Milton H. Marquis

NEW TECHNOLOGY SPILLOVERS INTO THE PAYMENT SYSTEM

In modern economies, multiple means of payment associated with the exchange of goods coexist. This paper examines one such payment system in an economy with endogenous technological change. It consists of money and a costly accounting system that receives spillovers from new technologies. Positive nominal interest rates are shown to produce welfare losses by inducing a reallocation of human capital into the payment system and out of the production of final goods and new knowledge. The former substitution produces level effects on output and the latter produces growth effects. At higher levels of inflation, these marginal effects are seen to be weaker. Copyright 1994 by Royal Economic Society.

Real interest rates and endogenous growth in a monetary economy

Abstract In endogenous growth models where the engine of growth is human capital acquired via formal education, inflation taxes may raise or lower real interest rates depending upon whether or not physical and/or human capital are liquidity constrained. Cases are examined.

Home production with endogenous growth

Abstract Benhabib et al. (1991) and Greenwood and Hercowitz (1991) demonstrate that general equilibrium Beckerian home production models that incorporate separate technology shocks to the home and market production functions are able to explain either the comovements in employment across consumption and investment sectors of the economy or the comovement in output across market and home investment sectors, but not both simultaneously. This paper demonstrates that these comovements can be resolved by introducing endogenous growth into the model, while retaining only a single technology shock to market production. The additional margin for allocating time between formal training and market activities is sufficient to bring about the observed positive comovements in employment and output across sectors.

Transitional and Steady-state Costs of Disinflation When Growth is Endogenous

In a monetary version of the Uzawa (1965)-Lucas (1988) model of endogenous growth, this paper illustrates how a credible policy of rapid disinflation can induce temporary declines in employment and output, with the former exhibiting a significant degree of persistence; however, these temporary declines in employment and output are not associated with any nominal rigidities in the economy, and therefore do not represent dead-weight losses that occur along the transition path, but are instead a part of an optimal response to the policy change. The measured welfare benefits of disinflation are seen to be higher when the transition path is taken into account. Copyright 1999 by The London School of Economics and Political Science

Note on human capital externalities

Abstract This paper provides an estimate for the magnitude of the externality generated by human capital investment that is required to fit the endogenous growth model of Lucas (1988). The model is calibrated to fit selected stylized facts of the postwar U.S. economy, including the behavior of a human capital series that was constructed by Jorgenson, Gollop, and Fraumeni (1987) and adjusted by Bishop (1989) for changes in the quality of the U.S. educational system. This calibration requires an externality that is somewhat larger than previously estimated. It also indicates that some “learning-by-doing” is required for the model to produce a reasonable allocation of nonleisure time between work and formal education.

On Using Relative Prices to Measure Capital-specific Technological Progress

Recently, Greenwood, Hercowitz and Krusell (GHK) have identified the relative price of (new) capital with capital-specific technological progress. In a two-sector growth model, however, the relative price of capital equals the ratio of the productivity processes in the two sectors. Restrictions from this model are used with data on wages and prices to construct measures of productivity growth and test the GHK identification, which is easily rejected by the data. This raises questions about various measures of the contribution that capital-specific technological progress might make to the economy. This identification also induces a negative correlation between the resulting measures of capital-specific and economy-wide technological change, which potentially explains why papers employing this identification find that capital-specific technological change accelerated in the mid-1970s. We impose structure on the productivity measures based on their long run behavior and find evidence of a slowdown in productivity in the 1970s that is common to both sectors and an acceleration in the mid-1990s that is exclusive to the capital sector.

Formal Training, On-the-Job Training and the Allocation of Time

A macroeconomic model is developed that incorporates a technology for on-the-job training into the endogenous growth model of Lucas (1988) and Uzawa (1965) in a manner that is consistent with the human capital explanations of certain robust features of wage profiles from the US economy. The model predicts procyclical investment in human capital through on-the-job training and countercyclical investment in human capital through formal training.

Capital in the Payments System

Capital is required to support the payments system in modern economies with well developed financial markets. Financial innovations raise the marginal product of capital in this usage. This suggests that there are general equilibrium consequences associated with an optimal selection of a payments system that includes barter, money, and a capital-based accounting system. In this paper, goods are differentiated with respect to the medium of exchange associated with their acquisition, which is endogenously determined as a consequence of explicit trading frictions. The response of the economy to endowment, production, and payments system shocks, including financial innovations, is examined. Copyright 1992 by The London School of Economics and Political Science.

Cash management and the demand for money by firms

Abstract This paper examines the implications for a firms demand for money of cash management innovations that make it feasible for the firm to alter its requirements for transaction balances by utilizing cash management services which are either purchased from outside suppliers or produced in-house. An optimization model of the money demand/cash management decision is developed and analyzed. The results indicate that this added flexibility lowers the responsiveness of money demand to changes in the scale and variability of the firms transaction, and increases the interest rate sensitivity of its demand for money. Regression results consistent with the theoretical results are presented.

Intra-National Effects of a Countervailing Duty on the United States/Canadian Hog Market

A countervailing duty (CVD) was placed on Canadian hog imports into the United States beginning in 1985. Not surprisingly, the CVD reduced Canadian hog prices relative to U.S. hog prices, but the relative impact varied geographically. The CVD created incentives for downstream substitution of Canadian pork products, so relative hog prices were reduced more in Canadian provinces with limited processing capacity. Multivariate time series analysis, including an examination of short-run dynamics, reveals differential dynamic impacts of U.S. prices in Canadian sub-markets after introduction of the CVD.