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
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.