New U.S. evidence from NIPA contradicts some of the well-known Kaldorstylized facts, and call for a reformulation of the modern theory ofeconomic growth. Among these new facts, two must be stressed: A permanentdecline in the relative price of durable goods, and a permanent increase inthe real equipment to real GDP ratio. To be consistent with these new facts,growth models must include at least two sectors and address the problem ofdefining aggregate output. In this paper, the economic theory of indexnumbers is used to define the growth rate of real output in a growth modelwith embodied technical change. The main findings are: (i) NIPA’smethodology measures growth in accordance with the economic theory on indexnumbers, and (ii) when the growth rate is measured as in NIPA, thecontribution of embodied technical change to per capital GDP growth in theU.S. is 69%, which reinforce the claim that embodied technical change isimportant for growth.

The evidence on U.S. investment in high-tech equipment and laborproductivity in the 1990s is briefly reviewed and some implicationsdiscussed. First, capturing the role of information technologies has raiseda number of important measurement issues, which have led to a change in theconstruction of aggregate real series in the U.S. national accounts, such asreal GDP. Second, the recent period provided an important confirmation fortraditional neoclassical theories of business investment and productivity.Third, there is a discussion of what type of theoretical and empiricalmodels of economic growth are likely to prove helpful in the future.

In this article I show that a permanent possitive shock on the rate ofinvestment-specific technical progress might cause, at least in the shortrun, a fall of the growth rate of both output per capita and total factorproductivity, as measured by the Solow residual. Several simulations areperformed which show that the extent of the Productivity Slowdowndrastically depends on the elasticity of the marginal cost of producing aunit of capital good with respect to the rate of investment-specifictechnical progress.

This paper presents a growth model in which property rights are insecure andcostly to enforce. Losses of property provide the impetus to establishinstitutions which seek to enforce property rights. Institutions are shownto implement policies that enforce property rights. The model establishesthat economies in which the institutional structure does not adequatelyprotect property rights grow slowly, or not at all, while countries withbetter property rights protection grow in accordance with the standardneoclassical model. Because income inequality is a primary incentive toviolate another’s property rights, the model also provides a positive theoryof income redistribution. Empirical tests of the model’s predictionsdemonstrates that government expenditures that enforce property rights raiseper capita income growth.

We investigate and interpret some of the properties of a multi-sectoralgrowth model with endogenous embodied technical change in the light of theongoing debate on the viability of an IT based growth regime. In particular,we illustrate the two main views of the 1995-2000 IT boom in the USA. If itonly comes from productivity gains in the production of hardware and/orsoftwares, and even though these gains are permanent, the story could bejust one of temporary massive capital deepening and no long term growtheffect. In contrast, if this boom relies on productivity gains in R&D,there is room for a permanent IT growth regime associated with a permanentaccumulation of both hardware and software.

We investigate the impact of innovative work practices on workingconditions. We use a unique French dataset providing information onindividual workers for year 1998. New work practices which play a key rolein the success of the new economy, include job rotation and the use ofquality norms. Working conditions are captured by occupational injuries aswell as indicators of mental strain. Using Rubin’s causal model, we showthat, even after controlling for employee and job characteristics andcorrecting for sample selection bias, workers involved in the new workpractices still face working conditions that are significantly worse thanthose of non innovative workers.

In this paper, we study how, depending on the sociological and technologicalcharacteristics of the economy, a “unified” or, on the contrary, astratified way of communicating may emerge. Communication takes place lessefficiently in the stratified case, because people who spend differentlanguages cannot communicate with each other.

The main results of the paper are as follows. First, the equilibrium degreeof literacy is suboptimally low because of the “thin market externality”associated with the language. Second, social stratification generateslinguistic stratification and the associated output and welfare losses dueto communication failure. Third, because of the thin market externality,there is too much stratification. Fourth, specialized technologies are lessvulnerable to stratification than flexible ones, or, equivalently, increasedflexibility may have adverse effects on output when society isstratified.

This paper outlines a theoretical framework to think about the role of NITon earnings inequality at a domestic level. Two main ideas inspired a growthmodel. First, to be connected is only meaningful for people who are alreadyliterate. Second internet, like the invention of printing, permits toincrease the part of knowledge that an individual can use. The results areobtained in terms of the Lorenz criterion. The role of some key parametersis emphasized like the elasticity of substitution between talent andknowledge. Two forces are at work. On the one hand, the gap between literateand non literate people will increase. On the other hand, the incentive tobecome literate increases. Policy implications are derived.

In this paper we examine the effect of innovation on job creation and jobdestruction in Spanish manufacturing. Our empirical analysis is based onfirm-level longitudinal data from which we have information on employmentand innovation activity. The estimation approach consists of a two-stepprocedure that takes into account the fact that firms endogenously choosepositive, negative or zero growth in employment, in which the selectionmechanism is an ordered probit. Our results point out the importance ofinnovation variables on employment growth: innovative firms create more jobs-and destroy fewer- than non-innovative, and the degree of technologicaleffort has a strong positive effect on net employment creation.

This paper explores the relationship between employment protectionlegislation (EPL) and the share of employment in the IT sector. Evidencefrom several OECD countries suggests that the importance of the IT sector issmaller in economies with high levels of EPL than in economies with lowlevels. This shows up in the amount of resources dedicated to research on ITas well as in the share of employment in the sector. A simple model isprovided to explain these facts. EPL affects both labor supply and labordemand in the same way resulting in lower employment equilibrium levels.

We build a model of endogenous destruction with credit and labor marketimperfections, represented by a matching process between financiers andentrepreneurs on one hand, and entrepreneurs and workers on the other hand.Business creation, credit opening and job destruction represent three activemargins of the model. Financial imperfections lead to financial fragility.This implies the existence of a forth latent margin whichmay be activated in the case of repudiation of financial contracts. Thisparadigm is applied to the recent development of the U.S. economy. Anempirical test in panel of OECD countries further suggests the importance ofventure capital for macroeconomic variables.

We study the relation of financial contracting and the pace of technologicaladvance in a dynamic agency theoretic model. A firm which is financed byoutside shareholders but run by managers has the prospect of a processinnovation which arrives stochastically. Adopting the innovation requiresfiring old management and hiring new with skills appropriate for the newtechnique. We show that subgame perfect equilibria in this game can be oftwo types. In “entrenchment” equilibrium once the new technique has beenannounced old style management raises their dividend payout sufficiently topreempt the innovation. In “maximum rent extraction” equilibrium’ managersare unable or unwilling to match the impending productivity improvement andinstead respond by increasing their perquisites for the remaining time oftheir tenure. We show that both equilibria involve several types ofinefficiencies and can result in underinvestment in positive NPV projects.We discuss the role of financial innovation in reducing the inefficienciesidentified.

This paper deals with some issues that recently arised from the puzzlingevolution of Stock Markets during the nineties, in particular from the sharpincrease of equity prices on the Nasdaq. We examine the hypothesis accordingto which such a bullish market could be explained by investors’ increasinglyoptimistic expectations about the ‘New economy’ perspectives. We thenanalyse to what extent the evolution of financial markets may have recentlyaffected aggregate demand in a stronger way than in the past. Using a simpleaggregate model with rational expectations, we finally show how monetarypolicy decisions should be influenced by such changes in the behaviour ofinvestors and consumers.

This paper proposes a model of industrial innovation linked to financialliberalisation where agents are characterised by heterogeneous innovativeabilities. Individual researchers may either be employed by a large firm andwork together on the firm’s innovative project, or they may alternativelyset up an individual firm in order to commercialise their own innovation.The large firm’s hiring decisions and the individual researcher’s decisionto set up his own firm depends on the researcher’s innovative ability and onthe financial conditions. Financial liberalisation leading to a lower costof setting up a small firm will affect the size of the large firm andincrease the number of small technology firms. A drop in the cost ofstarting a small firm may increase income inequality.

The most important claim of the ‘new economy’ is that a new wave oftechnologies is lifting potential GDP. The effects were first seen in theUnited States. In the first half of the nineties, information andcommunication technologies (ICT) stimulated capital accumulation andemployment, without any visible impact on productivity growth - theso-called ‘Solow paradox’. Starting in the middle of the decade, thelong-awaited increase in productivity growth at last came about: from 1995to 2001, average labour productivity in the US grew at 2.4%, one percentagepoint above the rate that prevailed between 1973 and 1995.