Towards Microeconomics of Innovation: Growth Engine Hallmark of Market Economics

WILLIAM J. BAUMOL

The Bourgeoisie (i.e., capitalism) cannot exist without constantly revolutionizing the instruments of production. Conservation of the old modes of production in unaltered form was, on the contrary, the first condition of existence for all earlier industrial classes. The bourgeoisie, during its rule of scarce one hundred years has created more massive and more colossal productive forces than have all preceding generations together. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts and Gothic cathedrals...[Marx and Engels, 1847].

Competition and Collusion in a Government Procurement Auction Market

SRABANA GUPTA

This paper tests the structure performance hypothesis by examining a highway construction industry in Florida. In the first-price sealed bid auction literature, there is little evidence on how many bidders are required for these markets to be competitive. Two different indicators are used to capture the transition from collusion to competition---a discontinuous effect of the number of bidders on winning bid price, and an associative effect of repeat bidding of a contractor with the same set of firms. The results suggest that winning bids decrease as the number of bidders rises until there are about six to eight firms. Since subsequent entry has no effect on the winning bid price, it is concluded that the highway construction market becomes competitive with about eight bidders. (JEL: D43, D44, L13, L74) Atlantic Econ. J., 30(1): pp. 13-25, March. 02. ©All Rights Reserved

A Heckscher-Ohlin-Samuelson Interpretation of the Labor-Environmental Coalition in Seattle

ROBERT E. KOHN

The coalition of North American labor unions and environmental organizations that joined in Seattle in 1999 is examined in the context of a Heckscher-Ohlin-Samuelson simulation in which a labor abundant developing country, with a comparative advantage in a globally polluting industry but a weak environmental policy, endeavors to export some of the output of that industry to a capital abundant industrialized country but is thwarted by a trade sanction that requires it to adopt the strong environmental policy of the industrialized country as a precondition for trade. Labor unions in the industrialized country and environmental organizations both gain when the developing country complies with the sanctions but lose out when the World Trade Organization overrules the sanctions as barriers to free trade. (JEL F11, Q25) Atlantic Econ. J., 30(1): pp. 26-33, March. 02. ©All Rights Reserved

Asymmetric Wage Indexation

JAMES P. COVER AND DAVID D. VAN HOOSE

Models of wage indexation uniformly have been based on the simplifying assumption that nominal wages adjust upward or downward symmetrically with unexpected price increases or decreases. Indexation typically is asymmetric in actual contracts, however. Wages are indexed to price increases but not to price reductions. This paper analyzes a macroeconomic model with asymmetric indexation. On the one hand, this paper finds that when stable equilibria supporting use of such asymmetrically indexed contracts exist, the result is an unambiguous downward bias in the base contract wage, because workers must pay a premium for insurance against real wage reductions that unexpected inflation otherwise would induce. On the other hand, the paper concludes that the likelihood of existence of stable equilibria supporting positive wage indexation generally declines as aggregate demand variability rises relative to the variability of aggregate supply. This may help explain why relatively low levels of wage indexation actually are observed in nations with relatively contained aggregate demand volatility. (JEL E24) Atlantic Econ. J., 30(1): pp. 34-47, March. 02. ©All Rights Reserved

Human and Knowledge Capital: A Contribution to the Empirics of State Economic Growth

RONALD L. MOOMAW, J. K. MULLEN, AND MARTIN WILLIAMS

Considerable debate persists over the prospects for regional economic convergence and the nature of economic growth in a sub-national context. Although endogenous growth theories have been invoked to explain persistent regional income gaps and related empirical phenomena, traditional models have yet to be fully discredited. This paper utilizes a more complete specification of a traditional growth model in an effort to better explain variations in regional per capita income and growth levels. The authors' effort involves a panel analysis of U.S. Gross State Product data that enables controlling for variations in underlying production technologies. They focus on the important role of both human and knowledge capital in specifying regional dimensions of productivity and growth. The use of alternative and unique definitions for knowledge capital inputs leads to an improved empirical understanding of the regional growth process. (JEL R) Atlantic Econ. J., 30(1): pp. 48-60, March. 02. ©All Rights Reserved