Norman Sedgley

The Geographic Concentration of Knowledge: Scale, Agglomeration, and Congestion in Innovation Across U.S. States:

Evidence of the importance of agglomeration economies in productivity is reported by a number of studies in regional economics. We extend the literature by looking into agglomeration and congestion in innovation and technological change using an endogenous innovation approach. It turns out that the geographic specificity of knowledge spillovers is also a central concern. Using data from U.S. states, evidence is found that knowledge spillovers are geographically concentrated but agglomeration economies far outweigh congestion effects. These results have important implications for new growth theory as well as regional economics because growth theorists have abandoned the scale implications of their models.

Prison's Dilemma: Do Education and Jobs Programmes Affect Recidivism?

This paper employs a hazard model to analyse the impact of education and two types of prison employment programmes on recidivism over a ten-year period for 4515 prisoners released from Ohio prisons in 1992. Estimations with a Weibull mixture model and propensity score approach provide two means for investigating self-selection bias. Selection bias is detected for participation in the most common prison job programme but has little effect on estimated marginal savings impacts of prison industry and education programmes. Estimates of the cost savings from postponing return to prison due to programme participation are provided. The potential for cost savings through decreasing or delaying return to prison is an important finding given the substantial and increasing cost of incarceration.

Vent for Surplus: A Case of Mistaken Identity

Adam Smiths theory of the gains from trade has caused a great deal of controversy among economic theorists. Throughout much of his work Smith argues that markets efficiently allocate resources. Smiths treatment of the gains from trade, however, is considered inconsistent with his system of natural liberty. This paper offers a new interpretation of the vent-for-surplus model. It is argued that Smiths theory of trade should be considered as an extension of his domestic theory of markets and his theory of productive and unproductive labor. Once interpreted in this light, no inconsistency is found between Smiths theory of trade and his system of natural liberty.

THE DYNAMIC PROPERTIES OF ENDOGENOUS GROWTH MODELS

This paper explores the dynamics of semiendogenous versus fully endogenous growth models in “lab equipment†specifications of the models with expanding sectors. Capital is allowed to accumulate and is used, together with other inputs, to produce new knowledge. The stability of the steady state path is found to be determined by the inequality and/or knife-edge restrictions needed to produce steady state growth. This paper takes the ratio of the shadow price of capital to knowledge and the level of consumption as jump variables. Semiendogenous growth models lead to a 4 A— 4 dynamic system where the sign of the coefficient matrix of the log linearized dynamic system is indefinite, leading to a potential for both stable and unstable equilibria. The knife-edge restrictions needed to generate policy influences on growth are shown to be restrictions that reduce the system to 3 A— 3 with a positive definite coefficient matrix, thereby guaranteeing a globally stable equilibrium. Implications for empirical testing are addressed.

Macroeconomic Shocks and Corporate R&D

Abstract This paper investigates the impact of output and credit market shocks on R&D spending in advanced economies and builds on the commonly accepted view that credit constraints lead to procyclical R&D spending. A theoretical model is developed where output and credit shocks are treated separately, though these shocks may be highly correlated. The estimation procedure utilizes a panel vector autoregression (VAR) in order to empirically identify the role of credit market shocks separately from the output shocks more commonly studied in the existing literature. The primary empirical findings can be summarized as follows: (1) R&D responds pro-cyclically to output shocks at the macroeconomic level, and (2) R&D co-moves positively with credit. More concretely, the results indicate that negative output shocks induce a simultaneous and subsequent contraction in credit and R&D consistent with a model where credit constraints drive cyclical adjustments to R&D. The impact of output and credit shocks on R&D are economically significant and a simulation exercise suggests the shocks associated with the global financial crisis have reduced US R&D by 10% relative to the pre-crisis path.

The Roles of Innovators and Labor in a Schumpeterian Factor Endowments Based Model of Intra-industry Trade

This paper builds a model of Schumpeterian innovation and trade that emphasizes endowments of innovators and labor as a key factor in determining the pattern of trade. The model suggests a strong complementarity between intra-industry and inter-industry trade. The pattern of inter-industry vs intra-industry trade is analyzed using the Grubel–Lloyd index. The theoretical model predicts that the prominence of intra-industry trade is a nonlinear function of the ratio of the proportion of world knowledge domestically generated to the domestic share of the world labor supply. Strong empirical evidence for this key result is presented and implications are discussed.

Exploring Fiscal Policy at Zero Interest Rates in Intermediate Macroeconomics

Since the financial meltdown of 2007, advanced macroeconomic theory has delved more deeply into the question of the appropriate fiscal policy when the nominal interest rate is close to or at zero percent. Such analysis is typically conducted with the aid of New Keynesian Dynamic Stochastic General Equilibrium models. The policy implications are, in some cases, surprising. Multipliers can change by large magnitudes, and the signs of some tax multipliers are reversed. The authors show how these results can be clearly presented to an intermediate undergraduate audience within the standard IS-MP and AD-AS framework of Jones (2011).