One of the most interesting debates in modern economics centers around the question of whether in... more One of the most interesting debates in modern economics centers around the question of whether integrating economies necessarily converge in terms of per capita income and technology. This debate is often believed to have been started by Thorstein Veblen in 1915. However, this paper demonstrates that the genesis of the convergence question goes back to the Scottish Enlightenment and the publication of an essay by David Hume in 1742. The ensuing 'rich country-poor country' debate--between David Hume on the convergence side and Josiah Tucker on the nonconvergence side--represents one of the first major doctrinal debates in economics.
ABSTRACT How to teach technical material to undergraduate students with a limited mathematical ba... more ABSTRACT How to teach technical material to undergraduate students with a limited mathematical background is a recurring concern for many teachers in subjects such as economics. One method that has proven successful for the current authors is to connect theoretically sophisticated material with actual data. This enables students to see how the theory relates to the real world, allowing for a deeper understanding of both. This paper develops a simple and insightful empirical application of the Solow growth model that can be used in an undergraduate macroeconomics or growth course. The exercise uses a dataset on perceptions of corruption levels by country to look at the relationship between corruption and the level and rate of growth of output per worker across 70 countries. The results allow students to see for themselves the impact that corruption has on actual countries while also improving their understanding of the distinction between level effects and long run growth effects.
Empirical work on the Heckscher–Ohlin (H-O) theorem has been unable to reach consensus on its con... more Empirical work on the Heckscher–Ohlin (H-O) theorem has been unable to reach consensus on its consistency with the data. In this paper we test the chain version of the H-O theorem empirically for the first time by using data on capital and labor endowments and capital/labor intensities by sector combined with export/import data for the United States. According to our findings, predictions of the theory are not confirmed by the data. However, when gross investment is used as a proxy for productive capital stock and capital/labor ratios are replaced by investment/labor ratios, we find almost perfect concordance between net trade flows and endowments as predicted by theory.
The gravity equation is a current workhorse of empirical trade theory. It is generally acknowledg... more The gravity equation is a current workhorse of empirical trade theory. It is generally acknowledged that this theory, which relates the extent of trade between countries to their respective sizes, distances, and relative trade barriers, was first developed by Jan Tinbergen in 1962. Acceptance of the gravity model as part of the discipline's core was limited by its scant theoretical foundation for the first 40 years of its existence. This paper finds that a theory of trade gravity was first developed by Adam Smith in The Wealth of Nations. Moreover, it is shown that Smith's statement of a proportional relation between economic size and distance came about as an application of his general theory of differential capital productivity in different economic sectors, and his elaboration of a theory of the gains from trade originated by David Hume. It is further shown that Smith had an explanation of the size of border affects in trade volumes, and a gravity theory of trade restrict...
Two fundamental issues have been ignored in the convergence debate which are addressed in this pa... more Two fundamental issues have been ignored in the convergence debate which are addressed in this paper. First, there has been little attention paid to the development of a general model able to explain convergence a divergence. Second, in the rush to put data to a convergence hypothesis, researchers have failed to consider certain methodological procedures with respect to the treatment of capital. To remedy this problem we use an input-output approach to measure catch-up. To address the theoretical lacunae we present case studies of Portugal and Japan, two countries which by 1959 had attained the threshold level of development required to join the “convergence- club”, but which, for various historical (path-dependent) reasons, have diverged rapidly from each other in the period since the late 1950’s.
This paper addresses the question of why Pareto’s sociology has not attracted a major following w... more This paper addresses the question of why Pareto’s sociology has not attracted a major following within economics or sociology. We criticize Pareto’s sociology for the internal inconsistency of its conception of non-logical action, and address limitations in the applicability of his analysis of residues via the sex residue. We also argue that developments in the theory of economic policy by Sidgwick, Marshall, and Pigou created a more user friendly platform for addressing many of the questions that Pareto set out to understand in his sociology, leaving economists little incentive to follow Pareto’s path.
Evidence suggests that race‐ and gender‐based discrimination are prevalent. If discrimination mis... more Evidence suggests that race‐ and gender‐based discrimination are prevalent. If discrimination misallocates resources then it is likely to generate social costs. This paper provides a general equilibrium model of the impacts of discrimination. We analyze effects of labor market discrimination in a model where agents make human capital decisions based on comparing the marginal benefits and marginal costs of additional human capital accumulation. Life expectancy is a consideration in making human capital decisions, and is allowed to be endogenous. We find that the impact of discrimination on equilibrium depends on the nature of any skills bias in discrimination.
In 1724, the anonymous essay A Modest Defence of Publick Stews (brothels) arrived in the bookshop... more In 1724, the anonymous essay A Modest Defence of Publick Stews (brothels) arrived in the bookshops of London. Now the essay is widely believed to be the work of Bernard Mandeville. In true heretical fashion, Mandeville detailed the social problems arising from the market in prostitution of his day. The genius of the work comes from the sophisticated tools, previously thought to be the product of the twentieth century, he utilized to analyse the market. These tools included the market failures of externalities and asymmetric information; government failures due to unintended consequences of public policies; and a proposal for regulating the market designed to alleviate these failings. Included in the proposal was a tax consistent with the principles of a first-best policy.
Ever since Adam Smith and David Hume launched an assault on specific mercantilist policies, most ... more Ever since Adam Smith and David Hume launched an assault on specific mercantilist policies, most economists have been of a similar opinion regarding the mercantilists: they were a loose group of writers who failed to grasp the proper workings of the economy, and/or they were simply a group of writers following their own narrow interests and argued for policies that furthered those interests at the expense of the general welfare. New work in the economic history of Europe from 1500 to 1800 suggests a reexamination of the role played by early mercantilist writers. The link between the Atlantic trade, mercantile interests, and institutional change favoring individual property rights outside of the monarch's inner circle suggests another broader interpretation of some prominent mercantilist writers as institutional reformers.
In a recent paper, Kemp and Shimomura extend the basic Heckscher-Ohlin model to show that no coun... more In a recent paper, Kemp and Shimomura extend the basic Heckscher-Ohlin model to show that no country has an incentive to hoard its technology. This basic result is not new. It was first shown by William Ellis in 1825. Ellis extended Ricardo's model to obtain the same free trade result. The history behind these similar theoretical developments is remarkably similar. These writers were responding to increased debates over the benefits of free trade when technologies are mobile between countries. The most widely accepted theoretical models of the time were extended so that policy discussions could be grounded in a strong theoretical base.
The recent political battles in the United States over the merits of NAFTA and the World Trade Or... more The recent political battles in the United States over the merits of NAFTA and the World Trade Organization (WTO), established in the GATT Uruguay Round Agreement, centered around the question of "national sovereignty." While proponents of these trade liberalization ...
One of the most interesting debates in modern economics centers around the question of whether in... more One of the most interesting debates in modern economics centers around the question of whether integrating economies necessarily converge in terms of per capita income and technology. This debate is often believed to have been started by Thorstein Veblen in 1915. However, this paper demonstrates that the genesis of the convergence question goes back to the Scottish Enlightenment and the publication of an essay by David Hume in 1742. The ensuing 'rich country-poor country' debate--between David Hume on the convergence side and Josiah Tucker on the nonconvergence side--represents one of the first major doctrinal debates in economics.
ABSTRACT How to teach technical material to undergraduate students with a limited mathematical ba... more ABSTRACT How to teach technical material to undergraduate students with a limited mathematical background is a recurring concern for many teachers in subjects such as economics. One method that has proven successful for the current authors is to connect theoretically sophisticated material with actual data. This enables students to see how the theory relates to the real world, allowing for a deeper understanding of both. This paper develops a simple and insightful empirical application of the Solow growth model that can be used in an undergraduate macroeconomics or growth course. The exercise uses a dataset on perceptions of corruption levels by country to look at the relationship between corruption and the level and rate of growth of output per worker across 70 countries. The results allow students to see for themselves the impact that corruption has on actual countries while also improving their understanding of the distinction between level effects and long run growth effects.
Empirical work on the Heckscher–Ohlin (H-O) theorem has been unable to reach consensus on its con... more Empirical work on the Heckscher–Ohlin (H-O) theorem has been unable to reach consensus on its consistency with the data. In this paper we test the chain version of the H-O theorem empirically for the first time by using data on capital and labor endowments and capital/labor intensities by sector combined with export/import data for the United States. According to our findings, predictions of the theory are not confirmed by the data. However, when gross investment is used as a proxy for productive capital stock and capital/labor ratios are replaced by investment/labor ratios, we find almost perfect concordance between net trade flows and endowments as predicted by theory.
The gravity equation is a current workhorse of empirical trade theory. It is generally acknowledg... more The gravity equation is a current workhorse of empirical trade theory. It is generally acknowledged that this theory, which relates the extent of trade between countries to their respective sizes, distances, and relative trade barriers, was first developed by Jan Tinbergen in 1962. Acceptance of the gravity model as part of the discipline's core was limited by its scant theoretical foundation for the first 40 years of its existence. This paper finds that a theory of trade gravity was first developed by Adam Smith in The Wealth of Nations. Moreover, it is shown that Smith's statement of a proportional relation between economic size and distance came about as an application of his general theory of differential capital productivity in different economic sectors, and his elaboration of a theory of the gains from trade originated by David Hume. It is further shown that Smith had an explanation of the size of border affects in trade volumes, and a gravity theory of trade restrict...
Two fundamental issues have been ignored in the convergence debate which are addressed in this pa... more Two fundamental issues have been ignored in the convergence debate which are addressed in this paper. First, there has been little attention paid to the development of a general model able to explain convergence a divergence. Second, in the rush to put data to a convergence hypothesis, researchers have failed to consider certain methodological procedures with respect to the treatment of capital. To remedy this problem we use an input-output approach to measure catch-up. To address the theoretical lacunae we present case studies of Portugal and Japan, two countries which by 1959 had attained the threshold level of development required to join the “convergence- club”, but which, for various historical (path-dependent) reasons, have diverged rapidly from each other in the period since the late 1950’s.
This paper addresses the question of why Pareto’s sociology has not attracted a major following w... more This paper addresses the question of why Pareto’s sociology has not attracted a major following within economics or sociology. We criticize Pareto’s sociology for the internal inconsistency of its conception of non-logical action, and address limitations in the applicability of his analysis of residues via the sex residue. We also argue that developments in the theory of economic policy by Sidgwick, Marshall, and Pigou created a more user friendly platform for addressing many of the questions that Pareto set out to understand in his sociology, leaving economists little incentive to follow Pareto’s path.
Evidence suggests that race‐ and gender‐based discrimination are prevalent. If discrimination mis... more Evidence suggests that race‐ and gender‐based discrimination are prevalent. If discrimination misallocates resources then it is likely to generate social costs. This paper provides a general equilibrium model of the impacts of discrimination. We analyze effects of labor market discrimination in a model where agents make human capital decisions based on comparing the marginal benefits and marginal costs of additional human capital accumulation. Life expectancy is a consideration in making human capital decisions, and is allowed to be endogenous. We find that the impact of discrimination on equilibrium depends on the nature of any skills bias in discrimination.
In 1724, the anonymous essay A Modest Defence of Publick Stews (brothels) arrived in the bookshop... more In 1724, the anonymous essay A Modest Defence of Publick Stews (brothels) arrived in the bookshops of London. Now the essay is widely believed to be the work of Bernard Mandeville. In true heretical fashion, Mandeville detailed the social problems arising from the market in prostitution of his day. The genius of the work comes from the sophisticated tools, previously thought to be the product of the twentieth century, he utilized to analyse the market. These tools included the market failures of externalities and asymmetric information; government failures due to unintended consequences of public policies; and a proposal for regulating the market designed to alleviate these failings. Included in the proposal was a tax consistent with the principles of a first-best policy.
Ever since Adam Smith and David Hume launched an assault on specific mercantilist policies, most ... more Ever since Adam Smith and David Hume launched an assault on specific mercantilist policies, most economists have been of a similar opinion regarding the mercantilists: they were a loose group of writers who failed to grasp the proper workings of the economy, and/or they were simply a group of writers following their own narrow interests and argued for policies that furthered those interests at the expense of the general welfare. New work in the economic history of Europe from 1500 to 1800 suggests a reexamination of the role played by early mercantilist writers. The link between the Atlantic trade, mercantile interests, and institutional change favoring individual property rights outside of the monarch's inner circle suggests another broader interpretation of some prominent mercantilist writers as institutional reformers.
In a recent paper, Kemp and Shimomura extend the basic Heckscher-Ohlin model to show that no coun... more In a recent paper, Kemp and Shimomura extend the basic Heckscher-Ohlin model to show that no country has an incentive to hoard its technology. This basic result is not new. It was first shown by William Ellis in 1825. Ellis extended Ricardo's model to obtain the same free trade result. The history behind these similar theoretical developments is remarkably similar. These writers were responding to increased debates over the benefits of free trade when technologies are mobile between countries. The most widely accepted theoretical models of the time were extended so that policy discussions could be grounded in a strong theoretical base.
The recent political battles in the United States over the merits of NAFTA and the World Trade Or... more The recent political battles in the United States over the merits of NAFTA and the World Trade Organization (WTO), established in the GATT Uruguay Round Agreement, centered around the question of "national sovereignty." While proponents of these trade liberalization ...
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Papers by Bruce Elmslie