EQUILIBRIUM AND ECONOMIC GROWTH: SPATIAL ECONOMETRIC MODELS AND SIMULATIONS

Article Abstract:

Neoclassical theory assumes diminishing returns to capital and spatially constant exogenously-determined technological progress, although it is questionable whether these are realistic assumptions for modeling manufacturing productivity growth variations across European Union (E.U.) regions. In contrast, the model developed in this paper assumes increasing returns and spatially varying technical progress, and is linked to endogenous growth theory and particularly to `new economic geography' theory. Simulations, involving 178 E.U. regions, show that productivity levels and growth rates are higher in all E.U. regions when the financially assisted (Objective 1) regions have faster output growth. This also reduces inequalities in levels of technology. Allowing the core regions to grow faster has a similar effect of raising productivity growth rates across the E.U., although inequality increases. Thus, the simulations are seen as an attempt to develop a type of `computable geographical equilibrium' model which, as suggested by Fujita, Krugman, and Venables (1999), is the way theoretical economic geography needs to evolve in order to become a predictive discipline.

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HOUSING MARKET DYNAMICS UNDER STOCHASTIC GROWTH: AN APPLICATION TO THE HOUSING MARKET IN BOULDER, COLORADO

Article Abstract:

Recent housing-market studies have modeled slow stock and price adjustment with some success. However, the empirical procedures used in these models break down if housing stocks or prices are driven by stochastic growth. In this paper I suggest an error-correction model for analyzing housing supply and demand under conditions of stochastic growth for a regional housing market. The model is applied to the housing market in Boulder, Colorado from 1981 through 1995--a period of rapid growth in housing values in the area. Long-run housing supply and demand are shown to be inelastic with respect to changes in the price of housing. The results indicate that developers respond more accurately to housing-market disequilibrium attributable to supply-side disturbances than to disturbances generated by changes in the demand for housing. On the other hand, price appreciation is driven primarily by demand disturbances.

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TECHNICAL INEFFICIENCY AND PUBLIC CAPITAL IN U.S. STATES: A STOCHASTIC FRONTIER APPROACH

Article Abstract:

This paper estimates a translog stochastic frontier production function in the analysis of all 48 contiguous U.S. states in the period 1970-1983, to attempt to measure and explain changes in technical efficiency. The model allows technical inefficiency to vary over time, and inefficiency effects to be a function of a set of explanatory variables in which the level and composition of public capital plays an important role. Results indicate that U.S. state inefficiency levels are significantly and positively correlated with the ratio of public capital to private capital. The proportion of public capital devoted to highways is negatively correlated with technical inefficiency, suggesting that not only the level but also the composition of public capital influences state efficiency.

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