Serie 1993

93-01 Boldrin, M., "Public Education and Capital Accumulation"

I study an overlapping generations model where physical and human capitals are inputs of production that can be accumulated by witholding resources from current consumption. Human capital is the output of a schooling system which can be financed either by private expenditures or by taxes on current income or by a combination of both. In a political equilibrium with majority voting, public school financing appears as an instrument to solve a "free rider problem". By improving the skills of next period's workers it increases the expected return on capital, something which cannot be achieved by means of private school only. Public schools turn out to be an instrument for intergenerational income redistribution and they may be preferred to private schools just for this motive.

93-02 Santos, M., "Smooth Dynamics and Computation in Models of Economic Growth"

In this paper we give an overview of the differentiability properties of the value and policy functions of dynamic programming. Based upon the differentiability analysis, we also establish approximation estimates for the value and policy functions of a discretized model amenable to the computation of optimal solutions.

93-03 Edlin, A. and Epelbaum M., "Rivalrous Benefit Taxation: "The Independent Viability of Separate Agencies or Firms"

We ask when firms with increasing returns can cover their costs independently by charging two-part tariffs (TPT's)---a condition we call independent viability. To answer, we develop notions of substitutability and complementarity that account for the total value of goods and use them to find the maximum extractable surplus. We then show that independent viability is a sufficient condition for existence of a general equilibrium in which regulated natural monopolies use TPT's. Independent viability also guarantees efficiency when the increasing returns arise solely from fixed costs. For arbitrary technologies, it ensures that a Second Welfare Theorem holds.

93-04 Santos, M. and Woodford M., "Rational Asset Pricing Bubbles"

This paper provides a fairly systematic study of general economic conditions under which rational asset pricing bubbles may arise in an intertemporal competitive equilibrium framework. Our main results are concerned with nonexistence of asset pricing bubbles in those economies. These results imply that the conditions under which bubbles are possible --including some well-known examples of monetary equilibria-- are relatively fragile.

93-05 Epelbaum M., "Menu Competition: The Case of Nonlinear Pricing"

Models of linear price competition predict that competing firms always have incentives to merge. Moreover, if the goods sold are substitutes (complements) mergers are socially detrimental (beneficial). In this paper we analyze these conjectures when the firms are allowed to set non-linear prices. We find that when the goods are substitutes mergers still improve firm's profits but do not induce inefficiencies. Moreover, when the goods are complements, mergers yields no private or social gains since the merged firms' behavior mimics that of competing firms. While the model developed here is posed in terms of firms that use non-linear prices, the abstraction is applicable to many circumstances where parties compete via menus.

93-06 Ramos-Francia, M., "The Demand for Money in an Unstable Economy: A Cointegration Approach for the Case of Mexico"

Recently, much of the empirical research on money demand has been centered on the question of whether the demand for money is a stable relationship. The importance of this issue is underscored when modeling the demand for narrow money in countries such as Mexico, given that its economic environment is relatively more volatile than in industrialized economies. In this paper, we apply the Hendry methodology to develop a constant, data coherent demand for money equation for Mexico. The obtained specification appears to have desirable statistical properties as well as being remarkably constant in the face of a relatively volatile economic environment.