Dynamic Complementarity Research Articles

Credit market imperfection, labor supply complementarity, and output volatility

This paper argues that output volatility depends on the degree of credit market imperfection. In the early stages of financial development, agents are constrained in their borrowing ability. As a result, the individual savings, affected by the labor supply, play a dual role in the economy, having repercussions on the interest rate. On the one hand, high savings imply high investment, low marginal product of capital and thus low interest rate. On the other hand, high savings affect the agents' ability to run highly productive investment projects, which increases the interest rate. When the former effect is dominant, a dynamic complementarity between individual and aggregate labor supply arises. This leads to a local and global indeterminacy of equilibrium paths. If the borrowing constraint is relaxed, the complementarity between individual and aggregate labor supply decisions weakens, equilibrium becomes globally unique and the possibility of having aggregate fluctuations in output disappears.

Adaptation for Mitigation

This paper develops a dynamic model consisting of two regions (North and South), in which the accumulation of human capital is negatively influenced by the global stock of pollution. By characterizing the equilibrium strategy of each region, we show that the regions’ best responses can be strategic complements through a dynamic complementarity effect. The model is used to analyze the impact of adaptation assistance from North to South. It is shown that North’s unilateral assistance to South (thus enhancing South’s adaptation capacity) can facilitate pollution mitigation in both regions, especially when the assistance is targeted at human capital protection.

Arab Countries Between Winter and Spring: Where Democracy Shock Goes Next!

We present new and rigorous mechanisms - a major weakness of the extant literature till date - to study spatiotemporal dynamic spillover effects of democratic shocks on cross-country economic growth in general and in Arab Spring, in particular. As a centrality of our research, we investigate how democratic shocks occurring in the ‘proximity’ of another country, is likely to trigger similar institutional reforms and growth upsurge in a system of interdependent economies. We define proximity in economic and socio-cultural sense and construct a distance metric based on these measures to estimate dynamic effects of (democratic) shocks. A spatial vector autoregressive framework is developed to study the first stage of dynamic complementarity with respect to democratic distance. Detailed response of democratic shocks and the transmission mechanism is modelled by Global Vector Autoregression method. Our work reveals discrete changes in regimes that run counter to the dominant aggregate trends of democratic waves or sequences, demonstrating how the ebb and flow of democracy varies among the world’s regions. The main finding suggests that the current revolution waves in the Arab World can be understood in light of the economic situation in a given country. More specifically, we find that high and upper middle income countries are immune to the recent democratic shock transference, whereas the lower middle and low income countries seem to be perfect candidates of another revolutionary wave.

Financial systems and economic growth in South Africa: a dynamic complementarity test

This study examines the relationship between banks, stock markets and economic growth in South Africa. The study attempts to answer one critical question: are stock markets and banks complementary to one another in the process of enhancing economic growth? The complementarity between the stock markets and banks is examined by including a set of interactive terms in a standard growth model, alongside bank development and stock market development proxies. In order to test the robustness of the results, three proxies of stock market development have been used, namely stock market capitalization, stock market traded value and stock market turnover – against the ratio of bank credit to the private sector, a proxy for bank-based financial development. The economic growth is, however, proxied by real GDP per capita. Using the ARDL-Bounds testing procedure, the study finds that the complementarity between stock market development and bank-based financial development is weak and sensitive to the proxy used to measure stock market development.

The Emergence of Political Accountability*

Abstract When and how do democratic institutions deliver accountable government? In addressing this broad question, we focus on the role played by political norms—specifically, the extent to which leaders abuse office for personal gain and the extent to which citizens punish such transgressions. We show how qualitatively distinct political norms can coexist because of a dynamic complementarity, in which citizens’ willingness to punish transgressions is raised when they expect such punishments to be used in the future. We seek to understand the emergence of accountability by analysing transitions between norms. To do so, we extend the analysis to include the possibility that, at certain times, a segment of voters are (behaviorally) intolerant of transgressions. Our mechanism highlights the role of leaders, offering an account of how their actions can instigate enduring change, within a fixed set of formal institutions, by disrupting prevailing political norms. We show how such changes do not depend on “sun spots” to trigger coordination, and are asymmetric in effect—a series of good leaders can (and eventually will) improve norms, whereas bad leaders cannot damage them.

On a new class of differential variational inequalities and a stability result

This paper addresses a new class of differential variational inequalities that have recently been introduced and investigated in finite dimensions as a new modeling paradigm of variational analysis to treat many applied problems in engineering, operations research, and physical sciences. This new subclass of general differential inclusions unifies ordinary differential equations with possibly discontinuous right-hand sides, differential algebraic systems with constraints, dynamic complementarity systems, and evolutionary variational systems. The purpose of this paper is two-fold. Firstly, we show that these differential variational inequalities, when considering slow solutions and the more general level of a Hilbert space, contain projected dynamical systems, another recent subclass of general differential inclusions. This relation follows from a precise geometric description of the directional derivative of the metric projection in Hilbert space, which is based on the notion of the quasi relative interior. Secondly we are concerned with stability of the solution set to this class of differential variational inequalities. Here we present a novel upper set convergence result with respect to perturbations in the data, including perturbations of the associated set-valued maps and the constraint set. Here we impose weak convergence assumptions on the perturbed set-valued maps, use the monotonicity method of Browder and Minty, and employ Mosco convergence as set convergence. Also as a consequence, we obtain a stability result for linear complementarity systems.

Self-Fulfilling Credit Cycles

In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable dynamic general equilibrium model in which unsecured firm credit arises from self-enforcing borrowing constraints, preventing an efficient capital allocation among heterogeneous firms. Unsecured credit rests on the value that borrowers attach to a good credit reputation which is a forward-looking variable. We argue that self-fulfilling beliefs over future credit conditions naturally generate endogenously persistent business cycle dynamics. A dynamic complementarity between current and future borrowing limits permits uncorrelated sunspot shocks to unsecured debt to trigger persistent aggregate fluctuations in both secured and unsecured debt, factor productivity and output. We show that these sunspot shocks are quantitatively important, accounting for around half of output volatility.

Patent Races with Dynamic Complementarity

Recent models of multi-stage R&D have shown that a system of weak intellectual property rights may lead to faster innovation by inducing firms to share intermediate technological knowledge. In this article I introduce a distinction between plain and sophisticated technological knowledge, which has not been noticed so far but plays a crucial role in determining how different appropriability rules affect the incentives to innovate. I argue that the positive effect of weak intellectual property regimes on the sharing of intermediate technological knowledge vanishes when technological knowledge is sophisticated, as is likely to be the case in many high tech industries.

Family Health, Children’s Own Health, and Test Score Gaps.

Gaps in educational performance between whites and racial minorities are not present at early ages but do emerge early in the schooling years and increase over time (Roland Fryer and Steve Levitt 2006, forthcoming). James Heckman (2007) assembles evidence from both the bio logical and social sciences which highlights the dynamic complementarity of the learning pro cess?the notion that early learning is vital for learning later on. A recent literature in econom ics finds evidence that the returns to early invest ments in children yield high returns to society (Heckman and Dimitriy Masterov 2007). That educational gaps exist and worsen over time is troubling as educational attainment is associated with a host of socioeconomic outcomes such as health, earnings, and wealth (David Cutler and Adriana Lleras-Muney 2008). At the same time, gaps in educational performance and outcomes are but one dimension of racial inequality. One area of research has been with respect to racial health disparities, which unlike educational dis parities appear at very early ages and increase over time (Linda Dynan (2009) provides a lit erature review). Little work, however, directly analyzes how health disparities in children may impact other outcomes.1 The fact that health out comes may lead to socioeconomic differences which themselves may lead to further health and

Dynamic analysis of competition and complementarity for light and N use to understand the yield and the protein content of a durum wheat–winter pea intercrop

In a previous paper [Bedoussac L, Justes E (2009) Plant Soil, doi: 10.1007/s11104-009-0082-2], we showed that intercropping of durum wheat and winter pea increased the yield and protein concentration of durum wheat when early N availability was less than 120 kg N ha−1. The aim of the present work was to understand these results by analysing intercrop species dynamics for growth, light and N acquisition. A 2-year field experiment was carried out in southwest France with different fertilizer-N levels in order to compare wheat (Triticum turgidum L.) and pea (Pisum sativum L.) grown as sole crops and as an intercrop in a row substitutive design. The advantages of intercropping in low N conditions were due mainly to: (1) better light use (up to 10%), thanks to species dynamic complementarity for leaf area index and height; (2) growth complementarity over time (higher growth rate of wheat until pea flowering and then of pea until wheat flowering); and (3) dynamic complementary N acquisition associated with better wheat N status throughout growth. Disadvantages, underlining poorer complementarity within the intercrop stand, were observed with ample available N in early growth. This induced higher cereal growth during winter, which led to increase interspecies competition by reducing pea light absorption and, consequently, its biomass production.

ITはITを呼ぶか？ ―便益を部分的に共有するIT製品間のダイナミックな補完と代替―

ITはITを呼ぶか？ ―便益を部分的に共有するIT製品間のダイナミックな補完と代替―

Social Science and/or Social Work: Do We (Should We) Teach Them Both?

Addresses teaching in social work on the basis of two different theories related to social work and social science, noting crucial aspects of each. Notes deep differences between theoretical and applied sciences and discusses ways in which a dynamic complementarity can be achieved in teaching the theoretical and the professional. Applies the major points of the discussion to practical situations in the classroom.

Interaction between myosin heavy chain and troponin isoforms modulate cardiac myofiber contractile dynamics

Coordinated expression of species-specific myosin heavy chain (MHC) and troponin (Tn) isoforms may bring about a dynamic complementarity to match muscle contraction speed with species-specific heart rates. Contractile system function and dynamic force-length measurements were made in muscle fibers from mouse and rat hearts and in muscle fibers after reconstitution with either recombinant homologous Tn or orthologous Tn. The rate constants of length-mediated cross-bridge (XB) recruitment (b) and tension redevelopment (k(tr)) of mouse fibers were significantly faster than those of rat fibers. Both the tension cost (ATPase/tension) and rate constant of length-mediated XB distortion (c) were higher in the mouse than in the rat. Thus the mouse fiber was faster in all dynamic and functional aspects than the rat fiber. Mouse Tn significantly increased b and k(tr) in rat fibers; conversely, rat Tn significantly decreased b and k(tr) in mouse fibers. Thus the length-mediated recruitment of force-bearing XB occurs much more rapidly in the presence of mouse Tn than in the presence of rat Tn, demonstrating that the speed of XB recruitment is regulated by Tn. There was a significant interaction between Tn and MHC such that changes in either Tn or MHC affected the speed of XB recruitment. Our data demonstrate that the dynamics of myocardial contraction are different in the mouse and rat hearts because of sequence heterogeneity in MHC and Tn. At the myofilament level, coordinated expression of complementary regulatory contractile proteins produces a functional dynamic phenotype that allows the cardiovascular systems to function effectively at different heart rates.

Semicopositive linear complementarity systems

AbstractInspired by the dynamic complementarity problem introduced by Mandelbaum, we define several matrix classes in terms of some integral conditions and discuss their connection with the existing class of strictly semicopositive matrices in linear complementarity theory. Using a time‐stepping approximation scheme, we establish the existence of an integrable solution to a class of index‐one linear complementarity systems (LCSs) involving these matrices, and that such a solution is ‘short‐time’ unique if the initial state belongs to a semiobservable cone defined in the recent paper (IEEE Trans. Autom. Control 2007, in press). In contrast to the existing well‐posedness theory for the LCS, our result is based on a well‐known matrix property that has not been used in the LCS literature before. Copyright © 2007 John Wiley & Sons, Ltd.

Differential variational inequalities

This paper introduces and studies the class of differential variational inequalities (DVIs) in a finite-dimensional Euclidean space. The DVI provides a powerful modeling paradigm for many applied problems in which dynamics, inequalities, and discontinuities are present; examples of such problems include constrained time-dependent physical systems with unilateral constraints, differential Nash games, and hybrid engineering systems with variable structures. The DVI unifies several mathematical problem classes that include ordinary differential equations (ODEs) with smooth and discontinuous right-hand sides, differential algebraic equations (DAEs), dynamic complementarity systems, and evolutionary variational inequalities. Conditions are presented under which the DVI can be converted, either locally or globally, to an equivalent ODE with a Lipschitz continuous right-hand function. For DVIs that cannot be so converted, we consider their numerical resolution via an Euler time-stepping procedure, which involves the solution of a sequence of finite-dimensional variational inequalities. Borrowing results from differential inclusions (DIs) with upper semicontinuous, closed and convex valued multifunctions, we establish the convergence of such a procedure for solving initial-value DVIs. We also present a class of DVIs for which the theory of DIs is not directly applicable, and yet similar convergence can be established. Finally, we extend the method to a boundary-value DVI and provide conditions for the convergence of the method. The results in this paper pertain exclusively to systems with “index” not exceeding two and which have absolutely continuous solutions.

The Technology of Skill Formation

Flavio Cunha; James Heckman.May, 2007.The technology of skill formation,Report,ChicagoAmerican Economic Association,17

Migrations et investissements directs étrangers dans l'espace européen (ue-15)

<titre>R&#233;sum&#233;</titre>Dans la th&#233;orie standard du commerce international, migrations et investissements directs &#233;trangers (ide) se substituent l&#8217;un &#224; l&#8217;autre dans le processus d&#8217;appariement entre travailleurs et firmes. Cependant, la litt&#233;rature socio-&#233;conomique r&#233;cente sugg&#232;re que les travailleurs migrants peuvent &#224; la fois transmettre de l&#8217;information sur leur pays d&#8217;origine (par exemple, sur la fa&#231;on d&#8217;y pratiquer des affaires, ou sur les caract&#233;ristiques de la main-d&#8217;&#339;uvre) et prendre part &#224; des r&#233;seaux d&#8217;affaires internationaux, ce qui dans les deux cas peut favoriser les transactions &#233;conomiques bilat&#233;rales. En utilisant des donn&#233;es sur les migrations et les ide intra-europ&#233;ens, nous montrons pour la d&#233;cennie 1990-2000 qu&#8217;il existe une compl&#233;mentarit&#233; dynamique entre migration qualifi&#233;e et ide alors que les liens entre migration non qualifi&#233;e et ide se caract&#233;risent plut&#244;t par une relation de substituabilit&#233; statique (ou contemporaine).

The Technology of Skill Formation

This paper develops a model of skill formation that explains a variety of findings established in the child development and child intervention literatures. At its core is a technology that is stage-specific and that features self productivity, dynamic complementarity and skill multipliers. Lessons are drawn for the design of new policies to alleviate the consequences of the accident of birth that is a major source of human inequality.

International labor and capital flows: Complements or substitutes?

In a global context, foreign direct investment (FDI) and migration substitute one another in the matching process between workers and firms. Yet, migrants provide information about future investment opportunities in their country of origin. Evidence from U.S. data is consistent with contemporaneous substitutability and dynamic complementarity between migration and FDI.

The Firm and Shaky Ground of Education for Sustainable Development

This paper employs academic and parable forms to evaluate critically the strengths and weaknesses, potentials and lacunae of education for sustainable development (ESD) and other sustainability-related educations. The meteoric rise to prominence of ESD is first briefly reviewed, as is the firm ground it now stands upon as an international and national educational priority. The remainder of the paper explores the shaky ground of ESD: the field's reliance on a goal, sustainable development, which, in its by-and-large continued embrace of the growth principle, is a myopic response to the Earth condition; the field's embrace of an instrumentalist conception of nature when such a conception itself feeds unsustainability; the overly skills/training orientation of ESD and its stunted engagement with a range of key aspects of the human-nature relationship; the failure of ESD to realize its original breadth and promise in its marginalization of the voice of peace, social justice, anti-discriminatory, indigenous and futures educators as well as that of sustainability educators in the South; its adoption of an anachronistic ‘steady state’ conception of nature. Finally, it is suggested that sustainability-related education would be enriched and enlivened by fomenting a dynamic complementarity between notions of transience and sustainability