a journal with a low review rate is more likely to adopt a strategy to increase pay and attract a critical mass of referees.

Is the Efficiency Wage Efficient? The Social Norm and Organizational Corruption*

The effectiveness of efficiency wage incentives is often jeopardized by perverse organizational corruption. We model organizational corruption as a phenomenon of social interaction and relate the substantial psychological role characterizing the social norm to the corruption problem. We find that if the status quo bribery rate within the firm is high, social norms can no longer serve as a sufficient sanction against a corrupt supervisor; pandemic organizational corruption tends to generate a critical mass effect--the snowball effect--which intensifies the corruption effect. This intensified effect, due to the snowballing character of social norms, may more than offset the usual incentive effect of wages, resulting in more widespread shirking in the firm. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

The turnover costs and the Solow condition in an efficiency wage model with intertemporal optimization

Abstract This paper sets out an intertemporal optimizing model embodying the efficiency wage hypothesis, and examines whether the Solow condition is valid. It is shown that, unless the turnover costs are absent and the voluntary quitting rate is independent from wage offer, the effort-wage elasticity is less than unity. Our result thus can be regarded as a theoretical solution of the Akerlof and Yellen criticism on the efficiency wage theory

Addictive behavior and endogenous growth

This paper sets up an endogenous-growth model in which the consumers preference is subject to habitual consumption, and examines how consumption habits will govern the rate of sustained growth. It is found that the habitual behavior may be either growth-enhancingor growth-reducing, depending upon whether the substitution between intertemporal consumption is inelastic and whether the consumption experience is harmful or beneficial to the agents. It is also found, given that the elasticity of intertemporal substitution is less than unity, that the learning speed of consumption habits has a positive (negative) impact on the balanced-growth rate if the consumption experience is harmful (beneficial) to the agents.

Anticipated Inflation in a Monetary Economy with Endogenous Growth

This paper makes a new attempt to investigate the role of anticipated monetary growth in economic growth. Combining the Barro (1990)-Rebelo (1991)-type endogenous growth model with Sidrauskis (1967) framework, we show that the pre-announcement of money supply behaviour may have significant effects on the rate of growth during the transition process. The key factor in determining adjustment patterns of the economy to anticipated monetary changes is the degree of relative risk aversion. However, changes in the rate of monetary growth do not affect the rate of long-run growth regardless of the degree of relative risk aversion.

Anticipated Environmental Policy and Transitional Dynamics in an Endogenous Growth Model

This paper makes a new attempt toinvestigate how an anticipatedenvironmental policy governs the transitionaldynamics of an economy when pollutionexternality is taken into account. Themodeling strategy we use is an AK technologyendogenous growth framework with an endogenousleisure-labor choice. It is found that, unlikeinelastic labor supply framework, a rise inpublic abatement expenditure will stimulate thebalanced economic growth rate. It is alsofound that public abatement technology plays animportant role in determining the transitionaladjustment of the economic growth rate inresponse to a pre-announced environmentalpolicy.

Profit sharing as a worker discipline device

Abstract A synthesis of profit-sharing and efficiency wage models is constructed to provide a preliminary account of how a firm determines its pay parameters, and why it chooses to be a profit-sharing or a fixed-wage firm. We find that the properties of the workers effort function crucially influence the firms choices between different compensation systems, and that the adoption of a profit-sharing scheme cannot guarantee the attainment of full employment. Other findings of the paper also seem to be very different from those of Weitzmans share model.

AN ENDOGENOUS GROWTH MODEL OF CAPITAL AND ARMS ACCUMULATION

This paper attempts to examine the effect of an anticipated foreign military threat on the steady‐state growth rate and the transitional behavior of the economy. The modeling strategy follows the Sandler and Hartley (1995) and Dunne et al. (2005) viewpoints to emphasize the role of national defense in affecting growth from the perspective of both the demand and the supply sides. We thus combine the public capital version of endogenous growth with a framework of competitive arms accumulation. It is found that the key factor determining the steady state and the transitional effects of a rise in the foreign military threat on the home weapon–capital ratio, the consumption–capital ratio, and the rate of economic growth, is the degree of relative risk aversion.