Gene Gruver

Optimal investment in pollution control capital in a neoclassical growth context

A neoclassical growth model is employed to study the optimal division of investment between pollution control capital and directly productive capital while simultaneously treating the saving rate as a policy variable to be varied to the optimal. The model treats pollution as a flow positively related to aggregate output, negatively related to the stock of pollution control capital, and having a negative effect on utility. Under the assumptions chosen, the optimal policy is an unbalanced one of specializing investment first in directly productive capital and subsequently in pollution control capital.

Teacher-student interaction: A game theoretic extension of the economic theory of education

Abstract This paper employs the ‘economic theory of education’ to consider the joint interactive choices of student and teacher. Game theoretic analysis is applied extending the work begun by Correa (1974) . It is shown that the relative degree of substitutability in the utility and achievement functions determines whether a student responds positively or negatively to the teachers greater effort or harder grading. Conditions for the existence and stability of a non-cooperative equilibrium are investigated. Due to the public good nature of student achievement, the non-cooperative equilibrium will result in insufficient academic effort being allocated to academic achievement for Pareto optimality; and therefore, there is a need for binding cooperative agreements.

Clusters, Agglomeration, and Economic Development Potential: Empirical Evidence Based on the Advent of Slab Casting by U.S. Steel Minimills

Ten new steel plants were constructed in the United States from 1989 to 2001, each taking advantage of new steel slab casting technologies that gave scrap-based minimills access to the flat-products market. This market had been served previously exclusively by ore-based integrated mills. Some of the new minimills were built in established steel industry agglomerations. Others were built in greenfield locations with little or no prior steelmaking activity. This research, based on direct observation and plant visits, brings new evidence to bear on the nature and importance of agglomeration economies associated with steel production by analyzing industry clusters related to the advent of slab casting by steel minimills. The authors find that industry clusters can play an important role in the process of market entry; however, certain product and firm characteristics can shape the nature of industry agglomerations and their effect on firms and regions.

Plant location and the advent of slab casting by U.S. steel minimills: An observation-based analysis ∗

Abstract The advent of slab casting for steel that is produced in electric furnaces resulted in a wave of new investments in the construction of steel minimills. From 1989 to 2001, 10 new plants were constructed in the United States on the basis of new technologies. Some were built in established steel industry agglomerations, while others were built in greenfield locations—regions that had little or no prior steelmaking activity. This research brings new evidence to bear on location decisions concerning modern steelmaking. The findings are based on direct observation and visits to the plants of all the new mills that were created by these investments. While the analysis reinforces the importance of transfer costs in decision making, it also argues that critical locational elements cannot be fully understood unless analyses take account of the characteristics of specific products, plants, and firms.

The US Regional Ferrous Scrap Model

The U.S. regional ferrous scrap model developed at the University of Pittsburgh is capable of simulating price interactions at a significant degree of geographic detail. In this model, estimates of the supply and demand for ferrous scrap in hundreds of local markets are used to estimate a set of equilibrium prices. The model can be used to simulate the impact of market changes such as new plant locations or transport rate adjustments on regional scrap prices. The analysis involved is based on realistic modeling of regional price interactions as well as careful attention to metallurgical relationships. The capability of the model provides a linkage between basic supply and demand conditions and an extensive network of regional scrap prices. Modeling simulations can be used to map price gradients across the United States based on very small county-based regions, providing useful information on spatial price differences.

The Application of the Leontief Input–Output Matrix in the Transition Process

Though input–output analysis has been widely applied, it faces serious problems in those socialist countries currently undergoing economic reform. This study focuses on exploring the limitation of the Leontief input–output matrix in the transition process from a centrally planned economy to a market economy and discussing the possible errors of using the traditional input–output coefficients in the dual price system. This article presents a new method to calculate the input–output coefficient which is applicable in the transition process. Based on Chinese statistical data of 1983, a comparison between the new input–output matrix and the traditional one was made through a computable general equilibrium model, and the differences between the two are presented in this paper.

Optimal R&D policy for a patent race with uncertain duration

Abstract We analyze a model with rival firms in a winner-take-all patent race in which the time of success is a random variable directly related to level of effort, a firm decision variable. At the symmetric Nash equilibrium, R&D effort varies directly with patent life, with benefits accruing to the successful firm, and with a change in the number of rivals. A cost-sharing subsidy induces an increase in effort, including the subsidy, but may result in a decrease in effort net of subsidy. In the centralized socially optimal version of the model the number of firms and the level of per firm effort are chosen optimally. We derive the characteristics of optimal patent life, fee for entry, and cost-sharing subsidy so that the competitive free-entry Nash equilibrium will replicate the socially optimal solution with respect to level of R&D effort and number of rival firms.

Rejoinder to Scott Duke Kominers

Scott Duke Kominers challenges our awareness of the importance that should be attached to explaining determinants of agglomerations in traditional industries, even though this is the primary motivation for our research. His assertion appears to be based on the omission of citations in our article to the literature on agglomeration indexes and the findings from this literature concerning the relative importance of agglomeration in traditional industries. We certainly do not cite the index literature, and reference to it would have added to the weight of the rather long list of articles that we do cite concerning agglomeration in traditional industry clusters. We wish to emphasize, however, that the motivation for our article is clear, and it is unchallenged by Mr. Kominers: Understanding the basis for clustering related to new plants in traditional industries is important, and necessary explanation requires deep knowledge concerning the nature of products, management goals, and firm characteristics. In turn, we challenge whether the application of agglomeration indexes offers explanation at any level. These descriptive devices point to patterns of market outcomes that demand explanation, but they do not offer explanation, per se. Finally, we believe that it is more accurate to characterize our methodology as comparative rather than case study. We take advantage of a particular event, the advent of a breakthrough technology, but we draw insight from a comparison of circumstances across 10 plants that owe their existence to this technology.