David Ulph

On Indices for the Measurement of Poverty

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Global Warming, Irreversibility and Learning

A number of economists have argued that the literature on the irreversibility effect implies that current abatement of greenhouse gas emissions should be greater when there is the possibility of obtaining better information in the future about the potential damages from global warming than when there is no possibility of obtaining better information. In this paper we show that even the simplest model of global warming does not satisfy either of Epsteins (1980) sufficient conditions, so it is not possible to use Epsteins analysis to tell whether the irreversibility effect applies to models of global warming. We derive an alternative sufficient condition for the irreversibility effect to hold.

Strategic R&D Policy

The outcome of technological competition between firms (or countries) depends on the resolution of two forces: the profit incentive and the competitive threat. This is illustrated using a simple duopoly model. This model is then used to analyze two policy issues: subsidizing R & D and collaborative research ventures. In evaluating the second of these, some use is made of numerical simulations.

Sequential Product Innovation and Industry Evolution

A certain sequence of innovations in a vertically differentiated good is considered. Two firms are engaged in a series of bidding games to acquire the (infinitely- lived) patents to these. Managerial diseconomies restrict firms to producing a single good which is chosen optimally from the set of patents owned by the firm. Product market equilibrium is Bertrand. Two theorems provide (1) a sufficient condition for the current leader to be overthrown (action-reaction) and (2) a necessary and sufficient condition for persistent dominance. An illustrative example shows that sequences satisfying these conditions can always be constructed. Copyright 1987 by Royal Economic Society.

Labour markets, bargaining and innovation

Much of the recent empirical work on the impact of unions on RD (ii) under some circumstances an increase in union strength can make both firms and unions worse off. We survey a more recent theoretical literature which takes account of the fact that R&D is often undertaken for strategic reasons by firms that are in competition with one another. We show that in this framework the prevailing theoretical paradigm may be overturned. Thus when firms and unions can enter into long-term bargains then an increase in union strength will increase (decrease) R&D spending if successful innovation causes employment to rise (respectively fall). However, when R&D falls then this increase in union strength can cause both firms and unions to be better off. When firms and unions engage in short-term bargaining then an increase in union bargaining strength will cause R&D to fall when bargaining is over wages alone. However, when bargaining takes place over wages and employment, then, if unions care a lot about employment, the relationship between union strength and R&D is inverse U-shaped.

Strategic Innovation and Strategic Environmental Policy

We know from the work of Barrett (1992) that strategic trade considerations will lead governments to impose environmental taxes too low a rate (below marginal damage) when they are acting non-cooperatively, and at too high a rate when they are acting cooperatively. It is sometimes thought that if firms were engaged in R&D competition then the strategic considerations would go the other way round, and that governments, acting non-cooperatively would set environmental taxes that were too high so as to encourage their firms to gain a strategic advantage by being forced to do additional R&D. This paper examines the argument in the context of two models of R&D competition: a non-tournament model where firms can innovate simultaneously, and a tournament model where firms are in a race to be the sole successful innovator. In both cases it is shown that the strategic considerations are more complex than in the simple Barrett model, but that there is no clear presumption that non-cooperation will produce excessively high taxes. More specifically, since firms themselves undertake R&D for strategic considerations, the factors that governments should take into account in setting taxes are strategic considerations ignored by firms. So, for example, since tournament models of R&D competition typically produce an excessively high level of R&D spending, then, other things equal, governments acting non-cooperatively will still want to set lower taxes than under cooperation, since they do not wish to increase the extent of over-investment.

Organization Design and Information-Sharing in a Research Joint Venture with Spillovers

The paper presents a non-tournament model of process innovation with spillovers in the R&D process when firms engage in Cournot competition in the product market. It is shown that careful modelling of information-sharing and coordination of research activities leads to the conclusion that a Research Joint Venture (RJV) will economize on scarce R&D resources. There is an analysis of the effects of R&D cooperation, in the form of an RJV, on the organization of R&D, i.e. the efficient number of research labs. R&D expenditure, which precedes production, results in lower unit costs. R&D is modelled as a two-stage process: in the first stage, firms incur expenditure that will generate new knowledge, while in the second stage this knowledge is employed to reduce unit costs. A distinction is made between single and complementary research paths. It is shown that the RJV will operate one lab in the case of a single research path exploiting its coordination advantage. In the case of complementary research paths the number of labs the RJV will operate crucially depends on the stage of the R&D process at which diminishing returns occur: it will operate both labs when diminishing returns occur at the first stage (creation of knowledge), while it will be indifferent as to the number of labs, one or two, when diminishing returns occur in the second stage (cost reduction).

Measuring Income and Measuring Sustainability

We examine what interpretation can be given to inclusive income, understood to be consumption plus the value of the net increase in all relevant capital stocks. We introduce the concept of instantaneously constant value income, defined as the maximum amount the economy can consume at a moment of time and keep the expected present value of utility of current and future generations constant. We argue that this income concept captures some of the concerns underlying sustainability. Our main result is that inclusive income equals instantaneously constant value income. We show that this result holds in a very general setting and, in particular, carries over to models incorporating technological progress when such progress can be captured by augmented stocks of knowledge. An important implication of our main result is that it provides a very simple method for deriving inclusive income, which does not involve any linearization of the Hamiltonian.

The determination of R&D : empirical evidence on the role of unions

Abstract This paper examines the empirical evidence of the role of union bargaining on innovation. We review the existing empirical evidence and emphasis some of the problems with the theoretical assumptions. We outline a simple model of strategic RD (b) the union bargains only over wages.

Strategic Innovation with Complete and Incomplete Labour Market Contracts

In a model of strategic RD (ii) the variance of employment is higher under complete contracts. Copyright 2001 by The editors of the Scandinavian Journal of Economics.